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EXHIBIT 2.1
[CONFIDENTIAL TREATMENT REQUESTED.
CERTAIN PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED
AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION.]
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
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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
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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
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(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;
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(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
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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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(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.
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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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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.
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<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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<PAGE>
(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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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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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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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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(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;
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<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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<PAGE>
(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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<PAGE>
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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<PAGE>
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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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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(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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(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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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.
-43-
<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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<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
XENOGEN CORPORATION
(Pursuant to Sections 242 & 245)
XENOGEN CORPORATION, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
FIRST: The name of this corporation is Xenogen Corporation.
SECOND: The original Certificate of Incorporation of the corporation
was filed with the Secretary of State of the State of Delaware on September 6,
2000 and the original name of the corporation was Xenogen Corporation. A
Certificate of Merger whereby Xenogen Corporation, a California corporation, was
merged with and into this corporation under the name of Xenogen Corporation, a
Delaware corporation, was filed with the Secretary of State of the State of
Delaware on September 11, 2000.
THIRD: The Amended and Restated Certificate of Incorporation of said
corporation shall be amended and restated to read in full as follows:
ARTICLE I
The name of this Corporation is Xenogen Corporation (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, Zip code 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
This Corporation is authorized to issue two classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which this Corporation is authorized to issue is 63,846,501
shares, of which 40,000,000 shares are Common Stock, with a par value of $0.001,
and 23,846,501 shares are Preferred Stock, with a par value of $0.001. Of the
Preferred Stock, 60,606 shares are designated Series A Preferred Stock, 200,000
shares are designated Series B Preferred Stock, 5,156,924 shares are designated
Series C Preferred Stock,
<PAGE>
6,678,791 shares are designated Series D Preferred Stock, 8,250,000 shares are
designated Series E Preferred Stock and 3,500,000 shares are designated Series F
Preferred Stock.
ARTICLE V
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock and the Series F Preferred Stock are as follows:
A. Dividends.
---------
1. Preference Dividends. The holders of Series A Preferred
--------------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock shall be entitled
to receive, on a pari passu basis, dividends, out of any assets legally
---- -----
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of this Corporation) on the Common
Stock of this Corporation, at the rate of $0.0264, $0.04, $0.104, $0.132, $0.34
and $10.00 per share, respectively, per annum when, as and if declared by the
board of directors.
2. Dividends Noncumulative. The right to dividends on shares
-----------------------
of the Common Stock and Preferred Stock shall not be cumulative, and no right
shall accrue to holders of Common Stock or Preferred Stock by reason of the fact
that dividends on said shares are not declared in any prior period.
3. So long as any shares of Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any other stock of the
Corporation ("Junior Stock"), nor shall any shares of Junior Stock be purchased,
redeemed, or otherwise acquired for value by the Corporation (except for
acquisitions of Common Stock by the Corporation pursuant to agreements which
permit the Corporation to repurchase shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transfer) until all dividends (set for in Section A.1) on the Preferred
Stock shall have been paid or declared and set apart. In the event dividends
are paid on any share of Common Stock, an additional dividend shall be paid with
respect to all outstanding shares of Preferred Stock in an amount equal per
share (on an as-if-converted to Common Stock basis) to the amount paid or set
aside for each share of Common Stock. The provisions of this Section A.3 shall
not, however, apply to (i) a dividend payable in Common Stock, (ii) the
acquisition of shares of any Junior Stock in exchange for shares of any other
Junior Stock, or (iii) the repurchase of any outstanding securities of the
Corporation that is unanimously approved by the Corporation's Board of
Directors.
B. Liquidation Preference.
----------------------
-2-
<PAGE>
1. Preference. In the event of any liquidation, dissolution or
----------
winding up of the Corporation, either voluntarily or involuntarily (a
"Liquidation"), distributions to the shareholders of the Corporation shall be
made as follows:
(a) Preferred Stock Preference. The holders of Series A Preferred
--------------------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock shall be entitled
to receive, on a pari passu basis and prior and in preference to any
---- -----
distribution of any of the assets or surplus funds of the Corporation to the
holders of Common Stock of the Corporation, an amount equal to $0.33, $0.50,
$1.30, $1.65, $4.25 and $10.00 per share of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock, respectively (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares), plus a further amount equal to any dividends declared
but unpaid on such shares (respectively, the "Series A Preference," the "Series
B Preference," the "Series C Preference," the "Series D Preference," the "Series
E Preference" and the "Series F Preference"). If upon such Liquidation the
assets of the Corporation are insufficient to provide for cash payment in full
described in this Section B.1(a) to the holders of Preferred Stock, the entire
assets of the Corporation as available shall be distributed pro rata among the
holders of Preferred Stock in proportion to the full preferential amount each
such holder would otherwise entitled to receive pursuant to this Section
B.1.(a).
(b) Remaining Assets. After the payment or setting apart of
----------------
payment to of the Series A Preference, the Series B Preference, the Series C
Preference, the Series D Preference, the Series E Preference and the Series F
Preference, the holders of Common Stock shall be entitled to receive pro rata
the remaining assets of the Corporation in proportion to the number of shares of
Common Stock then held by them.
(c) Superceding Payment. Notwithstanding anything to the
-------------------
contrary in Section B.1(b), if the amount that the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock would receive in a
Liquidation (assuming conversion of all shares of Preferred Stock to Common
Stock issuable upon conversion thereof immediately prior to the Liquidation)
(the "Converted Liquidation Amount") exceeds the Series A Preference, the Series
B Preference, Series C Preference, Series D Preference, Series E Preference or
Series F Preference (each a "Threshold Amount"), then the holder of the
applicable series shall be entitled to such higher Converted Liquidation Amount
in lieu of the applicable Threshold Amount.
2. Consolidation or Merger. A sale of all or substantially all of
-----------------------
the assets of the Corporation or a consolidation or merger of the Corporation
with or into any other Corporation or Corporations, in which the shareholders of
the Corporation immediately prior to such event do not own more than 50% of the
voting power of the surviving Corporation or its parent shall be deemed to be a
Liquidation within the meaning of this Section B, excluding any merger effected
exclusively to change the Corporation domicile (an "Acquisition"). Any
securities to be delivered to the holders of the Preferred Stock and Common
Stock upon a merger, reorganization or sale of substantially all of the assets
of the Corporation shall be valued as follows:
-3-
<PAGE>
(a) Securities not subject to investment letter or other similar
restrictions on free marketability:
(i) If traded on a securities exchange or the Nasdaq Stock
Market, the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the 30-day period ending three (3) days prior
to the closing of the transaction;
(ii) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid prices over the 30-day period
ending three (3) days prior to the closing of the transaction; and
(iii) If there is no active public market, the value shall
be the fair market value thereof, as determined in good faith by the board of
directors of this Corporation.
(b) The method of valuation of securities subject to investment
letter or other restrictions on free marketability shall be to make an
appropriate discount from the market value determined as above in Section
B.2.(a)(i)(ii) or (iii) to reflect the approximate fair market value thereof, as
determined in good faith by the board of directors of this Corporation.
3. In the event the requirements of Section B.2. are not complied
with, the Corporation shall forthwith either:
(a) cause such closing to be postponed until such time as the
requirements of this Section B.2. have been complied with, or
(b) cancel such transaction, in which event the rights,
preferences, privileges and restrictions of the holders of the Preferred Stock
shall revert to and be the same as such rights, preferences, privileges and
restrictions existing immediately prior to the date of the first notice referred
to in Section B.4. hereof.
4. The Corporation shall give each holder of record of Preferred
Stock written notice of such a Section B.2. transaction not later than twenty
(20) days prior to the shareholders' meeting called to approve such transaction,
or twenty (20) days prior to the closing of such transaction, whichever is
earlier, and shall also notify such holders in writing of the final approval of
such transaction. The first of such notices shall describe the material terms
and conditions of the impending transaction and the provisions of Section B.2.,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than
twenty (20) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
-------- -------
the written consent of the holders of a majority of the shares of Preferred
Stock then outstanding.
C. Conversion. The holders of the Preferred Stock shall have conversion
----------
rights as follows (the "Conversion Rights"):
1. Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of
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<PAGE>
the Corporation or any transfer agent for the Preferred Stock. Each share of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock
shall be convertible into the number of fully paid and nonassessable shares of
Common Stock which results from dividing the Conversion Price (as hereinafter
defined) per share in effect for each series of Preferred Stock at the time of
conversion into the per share Conversion Value (as hereinafter defined) of such
series. The initial Conversion Price per share of Series A Preferred Stock shall
be $0.33 and the per share Conversion Value of Series A Preferred Stock shall be
$0.33; the initial Conversion Price per share of Series B Preferred Stock shall
be $0.50 and the per share Conversion Value of Series B Preferred Stock shall be
$0.50; the initial Conversion Price per share of Series C Preferred Stock shall
be $1.30 and the per share Conversion Value of Series C Preferred Stock shall be
$1.30; the initial Conversion Price per share of Series D Preferred Stock shall
be $1.65 and the per share Conversion Value of Series D Preferred Stock shall be
$1.65; the initial Conversion Price per share of Series E Preferred Stock shall
be $4.25 and the per share Conversion Value of Series E Preferred Stock shall be
$4.25; and the initial Conversion Price per share of Series F Preferred Stock
shall be $10.00 and the per share Conversion Value of Series F Preferred Stock
shall be $10.00. The Conversion Price of each series shall be subject to
adjustment from time to time as provided below. The number of shares of Common
Stock into which a series of Preferred Stock is convertible is hereinafter
referred to as the "Conversion Rate" of such series.
2. Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon:
(a) the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, the aggregate gross proceeds to the Corporation of
which exceed $15,000,000 and the per share price to the public of which is at
least $8.00 (subject to equitable adjustment in the event of any stock split,
stock dividend, combination, reclassification of shares or other similar event),
prior to deduction of underwriting commissions and offering expenses, or
(b) the election of the holders of a majority of the shares of
Preferred Stock then outstanding.
3. Mechanics of Conversion. Before any holder of Preferred Stock
-----------------------
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the Corporation at such office that he elects to
convert the same (except that no such written notice of election to convert and
no surrender of the stock certificate or certificates shall be necessary in the
event of an automatic conversion pursuant to paragraph C.2. hereof). The
Corporation shall, as soon as practicable thereafter, but in no event later than
ten (unless any of the Corporation's capital stock is publicly traded in which
in no event than three) business days after receipt of the certificates
representing the Preferred Stock surrendered for conversion, issue and deliver
at such office to such holder of Preferred Stock a certificate or certificates
for the number of shares of Common Stock to which such holder shall be entitled.
Such conversion shall be deemed to have been made immediately before the close
of
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<PAGE>
business on the date of such surrender of the shares of Preferred Stock to be
converted, (except that in the case of an automatic conversion pursuant to
paragraph C.2. such conversion shall be deemed to have been made either
immediately before the closing of the offering referred to in paragraph C.2.(a)
or immediately upon the election of the holders of a majority of Preferred Stock
referred to in paragraph C.2.(b)) and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock at
such time.
4. Fractional Shares. In lieu of any fractional shares of common
-----------------
Stock to which any holder of Preferred Stock would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock. The "fair market value" of the Common Stock
shall be determined by the following methods: (i) if the Common Stock is traded
on a securities exchange or the Nasdaq Stock Market, the "fair market value"
shall be deemed to be the closing price of the Common Stock on the trading day
prior to conversion of the Preferred Stock; (ii) if the Common Stock is actively
traded over-the-counter, the "fair market value" shall be deemed to be the
closing bid price of the Common Stock on the trading prior to conversion of the
Preferred Stock; and (iii) if there is no active public market for the Common
Stock, the "fair market value" shall be determined in good faith by the board of
directors of this Corporation. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock of each holder at the time converting into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
5. Adjustment of Conversion Price. The Conversion Price of each
------------------------------
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(a) If the Corporation shall issue any Common Stock other than
"Excluded Stock," as defined below, for a consideration per share less than the
applicable Conversion Price in effect immediately prior to the issuance of such
Common Stock (excluding stock dividends, subdivisions, split-ups, combinations,
dividends or recapitalizations which are covered by Section C.5.(c),(d),(e) and
(f)), the applicable Conversion Price in effect immediately after each such
issuance shall forthwith (except as provided in this Section C.5.) be adjusted
to a price equal to the quotient obtained by dividing:
(1) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock) immediately prior to such issuance multiplied by the
applicable Conversion Price in effect immediately prior to such issuance, plus
(y) the consideration received by the Corporation
upon such issuance, by
(2) the total number of shares of Common Stock outstanding
(including any shares of Common Stock issuable upon conversion of the Preferred
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<PAGE>
Stock) immediately prior to such issuance plus the additional shares of Common
Stock issued in such issuance (but not including any additional shares of Common
Stock deemed to be issued as a result of any adjustment in the applicable
Conversion Price resulting from such issuance).
For purposes of any adjustment of a Conversion Price pursuant to this
clause (a), the following provisions shall be applicable:
(ii) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting any discounts or commissions paid or incurred by the Corporation in
connection with the issuance and sale thereof but without deduction of any
expenses payable by the Corporation.
(iii) In the case of the issuance of Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash shall be
deemed to be the fair market value thereof as determined by the board of
directors of the Corporation, in accordance with generally accepted accounting
treatment; provided, however, that if, at the time of such determination, the
-------- -------
Corporation's Common Stock is traded in the over-the-counter market or on a
national or regional securities exchange, such fair market value as determined
by the board of directors of the Corporation shall not exceed the aggregate
"Current Market Price" (as defined below) of the shares of Common Stock being
issued.
(iv) In the case of issuance of (1) options to purchase or rights to
subscribe for Common Stock (other than Excluded Stock), (2) securities by their
terms convertible into or exchangeable for Common Stock (other than Excluded
Stock), or (3) options to purchase or rights to subscribe for such convertible
or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (i) and (ii) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof, shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subdivisions (i) and (ii) above);
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<PAGE>
(C) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable securities, or on
any change in the minimum purchase price of such options, rights or securities,
other than a change resulting from the antidilution provisions of such options,
rights or securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon (x) the
issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(b) "Excluded Stock" shall mean:
(i) all shares of Common Stock issued and outstanding
on the date of the first issuance of any shares of Series F Preferred Stock and
all shares of capital stock issuable upon exercise of options or warrants
outstanding on the date of the first issuance of any shares of Series F
Preferred Stock;
(ii) all shares of Common Stock into which the shares
of Preferred Stock are convertible;
(iii) shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to employees, officers,
directors, scientific advisors and consultants of the Corporation pursuant to
any plan or arrangement approved by the board of directors of the Corporation;
(iv) all securities issuable to lending or leasing
institutions in an aggregate not to exceed 100,000 shares pursuant to any plan
or arrangement approved by the board of directors of the Corporation including
approval by all of the Preferred Directors (as defined below); and
(v) all securities issued or issuable to licensors or
corporate partners of the Corporation upon the unanimous approval of the board
of directors of the Corporation.
-8-
<PAGE>
(c) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective, the
Conversion Price of each series of Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
any shares of each series of Preferred Stock shall be increased in proportion to
such increase of outstanding shares.
(d) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
Conversion Price of each series of Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
any shares of each series of Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(e) In case the Corporation shall declare a cash dividend
upon its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of this capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
each series of Preferred Stock shall, concurrent with the distribution to
holders of Common Stock, receive a like distribution based upon the number of
shares of Common Stock into which such series of Preferred Stock is convertible.
(f) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the Corporation with
or into another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any change in
the Common Stock or a consolidation or merger where Section B.2. applies), the
shares of each series of Preferred Stock shall, after such reorganization,
reclassification, consolidation, merger, sale or other disposition, be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or otherwise to which such holder would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation, merger, sale or other disposition he had converted his shares of
Preferred Stock into Common Stock. The provisions of this clause (f) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.
(g) All calculations under this Section C shall be made to
the nearest cent or to the nearest one one-hundredth (1/100) of a share, as the
case may be.
(h) For the purpose of any computation pursuant to this
Section C.5., the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
Nasdaq National Market (or equivalent recognized source of quotations);
provided, however, that if the Common Stock is not traded in such manner that
-------- -------
the quotations referred to in this paragraph are available for the period
required hereunder, Current
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<PAGE>
Market Price shall be determined in good faith by the board of directors of the
Corporation, but if challenged by the holders of more than fifty percent (50%)
of the outstanding Preferred Stock, then as determined by an independent
appraiser selected by the board of directors of the Corporation, the cost of
such appraisal to be borne by the challenging parties.
6. Minimal Adjustments. No adjustment in the Conversion Price
-------------------
need be made if such adjustment would result in a change in the Conversion Price
of less than $0.01. Any adjustment of less than $0.01 which is not made shall
be carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
7. No Impairment. The Corporation will not, through any
-------------
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section C and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Preferred Stock against impairment.
This provision shall not restrict the Corporation's right to amend its
Certificate of Incorporation with the requisite shareholder consent.
8. Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Rate pursuant to this Section C,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of Preferred Stock.
9. Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right or upon any
Acquisition (as defined in Section B.2) or any other capital reorganization of
the Corporation, any reclassification of the capital stock, or any Liquidation,
the Corporation shall mail to each holder of Preferred Stock at least twenty
(20) days prior to such record date, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or distribution or
right or action, and the amount and character of such dividend, distribution or
right or the date such action is to be effective.
10. Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the full
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<PAGE>
conversion of all outstanding shares of the Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the full conversion of all then outstanding shares of the
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
11. Notices. Any notice required by the provisions of this
-------
Section C to be given to the holder of shares of the Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
D. Redemption.
----------
1. Restriction on Redemption. Except as expressly provided in
-------------------------
this Section D, the Corporation shall not have the right to redeem or otherwise
acquire for value any or all of the Preferred Stock. The redemption rights of
the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock shall be separate and distinct such that only
the holders of Series C Preferred Stock can effect a redemption of the Series C
Preferred Stock, only the holders of Series D Preferred Stock can effect a
redemption of the Series D Preferred Stock, only the holders of Series E
Preferred Stock can effect a redemption of the Series E Preferred Stock and only
the holders of Series F Preferred Stock can effect a redemption of the Series F
Preferred Stock.
2. Redemption on Demand. In the event that holders of a
--------------------
majority of the then outstanding Series C Preferred Stock give written notice to
the Corporation of a demand for redemption of their Series C Preferred Stock (a
"Series C Redemption Notice"), the holders of a majority of the then outstanding
Series D Preferred Stock give written notice to the Corporation of a demand for
redemption of their Series D Preferred Stock (a "Series D Redemption Notice"),
the holders of a majority of the then outstanding Series E Preferred Stock give
written notice to the Corporation of a demand for redemption of their Series E
Preferred Stock (a "Series E Redemption Notice") or the holders of a majority of
the then outstanding Series F Preferred Stock give written notice to the
Corporation of a demand for redemption of their Series F Preferred Stock (a
"Series F Redemption Notice") at any time after December 31, 2004, the
Corporation will, on the date 90 days after such notice is given (a "Redemption
Date"), to the extent legally permitted, repurchase all shares of Series C
Preferred Stock (with respect to a Series C Redemption Notice), Series D
Preferred Stock (with respect to a Series D Redemption Notice), Series E
Preferred Stock (with respect to a Series E Redemption Notice), or Series F
Preferred Stock (with respect to a Series F Redemption Notice) elected to be
redeemed by holders of Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock, by payment of the
Redemption Price (as defined below) in three equal annual installments.
3. Redemption Price. The price per share to be paid to
----------------
repurchase the Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock or Series F Preferred Stock shall be an amount equal to
$1.30, $1.65, $4.25 and $10.00 per share of Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock or Series F Preferred Stock,
respectively (as adjusted for any stock dividend, combination, splits, recaps
and the like with respect
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<PAGE>
to the shares, plus a further amount equal to any dividends declared but unpaid
on such series (the "Redemption Price").
4. Partial Redemption. In the event of any redemption of only
------------------
a part of the then outstanding Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or Series F Preferred Stock, as the case may be,
the Corporation shall effect such redemption pro rata among the holders of
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock according to the aggregate Redemption Price each such
holder would otherwise be entitled to receive.
5. Redemption Procedure. At least 30 days prior to the
--------------------
Redemption Date, written notice (the "Redemption Notice") shall be mailed,
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F
Preferred Stock electing to have shares redeemed, at the address last shown on
the records of the Corporation for such holder or given by the holder to the
Corporation for the purpose of notice or if no such address appears or is given,
at the place where the principal executive office of the Corporation is located,
notifying such holder of the redemption to be effected, specifying the number of
shares to be redeemed, the Redemption Price, the place at which payment may be
obtained and the date on which such holder's right to convert Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred
Stock into Common Stock as to such shares terminates and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, its certificate or certificates representing the shares to be
redeemed. Except as provided in Section D.6., on or after the Redemption Date,
each holder of Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock to be redeemed shall surrender to
the Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon,
subject to the provisions of Section D.4., the aggregate Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
6. Effect of Redemption. From and after the Redemption Date,
--------------------
unless there shall have been a default in payment of the Redemption Price, all
rights of the holders of such shares as holders of Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock
(except the right to receive their respective Redemption Price without interest
upon surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books of
the Corporation or be deemed to be outstanding for any purpose whatsoever. If
the funds of the Corporation legally available for redemption of shares of
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock on any Redemption Date are insufficient to redeem the
total number of shares of Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock to be redeemed on such
date, those funds which are legally available will be used to redeem the maximum
possible number of such shares pro rata as described in Section D.4. The shares
of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock
or Series F
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<PAGE>
Preferred Stock not redeemed shall remain outstanding and be entitled to all the
rights and preferences provided herein. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock, such funds will immediately be set aside for the
redemption of the balance of the shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed;
provided that the holders of such Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or Series F Preferred Stock shall receive at
least 30 days notice of such redemption.
7. Redemption Funding. On or prior to each Redemption
------------------
Date, the Corporation shall deposit the Redemption Price of all shares of
Preferred Stock designated for redemption in the Redemption Notice, with a bank
or trust Corporation located in the State of California having aggregate capital
and surplus in excess of $100,000,000 as a trust fund for the benefit of the
respective holders of the shares designated for redemption and not yet redeemed.
Simultaneously, the Corporation shall deposit irrevocable instructions and
authority to such bank or trust Corporation to pay, on and after the date fixed
for redemption or prior thereto, the Redemption Price of the Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred
Stock to the holders thereof, respectively, upon surrender of their
certificates. Any money or notes deposited by the Corporation pursuant to this
Section D.7. for the redemption of shares which are thereafter converted into
shares of Common Stock no later than the close of business on the last business
day prior to each Redemption Date shall be returned to the Corporation forthwith
upon such conversion. The balance of any money or notes deposited by the
Corporation pursuant to this subsection remaining unclaimed at the expiration of
six months following each Redemption Date shall thereafter be returned to the
Corporation, provided that the shareholder to which such money would be payable
hereunder shall be entitled, upon proof of its ownership of the Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F
Preferred Stock and payment of any bond requested by the Corporation, to receive
such monies but without interest from each Redemption Date.
E. Voting Rights.
-------------
1. General. Except as otherwise required by law or by
-------
Sections E.2 and F hereof, the holder of each share of Common Stock issued and
outstanding shall have one vote and the holder of each share of Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Preferred Stock could be converted at the record
date for determination of the shareholders entitled to vote on such matters, or,
if no such record date is established, at the date such vote is taken or any
written consent of shareholders is solicited, such votes to be counted together
with all other shares of the Corporation having general voting power and not
separately as a class. Fractional votes by the holders of Preferred Stock shall
not, however, be permitted and any fractional voting rights shall (after
aggregating all shares into which shares of Preferred Stock held by each holder
could be converted) be rounded to the nearest whole number.
2. Election of Directors. One (1) member of the
---------------------
Corporation's board of directors shall be elected by the holders of Series D
Preferred Stock, voting as a separate class, and one (1) member of the
Corporation's board of directors shall be elected by the holders of Series E
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<PAGE>
Preferred Stock, voting as a separate class. Two (2) members of the
Corporation's board of directors shall be elected by the holders of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting
together as a single class. Two (2) members of the Corporation's board of
directors shall be elected by the holders of the Common Stock, voting as a
separate class. Any remaining members of the Corporation's board of directors
shall be elected by the holders of the Common Stock and the Preferred Stock,
voting together as a single class.
Any director who was elected by a specified series, class or classes of
shares may be removed during his or her term of office, either for or without
cause, by, and only by, the affirmative vote of a majority of the holders of the
shares of the series, class or classes of shares which initially elected such
director. Such vote may be given at a special meeting of such shareholders duly
called or by an action by written consent for that purpose.
Vacancies in the board of directors may be filled by a majority of the
remaining directors originally elected by the same series, class or classes of
shares who could elect an individual to fill such vacancy on the board of
directors, though less than a quorum, except that a vacancy created by the
removal of a director by court order may be filled by only the vote of a
majority of the outstanding shares entitled to vote thereon represented at a
duly held meeting at which a quorum is present, or by unanimous written consent
of all shares entitled to vote thereon. Each director so elected shall hold
office until the next annual meeting of shareholders and until a successor has
been elected and qualified.
The shareholders of the specified series or class entitled to vote upon the
election of any director from which a vacancy arose may elect a director at any
time to fill such vacancy not filled by the directors.
F. Protective Provisions. In addition to any other class or series
---------------------
vote that may be required by law, so long as at least 5,000,000 shares of
Preferred Stock shall be outstanding, the Corporation shall not without first
obtaining the approval of the holders of more than fifty percent (50%) of the
outstanding Preferred Stock:
1. purchase, redeem or otherwise acquire Preferred Stock other
than pursuant to the redemption provisions contained in the Certificate of
Incorporation;
2. repurchase any shares of Common Stock (except for the
repurchase of shares of Common Stock from directors, employees and consultants
pursuant to agreements under which the Corporation has the option to purchase
such shares at cost, not to exceed $25,000 in any twelve-month period);
3. authorize, issue or obligate itself to issue any security
having rights senior to or pari passu with the Series C Preferred Stock, Series
D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock;
4. declare or pay dividends on or make any distribution on
account of the Common Stock;
-14-
<PAGE>
5. effect any Liquidation or the sale of all or substantially
all of the Corporation's assets or take any action, including any merger or
consolidation, which results in the holders of the Corporation's capital stock
prior to the transaction owning less than 50% of the voting power of the
Corporation's capital stock after the transaction;
6. permit a subsidiary of the Corporation to sell securities to
a third party;
7. increase or decrease the number of authorized shares of
Common Stock or Preferred Stock;
8. amend the Certificate of Incorporation to change the rights,
preferences, privileges or limitations of the Preferred Stock;
9. change the variable range of the number of directors from
the current variable range of five (5) to seven (7);
10. increase the par value of the Common Stock; or
11. reissue any share of Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise.
G. Residual Rights. All rights accruing to the outstanding shares
---------------
of the Corporation not expressly provided for to the contrary herein shall be
vested with the Common Stock.
H No Reissuance of Preferred Stock. No share or shares of Preferred
--------------------------------
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued; and, in addition, the Certificate of
Incorporation shall be appropriately amended to effect any corresponding
reduction in the Corporation's authorized stock.
ARTICLE VI
The following is applicable to the Common Stock:
I. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
J. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section B of Article IV hereof.
K. Redemption. The Common Stock is not redeemable.
----------
-15-
<PAGE>
L. Voting Rights. The holder of each share of Common Stock shall have
-------------
the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law. The
right to vote for directors shall be subject to Section E.2 of Article IV
hereof.
ARTICLE VII
The Corporation is to have perpetual existence.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
ARTICLE IX
The election of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide; provided, however, that any election
-------- -------
for directors must be by ballot if demanded by any stockholder at the meeting
and before the voting has begun.
ARTICLE X
To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Corporation shall indemnify to the fullest extent permitted by the law, any
person made or threatened to be made a party, to any action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
the he or she, or his or her testator or intestate, is or was a director or
officer of the Corporation or any predecessor of the Corporation, or serves or
served at any other enterprise as a director or officer at the request of the
Corporation or any predecessor to the Corporation. Neither any amendment nor
repeal of this Article, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
-16-
<PAGE>
ARTICLE XII
The name and mailing address of the incorporator are:
Pamela R. Contag, Ph.D.
860 Atlantic Avenue
Alameda, CA 94501
[Remainder of page intentionally left blank]
-17-
<PAGE>
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying,
under penalties of perjury, that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 6th day of
November, 2000.
s/Pamela Reilly Contag
________________________________________
Pamela R. Contag, Ph.D.,
Co-Chief Executive Officer and President
[SIGNATURE PAGE TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF XENOGEN
CORPORATION]
-18-
<PAGE>
EXHIBIT B
[CONFIDENTIAL TREATMENT REQUESTED.
CERTAIN PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED
AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION.]
STRATEGIC RELATIONSHIP AGREEMENT
--------------------------------
THIS AGREEMENT made as of the _____ day of November, 2000 (the "Effective
Date").
BETWEEN:
MDS INC., a body
corporate incorporated pursuant to the
laws of Canada and having an office
in the City of Toronto, Ontario, Canada
("MDS")
-and-
DRUM ACQUISITION CORPORATION, a body
corporate incorporated pursuant to the
laws of Delaware and having an office
in the City of Alameda, California, USA.
("Merger Sub")
-and-
XENOGEN CORPORATION, a body
corporate incorporated pursuant to the
laws of Delaware, and having an office
in the City of Alameda, California, USA
("Xenogen")
<PAGE>
-2-
WHEREAS MDS, Merger Sub and Xenogen, and certain other parties,
have entered into an agreement and plan of reorganization dated September __,
2000 (the "Merger Agreement") pursuant to which Merger Sub, a wholly-owned
subsidiary of Xenogen, has entered into a business combination transaction with
Chrysalis DNX Transgenic Sciences Corporation ("DNX"), an indirect wholly-owned
subsidiary of MDS;
AND WHEREAS MDS and its Affiliates, including MDS Pharma Services or
any other Affiliate of MDS designated by MDS ("MDS Pharma Services") have proven
technologies and skills as, among other things, a leading contractual research
organisation and a service provider in the field of transgenic technology
development;
AND WHEREAS the Parties wish to enter into an exclusive strategic
relationship whereby, among other things MDS Pharma Services shall be entitled
to use, existing and subsequently discovered or developed services, equipment
and technology of Xenogen and shall be entitled to an exclusive license and
access to certain Xenogen products, services and equipment in a specific field
of use;
NOW THEREFORE in consideration of entering into the Merger Agreement,
the sum of $1.00, and other good and valuable consideration, the receipt and
sufficiency of which the Parties, acknowledge, the Parties agree as follows:
Article 1 - Interpretation
--------------------------
1.1 This Agreement shall be governed by, and interpreted and enforced in
accordance with, the laws of the State of California (excluding any conflict of
laws, rule or principle which might refer such interpretation to the laws of
another jurisdiction).
1.2 Each Party shall do such acts and shall execute such further documents,
conveyances, deeds, assignments, transfers and the like, and will cause the
doing of such acts and will cause the execution of such further documents as are
within its power as any other Party may in writing at any time and from time to
time reasonably request be done and or executed, in order to give full effect to
the provisions of this Agreement.
1.3 The division of this Agreement into articles, sections, subsections and
schedules and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement. The
article, section, subsection and schedule headings in
<PAGE>
-3-
this Agreement are not intended to be full or precise descriptions of the text
to which they refer and are not to be considered part of this Agreement. All
uses of the words "hereto", "herein," "hereof," "hereby" and "hereunder" and
similar expressions refer to this Agreement and not to any particular section or
portion of it. References to an Article, Section, Subsection or Schedule refer
to the applicable article, section, subsection or schedule of this Agreement.
The use of the word "including" or related expressions shall be deemed to mean
"including without limitation".
1.4 In this Agreement, words in the singular include the plural and vice-versa
and words in one gender include all genders.
1.5 If any action is required to be taken pursuant to this Agreement on or by
a specified date which is not a business day, then such action shall be valid if
taken on or by the next succeeding business day and business day means a day on
which banks are open for business in Toronto and in California.
1.6 Nothing contained in this Agreement shall be construed to imply a joint
venture, partnership, or principal-agent relationship between the Parties; and
no Party by virtue of this Agreement shall have the right, power, or authority
to act or create any obligation, express or implied, on behalf of any other
Party. Neither shall this Agreement be construed to create rights, express or
implied, on behalf of or for the use of any Party, aside from MDS, Merger Sub
and Xenogen. None of MDS, Merger Sub or Xenogen shall be obligated, separately,
or jointly, to any third parties by virtue of this Agreement.
1.7 This Agreement shall inure to the benefit of each of the Parties and their
respective successors.
1.8 In this Agreement, the following terms have the meanings indicated:
(a) "Affiliate" shall mean any corporation or other entity which is
directly or indirectly Controlling, Controlled by or under the common
Control of a Party hereto for so long as such Control exists. For the
purpose of this Section, "Control" shall mean the direct or indirect
ownership of at least fifty percent (50%) of the outstanding shares or
other voting rights of the subject entity to elect directors, or if
not meeting the preceding, any entity owned or Controlled by or owning
or Controlling at the maximum Control or ownership right permitted in
the country where such entity exists.
<PAGE>
-4-
(b) "Contractual Research Organization" or "CRO" means a Person (as
defined below) which performs Preclinical Studies for third party CRO
Customers (both as defined below) directed to the discovery and
development of therapeutic pharmaceutical and/or biotechnology
products.
(c) "Control," "Controls," "Controlled," or "Controlling" shall mean
(except with respect to "Affiliate") possession of the ability to
grant the licenses or sublicenses as provided herein without violating
the terms of any license agreement or other arrangement with any third
party.
(d) "CRO" Customers" means Persons whose primary line of business is the
development of pharmaceutical and/or biotechnology products and which
have contracted with a CRO for the performance of some or all
Preclinical Studies for a particular product.
(e) "Field" means the performance of Preclinical Studies for third party
CRO Customers directed to the discovery and development of therapeutic
pharmaceutical and/or biotechnology products.
(f) "Intellectual Property" means, collectively, all intellectual property
rights of whatsoever nature, kind or description including:
(i) all trade-marks, service marks, trade-mark and service mark
registrations, trade-mark and service mark applications, rights
under registered user agreements, trade names and other trade-
mark and service mark rights;
(ii) all copyrights and applications therefor, including all computer
software and rights related thereto;
(iii) all inventions, patents, patent applications and patent rights
(including any patents issuing on such applications or rights),
as well as any divisions, continuations, continuations-in-part,
reissues, reexaminations, patents of addition, extensions or
other governmental actions which extend any of the subject
matter of the foregoing patent applications or patents, and any
substitutions, confirmations, registrations or revalidations of
any of the foregoing, in each case, which is owned or
Controlled, in whole or part, by license, assignment or
otherwise, to the extent that the owner or licensee has the
right to license or sublicense any of the foregoing, and subject
to any limitations of any such license or sublicense;
(iv) all trade secrets and proprietary information;
<PAGE>
-5-
(v) all industrial designs and registrations thereof and
applications therefor;
(vi) all renewals, modifications, developments and extensions of any
of the items listed in clauses (i) through (v) above; and
(vii) all patterns, plans, designs, research data, other proprietary
know-how, processes, methods, drawings, technology, inventions,
computer programs, algorithms, data bases, formulae,
specifications, performance data, quality control information,
unpatented blue prints, flow sheets, equipment and parts lists,
instructions, manuals, records and procedures, and all licenses,
agreements and other contracts and commitments relating to any
of the foregoing.
(g) "Normal Commercial Purposes" means fee-for-service contracts, or
research and development collaborations or contracts, whether stand
alone or in conjunction with a broader agreement, in all cases entered
into between MDS or MDS Pharma Services and a third party CRO Customer
in respect of an application within the Field.
(h) "Party" means any one of Xenogen, Merger Sub and MDS, and "Parties"
means all of them.
(i) "Person" means an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, joint venture, trust, body corporate, and a natural
person in his or her capacity as trustee, executor, administrator, or
other legal representative.
(j) "Preclinical Studies" means studies performed in the drug development
process of a lead compound or biological product not involving the
introduction of a subject compound or biological product into humans
(e.g., the dosing of a human patient in clinical trials). Without
limiting the generality of the foregoing, preclinical studies consist
of: the selection, evaluation and qualification of putative drugs
and/or biological products for therapeutic uses; and pharmacokinetic
and pharmacodynamic studies of the pharmacological effects and
mechanism(s) of action of the drug in animals, and information on the
absorption, distribution, metabolism, and excretion of the drug, if
known, and, for purposes of certainty include animal studies occurring
after first-in-man administration. Preclinical studies specifically
exclude any and all toxicology testing, whether in vitro or in vivo.
<PAGE>
-6-
(k) "Xenogen Products and Services" means all services, services-related
products and equipment of Xenogen having applications in the Field,
whether now existing or which Xenogen may make, discover, develop,
acquire or have the right to license as provided for herein, including
any and all improvements thereof, during the term of this Agreement
which have applications for CRO Customers during the Development
Period, as listed in Schedule "A", attached hereto and which shall be
updated from time-to-time to reflect additions and deletions.
(l) "Xenogen Technology" means (i) all patents and patent applications
owned or controlled by Xenogen that relate to the practice of in vivo
imaging as claimed in U.S. Patent No. 5,650,135; (ii) all divisions,
substitutions, continuations, and continuation-in-part applications
of(i); (iii) all foreign counterparts of any of the preceding; (iv)
all patents issuing on any of the preceding, including reissues,
reexaminations and extensions; and (v) all future patents and patent
applications relating to the practice of in vivo imaging, described in
Schedule "B", attached hereto and which shall be updated from time-to-
time to reflect additions and deletions. For purposes of clarity, the
Parties acknowledge that this definition refers to a method of
practice only, and does not include any tangible or intangible
products or services (e.g., software, hardware, biological materials).
Section 2 - License Grant
-------------------------
2.1 Subject to the terms and conditions of this Agreement, Xenogen hereby
grants MDS and its Affiliates a royalty-free, exclusive license (in the form
provided at Schedule "C"), without the right to sublicense, during the term of
this Agreement to use and market the Xenogen Technology in and for the Field.
For purposes of this Agreement, "exclusive" shall mean that MDS and its
Affiliates shall be the only Contractual Research Organization to which Xenogen
shall grant a license to use the Xenogen Technology in the Field.
Notwithstanding the foregoing, MDS may, upon written request by Xenogen, waive,
in writing and at its sole discretion, such exclusivity for specific Xenogen
Technology, on a case by case basis. No such waiver shall affect MDS's right to
otherwise rely on the exclusivity provision contained in this Section. It is
expressly acknowledged by Xenogen that this license may extend to MDS entering
into joint ventures, "collaborative discovery programs", or similar
relationships of any sort, provided that the Xenogen Technology may not be used
outside the Field. MDS acknowledges, however, that the license granted in this
Section does not include any rights to modify Xenogen Products and Services or
Xenogen Technology, or create any derivative works thereof.
<PAGE>
-7-
2.2 It is acknowledged that Xenogen shall promptly advise MDS of all new
Xenogen Technologies discovered or developed by Xenogen after the date hereof
during the term of this Agreement, and such new technologies shall be included
within Xenogen Technology for purposes of this Agreement.
2.3 Notwithstanding Section 2.1, should any inventions and/or Intellectual
Property in Xenogen Products and Services or Xenogen Technology arise during the
course of or as a result of this Agreement, title to all such inventions and/or
Intellectual Property made solely by MDS's employees or its agents without
inventive contribution by Merger Sub's or Xenogen's employees or agents may be
owned by MDS, and, as between the Parties, Merger Sub or Xenogen shall hold such
ownership in all other cases. In the event that MDS holds ownership rights as
described in the foregoing sentence, MDS hereby grants to Xenogen a sole,
irrevocable, worldwide, royalty-free license under any such invention or
Intellectual Property, with the right to grant and authorize sublicenses (except
within the Field as long as MDS retains its exclusivity hereunder), to make,
have made, use, sell, offer for sale and import such invention or Intellectual
Property in connection with Xenogen Products and Services and Xenogen Technology
during the term of this Agreement, provided that following the termination or
expiration of this Agreement, such license shall survive.
2.4 Except as expressly provided herein, no right, title or interest in or to
the Xenogen Technology is granted by Xenogen. MDS acknowledges that this
Agreement does not grant MDS or its Affiliates any express or implied license to
Xenogen Products and Services other than: i) the right to practice the method of
in vivo imaging as expressly granted in Section 2.1; or ii) as may be acquired
through the separate acquisition or license of Xenogen Products and Services
pursuant to Section 3 below. Further, notwithstanding the rights granted in
Section 2.1 above, Xenogen reserves the right to use, market, distribute, and
license, directly or indirectly, and nothing in this Agreement will prevent
Xenogen from using, the Xenogen Products and Services or Xenogen Technology to
make, have made, develop, sell, license, distribute and/or market new products
and/or services; except, for purposes of certainty, it will not license the
Xenogen Technology to any Contractual Research Organization for use within the
Field as long as MDS's license remains exclusive hereunder. Xenogen further
reserves the right under all its Intellectual Property rights to make, have
made, use, copy, modify, have modified, create derivative works of, have created
derivative works of, demonstrate, maintain, and support the Xenogen Products and
Services or Xenogen Technology, and the right to license the foregoing rights.
<PAGE>
-8-
2.5 MDS acknowledges that, subject to the exclusive license granted in Section
2.1, Xenogen reserves the right to use, market, distribute, and license,
directly or indirectly, the Xenogen Products and Services or Xenogen Technology
to any third party, including third party CRO Customers, for any and all
purposes outside the Field, and nothing in this Agreement will prevent Xenogen
from doing so.
Section 3 - Preferred Terms
---------------------------
3.1 As partial consideration for MDS entering into the Merger Agreement and
for adding value through increased market exposure of Xenogen Products and
Services and Xenogen Technology, MDS and its Affiliates may purchase or license
Xenogen Products and Services at Xenogen`s regularly published or quoted
commercial prices for North America, less a discount of ***, in all cases only
for its Normal Commercial Purposes and use in the Field. *** All of the
foregoing shall be accomplished pursuant to Xenogen's then-existing purchase
order forms and license agreements, the terms of which shall govern the subject
transactions; provided that those terms include the discount granted by this
Section 3.
3.2 It is acknowledged that Xenogen shall promptly advise MDS of all new
Xenogen Products and Services discovered or developed by Xenogen or its
Affiliatesafter the date hereof during the term of this Agreement, and such new
products and services shall be included within Xenogen Products and Services for
purposes of this Section 3. It is further acknowledged that, after the Effective
Date, Xenogen Products and Services will include products and services from
Xenogen's Controlled Affiliates' which are intended for use in conjunction with
Xenogen Services and Products for use in the Field.
Section 4 - Strategic Relationship Obligations
----------------------------------------------
3.3 As partial consideration for the license and preferred terms granted by
Xenogen in Sections 2 and 3 herein, and as MDS's obligation under the strategic
relationship entered into with Xenogen, during the Initial Term and the Second
Term (as defined in Section 7.1 below) MDS agrees, and will cause its
Affiliates, including MDS Pharma Services, to satisfy following marketing
obligations.
a) Introduce, and attempt to use, the Xenogen Products and Services and
Xenogen Technology as a preferred approach for Preclinical Testing;
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
-9-
b) Consent to Xenogen's use of MDS as a customer reference which
potential Xenogen clients may contact;
c) Reasonably participate in Xenogen's public relations efforts,
including, but not limited to, the attendance and participation of an
executive speaker at Xenogen's seminars and trade show exhibits;
d) Support Xenogen's product improvement efforts by actively
participating in product reviews and testing.
Should MDS fail to perform any of the foregoing obligations, Xenogen's
sole remedy shall be to provide MDS written notice thereof and, if not cured
within thirty (30) days thereafter, the Parties shall negotiate and reach
agreement on substitute marketing obligations. However the failure to agree upon
such substitute marketing obligations shall not constitute a material breach of
this Agreement.
3.4 As for Merger Sub's obligation under the strategic relationship entered
into with MDS, any and all royalties payable pursuant to the presently existing
licensing agreements of DNX listed in Schedule "D", shall, as of the date
hereof, be payable from the respective licensees to MDS Pharma Services. DNX and
Merger Sub shall jointly send a letter in mutually agreed form to the licensees
to so advise them. To the extent Merger Sub or any its affiliates receive any
such royalty payments, Merger Sub shall forthwith forward same, without
deduction except for third-party licensor fees due on such royalty payments, to
MDS Pharma Services and notify the licensee that all future royalty payments
shall be payable directly to MDS Pharma Services. For purposes of certainty, all
non-royalty payments, including milestone payments, license retainer fees and
animal transfer fees, payable pursuant to such presently existing agreements
shall be payable to Merger Sub, and MDS Pharma Services will use its reasonable
best efforts to obtain any and all consents required in order to permit this.
Subsequent to the Effective Date, the Parties will mutually agree on specific
practices to be undertaken pursuant to this Section.
Section 5 - Confidentiality
---------------------------
5.1 Except as expressly provided herein, the Parties agree that, for the term
of this Agreement and for five (5) years thereafter, the receiving Party shall
not publish or otherwise disclose and shall not use for any purpose any
information furnished to it by the other Party hereto pursuant to this Agreement
which if disclosed in tangible form is marked "Confidential" or with other
similar designation to indicate its confidential or proprietary nature or if
disclosed orally is indicated orally to be confidential or proprietary by the
party disclosing such information at the
<PAGE>
-10-
time of such disclosure and is confirmed in writing as confidential or
proprietary by the disclosing party within a reasonable time after such
disclosure (collectively, "Confidential Information"). The receiving Party shall
use the same standard of care in safeguarding the disclosing Party's information
as the receiving Party uses for its own similarly sensitive information.
Notwithstanding the foregoing, Confidential Information shall not include
information to the extent that such information, in each case is demonstrated by
written documentation:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure hereunder;
(b) was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving Party hereunder;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or
(d) was subsequently lawfully disclosed to the receiving Party by a
person other than a party or developed by the receiving Party without
reference to any information or materials disclosed by the disclosing
Party.
5.2 Notwithstanding the provisions of Section 5.1 above, each Party hereto may
use and disclose the other Party's Confidential Information to the extent such
disclosure is reasonably necessary to exercise the rights granted to or retained
by it under this Agreement, in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable governmental
regulations, submitting information to tax or other governmental authorities
(including regulatory authorities), provided that if a party is required by law
to make any such disclosure of the other Party's Confidential Information, to
the extent it may legally do so, it will give reasonable advance notice to the
latter Party of such disclosure and, save to the extent inappropriate in the
case of patent applications or otherwise, will use its reasonable efforts to
secure confidential treatment of such Confidential Information prior to its
disclosure (whether through protective orders or otherwise). The receiving Party
will ensure that its employees, consultants, directors, and other
representatives or agents have executed a confidentiality agreement no less
stringent than the provisions of this Section 5.0 prior to their access to such
Confidential Information. If the party whose Confidential Information is to be
disclosed has not filed a patent application with respect to such Confidential
Information, it may require the other
<PAGE>
-11-
Party to delay the proposed disclosure (to the extent the disclosing Party may
legally do so), for up to ninety (90) days, to allow for the filing of such an
application.
5.3 The provisions of this Agreement, including all schedules attached, shall
be held confidential by the Parties and their respective employees, and shall
not be disclosed to any third parties without the consent in writing of the
Parties; provided, however, that the contents hereof may be disclosed without
such consent: (a) as required by applicable law; (b) in connection with the
enforcement of this Agreement; or (c) to such directors, officers, employees,
lawyers, accountants, other professional advisers, and lenders of a Party who
have a need to know such information.
5.4 Upon any termination of this Agreement, all of MDS's licenses hereunder
shall terminate, except that such licenses will continue with respect to MDS's
contractual obligations to CRO Customers to use Xenogen Technology for a maximum
period of six (6) months, unless a longer period is required under MDS' written
contractual obligations, but in no case to exceed twelve (12) months. Each Party
shall promptly return to the other Parties all Confidential Information received
from the other Parties (except one copy which may be retained for archival
purposes), and at Xenogen's election, MDS shall promptly destroy or return to
Xenogen all biological materials received pursuant to the terms of this
Agreement and any derivatives, progeny or variants thereof, and provide Xenogen
written confirmation thereof.
Section 6 - Compliance with Regulations
---------------------------------------
The Parties agree at all times and at their own expense to (i) strictly
comply with all applicable laws, rules, regulations, governmental orders and
applicable codes of practice, now or hereafter in effect, relating to its
performance of this Agreement including those concerning environmental,
industrial safety, transportation and export issues, (ii) pay all fees and other
charges required by such laws, rules and regulations, codes and orders and (iii)
maintain in full force and effect all licenses, permits, authorisation,
registration and qualifications necessary to perform their obligations under
this Agreement. Each Party agrees to protect and fully defend and indemnify the
other Parties from any and all costs, claims, expenses, and damages resulting
from its breach of any such laws, by-laws, regulations and guidelines, except to
the extent such costs, claims, expenses, or damages are due to the gross
negligence or wilful misconduct of the Party seeking indemnification.
<PAGE>
-12-
Section 7 - Term and Termination
--------------------------------
7.1 Subject to the following, the initial term of this Agreement shall be five
(5) years from the date hereof (the "Initial Term") and, subject to the
following, shall be automatically renewed for a term of a further consecutive
five (5) years (the "Second Term"). If not earlier terminated pursuant to the
provisions of this Section 7, then upon expiration of the Second Term and
subject to the mutual agreement of the Parties, this Agreement may be renewed
for successive twelve (12) month periods ("Renewal Terms"). However, in the
event that MDS and its Affiliates at any time after the Initial Term own less
than twenty-five percent (25%) of the number of shares of Xenogen that they
owned at the end of the Initial Term (the "Minimum Holding"), the Parties shall
renegotiate, in good faith, the terms of a non-exclusive license to Xenogen
Technology for use in the Field. In calculating the Minimum Holding, adjustment
shall be made to reflect appropriately the effect of any stock split, reverse
stock split, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change occurring after the Initial Term.
7.2 Notwithstanding Section 7.1, Xenogen and/or Merger Sub may terminate this
Agreement at any time during the Initial Term upon sixty (60) days written
notice (the "Default Notice") to MDS and compliance with Section 10 below in the
event of a material breach of Section 2 of this Agreement by MDS or its
Affiliates which is not cured within such notice period. For greater certainty,
the Section 11 dispute resolution mechanisms shall remain applicable to the
ultimate determination of whether a material breach has occurred, although
termination need not await the completion of such mechanisms. Following the
Second Term, Xenogen and/or Merger Sub may so terminate in the event of an
uncured material breach of any Section of this Agreement by MDS or its
Affiliates. The Default Notice shall specify in reasonable detail the material
breach alleged to have been committed by MDS or its Affiliates. In the event
that either Xenogen and/or Merger Sub, acting reasonably, believes that it will
suffer material or irreparable harm which can not be rectified by money damages,
the Default Notice shall so state, and Xenogen and/or Merger Sub may terminate
the Agreement immediately without awaiting the sixty (60) day written notice
period, and/or to commence proceedings for injunctive relief. The Parties agree
that, after the Initial Term, a material breach of a material separate agreement
entered into between MDS (and/or its Affiliates) and Xenogen or Merger Sub
pursuant to the terms herein, if not cured within such time as an opportunity to
cure is permitted, shall be deemed a material breach of this Agreement.
7.3 Notwithstanding Section 7.1, in the event of a material breach of this
Agreement by Xenogen and/or Merger Sub, MDS may deliver a written notice to
Xenogen or Merger Sub, as
<PAGE>
-13-
appropriate, setting out in reasonable detail the material breach alleged to
have been committed by Xenogen or Merger Sub. In the event that Xenogen or
Merger Sub, as appropriate, does not cure such material breach within sixty (60)
days of such notice and after compliance with Section 10 below, MDS may commence
the dispute resolution mechanisms provided for in Sections 11 of this Agreement,
terminate this Agreement, or, notwithstanding Section 11, at MDS's sole option,
if MDS, acting reasonably, believes it will suffer material or irreparable harm
which can not be rectified by money damages, to commence proceedings for
injunctive relief.
7.4 Termination of this Agreement for any reason shall not release any Party
from any liability which, at the time of such termination, has already accrued
to one of the other Parties or which is attributable to a period prior to such
termination nor preclude any Party from pursuing any rights and remedies it may
have hereunder or at law or in equity with respect to any breach of this
Agreement.
7.5 Notwithstanding the termination of this Agreement for any reason whatsoever,
the obligations of the Parties and the other terms set forth in the following
sections or subsections 2.3, 2.4, 2.5, 4, 5, 6, 7.4, 7.5, 8, 11 and 13 of this
Agreement, and the agreements contemplated by those sections, and any other
provisions of this Agreement intended by their nature to continue beyond the
termination of this Agreement will remain in full force and effect, enforceable
in accordance with their terms.
Section 8 - Representations and Warranties
------------------------------------------
8.1 MDS represents and warrants to Xenogen and Merger Sub that:
(a) this Agreement has been duly authorized, executed and delivered by MDS
and constitutes a legal, valid and binding obligation of MDS
enforceable in accordance with its terms except that the enforcement
thereof may be limited by bankruptcy, insolvency and other laws
affecting the enforcement of creditors' rights generally;
(b) none of the execution and delivery of, or the observance and
performance by MDS of, any covenant or obligation under this Agreement,
contravenes or results in, or will contravene or result in, a material
violation of, or a material default under (with or without the giving
of notice or lapse of time, or both), or in the acceleration of any
material obligation under: i) any applicable law; ii) any Intellectual
Property held by MDS; iii) the articles, by-laws, directors' or
shareholders' resolutions of MIX; or iv)
<PAGE>
-14-
any agreement, lease, mortgage, security document, obligation or
instrument to which MDS is a party, or by which it or its assets is
bound or affected;
(c) MDS is a corporation duly incorporated, continued or amalgamated and
organized, and is validly subsisting under the laws of Canada;
(d) all necessary consents, approvals and authorizations, which are
required for the consummation by MDS and of the transactions
contemplated by this Agreement have been obtained;
(e) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not breach,
violate or conflict with any instrument or agreement governing any of
the Intellectual Property used by MDS in the operation of its business;
and
(f) MDS has not previously granted, and will not grant during the term of
this Agreement, any right, license or interest that is in conflict with
the rights granted under this Agreement.
8.2 MDS's liability with respect to the representations and warranties
contained herein will survive the closing of the transactions and continue in
effect until two (2) years after the termination date.
8.3 Xenogen and Merger Sub jointly and severally represent and warrant to MDS
that:
(a) as of the Effective Date, this Agreement has been duly authorized,
executed and delivered by each of Xenogen and Merger Sub and
constitutes, or will constitute when executed, a legal, valid and
binding obligation of each of Xenogen and Merger Sub enforceable in
accordance with its terms except that the enforcement thereof may be
limited by bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally;
(b) as of the Effective Date, none of the execution and delivery of, or the
observance and performance by either of Xenogen or Merger Sub of, any
covenant or obligation under this Agreement, contravenes or results in,
or will contravene or result in, a material violation of or a material
default under (with or without the giving of notice or lapse of time,
or both) or in the acceleration of any material obligation under: i)
any applicable
<PAGE>
-15-
law; ii) any Intellectual Property held by Xenogen or Merger Sub; iii)
the articles, by-laws, directors' or shareholders' resolutions of
Xenogen or Merger Sub; or iv) any agreement, lease, mortgage, security
document, obligation or instrument to which Xenogen or Merger Sub is a
party, or by which it or its assets is bound or affected;
(c) as of the Effective Date, each of Xenogen and Merger Sub is a
corporation duly incorporated, continued or amalgamated and organized,
and is each validly subsisting under the laws of Delaware;
(d) as of the Effective Date, all necessary consents, approvals and
authorizations, which are required for the consummation by each of
Xenogen and Merger Sub and of the transactions contemplated by this
Agreement have been obtained; and
(e) as of the Effective Date, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby will not breach, violate or conflict with any instrument or
agreement governing any of the Intellectual Property used by either of
Xenogen or Merger Sub in the operation of its business; and
(f) as of the Effective Date, neither Xenogen and Merger Sub have
previously granted, and will not grant during the term of this
Agreement, any right, license or interest that is in conflict with the
rights granted under this Agreement.
8.4 The Parties' liability with respect to the representations and warranties
contained herein will survive until two (2) years after the termination date.
8.5 EXCEPT AS EXPRESSLY SET FORTH HEREIN, XENOGEN AND MERGER SUB EXPRESSLY
DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
WITH RESPECT TO THE XENOGEN PRODUCTS AND SERVICES AND MERGER SUB TECHNOLOGY,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, NONINFRINGEMENT
OF THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY, OR FITNESS FOR A
PARTICULAR PURPOSE.
8.6 IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY HERETO OR ANY
OTHER ENTITY FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, LOST PROFITS, OR ANY
OTHER SPECIAL, CONSEQUENTIAL, RELIANCE OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND
ARISING UNDER ANY THEORY OF LIABILITY WHETHER BASED IN CONTRACT, TORT (INCLUDING
NEGLIGENCE),
<PAGE>
-16-
OR OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN. THE PARTIES AGREE THAT
THIS SECTION 8.6 REPRESENTS A REASONABLE ALLOCATION OF RISK.
Section 9 - Notices
-------------------
All notices, requests, directions or other communications required or
permitted herein shall be in writing and shall be delivered to the Parties
hereto respectively as follows:
<TABLE>
<S> <C>
(a) if to MDS: MDS, Inc.
100 International Boulevard
Toronto, Ontario
M9W 6L6
Attention: Senior Vice-President, Strategic Initiatives and Investments
Telephone No.: (416) 213-4163
Facsimile No.: (416) 213-4222
(b) if to Merger Sub: Drum Acquisition Corporation
860 Atlantic Avenue
Alameda, California
94501, USA
Attention: President
Telephone No.: (510) 291-6100
Facsimile No.: (510) 291-6134
(c) if to Xenogen: Xenogen Corporation
860 Atlantic Avenue
Alameda, California
94501, USA
Attention: President
Telephone No.: (510) 291-6100
Facsimile No.: (510) 291-6134
(d) with a copy to: Wilson Sonsini Goodrich & Rosati
One Market Street, Spear Tower
San Francisco, California
94105, USA
Attention: Karen Dempsey, Esq.
Telephone No.: (415) 947-2000
Facsimile No.: (415) 947-2099
</TABLE>
<PAGE>
-17-
In order for any notices, requests, directions or other communications to
be effective they shall be delivered in person or sent by international express
delivery service, registered or certified air mail, return receipt requested,
postage prepaid, or by facsimile (confirmed by prepaid registered or certified
air mail letter or by international express delivery mail) (e.g., FedEx))
addressed to the Party for whom it is intended at the above mentioned address.
Such communications shall be deemed to have been properly served to the
addressee upon receipt of such written communications. Either Party may change
its address for notice by giving notice in the manner set out in this section.
Section 10 - Mutual Consultation
--------------------------------
The Parties hereto shall mutually consult each other in good faith to
amicably and smoothly resolve matters not set forth herein or for questions
involving the interpretation of this Agreement. Any dispute, controversy or
claim arising out of or relating to this Agreement (collectively referred to as
"Disputes") shall be attempted to be settled by the Parties, without litigation,
in good faith, by submitting each such Dispute to appropriate senior management
representatives of each Party in an effort to effect a mutually acceptable
resolution thereof.
Section 11 - Dispute Resolution
-------------------------------
11.1 Any Dispute (including, without limitation, validity, interpretation or
performance of this Agreement) between the Parties which can not be resolved by
the Parties pursuant to Section 10 on an amicable basis shall be submitted for
final and binding arbitration before a panel of 3 arbitrators, one selected by
MDS, one selected by Xenogen and Merger Sub and the third selected by the prior
two arbitrators. At least one of the arbitrators shall have knowledgeable and
experienced in the pharmaceutical and/or biotechnology industry. Any arbitration
hereunder shall be held at a mutually agreed upon location in the state of New
Jersey, unless the Parties otherwise agree to hold it elsewhere. The arbitration
shall be conducted pursuant to the Commercial Rules and Supplementary Procedures
for Large, Complex Disputes of the American Arbitration Association then in
effect. The Panel shall, in rendering its decision, apply the substantive law of
the State of California, without regard to its conflict of laws provisions,
except that the interpretation of and enforcement of this Section 11 shall be
governed by the U.S. Federal Arbitration Act. The U.N. Convention on the Sale of
Goods shall not apply to this Agreement. Neither Party shall initiate an
arbitration hereunder unless it has first attempted to resolve the matter in
accordance with Section 10 above.
<PAGE>
-18-
11.2 Each Party shall bear the cost of its own attorneys' and expert fees;
provided that the arbitrators may in their discretion award to the prevailing
Party the reasonable costs and expenses incurred by the prevailing Party in
connection with the arbitration proceeding. Any award with respect to late
payments due hereunder shall include interest at commercially reasonable rates
from the date such payments were due. The decision and/or award rendered by the
arbitrators shall be written, final and non-appealable and may be entered in any
court of competent jurisdiction. The costs of any arbitration, including
administrative fees and fees of the arbitrators, shall be shared equally by the
Parties, unless otherwise determined by the arbitrators. Each Party shall bear
the cost of its own attorneys' and expert fees; provided that the arbitrators
may in their discretion award to the prevailing Party the reasonable costs and
expenses incurred by the prevailing Party in connection with the arbitration
proceeding.
Section 12 - Assignment and Transferability
-------------------------------------------
12.1 No Party may assign any right, benefit or interest in this Agreement
without the written consent of the other Parties and any purported assignment
without such consent will be void; except that any Party may assign this
Agreement without the other Parties' consent to an entity that acquires
substantially all of the business or assets of such assigning Party, in each
case whether by merger, acquisition, or otherwise. In the event of an assignment
by Merger Sub or Xenogen, no intellectual property or technology owned or
controlled by the third party involved in such merger, acquisition, or otherwise
shall be included within Xenogen Technology or Xenogen Products and Services.
12.2 Other than an assignment in connection with a merger, acquisition, or other
reorganization transaction, no transfer of any right, benefit or interest in
this Agreement shall relieve such Party of or from:
(a) any of its obligations under this Agreement to the extent that such
obligations arose prior to such transfer; or
(b) any of its liabilities or obligations to third parties.
Section 13 - Indemnification
----------------------------
13.1 Each Party (the "Indemnifying Party") agrees to indemnify and save the
other Parties, its affiliates and directors, officers, employees, agents and
advisors (the "Indemnified Parties") harmless from and against any and all
losses (other than loss of profits), claims, actions, suits, proceedings,
damages, liabilities or expenses of whatsoever nature or kind, including
<PAGE>
-19-
investigation expenses and legal expenses on a solicitor (attorney) and client
basis incurred by the Indemnified Parties (any of the foregoing, a "Claim"), to
which the Indemnified Parties may become subject by reason of (i) the
Indemnified Party's use of the Xenogen Technology (with the exception of
Xenogen's use of the Xenogen Technology), or (ii) the exercise of any right
granted to the Indemnified Party pursuant to this Agreement; except, in either
case, to the extent that any such Claim results from the wilful misconduct, bad
faith or violation of any applicable law by the particular Indemnified Party.
Notwithstanding the foregoing, Xenogen shall have no liability for: (i) the use
of a prior version of any product or service provided by Xenogen if MDS was
provided with the current version at no charge; (ii) the use of any Xenogen
Technology or Xenogen Products and Services other than as set forth in its
accompanying documentation and as permitted by the terms of any agreement
providing for their use by MDS and/or its Affiliates; (iii) the modification of
the Xenogen Technology or Xenogen Products and Services by any party other than
Xenogen; or (iv) any infringement arising from the use of any Xenogen Technology
or Xenogen Products and Services in combination with products, services or
technology not provided by Xenogen.
13.2 A Party that intends to claim indemnification under this Article 13 (the
"Indemnitee") shall promptly notify the other Party (the "Indemnitor") in
writing of any Claim, in respect of which the Indemnitee intends to claim such
indemnification, and except with respect to Xenogen Technology, the Indemnitor
shall have sole control of the defense and/or settlement thereof. The indemnity
arrangement in this Article 13 shall not apply to amounts paid in settlement of
any action with respect to a Claim, if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably. The
failure to deliver written notice to the Indemnitor within a reasonable time
after the commencement of any action with respect to a Claim, if prejudicial to
its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 13 but the omission so to deliver
written notice to the Indemnitor shall not relieve the Indemnitor of any
liability that it may have to any Indenmitee otherwise than under this Article
13. Notwithstanding the foregoing, no Indemnitor shall enter into any agreement
which (i) extends or purports to exercise MDS's rights under the Xenogen
Technology beyond the rights granted pursuant to this Agreement, (ii) makes any
admission regarding (a) wrongdoing on the part of Merger Sub or Xenogen, or (b)
the invalidity, unenforceability or absence of infringement of any aspect or
element of Xenogen Technology without the prior written consent of Xenogen. The
Parties shall cooperate with each other in connection with any such claim, suit
or proceeding and shall keep each other reasonably informed of all material
developments in connection with any such claim, suit or proceeding.
<PAGE>
-20-
Section 14 -Waiver, Amendment, Modification
-------------------------------------------
Except as otherwise provided in this Agreement, any waiver, amendment or
other modification of this Agreement will not be effective unless in writing and
signed on behalf of all of the Parties, by their respective authorized
signatories.
Section 15 - Severability
-------------------------
If any provision of this Agreement is held to be unenforceable, this
holding will not affect the validity of the other provisions of this Agreement.
If any provision hereof should be held invalid, illegal or unenforceable by a
court or governmental agency of competent jurisdiction, the parties shall
negotiate in good faith a valid, legal and enforceable substitute provision that
most nearly reflects the original intent of the Parties and all other provisions
hereof shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the Parties hereto
as nearly as may be possible. Such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of such provision in
any other jurisdiction. Notwithstanding the foregoing, in the event a Party
hereto seeks to avoid a provision of this Agreement by asserting, or prompting
or otherwise cooperating with a third party or governmental agency with respect
to any assertion, that such provision is invalid, illegal or otherwise
unenforceable, the other Party shall have the right to terminate this Agreement
upon sixty (60) days' prior written notice to the asserting Party, unless such
assertion is eliminated and fully cured within such sixty (60) day period.
Section 16 - Force Majeure
--------------------------
No Party shall be considered in breach of this Agreement or in default of
its obligations hereunder if it fails to perform or observe any or all of the
terms of this Agreement resulting directly or indirectly from causes beyond the
reasonable control of such Party, such as but not limited to, acts of God, civil
or military authority, acts of the public enemy, war, riots, civil disturbances,
insurrections, accidents, explosions, fires, earthquakes, floods, strikes,
labour disputes, transportation embargoes, epidemics, acts of Government, its
agencies or officers, or any other legitimate cause beyond the reasonable
control of the Parties. In such case, the Party whose performance is affected or
is likely to be affected thereby, shall notify the other Parties of the
occurrence of such cause. If, as a consequence of such cause, performance by a
Party under this Agreement shall be prevented for a period longer than six (6)
months, then the other Parties shall have the right to cancel this Agreement.
<PAGE>
-21-
Section 17- Entire Agreement
----------------------------
This Agreement, including the Schedules hereto, and the Merger Agreement
constitute the complete and entire statement of all terms, conditions and
representations of the Agreement between MDS, Merger Sub and Xenogen with
respect to the subject matter herein.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
MDS INC.
Per: /s/ [ILLEGIBLE]
----------------------------
Authorized Signing Officer
DRUM ACQUISITION CORPORATION
Per:______________________________
Authorized Signing Officer
XENOGEN CORPORATION
Per:______________________________
Authorized Signing Officer
<PAGE>
-21-
Section 17- Entire Agreement
----------------------------
This Agreement, including the Schedules hereto, and the Merger Agreement
constitute the complete and entire statement of all terms, conditions and
representations of the Agreement between MDS, Merger Sub and Xenogen with
respect to the subject matter herein.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
MDS INC.
Per: /s/ [ILLEGIBLE]
----------------------------
Authorized Signing Officer
DRUM ACQUISITION CORPORATION
Per:/s/ Pamela Reilly Contag
------------------------------
Authorized Signing Officer
XENOGEN CORPORATION
Per:/s/ Kevin J. Birtchnell
------------------------------
Authorized Signing Officer
<PAGE>
Schedule "A"
Xenogen Products and Services
-----------------------------
. Tracking and monitoring of light emitting microoganisms and cell lines
. LP Transgenic Animals
. R&D Collaborations and FTE reimbursement for development of bioluminescent
reporter applications and other transgenic technology development (promoter
systems, etc.) for drug development
. Contract R&D - FTE reimbursement for gene function determination and target
selection based upon transgenic/KO/phenotyping capabilities integrated with
light emitting technology (expanded Pfizer type programs)
. Contract Research - Fee based transgenic/KO model development and transgenic
mouse and rat production (non-Light Producing Transgenic Animals ("LPTA"
and LPTA animals).
. Screening of potential lead compounds in transgenic animal models
. Animal Sales- LPTA and non-LPTA transgenic animals
. Bioware(TM)
. Imaging Equipment Sales/Leases
<PAGE>
Schedule "B"
Xenogen Technology
------------------
. Real time in-vivo technology enabling the detection of fluorescent or
bioluminescent markers, allowing non-invasive visualisation and tracking of
the markers to monitor biological processes including the effects of
treatment with chemical entities, including detection, display, analysis and
interpretation (concerning the method only, and not including biological
products, hardware or software necessary or useful for the practice of such
technology).
. Real time, non-invasive detection of gene expression (LPTA animals),
including detection, display, analysis and interpretation (concerning the
method only, and not including biological products, hardware or software
necessary or useful for the practice of such technology).
<PAGE>
Schedule "C"
Form of Technology License
--------------------------
<PAGE>
Schedule "D"
Royalty Agreements
------------------
Tg. Prod. (Bioreactor) Licensees:
---------------------------------
Genzyme Transgenics 2/l/90 2/l/91
GenPharm Intl./Medarex 1/1/91 l/1/92
Nextran/Baxter Healthcare 8/29/94
Pharmaceutical Protein Holdings 5/9/94 l/3l/95
Pharming BV 7/l/97 7/l/98
<PAGE>
EXHIBIT C
<PAGE>
United States Patent [19] [11] Patent Number: 4,873,191
Wagner et al. [45] Date of Patent: Oct. 10, 1989
--------------------------------------------------------------------------------
[54] GENETIC TRANSFORMATION OF ZYGOTES
[75] Investors: Thomas E. Wagner, Athens, Ohio;
Peter C. Hoppe, Bar Harbor, Me.
[73] Assignee: Ohio University, Athens, Ohio
[21] Appl. No.: 897,666
[22] Filed: Aug 18, 1986
Related U.S. Application Data
[63] Continuation of Ser. No. 607,754, May 4, 1984, abandoned, which is a
continuation of Ser. No. 273,239, Jun. 12, 1981, abandoned.
[51] Int. Cl./4/ ................... C12N 15/00; C12N 1/00;
C12N 5/00
[52] U.S. Cl. ...................... 435/172.3; 435/172.1;
435/317.l; 435/320; 435/240.2; 935/53;
935/70; 800/1
[58] Field of Search ............. 435/172.3, 240.2, 172.1;
800/1
[56] References Cited
PUBLICATIONS
Gordon et al, PNSA USA, vol. 77, pp. 7380-7384, Dec. 1980.
Wigler et al, Cell, vol. 16. pp. 777-785, Apr. 1979.
Jahner et al, Nature, vol. 287, pp. 456-458 (Oct. 1980).
Jacnish et al, PNAS, vol. 71, pp. 1250-1254 (Apr. 1974).
Lacy et al, Cell, vol. 18, pp. 1273-1283 (Dec. 1979).
Lacy et al, Cell, vol. 21, pp. 545-553 (Sep. 1980).
Hardison et al, Cell, vol. 18, pp. 1285-1297 (Dec. 1979).
Wagner et al, PNAS USA, vol. 78, pp. 6376-6380 (Oct. 1981).
Brinster, J. Exp. Med., vol. 140, pp. 1049-1056 (1974).
Mintz et al, PNSA USA, vol. 72, pp. 3585-3589 (1975).
Pafaioannou et al, Nature, vol. 258, pp. 69-73 (1975).
Pellicer et al, PNSA USA, vol. 77, pp. 2098-2102 (1980).
Watanabe et al, PNSA USA, vol. 75, pp. 5113-5117 (1978).
Illimenses et al, PNSA USA, vol. 75, pp. 1914-1981 (1978).
Jacnisch, PNAS USA, vol. 73, pp. 1260-1264 (1976).
Mulligan et al, Nature, vol. 277, pp. 108-114, Jan. 11, 1979.
Goeddel et al, Nature, vol. 281, pp. 544-548, Oct. 18, 1979.
Cline et al, Nature, vol. 284, pp. 422-425, Apr. 3, 1980.
Wigler et al, Cell, vol. 11, pp. 223-232 (1977).
Wigler et al, Cell, vol. 14, pp. 725-731 (1978).
Wigler et al, PNSA USA, vol. 76, pp. 1373-1376 (1979).
Capecchi et al, Cell, vol. 22, pp. 479-488 (1980).
Gordon, J. Exptl. Zoology, 228: 313-324 (1983).
Brinster, Cell, 27: 233-31 (Nov. 1981).
Harbers et al, Cell., 27: 233-231 (Nov. 1981).
Constantini and Lacy, Nature, 294: 92-14 (Nov. 1981).
Primary Examiner--Alvin E. Tanenholtz
Attorney, Agent or Firm--Iver P. Cooper; Donald G. Leavitt
[57] ABSTRACT
Genetic transformation of a zygote and the embryo and mature organism which
result therefrom is obtained by placing or inserting exogenous genetic material
into the nucleus of the zygote or into any genetic material which ultimately
forms at least a part of the nucleus of the zygote. It is preferred that the
exogenous genetic material be added to a pronuclei of the zygote and is
particularly preferred that it be added to the male pronecleus of the
zygote. Thereafter, the zygote is allowed to undergo differentiation and
development into the organism. The genotype of the zygote and the organism which
results therefrom will include the genotype of the exogenous genetic material
and the exogenous genetic material will be phenotypically expressed.
The invention can be utilized in a variety of ways including, for example,
animal and plant breeding to modify or create new species, it can be used in
epigenetics and in the understanding and treatment of genetic diseases.
7 Claims, No Drawings
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED. CERTAIN PORTIONS OF THIS
AGREEMENT HAVE BEEN REDACTED AND SEPARATELY FILED WITH THE COMMISSION]
LICENSE AGREEMENT
-----------------
This Agreement made this 13th day of June, 1985 between the Ohio
University, a body politic incorporated under the laws of the State of Ohio
having its principal office at Athens, Ohio 45701 (hereinafter "Licensor"), and
Embryogen, Inc., a corporation under the laws of the State of Ohio having its
principal office at One President Street, Athens, Ohio 45701 (hereinafter
"licensee").
WHEREAS, Licensor and Licensee have entered into a License Agreement
dated November 1, 1984, which granted a nonexclusive license to Licensee for the
purpose of developing and commercializing the technology embodied in a patent
application, U.S. Serial No. 273.239, filed June 12, 1981, entitled Genetic
Transformation of Zygotes, and more specifically described as embryonic nuclear
insertion gene transfer technology (hereinafter referred to as the "Invention");
WHEREAS, Licensor and Licensee intend to terminate the November 1,
1984 License Agreement and enter into this Agreement in lieu thereof;
WHEREAS, Licensor desires to grant an exclusive license to Licensee,
subject to a certain limited license heretofore granted to Genetic Engineering
(hereinafter referred to as the "Genetic Engineering License"), and subject to
certain terms and conditions set forth below, for the purpose of developing the
technology claimed in the patent application for commercial purposes; and
WHEREAS, Licensee desires to obtain an exclusive license from
Licensor, excluding the rights granted under the Genetic
<PAGE>
Engineering License and subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and the sum of $10.00 paid by Licensee to Licensor,
the receipt of which is hereby acknowledged, the parties hereto agree as
follows:
A. LICENSOR'S AND LICENSEE'S RIGHTS.
1. License. The Licensor grants to the Licensee the exclusive,
-------
nontransferable right and license to manufacture, use, market, sell, and
otherwise commercialize the Invention and its improvements throughout the world.
Such license includes the right to grant sublicenses upon terms consistent with
this Agreement. The exclusive right and license herein granted shall apply to
all inventions, improvements, patent applications, letters patent, trade
secrets, know-how or proprietary information which the Licensor now owns or
controls, or hereafter shall own or control, relating to the Invention,
including the patent application, U.S. Serial No. 273.239, filed June 12, 1981,
entitled Genetic Transformation of Zygotes.
2. Exclusion. The exclusivity of this license is subject to the rights
---------
granted in the Genetic Engineering License, a copy of which is available for
inspection at the offices of Licensor. This exclusion shall apply to only such
rights as are granted therein and Licensee shall have all other rights for its
exclusive use and employment.
3. Improvements. Should Licensor make any improvements in the Invention
------------
or the manner of using the same, it is hereby agreed that Licensee shall be
entitled to use the same with all
<PAGE>
rights which are hereby granted with respect to the Invention. The term,
"improvements", shall mean all modifications, enhancements and changes in or
with respect to the Invention, including the manufacture, use and the
application of the Invention.
4. Royalties.
---------
(a) Licensee shall pay to Licensor the following royalty payments:
(i) A royalty equivalent to * * * of the net sales made, if any,
by Licensee on any product produced from Licensee's use of the Invention
referred to above for the term of this Agreement; and
(ii) A royalty equivalent to * * * of the royalties, rents, fixed
payments or other payments actually received, if any, by Licensee, under
licenses, sublicenses, and distribution, marketing, or exploitation agreements
with others regarding the Invention and any products produced therefrom.
(b) "Net Sales" shall refer to the invoice price and dollars charged
by Licensee for all products sold using the information contained in the
Invention which is the subject matter of this Agreement, excluding the
following:
(i) Any common carrier charge for transportation of said
product, to the extent included in such invoice price as a separately stated
charge;
(ii) Credit given or allowances made by Licensee on account of
returns, replacement, defects or renegotiation of the invoice price of the
product sold hereunder;
(iii) Any sales, excise, use or ad valorem taxes
* * * CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
and any direct governmental charges assessed on the manufacture, sales or
delivery of said product and included in such invoice price as a separately
stated charge;
(iv) Any price paid by any subsidiary or affiliate controlled by
Licensee, if said subsidiary or affiliate purchased the product; and
(v) Any insurance, packing charges, rate discounts, normal and
customary trade, cash, and quantity discounts actually allowed, or commissions
to local or foreign agents to the extent that they are separately stated on the
invoice.
(c) "Payments actually received" shall mean cash received or funds
deposited to the account of Licensee in which Licensee has an unrestricted right
of access and right to use the funds so paid.
(d) Royalties shall be due and payable annually on or before April 30
for the previous fiscal year (December 31) and Licensee agrees to render with
each royalty payment a written statement setting forth the total net sales and
payments actually received that are subject to the aforesaid royalty.
(e) Licensee shall keep, and cause to be kept, detailed accurate
records and books of accounts showing the information necessary for accurate
determination of royalties to be paid under this Agreement. Licensee agrees to
allow Licensor and its representatives to make reasonable inspections and
examinations of Licensee's operation, books and records as they relate to this
particular license, but no more than once per year.
<PAGE>
5. Disclosure. Promptly upon request by Licensee, Licensor shall fully
----------
disclose to Licensee all available information concerning the practice of the
Invention.
B. PATENT APPLICATION AND USE OF THE LICENSE
1. Patent Prosecution. Licensor agrees to prosecute domestic and
------------------
foreign patent applications at its expense concerning the Invention and any
improvements hereto licensed to Licensee by Licensor pursuant to this Agreement.
2. Right to Sublicense. Licensee shall have the right to sublicense
-------------------
any of its rights granted hereunder to any person, firm or corporation
wheresoever situated.
3. Marketing Disclosure. From time to time, Licensee agrees to consult
--------------------
with Licensor concerning the plans relating to the proposed marketing of the
subject matter of the Invention and to inform Licensor as to the progress being
made in the development for the ultimate commercial exploitation of the
Invention.
4. Assignment. The Licensee shall not have the right to assign this
----------
Agreement without the prior written consent of the Licensor, unless such
assignment shall be to an entity in which Licensee owns a controlling interest.
C. LICENSOR'S RESERVED RIGHTS.
Licensor reserves the right to continue research and development of
the Invention, including assigning research rights and engaging in other funded
research regarding the Invention and the subject matter of the Invention.
Licensor shall not commercialize, sell, assign or otherwise transfer any right
or information regarding the Invention for the purpose of commercial
-5-
<PAGE>
practice of the Invention without the prior written consent of Licensee, which
consent may be withheld for any reason whatsoever. Licensor shall prevent the
disclosure of trade secrets and other proprietary information regarding the
Invention and it shall require any person, firm or corporation to whom it shall
make an authorized disclosure to enter into a confidentiality agreement in form
satisfactory to Licensee.
D. TERM
1. Events of Termination. This Agreement shall continue until the
---------------------
expiration of the last patent on the Invention and its improvements, subject to
the following:
(a) The Invention shall enter the public domain due to any reason
whatsoever;
(b) In the event of default or the breach of any term or condition of this
Agreement by the Licensee, the Licensor may terminate this Agreement on 90 days
written notice provided that the Licensee shall have a period of 90 days from
the date of receipt of such notice within which to cure any default or breach.
In the event such default or breach is cured, the termination shall be withdrawn
by the Licensor;
(c) In the event of default or breach by Licensor, the same provisions
shall apply as for the Licensee in the foregoing subparagraph.
2. Termination Procedure. Upon termination of this Agreement for any
---------------------
cause, the Licensee shall duly account to the Licensor and shall transfer to
Licensor all rights which it may possess and sublicenses, letters patents,
inventions, trade names, and trademarks relating to the Invention and
improvements
<PAGE>
thereto.
3. Effects of Termination. In the event of termination of this Agreement,
----------------------
the following shall occur:
(a) Unless otherwise prohibited by law, upon the termination of this
Agreement, Licensee shall have the right to complete any and all contracts for
the sales of products containing the Invention or improvements that it may have
upon its book or that it has become obligated for, and Licensee shall pay the
royalties as herein provided; provided that all contracts and sales are
completed within six (6) months after the termination of this Agreement;
(b) Licensee shall provide in any sublicense of the rights granted in
this Agreement that, upon the request of Licensor, Licensee shall have the right
and power to assign, and shall forthwith assign to Licensor all rights, title
and interest in, to and under the sublicense agreement between Licensee and its
sublicensees and that after any such assignment Licensor shall be entitled to
the royalties and other compensation payable by the sublicensees pursuant to the
terms of the sublicense and Licensor shall be subrogated to the rights and
liabilities of Licensee. In the event such sublicense grants rights to other
inventions and improvements owned or controlled by other persons, firms or
corporations in addition to the rights to the Inventions and improvements
granted hereunder, Licensor shall only be assigned a share of the compensation
payable under such sublicense. Such share shall be in proportion to the ratio of
the royalty amount Licensor would have received under this Agreement to the
total amount payable by Licensee to all
<PAGE>
licensors, including Licensor, as a result of Licensee's sublicense;
(c) Subject to the foregoing requirements regarding the completion of
contracts, upon the termination of this Agreement for whatever reason, Licensee
shall return any and all information in its possession regarding the Invention
or improvements;
(d) Due to the unique nature of the Invention and improvements and the
irreparable harm to the Licensor should Licensee continue to propagation of the
Invention or improvements embodied in the Licensee's products, Licensor is
authorized and entitled to obtain from any court of competent jurisdiction
restraining orders and preliminary and permanent injunctive relief, as well as
an equitable accounting of all profits and benefits arising out of any such
occurrence, prohibiting Licensee from thereafter using, raising, selling,
propagating or otherwise disseminating the Invention or improvements. The
restraining orders and injunctive relief shall allow Licensee to complete
certain of its sales contracts as provided heretofore and to require Licensee
and its sublicensees to immediately sell, if possible without further
propagation or use, all products containing the Invention or improvements or
otherwise assure Licensor that there will be no further use or propagation of
the Invention or improvements;
(e) At the option of Licensee, and in lieu of the foregoing equitable
remedy prohibiting the use and propagation of the Invention or improvements,
Licensee may elect to pay liquidated damages in the amount of two and one half
(2.5) times
<PAGE>
the present value of the stream of royalty income Paid to Licensor over a 5 year
period and amortized at a ten percent (10%) discount rate. The yearly royalty
payment for the stream of income shall be the highest yearly royalty for any one
calendar year during the preceding three (3) years. In such event, Licensee
shall continue to receive the rights and benefits granted under this Agreement.
E. INFRINGEMENT.
1. Licensee to Defend. The Licensee shall defend infringement suits
------------------
that may be brought against Licensee or Licensor on account of the manufacture,
use, or sale of-the-Invention and improvements thereto and when information is
brought to its attention indicating that others, without license, are unlawfully
infringing on the rights granted in this Agreement, Licensee shall prosecute
diligently the infringer.
2. Cooperation. Licensor shall cooperate and assist Licensee at the
-----------
request of Licensee in the defense of any infringement or the prosecution of any
unlawful infringer.
3. Expenses. Licensor shall, to the extent of the royalties to be
--------
received hereunder, indemnify Licensee for all expenses incurred for the defense
of any infringement suits that may be brought against Licensee or Licensor on
account of the manufacture, use, or sale of the Invention. Licensee shall pay
all expenses incurred with respect to prosecuting unlawful infringers of the
Invention.
F. NOTICE.
Any notice or payment required under this Agreement shall be addressed
as follows:
-9-
<PAGE>
If to Licensor:
The Edison Animal Biotechnology Center
The Ohio University
Attention: Director of the Center
Athens, Ohio 45701
If to Licensee:
Embryogen, Inc.
Attention: President
One President Street
Athens, Ohio 45701
G. MISCELLANEOUS
1. Benefit. This Agreement shall be binding upon the parties, their
-------
successors and assigns, where permitted.
2. Waiver. Waiver of any breach of this Agreement by either party
------
hereto shall in no event constitute a waiver as to any future breach, whether or
not similar in nature.
3. Covenant of Further Assurances. Each of the parties hereto, forthwith
------------------------------
upon request from the other, shall execute and deliver such documents and take
such actions as may be reasonably requested in order to carry out the intent and
purposes of this Agreement.
4. Construction and Governing Law. This Agreement shall be construed
------------------------------
and interpreted in accordance with the laws of the State of Ohio.
5. Arbitration. Any dispute under this Agreement shall be settled in
-----------
Athens, Ohio, by arbitration pursuant to the rules then obtaining of the
American Arbitration Association.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officer on the date and year first above
written.
-10-
<PAGE>
THE OHIO UNIVERSITY
By /s/ James L. Bruning
------------------------
James L. Bruning, Provost
EMBRYOGEN, INC
By /s/ Wilfred R. Konneker
-----------------------------
Wilfred R. Konneker, President
-11-
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
DATED THE 13TH DAY OF JUNE, 1985
Licensee shall prosecute all continuation and improvements in the patent No
4,873,191, Genetic Transformation of Zygotes, covered by this License Agreement
at its expense; and to report of any major developments with such prosecution to
the Licensor and provide a yearly written report of developments along with the
fourth-quarter royalty report.
Dated and effective this 1st day of July 1991.
LICENSEE LICENSOR
/s/ Steven Holtzman /s/ James L. Bruning
---------------------------- --------------------------
Steven Holtzman James L. Bruning
Vice President, D.N.X., Inc. Provost of Ohio University
<PAGE>
EXHIBIT D
<PAGE>
Prescribed by J. Kenneth Blackwell
[STAMP] Expedite this form
Please obtain fee amount and mailing [X}
instructions from the Forms Inventory
List (using the 3 digit form # located
at the bottom of this form). To obtain
the Forms Inventory List or for
assistance, please call Customer Service:
Central Ohio: (614)-466-3910
Toll Free: 1-877-SOS-FILE (1-877-767-3453)
ARTICLES OF INCORPORATION
(Under Chapter 1701 of the Ohio Revised Code)
Profit Corporation
The undersigned, desiring to form a corporation, for profit, under Sections
1701.01 et seq. of the Ohio Revised Code, do hereby state the following:
FIRST. The name of the said corporation shall be:
Xenogen Biosciences Corporation
----------------------------------------------------------------------
SECOND. The place in Ohio where its principal office is to be located is
Cleveland Cuyahoga Country, Ohio
------------------------------------, -----------------
(city, village or township)
THIRD. The purpose(s) for which this corporation is formed is:
To engage in any lawful act or activity for which a corporation may be
formed in Ohio
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
FOURTH. The number of shares which the corporation is authorized to have
outstanding is: 1,000 shares of Common Stock with a par value of
$0.0001 per share. (Please state whether shares are common or
preferred, and their par value, if any. Shares will be recorded as
common with no par value unless otherwise indicated.)
IN WITNESS WHEREOF, we have hereunto subscribed our names, on _____________
(date)
Signature:__________________________________, Incorporator
Name:__________________________________
Signature:__________________________________, Incorporator
Name:__________________________________
Signature:__________________________________, Incorporator
Name:__________________________________
Page 1 of 2 Version: May 1, 1999
<PAGE>
[THE SEAL OF THE SECRETARY OF STATE OF OHIO]
Prescribed by J. Kenneth Blackwell
Please obtain fee amount and mailing instructions from the Forms
Inventory List (using the 3 digit form # located at the bottom of
this form). To obtain the Forms Inventory List or for assistance,
please call Customer Service:
Central Ohio: (614-466-3910 Toll Free: 1-877-SOS-FILE (1-877-767-
3453)
ORIGINAL APPOINTMENT OF STATUTORY AGENT
The undersigned, being at least a majority of the incorporators of Xenogen
Biosciences Corporation hereby appoint CT Corporation System, to be statutory
agent upon whom any process, notice or demand required or permitted by statute
to be served upon the corporation may be served. The complete address of the
agent is:
1300 East 9th Street
---------------------------------------------------------------------
(street name and number P.O. Boxes are not acceptable)
Cleveland Ohio 44114
---------------------------------------------------, -----------
(city, village or township) (zip code)
Signature:
------------------------
Name:
------------------------
Signature:
------------------------
Name:
------------------------
Signature:
------------------------
Name:
------------------------
ACCEPTANCE OF APPOINTMENT
The undersigned, CT Corporation System, named herein as the statutory agent for,
Xenogen Biosciences Corporation, hereby acknowledges and accepts the appointment
of statutory agent for said corporation.
Signature:_____________________________________
Statutory Agent
CT Corporation System
Page 2 of 2 Version: May 1, 1999
<PAGE>
EXHIBIT D
*****
REGULATIONS
of
XENOGEN BIOSCIENCES CORPORATION
*****
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Athens, County of
Athens, State of Ohio.
Section 2. The corporation may also have offices at such other places as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section.1. Meetings of the shareholders shall be in the City of Athens,
County of Athens, State of Ohio.
Section 2. An annual meeting of the shareholders, commencing with the year
2001, shall be held on the third Wednesday in June at 10:00 a.m. in each year if
not a legal holiday, and, if a legal holiday, then on the next secular day
following at 10:00 a.m., when they shall elect by a plurality vote a board of
directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice stating the time, place and purpose of a meeting
of the shareholders shall be given either by personal delivery or by mail not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each shareholder of record entitled to notice of the meeting by or at the
direction of the president or a vice president or the secretary or an assistant
secretary. If mailed, such notice shall be addressed to the shareholder at his
address as it appears on the records of the corporation. Notice of adjournment
of a meeting need not be given if the time and place to which it is adjourned
are fixed and announced at such meeting.
Section 4. Meetings of the shareholders may be called by the president or
a vice president, or the directors by action at a meeting, or a majority of the
directors acting without meeting or by the secretary of the corporation upon the
order of the board of directors, or by the persons who hold twenty-five per cent
of all the shares outstanding and entitled to vote thereat. Upon the request in
writing delivered either in person or by registered mail to the president or
secretary by any persons entitled to call a meeting of the shareholders, such
officer shall
<PAGE>
forthwith cause notice to be given to the shareholders entitled thereto. If such
request be refused, then the persons making such request may call a meeting by
giving notice in the manner provided in these regulations.
Section 5. Business transacted at any special meeting of shareholders shall
be confined to the purposes stated in the notice.
Section 6. Upon request of any shareholders at any meeting of shareholders,
there shall be produced at such meeting an alphabetically arranged list, or
classified lists, of the shareholders of record as of the record date of such
meeting, who are entitled to vote, showing their respective addresses and the
number and class of shares held by each. Such list or lists when certified by
the officer or agent in charge of the transfers of shares shall be prima-facie
evidence of the facts shown therein.
Section 7. The holders of the majority of the shares issued and outstanding
having voting power, present in person or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of shareholders for the
transaction of business, except that at any meeting of shareholders called to
take any action which is authorized or regulated by statute, in order to
constitute a quorum, there shall be present in person or represented by proxy
the holders of record of shares entitling them to exercise the voting power
required by statute, the articles of incorporation, or these regulations, to
authorize or take the action proposed or stated in the notice of the meeting.
If, however, such quorum shall not be present or represented at any meeting of
the shareholders, the shareholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. When a quorum is present or represented at any meeting, the vote
of the holders of a majority of the stock having voting power, present in person
or represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes or
of the articles of incorporation or of these regulations, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. At every meeting of shareholders, each outstanding share having
voting power shall entitle the holder thereof to one vote on each matter
properly submitted to the shareholders, subject to the provisions with respect
to cumulative voting set forth in this section. If notice in writing is given by
any shareholder to the president, a vice president or the secretary, not less
than forty-eight hours before the time fixed for holding a meeting of the
shareholders
<PAGE>
for the purpose of electing directors if notice of such meeting shall have been
given at least ten days prior thereto, and otherwise not less than twenty-four
hours before such time, that he desires that the voting at such election shall
be cumulative, and if an announcement of the giving of such notice is made upon
the convening of the meeting by the chairman or secretary or by or on behalf of
the shareholder giving such notice, each shareholder shall have the right to
cumulate such voting power as he possesses and to give one candidate as many
votes as the number of directors to be elected multiplied by the number of his
votes equals, or to distribute his votes on the same principle among two or more
candidates, as he sees fit. A shareholder shall be entitled to vote even though
his shares have not been fully paid, but shares upon which an installment of the
purchase price is overdue and unpaid shall not be voted.
Section 10. A person who is entitled to attend a shareholders' meeting, to
vote thereat, or to execute consents, waivers, or releases, may be represented
at such meeting or vote thereat, and execute consents, waivers, and releases,
and exercise any of his other rights, by proxy or proxies appointed by a writing
signed by such person. A telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of a writing, appointing a proxy is sufficient writing. No
appointment of a proxy shall be valid after the expiration of eleven months
after it is made unless the writing specifies the date on which it is to expire
or the length of time it is to continue in force.
Section 11. Unless the articles or these regulations prohibit the
authorization or taking of any action of the shareholders without a meeting, any
action which may be authorized or taken at a meeting of the shareholders may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings signed by all the shareholders who would be
entitled to notice of a meeting of the shareholders held for such purpose, which
writing or writings shall be filed with or entered upon the records of the
corporation.
ARTICLE III
DIRECTORS
Section 1. The number of directors, which shall not be less than three,
may be fixed or changed at a meeting of shareholders called for the purpose of
electing directors. The first board shall consist of three (3) directors. Except
where the law, the articles of incorporation, or these regulations require any
action to be authorized or taken by shareholders, all of the authority of the
corporation shall be exercised by the directors. The directors shall be elected
at the annual meeting of shareholders, except as provided in Section 2 of this
article, and each director shall hold office until the next annual meeting of
the shareholders and until his successor is elected and qualified, or until his
earlier resignation, removal from office, or death. When the annual meeting is
not held or directors are not elected thereat, they may be elected at a special
meeting
<PAGE>
called for that purpose. Directors need not be shareholders.
Section 2. If the office of any director or directors becomes vacant by
reason of death, resignation, retirement, disqualification, removal from office,
or otherwise, the remaining directors, though less than a quorum, shall by a
vote of a majority of their number, choose a successor or successors, who shall
hold office for the unexpired term in respect to which such vacancy occurred.
Section 3. For their own government the directors may adopt by-laws not
inconsistent with the articles of incorporation or these regulations.
Section 4. The directors may hold their meeting, and keep the books of the
corporation, outside the State of Ohio, at such places as they may from time to
time determine but, if no transfer agent is appointed to act for the corporation
in Ohio, it shall keep an office in Ohio at which shares shall be transferable
and at which it shall keep books in which shall be recorded the names and
addresses of all shareholders and all transfers of shares.
COMMITTEES
Section 5. The directors may at any time elect three or more of their
number as an executive committee or other committees, which shall, in the
interval between meetings of the board of directors, exercise such powers and
perform such duties as may from time to time be prescribed by the board of
directors. Any such committee shall be subject at all times to the control and
direction of the board of directors. Unless otherwise ordered by the board of
directors, any such committee may act by a majority of its members at a meeting
or by a writing or writings signed by all its members. An act or authorization
of an act by any such committee within the authority delegated to it shall be as
effective for all purposes as the actor authorization of the board of directors.
Section 6. The committee shall keep regular minutes of their proceedings
and report the same to the board when required.
COMPENSATION OF DIRECTORS
Section 7. Directors, as such, shall not receive any stated salary for
their services but, by resolution of the board, a fixed sum, and expenses of
attendance if any, may be allowed for attendance at each regular or special
meeting of the board; provided that nothing herein contained shall be construed
to preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 8. Members of the executive committee or other committees may be
allowed like compensation for attending committee meetings.
_______________________
<PAGE>
MEETINGS OF THE BOARD
Section 9. The first meeting of each newly elected board shall be held at
such time and place, either within or without the State of Ohio, as shall be
fixed by the vote of the shareholders at the annual meeting, of which two days'
notice shall be delivered personally or sent by mail or telegram to each newly
elected director. Such meeting may be held at any place or time as may be fixed
by the consent in writing of all the directors, given either before or after the
meeting.
OR
--
MEETINGS OF THE BOARD
Section 9. The first meeting of each newly elected board other than the
board first elected shall be held at such time and place, either within or
without the State of Ohio, as shall be fixed by the vote of the shareholders at
the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present, or they may meet at such place and time as shall be
fixed by the consent in writing of all the directors given either before or
after the meeting.
Section 10. Regular meetings of the board may be held at such time and
place, either within or without the State of Ohio, as shall be determined by the
board.
Section 11. Special meetings of the board may be called by the president,
any vice president, or by two directors on two days' notice to each director,
either delivered personally or sent by mail, telegram or cablegram. The notice
need not specify the purposes of the meeting.
Section 12. At all meetings of the board a majority of the authorized
number of directors shall be necessary and sufficient to constitute a quorum for
the transaction of business, and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
articles of incorporation or by these regulations. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time, until a quorum shall be present. Notice of
adjournment of a meeting need not be given to absent directors if the time and
place are fixed at the meeting adjourned.
Section 13. Unless the articles or these regulations prohibit the
authorization or taking of any action of the directors without a meeting, any
action which may be authorized or taken at a meeting of the directors may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings signed by all the directors, which writing or
writings shall be filed with or entered upon the records of the corporation.
<PAGE>
REMOVAL OF DIRECTORS
Section 14. All the directors, or all the directors of a particular class,
if any, or any individual director may be removed from office, without assigning
any cause, by the vote of the holders of a majority of the voting power
entitling them to elect directors in place of those to be removed, provided that
unless all the directors, or all the directors of a particular class, if any,
are removed, no individual director shall be removed in case the votes of a
sufficient number of shares are cast against his removal which, if cumulatively
voted at an election of all the directors, or all the directors of a particular
class, if any, as the case may be, would be sufficient to elect at least one
director. In case of any such removal, a new director may be elected at the same
meeting for the unexpired term of each director removed. Failure to elect a
director to fill the unexpired term of any director removed shall be deemed to
create a vacancy in the board.
ARTICLE IV
NOTICES
Section 1. Notices to directors and shareholders shall be in writing and
delivered personally or mailed to the directors or shareholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors and shareholders may also be given by telegram or telephone.
Section 2. Notice of the time, place and purposes of any meeting of
shareholders or directors as the case may be, whether required by law, the
articles of incorporation or these regulations, may be waived in writing, either
before or after the holding of such meeting, by any shareholder, or by any
director, which writing shall be filed with or entered upon the records of the
meeting.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
directors and shall be a president, a vice president, a secretary and a
treasurer. The board of directors may also choose additional vice presidents,
and one or more assistant secretaries and assistant treasurers. Any two or more
of such offices except the offices of president and vice president, may be held
by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law or by
these regulations to be executed, acknowledged or verified by any two or more
officers.
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president, a vice president, a secretary
<PAGE>
and a treasurer, none of whom need be a member of the board.
Section 3. The board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 4. The salaries of all officer and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors. If the office of
any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation; he shall preside at all meetings of the shareholders and directors,
shall be ex officio a member of the executive committee or any other committee,
shall have general and active management of the business of the corporation, and
shall see that all orders and resolutions of the board are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice presidents in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the president, perform the duties and exercise the powers of the
president. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the
<PAGE>
shareholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall keep in safe custody the seal of
the corporation and, when authorized by the board of directors, affix the same
to any instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of the treasurer or an assistant secretary.
Section 10. The assistant secretaries in the order of their seniority
unless otherwise determine by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
_________20 THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurers in the order of their seniority,
unless otherwise determined by the board of directors, shall, in the absence or
disability of the treasurer, perform the duties and exercise the powers of the
treasurer. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Each holder of shares is entitled to one or more certificates,
signed by the president or a vice president and by the secretary, an assistant
<PAGE>
secretary, the treasurer, or an assistant treasurer of the corporation, which
shall certify the number and class of shares held by him in the corporation.
Every certificate shall state that the corporation is organized under the laws
of Ohio, the name of the person to whom the shares represented by the
certificate are issued, the number of shares represented by the certificate, and
the par value of each share represented by it or that the shares are without par
value, and if the shares are classified, the designation of the class, and the
series, if any, of the shares represented by the certificate. There shall also
be stated on the face or back of the certificate the express terms, if any, of
the shares represented by the certificate and of the other class or classes and
series of shares, if any, which the corporation is authorized to issue, or a
summary of such express terms, or that the corporation will mail to the
shareholder a copy of such express terms without charge within five days after
receipt of written request therefor, or that a copy of such express terms is
attached to and by reference made a part of such certificate and that the
corporation will mail to the shareholder a copy of such express terms without
charge within five days after receipt of written request therefor if the copy
has become detached from the certificate.
Section 2. In case of any restriction on transferability of shares or
reservation of lien thereon, the certificate representing such shares shall set
forth on the face or back thereof the statements required by the General
Corporation Law of Ohio to make such restrictions or reservations effective.
Section 3. Where a certificate is countersigned by an incorporated
transfer agent or registrar, the signature of any of the officers specified in
Section 1 of this article may be facsimile, engraved, stamped, or printed.
Although any officer of the corporation, whose manual or facsimile signature has
been placed upon such certificate, ceases to be such officer before the
certificate is delivered, such certificate nevertheless shall be effective in
all respects when delivered.
LOST CERTIFICATES
Section 4. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
<PAGE>
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 6. For any lawful purpose, including without limitation, (1) the
determination of the shareholders who are entitled to receive notice of or to
vote at a meeting of shareholders; (2) receive payment of any dividend or
distribution; (3) receive or exercise rights of purchase of or subscription for,
or exchange or conversion of, shares or other securities, subject to contract
rights with respect thereto; or (4) participate in the execution of written
consents, waivers, or releases, the directors may fix a record date which shall
not be a date earlier than the date on which the record date is fixed and, in
the cases provided for in clauses (l), (2) and (3) above, shall not be more than
sixty days, preceding the date of the meeting of the shareholders, or the date
fixed for the payment of any dividend or distribution, or the date fixed for the
receipt or the exercise of rights, as the case may be.
Section 7. If a meeting of the shareholders is called by persons entitled
to call the same, or action is taken by shareholders without a meeting, and if
the directors fail or refuse, within such time as the persons calling such
meeting or initiating such other action may request, to fix a record date for
the purpose of determining the shareholders entitled to receive notice of or
vote at such meeting, or to participate in the execution of written consents,
waivers, or releases, then the persons calling such meeting or initiating such
other action may fix a record date for such purposes, subject to the limitations
set forth in Section 6 of this article.
Section 8. The record date for the purpose of clause (1) of Section 6 of
this article shall continue to be the record date for all adjournments of such
meeting, unless the directors or the persons who shall have fixed the original
record date shall, subject to the limitations set forth in Section 6 of this
article, fix another date, and in case a new record date is so fixed, notice
thereof and of the date to which the meeting shall have been adjourned shall be
given to shareholders of record as of said date in accordance with the same
requirements as those applying to a meeting newly called.
Section 9. The directors may close the share transfer books against
transfers of shares during the whole or any part of the period provided for in
Section 6 of this article, including the date of the meeting of the shareholders
and the period ending with the date, if any, to which adjourned. If no record
date is
<PAGE>
fixed therefor, the record date for determining the shareholders who are
entitled to receive notice of, or who are entitled to vote at, a meeting of
shareholders, shall be the date next preceding the day on which notice is given,
or the date next preceding the day on which the meeting is held, as the case may
be.
Section 10. The corporation shall be entitled to recognize the exclusive
rights of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Ohio.
ARTICLE VII
GENERAL PROVISIONS DIVIDENDS
Section 1. The board of directors may declare and the corporation may pay
dividends and distributions on its outstanding shares in cash, property, or its
own shares pursuant to law and subject to the provisions of its articles of
incorporation.
Section 2. Before payment of any dividend or distribution, there may be
set aside out of any funds of the corporation available for dividends or
distributions such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends or distributions, or for repairing or maintaining any
property of the corporation, or for such other purposes as the directors shall
think conducive to the interests of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. At the annual meeting of shareholders, or the meeting held in
lieu of it, the corporation shall prepare and lay before the shareholders a
financial statement consisting of: A balance sheet containing a summary of the
assets, liabilities, stated capital, if any, and surplus (showing separately any
capital surplus arising from unrealized appreciation of assets, other capital
surplus, and earned surplus) of the corporation as of a date not more than four
months before such meeting; if such meeting is an adjourned meeting, the balance
sheet may be as of a date not more than four months before the date of the
meeting as originally convened; and a statement of profit and loss and surplus,
including a summary of profits, dividends or distributions paid, and other
changes in the surplus accounts of the corporation for the period commencing
with the date marking the end of the period for which the last preceding
statement of profit and loss required under this section was made and ending
with the date of the balance sheet, or in the case of the first statement of
profit and loss, from the
<PAGE>
incorporation of the corporation to the date of the balance sheet.
The financial statement shall have appended to it a certificate signed by the
president or a vice president or the treasurer or an assistant treasurer or by a
public accountant or firm of public accountants to the effect that the financial
statement presents fairly the position of the corporation and the results of its
operations in conformity with generally accepted accounting principles applied
on a basis consistent for the period covered thereby, or to the effect that the
financial statements have been prepared on the basis of accounting practices and
principles that are reasonable in the circumstances.
Section 4. Upon the written request of any shareholder made within sixty
days after notice of any such meeting has been given, the corporation, not later
than the fifth day after receiving such request or the fifth day before such
meeting, whichever is the later date, shall mail to such shareholder a copy of
such financial statement.
CHECKS
Section 5. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the board of directors may from
time to time designate.
FISCAL YEAR
Section 6. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 7. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Ohio." The seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
ARTICLE VIII
AMENDMENTS
Section 1. These regulations may be amended or new regulations adopted by
the affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power on such proposal, at any regular meeting of the
shareholders, or at any special meeting of the shareholders if notice of the
proposal to amend or add to the regulations be contained in the notice of the
meeting, or, without a meeting, by the written consent of the holders of record
of shares entitling them to exercise a majority of the voting power on such
proposal.
<PAGE>
1,000 shares, par value $0.0001
<PAGE>
EXHIBIT D
*****
REGULATIONS
of
XENOGEN BIOSCIENCES CORPORATION
*****
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Athens, County of
Athens, State of Ohio.
Section 2. The corporation may also have offices at such other places as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section.1. Meetings of the shareholders shall be in the City of Athens,
County of Athens, State of Ohio.
Section 2. An annual meeting of the shareholders, commencing with the year
2001, shall be held on the third Wednesday in June at 10:00 a.m. in each year if
not a legal holiday, and, if a legal holiday, then on the next secular day
following at 10:00 a.m., when they shall elect by a plurality vote a board of
directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice stating the time, place and purpose of a meeting
of the shareholders shall be given either by personal delivery or by mail not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each shareholder of record entitled to notice of the meeting by or at the
direction of the president or a vice president or the secretary or an assistant
secretary. If mailed, such notice shall be addressed to the shareholder at his
address as it appears on the records of the corporation. Notice of adjournment
of a meeting need not be given if the time and place to which it is adjourned
are fixed and announced at such meeting.
Section 4. Meetings of the shareholders may be called by the president or
a vice president, or the directors by action at a meeting, or a majority of the
directors acting without meeting or by the secretary of the corporation upon the
order of the board of directors, or by the persons who hold twenty-five per cent
of all the shares outstanding and entitled to vote thereat. Upon the request in
writing delivered either in person or by registered mail to the president or
secretary by any persons entitled to call a meeting of the shareholders, such
officer shall
<PAGE>
forthwith cause notice to be given to the shareholders entitled thereto. If such
request be refused, then the persons making such request may call a meeting by
giving notice in the manner provided in these regulations.
Section 5. Business transacted at any special meeting of shareholders
shall be confined to the purposes stated in the notice.
Section 6. Upon request of any shareholders at any meeting of
shareholders, there shall be produced at such meeting an alphabetically arranged
list, or classified lists, of the shareholders of record as of the record date
of such meeting, who are entitled to vote, showing their respective addresses
and the number and class of shares held by each. Such list or lists when
certified by the officer or agent in charge of the transfers of shares shall be
prima-facie evidence of the facts shown therein.
Section 7. The holders of the majority of the shares issued and
outstanding having voting power, present in person or represented by proxy,
shall be requisite and shall constitute a quorum at all meetings of shareholders
for the transaction of business, except that at any meeting of shareholders
called to take any action which is authorized or regulated by statute, in order
to constitute a quorum, there shall be present in person or represented by proxy
the holders of record of shares entitling them to exercise the voting power
required by statute, the articles of incorporation, or these regulations, to
authorize or take the action proposed or stated in the notice of the meeting.
If, however, such quorum shall not be present or represented at any meeting of
the shareholders, the shareholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the stock having voting power, present in
person or represented by proxy, shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
statutes or of the articles of incorporation or of these regulations, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 9. At every meeting of shareholders, each outstanding share having
voting power shall entitle the holder thereof to one vote on each matter
properly submitted to the shareholders, subject to the provisions with respect
to cumulative voting set forth in this section. If notice in writing is given by
any shareholder to the president, a vice president or the secretary, not less
than forty-eight hours before the time fixed for holding a meeting of the
shareholders
<PAGE>
for the purpose of electing directors if notice of such meeting shall have been
given at least ten days prior thereto, and otherwise not less than twenty-four
hours before such time, that he desires that the voting at such election shall
be cumulative, and if an announcement of the giving of such notice is made upon
the convening of the meeting by the chairman or secretary or by or on behalf of
the shareholder giving such notice, each shareholder shall have the right to
cumulate such voting power as he possesses and to give one candidate as many
votes as the number of directors to be elected multiplied by the number of his
votes equals, or to distribute his votes on the same principle among two or more
candidates, as he sees fit. A shareholder shall be entitled to vote even though
his shares have not been fully paid, but shares upon which an installment of the
purchase price is overdue and unpaid shall not be voted.
Section 10. A person who is entitled to attend a shareholders' meeting,
to vote thereat, or to execute consents, waivers, or releases, may be
represented at such meeting or vote thereat, and execute consents, waivers, and
releases, and exercise any of his other rights, by proxy or proxies appointed by
a writing signed by such person. A telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of a writing, appointing a proxy is sufficient writing. No
appointment of a proxy shall be valid after the expiration of eleven months
after it is made unless the writing specifies the date on which it is to expire
or the length of time it is to continue in force.
Section 11. Unless the articles or these regulations prohibit the
authorization or taking of any action of the shareholders without a meeting, any
action which may be authorized or taken at a meeting of the shareholders may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings signed by all the shareholders who would be
entitled to notice of a meeting of the shareholders held for such purpose, which
writing or writings shall be filed with or entered upon the records of the
corporation.
ARTICLE III
DIRECTORS
Section 1. The number of directors, which shall not be less than three,
may be fixed or changed at a meeting of shareholders called for the purpose of
electing directors. The first board shall consist of three (3) directors. Except
where the law, the articles of incorporation, or these regulations require any
action to be authorized or taken by shareholders, all of the authority of the
corporation shall be exercised by the directors. The directors shall be elected
at the annual meeting of shareholders, except as provided in Section 2 of this
article, and each director shall hold office until the next annual meeting of
the shareholders and until his successor is elected and qualified, or until his
earlier resignation, removal from office, or death. When the annual meeting is
not held or directors are not elected thereat, they may be elected at a special
meeting
<PAGE>
called for that purpose. Directors need not be shareholders.
Section 2. If the office of any director or directors becomes vacant by
reason of death, resignation, retirement, disqualification, removal from office,
or otherwise, the remaining directors, though less than a quorum, shall by a
vote of a majority of their number, choose a successor or successors, who shall
hold office for the unexpired term in respect to which such vacancy occurred.
Section 3. For their own government the directors may adopt by-laws not
inconsistent with the articles of incorporation or these regulations.
Section 4. The directors may hold their meeting, and keep the books of
the corporation, outside the State of Ohio, at such places as they may from time
to time determine but, if no transfer agent is appointed to act for the
corporation in Ohio, it shall keep an office in Ohio at which shares shall be
transferable and at which it shall keep books in which shall be recorded the
names and addresses of all shareholders and all transfers of shares.
COMMITTEES
Section 5. The directors may at any time elect three or more of their
number as an executive committee or other committees, which shall, in the
interval between meetings of the board of directors, exercise such powers and
perform such duties as may from time to time be prescribed by the board of
directors. Any such committee shall be subject at all times to the control and
direction of the board of directors. Unless otherwise ordered by the board of
directors, any such committee may act by a majority of its members at a meeting
or by a writing or writings signed by all its members. An act or authorization
of an act by any such committee within the authority delegated to it shall be as
effective for all purposes as the actor authorization of the board of directors.
Section 6. The committee shall keep regular minutes of their proceedings
and report the same to the board when required.
COMPENSATION OF DIRECTORS
Section 7. Directors, as such, shall not receive any stated salary for
their services but, by resolution of the board, a fixed sum, and expenses of
attendance if any, may be allowed for attendance at each regular or special
meeting of the board; provided that nothing herein contained shall be construed
to preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 8. Members of the executive committee or other committees may be
allowed like compensation for attending committee meetings.
____________________
<PAGE>
MEETINGS OF THE BOARD
Section 9. The first meeting of each newly elected board shall be held at
such time and place, either within or without the State of Ohio, as shall be
fixed by the vote of the shareholders at the annual meeting, of which two days'
notice shall be delivered personally or sent by mail or telegram to each newly
elected director. Such meeting may be held at any place or time as may be fixed
by the consent in writing of all the directors, given either before or after the
meeting.
OR
--
MEETINGS OF THE BOARD
Section 9. The first meeting of each newly elected board other than the
board first elected shall be held at such time and place, either within or
without the State of Ohio, as shall be fixed by the vote of the shareholders at
the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present, or they may meet at such place and time as shall be
fixed by the consent in writing of all directors given either before or after
the meeting.
Section 10. Regular meetings of the board may be held at such time and
place, either within or without the State of Ohio, as shall be determined by the
board.
Section 11 Special meetings of the board may be called by the president,
any vice president, or by two directors on two days' notice to each director,
either delivered personally or sent by mail, telegram or cablegram. The notice
need not specify the purposes of the meeting.
Section 12. At all meetings of the board a majority of the authorized
number of directors shall be necessary and sufficient to constitute a quorum for
the transaction of business, and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
articles of incorporation or by these regulations. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time, until a quorum shall be present. Notice of
adjournment of a meeting need not be given to absent directors if the time and
place are fixed at the meeting adjourned.
Section 13. Unless the articles or these regulations prohibit the
authorization or taking of any action of the directors without a meeting, any
action which may be authorized or taken at a meeting of the directors may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings signed by all the directors, which writing or
writings shall be filed with or entered upon the records of the corporation.
<PAGE>
REMOVAL OF DIRECTORS
Section 14. All the directors, or all the directors of a particular
class, if any, or any individual director may be removed from office, without
assigning any cause, by the vote of the holders of a majority of the voting
power entitling them to elect directors in place of those to be removed,
provided that unless all the directors, or all the directors of a particular
class, if any, are removed, no individual director shall be removed in case the
votes of a sufficient number of shares are cast against his removal which, if
cumulatively voted at an election of all the directors, or all the directors of
a particular class, if any, as the case may be, would be sufficient to elect at
least one director. In case of any such removal, a new director may be elected
at the same meeting for the unexpired term of each director removed. Failure to
elect a director to fill the unexpired term of any director removed shall be
deemed to create a vacancy in the board.
ARTICLE IV
NOTICES
Section 1. Notices to directors and shareholders shall be in writing and
delivered personally or mailed to the directors or shareholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors and shareholders may also be given by telegram or telephone,
Section 2. Notice of the time, place and purposes of any meeting of
shareholders or directors as the case may be, whether required by law, the
articles of incorporation or these regulations, may be waived in writing, either
before or after the holding of such meeting, by any shareholder, or by any
director, which writing shall be filed with or entered upon the records of the
meeting.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
directors and shall be a president, a vice president, a secretary and a
treasurer. The board of directors may also choose additional vice presidents,
and one or more assistant secretaries and assistant treasurers. Any two or more
of such offices except the offices of president and vice president, may be held
by the the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law or by
these regulations to be executed, acknowledged or verified by any two or more
officers.
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president, a vice president, a secretary
<PAGE>
and a treasurer, none of whom need be a member of the board.
Section 3. The board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 4. The salaries of all officer and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors. If the office of
any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation; he shall preside at all meetings of the shareholders and directors,
shall be ex officio a member of the executive committee or any other committee,
shall have general and active management of the business of the corporation, and
shall see that all orders and resolutions of the board are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice presidents in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the president, perform the duties and exercise the powers of the
president. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the
<PAGE>
shareholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall keep in safe custody the seal of
the corporation and, when authorized by the board of directors, affix the same
to any instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of the treasurer or an assistant secretary.
Section 10. The assistant secretaries in the order of their seniority
unless otherwise determine by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
20 THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurers in the order of their seniority,
unless otherwise determined by the board of directors, shall, in the absence or
disability of the treasurer, perform the duties and exercise the powers of the
treasurer. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Each holder of shares is entitled to one or more certificates,
signed by the president or a vice president and by the secretary, an assistant
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secretary, the treasurer, or an assistant treasurer of the corporation, which
shall certify the number and class of shares held by him in the corporation.
Every certificate shall state that the corporation is organized under the laws
of Ohio, the name of the person to whom the shares represented by the
certificate are issued, the number of shares represented by the certificate, and
the par value of each share represented by it or that the shares are without par
value, and if the shares are classified, the designation of the class, and the
series, if any, of the shares represented by the certificate. There shall also
be stated on the face or back of the certificate the express terms, if any, of
the shares represented by the certificate and of the other class or classes and
series of shares, if any, which the corporation is authorized to issue, or a
summary of such express terms, or that the corporation will mail to the
shareholder a copy of such express terms without charge within five days after
receipt of written request therefor, or that a copy of such express terms is
attached to and by reference made a part of such certificate and that the
corporation will mail to the shareholder a copy of such express terms without
charge within five days after receipt of written request therefor if the copy
has become detached from the certificate.
Section 2. In case of any restriction on transferability of shares or
reservation of lien thereon, the certificate representing such shares shall set
forth on the face or back thereof the statements required by the General
Corporation Law of Ohio to make such restrictions or reservations effective.
Section 3. Where a certificate is countersigned by an incorporated
transfer agent or registrar, the signature of any of the officers specified in
Section 1 of this article may be facsimile, engraved, stamped, or printed.
Although any officer of the corporation, whose manual or facsimile signature has
been placed upon such certificate, ceases to be such officer before the
certificate is delivered, such certificate nevertheless shall be effective in
all respects when delivered.
LOST CERTIFICATES
Section 4. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
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TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 6. For any lawful purpose, including without limitation, (1) the
determination of the shareholders who are entitled to receive notice of or to
vote at a meeting of shareholders; (2) receive payment of any dividend or
distribution; (3) receive or exercise rights of purchase of or subscription for,
or exchange or conversion of, shares or other securities, subject to contract
rights with respect thereto; or (4) participate in the execution of written
consents, waivers, or releases, the directors may fix a record date which shall
not be a date earlier than the date on which the record date is fixed and, in
the cases provided for in clauses (l), (2) and (3) above, shall not be more than
sixty days, preceding the date of the meeting of the shareholders, or the date
fixed for the payment of any dividend or distribution, or the date fixed for the
receipt or the exercise of rights, as the case may be.
Section 7. If a meeting of the shareholders is called by persons entitled
to call the same, or action is taken by shareholders without a meeting, and if
the directors fail or refuse, within such time as the persons calling such
meeting or initiating such other action may request, to fix a record date for
the purpose of determining the shareholders entitled to receive notice of or
vote at such meeting, or to participate in the execution of written consents,
waivers, or releases, then the persons calling such meeting or initiating such
other action may fix a record date for such purposes, subject to the limitations
set forth in Section 6 of this article.
Section 8. The record date for the purpose of clause (1) of Section 6 of
this article shall continue to be the record date for all adjournments of such
meeting, unless the directors or the persons who shall have fixed the original
record date shall, subject to the limitations set forth in Section 6 of this
article, fix another date, and in case a new record date is so fixed, notice
thereof and of the date to which the meeting shall have been adjourned shall be
given to shareholders of record as of said date in accordance with the same
requirements as those applying to a meeting newly called.
Section 9. The directors may close the share transfer books against
transfers of shares during the whole or any part of the period provided for in
Section 6 of this article, including the date of the meeting of the shareholders
and the period ending with the date, if any, to which adjourned. If no record
date is
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fixed therefor, the record date for determining the shareholders who are
entitled to receive notice of, or who are entitled to vote at, a meeting of
shareholders, shall be the date next preceding the day on which notice is given,
or the date next preceding the day on which the meeting is held, as the case may
be.
Section 10. The corporation shall be entitled to recognize the exclusive
rights of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Ohio.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. The board of directors may declare and the corporation may pay
dividends and distributions on its outstanding shares in cash, property, or its
own shares pursuant to law and subject to the provisions of its articles of
incorporation.
Section 2. Before payment of any dividend or distribution, there may be
set aside out of any funds of the corporation available for dividends or
distributions such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends or distributions, or for repairing or maintaining any
property of the corporation, or for such other purposes as the directors shall
think conducive to the interests of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. At the annual meeting of shareholders, or the meeting held in
lieu of it, the corporation shall prepare and lay before the shareholders a
financial statement consisting of: A balance sheet containing a summary of the
assets, liabilities, stated capital, if any, and surplus (showing separately any
capital surplus arising from unrealized appreciation of assets, other capital
surplus, and earned surplus) of the corporation as of a date not more than four
months before such meeting; if such meeting is an adjourned meeting, the balance
sheet may be as of a date not more than four months before the date of the
meeting as originally convened; and a statement of profit and loss and surplus,
including a summary of profits, dividends or distributions paid, and other
changes in the surplus accounts of the corporation for the period commencing
with the date marking the end of the period for which the last preceding
statement of profit and loss required under this section was made and ending
with the date of the balance sheet, or in the case of the first statement of
profit and loss, from the
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incorporation of the corporation to the date of the balance sheet.
The financial statement shall have appended to it a certificate signed by the
president or a vice president or the treasurer or an assistant treasurer or by a
public accountant or firm of public accountants to the effect that the financial
statement presents fairly the position of the corporation and the results of its
operations in conformity with generally accepted accounting principles applied
on a basis consistent for the period covered thereby, or to the effect that the
financial statements have been prepared on the basis of accounting practices and
principles that are reasonable in the circumstances.
Section 4. Upon the written request of any shareholder made within sixty
days after notice of any such meeting has been given, the corporation, not later
than the fifth day after receiving such request or the fifth day before such
meeting, whichever is the later date, shall mail to such shareholder a copy of
such financial statement.
CHECKS
Section 5. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the board of directors may from
time to time designate.
FISCAL YEAR
Section 6. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 7. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal, Ohio."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any other manner reproduced.
ARTICLE VIII
AMENDMENTS
Section 1. These regulations may be amended or new regulations adopted by
the affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power on such proposal, at any regular meeting of the
shareholders, or at any special meeting of the shareholders if notice of the
proposal to amend or add to the regulations be contained in the notice of the
meeting, or, without a meeting, by the written consent of the holders of record
of shares entitling them to exercise a majority of the voting power on such
proposal.
