SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the registrant |X|
Filed by a party other than the registrant |_| Check the appropriate box:
|X| Preliminary proxy statement
|_| Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rules 14a-11(c) or 14a-12
PROTEIN DATABASES, INC.
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(Name of Registrant as Specified in Charter)
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(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing:
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PROTEIN DATABASES, INC.
775 PARK AVENUE, SUITE 255
HUNTINGTON, NEW YORK 11743
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
o
To the Stockholders of
PROTEIN DATABASES, INC.
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of PROTEIN DATABASES, INC., a Delaware corporation (the "Company"),
will be held at o on o at 10:00 A.M. for the following purposes:
(1) To consider and act upon a proposal to approve the Plan of
Complete Liquidation and Dissolution attached as Exhibit A to the Proxy
Statement;
(2) To consider and act upon a proposal to approve the Asset Purchase
Agreement, dated as of July 16, 1997, by and between the Company and
Bio-Rad Laboratories, Inc., a Delaware corporation, attached as Exhibit B
to the Proxy Statement;
(3) To consider and act upon a proposal to change the name of the
Company to "IDP Liquidating Corp."; and
(4) To consider and transact such other business as may properly come
before the Meeting or any adjournment thereof.
The Board of Directors unanimously recommends that you vote (i) FOR the approval
of the Plan of Complete Liquidation and Dissolution, (ii) FOR the approval of
the Asset Purchase Agreement, and (iii) FOR the change of the Company's name.
Only stockholders of record at the close of business on o are entitled
to notice of, and to vote at, the Meeting or any adjournment thereof.
By Order of the Board of Directors
RONALD R. HAHN
Secretary
Huntington, New York
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE AND SIGN THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY, AND
RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. ANY
STOCKHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN
NOTICE TO SUCH EFFECT, ATTN: CORPORATE SECRETARY, BY SUBMITTING A SUBSEQUENTLY
DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
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PROTEIN DATABASES, INC.
775 PARK AVENUE, SUITE 255
HUNTINGTON, NEW YORK 11743
PROXY STATEMENT
This Proxy Statement and accompanying form of proxy are being furnished
in connection with the solicitation of proxies by the Board of Directors of
Protein Databases, Inc., a Delaware corporation (the "Company"), for use at the
Special Meeting of Stockholders (the "Meeting") to be held on o, at 10:00 a.m.
at o, or any adjournment thereof. This Proxy Statement, the attached Notice of
Special Meeting of Stockholders and the accompanying form of proxy, together
with the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, and the Company's Quarterly Report on Form 10-QSB for the
period ended June 30, 1997, are being mailed on or about o to all stockholders
of record of the Company at the close of business on o (the "Record Date").
All proxies duly executed and received will be voted on all matters
presented at the Meeting in accordance with the specifications made in such
proxies. In the absence of specified instructions, proxies so received will be
voted (i) FOR the proposal to approve the Plan of Complete Liquidation and
Dissolution, (ii) FOR the proposal to approve the Asset Purchase Agreement,
(iii) FOR the proposal to change the name of the Company to "IDP Liquidating
Corp.", and (iv) in the discretion of the proxies named on the proxy card with
respect to any other matters properly brought before the Meeting.
The Board of Directors is proposing for approval by the stockholders at
the Meeting the Plan of Complete Liquidation and Dissolution of the Company (the
"Plan"), a copy of which is attached as Exhibit A to this Proxy Statement.
Pursuant to the Plan, the Company will, subject to paying or providing for all
claims, obligations, liabilities and expenses, be completely liquidated by a
transfer of the assets of the Company to a liquidating trust (the "Liquidating
Trust") for the pro rata benefit of the stockholders of the Company of record on
the date of liquidation or dissolution or, if the Bio-Rad Asset Sale (as defined
below) is not consummated, either by a transfer of the assets of the Company to
the Liquidating Trust or by a sale of such assets (other than cash, cash
equivalents and accounts receivable) by the Company and cash distributions to
stockholders pro rata by the Company. Approval of the Plan will constitute
stockholder approval of the appointment by the Board of Directors of one or more
trustees of the Liquidating Trust (the "Liquidating Trustees") and the execution
of a liquidating trust agreement with the Liquidating Trustees on such terms and
conditions as the Board of Directors shall determine in its absolute discretion.
In addition, approval of the Plan will constitute stockholder approval of any
and all sales of assets of the Company approved by the Board of Directors or, if
applicable, the Liquidating Trustees. See "Approval of Plan of Complete
Liquidation and Dissolution" for a more complete description of the Plan.
The second proposal to be acted upon at the Meeting is the approval of
the Asset Purchase Agreement, dated as of July 16, 1997 (the "Asset Purchase
Agreement"), by and between the Company and Bio-Rad Laboratories, Inc., a
Delaware corporation ("Bio-Rad"). A copy of the Asset Purchase Agreement is
attached as Exhibit B to this Proxy Statement. Pursuant to the Asset Purchase
Agreement, the Company will sell to Bio-Rad substantially all of its assets
(other than cash, cash equivalents and accounts receivable) (the "Assets"),
including, among other things, intellectual property, computers and software,
inventory, fixed assets, property, plant and equipment and certain contract
rights relating to the Company's business (such sale being referred to as the
"Bio-Rad Asset Sale"). See "Approval of Asset Purchase Agreement" for a more
complete description of the Asset Purchase Agreement.
The third proposal being submitted by the Board of Directors at the
Meeting is the approval of the change of the name of the Company to "IDP
Liquidating Corp." See "Approval of Change of Name."
Except as described in this Proxy Statement, the Board of Directors
does not know of any other matters that may be brought before the Meeting. In
the event that any other matter should come before the Meeting, the
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persons named on the proxy cards will have discretionary authority to vote all
proxies not marked to the contrary with respect to such matters in accordance
with their best judgment. A proxy may be revoked at any time before being voted
by written notice to such effect received by the Company at the address set
forth above, attn: Corporate Secretary, by delivery of a subsequently dated
proxy or by a vote cast in person at the Meeting. Presence at the Meeting does
not itself revoke the proxy.
VOTING
Only holders of record of the Company's common stock, par value $.01
per share, of the Company (the "Common Stock"), which is traded in the
over-the-counter market on the OTC Electronic Bulletin Board of the National
Association of Securities Dealers (the "NASD") under the symbol PDBQ, at the
close of business on the Record Date, will be entitled to notice of and vote at
the Meeting or any adjournment thereof. As of the Record Date, 1,459,724 shares
of Common Stock were issued and outstanding. Each outstanding share of Common
Stock entitles the holder thereof to one noncumulative vote.
A majority of the shares of Common Stock outstanding and entitled to
vote as of the Record Date, or 729,863 shares, must be present at the Meeting in
person or by proxy in order to constitute a quorum for the transaction of
business. Abstentions and broker non-votes will be counted as present for
purposes of determining whether the quorum requirement is satisfied. The
affirmative vote of the holders of a majority of the shares of Common Stock
issued and outstanding and entitled to vote is required for approval of the
proposed Plan, the approval of the Asset Purchase Agreement and the approval of
the proposal to change the Company's name. Accordingly, abstentions and broker
non-votes have the effect of negative votes. Certain stockholders, who
collectively hold 50.2% of the outstanding Common Stock, have indicated that
they intend to vote for approval of the proposed Plan, approval of the Asset
Purchase Agreement and approval of the name change proposal. Accordingly, the
Plan, the Asset Purchase Agreement and the name change should be approved
regardless of the vote of any other stockholders of the Company.
The Company will pay the entire expense of soliciting proxies. In
addition to the use of the mail, certain directors, officers and employees of
the Company may solicit proxies in person or by telephone, telecopier or
telegram, without special compensation. The Company may reimburse brokers and
other persons holding stock in their names or in the names of nominees for their
expenses in sending proxy soliciting material to beneficial owners.
A list of stockholders entitled to vote at the Meeting will be
available for examination by any stockholder, for any purpose germane to the
Meeting, during ordinary business hours, at the Company's offices, 775 Park
Avenue, Suite 255, Huntington, New York, for a period of ten days prior to the
Meeting and will also be available at the Meeting. The Company's telephone
number is (516) 673-3939.
PROPOSAL 1
APPROVAL OF PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
GENERAL
The Company is proposing a Plan of Complete Liquidation and Dissolution
for approval by the stockholders at the Meeting. The Plan was approved by the
Board of Directors, subject to stockholder approval, on [_____]. A copy of the
Plan is attached as Exhibit A to this Proxy Statement. The material features of
the Plan are summarized below; this summary does not purport to be complete and
is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the Plan. STOCKHOLDERS ARE URGED TO READ THE PLAN IN
ITS ENTIRETY.
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BACKGROUND
Since its incorporation in 1983, the Company has been in the business
of marketing innovative image analysis software and hardware products for the
worldwide bioresearch, drug discovery and clinical diagnostic markets. Based on
Long Island, New York, the Company developed user-friendly, software-integrated
scanner systems for biotechnology and related research in the drug discovery and
diagnostic systems development markets. These systems were sold to life science
research laboratories at university, government, hospital and industrial
(biotech and pharmaceutical) institutions, in the United States and abroad, for
analysis of biological information.
The Company sold its products in the United States and Canada directly
to customers and was substantially dependent upon distributors for the sales of
its products outside the United States. The Company sold its products in Japan
under a distribution agreement with Toyobo Co. Ltd. ("Toyobo") and in Germany,
Korea, India, Taiwan and Israel under agreements with local distributors. In
Europe, the Middle East and Asia, the Company sold its products under
distribution agreements with Pharmacia Biosystems B.V. and Pharmacia Biotech
A.B. (collectively, "Pharmacia"). During fiscal 1996, Toyobo accounted for 41%
of the Company's total revenues. During fiscal 1995, Pharmacia accounted for 29%
and Toyobo accounted for 19% of the Company's total revenues.
The market for the Company's products in Europe, Japan and the Middle
East had been significant to the Company's financial business plans, with the
combined regions accounting for approximately 65% of the Company's total
revenues in fiscal 1996 and approximately 52% of the Company's total revenues in
fiscal 1995.
As a result of the completion of Pharmacia's software purchase
requirements during the third quarter of fiscal 1995, the Company operated
unprofitably in the fourth quarter of fiscal 1995 and in each quarter of fiscal
1996. For the fiscal year ended December 31, 1996, the Company had a net loss
from operations of $811,323. On April 19, 1996, Pharmacia, the most significant
distributor of the Company's products, elected not to renew its contract to
distribute the Company's products. In addition, the Company's distribution
agreement with Toyobo, the exclusive distributor of the Company's products in
Japan and the non-exclusive distributor of the Company's products in all other
countries in the Far East, expires on December 31, 1998. The Company has been
unsuccessful in arranging one or more suitable alternative distribution
arrangements for the Company's products.
In December 1995, members of management met to discuss the Company's
relationship with Pharmacia and the need to locate third parties interested in
entering into distribution agreements for the Company's products or acquiring
any or all of the assets of the Company. In order to assist management and the
Board of Directors in identifying suitable purchasers, MedTech Capital of Boston
("MedTech"), an investment banking firm, was retained as a financial advisor in
March 1996. MedTech approached approximately 20 companies with respect to the
sale of the Company, and, in December 1996, identified Bio-Rad as a possible
purchaser of certain of the assets of the Company.
Beginning in April 1997, the Company began negotiations with Bio-Rad
concerning the possible sale of substantially all of the Company's assets (other
than cash, cash equivalents and accounts receivable) to Bio-Rad. On July 16,
1997, the Company and Bio-Rad entered into the Asset Purchase Agreement, in
which the Company agreed to sell the Assets for $1,000,000 in cash. The
transaction is subject to the approval of the Company's stockholders and certain
other conditions. See "Approval of Asset Purchase Agreement." In contemplation
of the execution of the Asset Purchase Agreement and in order to conserve its
cash resources, the Company discontinued most of its operations as of June 30,
1997. At that time, the Company ceased all of its sales and distribution,
product development and customer support activities. Since June 30, 1997,
substantially all of the Company's activities have related to the negotiation of
the Asset Purchase Agreement, the collection of the Company's outstanding
accounts receivable and preparations for the liquidation and winding up of the
Company.
REASONS FOR THE PLAN; DIRECTORS' RECOMMENDATION
Declining Value of Key Assets. The Company's key assets are its
proprietary software programs and related intellectual property for its
integrated biological data scanner systems. The software code must be
continually revised and upgraded to keep pace with scientific developments,
hardware improvements and feature refinements
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requested by customers. Without continuing development and upgrades, the
software would rapidly become obsolete.
Because of the reversals in the Company's distribution network, it has
become uneconomical to support the software development necessary to maintain
the competitiveness of the Company's products. In these circumstances, the Board
of Directors believes that the value of the Company's intellectual property and
its inventory of existing products will decline over time and may decline
precipitously. The Board of Directors therefore believes that the only way for
stockholders to realize value on their investment in the Company is to monetize
the Company's software assets at their present value, liquidate the Company and
distribute to stockholders the cash value of the Company's assets after
satisfaction of all outstanding claims, obligations, liabilities and expenses.
Departure of Key Personnel. As a result of recent losses, the lack of
prospects for improved operating results and the lack of the Company's ability
to pay competitive compensation, substantially all of the Company's key
personnel have recently left the employ of the Company. These include the
Company's chief executive officer since August 1, 1997, the Company's chief
financial officer since June 6, 1997, and the Company's two principal software
programmers. Other personnel have been terminated because of the Company's need
to conserve its cash resources, including the Company's sales and marketing
personnel. The Board of Directors does not believe that it is possible to
replace these personnel. Without these personnel, the Company cannot function as
a going concern.
Competition. The inability of the Company to arrange for new
distribution channels for its products has prevented the Company from
effectively competing against manufacturers of similar products who have
substantially greater financial, development and marketing resources than the
Company. These competitors include Bio-Rad, Molecular Dynamics, Inc, and Bio
Image Corp., each of which sells a turnkey image analysis instrument capable of
scanning and analyzing one and two dimensional DNA gels similar to the products
of the Company. The Board of Directors does not foresee any near term
improvement in the competitive position of the Company.
Market Price of Common Stock. The Board of Directors believes that the
Common Stock has been trading at prices that are less than the value that the
Company's stockholders would receive upon a dissolution of the Company and the
distribution to stockholders of the value of its net assets. The Common Stock
trades in the over-the-counter market on the OTC Electronic Bulletin Board of
the NASD. The average of the low bid and high ask price for the Common Stock on
the last trading day prior to the announcement of the execution of the Asset
Purchase Agreement on July 21, 1997, was $0.17. The average of the daily average
low bid and high ask price for the Common Stock during the 20 trading days
preceding the first public announcement on April 8, 1997 that the Company was
engaged in negotiations concerning the possible sale of its assets was $0.14.
The Board of Directors has estimated that the net assets of the Company
available for distribution to stockholders following a liquidation, after
deduction of cash amounts for payment of all expenses and other known
liabilities and possible contingent obligations, as based upon the Company's
unaudited balance sheet as of June 30, 1997, will be approximately $[645,000] or
$[0.33] per share. See "Unaudited Pro Forma Statement of Net Assets in
Liquidation."
Comparing the recent historical trading prices of the Common Stock with
the estimated net amount available for distribution on liquidation, the Board of
Directors believes that dissolution of the Company presents an opportunity for
stockholders to maximize the value of their investment in the Company at this
time. The Board of Directors also believes the estimated liquidation value per
share of Common Stock is likely to exceed the probable trading value of the
Common Stock in the foreseeable future absent the proposed liquidation.
Furthermore, the Board of Directors believes there is currently no effective
market for the Common Stock and such effective market has been absent for some
time.
Stockholders should be aware, however, that the actual amount available
for distribution to stockholders upon a dissolution of the Company could be less
than or greater than the amount estimated by the Board of Directors. In
particular, the Board of Directors in its estimation has allowed for
contingencies that includes possible
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future claims against the Company or its assets. However, the Board of Directors
cannot predict with any degree of certainty the amount of future claims,
including any claims arising under the Asset Purchase Agreement, that may reduce
the amount available for distribution to stockholders. Also, the Board of
Directors' estimation does not take account of the delay in the payment to
stockholders of amounts available for distribution between the time that the
Plan is approved by stockholders and the time or times that such distribution is
actually made. Such delay is anticipated to result, among other things, from the
necessity of paying, settling or otherwise making allowance for the Company's
liabilities, the holdback of a portion of the purchase price payable by Bio-Rad
under the Asset Purchase Agreement (see "Approval of Asset Purchase Agreement")
and reserves that may be set aside for a period of time in respect of
contingencies.
Alternatives. The Board of Directors considered alternatives to the
Plan, including continuing the Company's operations and pursuing new
distribution arrangements and raising new capital. Because of the Company's
business and financial circumstances, however, the Board of Directors did not
consider any of these alternatives to be viable. The Company has been unable
thus far to identify and consummate new distribution arrangements on
economically reasonable terms. It is doubtful that the Company could do so in
the future within a time frame that would allow the Company to preserve the
existing value of its assets and not exhaust the Company's cash resources.
Tax Treatment. In adopting the Plan, the Board of Directors recognized
that stockholders, depending on the tax basis in their shares, may be required
to recognize gain for tax purposes upon receipt of distributions in liquidation
and/or upon the transfer of the assets to a liquidating trust. Distributions
pursuant to a plan of complete liquidation and dissolution, however, are not
taxable to a stockholder for federal income tax purposes to the extent of such
stockholder's tax basis in his or her shares. In addition, the gain or loss a
stockholder recognizes with respect to distributions pursuant to a plan of
complete liquidation and dissolution is generally treated as capital gain or
loss (assuming shares of Common Stock are capital assets in the hands of such
stockholder). The Company will generally recognize gain or loss on sales of its
assets pursuant to the Plan, or upon any distribution of assets to the
stockholders and/or a liquidating trust pursuant to a plan of complete
liquidation and dissolution. See "Certain Federal Income Tax Consequences."
Absence of Financial Advisor. The Board of Directors did not, and did
not consider it advisable, to engage an independent financial advisor to render
a fairness opinion with respect to the Plan. The Company's assets consist
substantially in their entirety of cash, cash equivalents, accounts receivable
and the assets that will be sold to Bio- Rad in accordance with the Asset
Purchase Agreement. The value of these assets is readily determinable. The
purchase price for the Assets to be sold under the Asset Purchase Agreement was
negotiated at arm's-length between Bio-Rad and the Company. The other factors
considered by the Board of Directors, such as the need for active development to
maintain the value of the Company's assets, the state of the Company's
distribution arrangements, the loss of personnel and the Company's competitive
environment, were within the competence of the Board of Directors and not of a
type typically addressed in fairness opinions. Also, given the Company's limited
resources, the Board of Directors did not believe that it was in the best
interests of stockholders to incur the cost of a fairness opinion.
BASED UPON THE FOREGOING, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL OF THE PLAN.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS,
INCLUDING STATEMENTS, BASED ON THE BOARD OF DIRECTORS' ESTIMATE OF THE VALUES OF
THE COMPANY'S NET ASSETS, THAT THE BOARD OF DIRECTORS BELIEVES THAT THE
LIQUIDATION VALUE PER SHARE OF COMMON STOCK IN THE HANDS OF THE STOCKHOLDERS IS
LIKELY TO EXCEED ITS PROBABLE TRADING VALUE IN THE FORESEEABLE FUTURE ABSENT THE
PROPOSED LIQUIDATION. THE METHODS USED BY THE BOARD OF DIRECTORS AND MANAGEMENT
IN ESTIMATING THE VALUE OF THE COMPANY'S NET ASSETS DO NOT RESULT IN AN EXACT
DETERMINATION OF VALUE NOR ARE THEY INTENDED TO INDICATE THE AMOUNT A
STOCKHOLDER WILL RECEIVE IN LIQUIDATION. THE BOARD OF DIRECTORS' ASSESSMENT
ASSUMES THAT THE BIO-RAD ASSET SALE WILL BE CONSUMMATED IN
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ACCORDANCE WITH ITS TERMS AND THAT THE ESTIMATES OF THE COMPANY'S LIABILITIES
AND CONTINGENT LIABILITIES IS ACCURATE. THE BIO-RAD ASSET SALE IS SUBJECT TO A
NUMBER OF CONDITIONS AND THERE CAN BE NO ASSURANCE THAT ALL SUCH CONDITIONS WILL
BE SATISFIED, OR, IF THEY ARE NOT SATISFIED, THAT THE CONDITIONS WILL BE WAIVED.
THE ESTIMATES OF THE COMPANY'S LIABILITIES ARE SUBJECT TO NUMEROUS UNCERTAINTIES
BEYOND THE COMPANY'S CONTROL. NO ASSURANCE CAN BE GIVEN THAT THE AMOUNT TO BE
RECEIVED IN LIQUIDATION WILL EQUAL OR EXCEED THE PRICE OR PRICES AT WHICH THE
COMMON STOCK HAS GENERALLY TRADED OR IS EXPECTED TO TRADE IN THE FUTURE.
STOCKHOLDERS WHO DISAGREE WITH THE BOARD OF DIRECTORS' DETERMINATION THAT THE
VALUE OF THE NET ASSETS AS DISTRIBUTED TO THE STOCKHOLDERS EXCEEDS THE PRICE AT
WHICH THE COMMON STOCK HAS TRADED SHOULD CONSIDER VOTING "AGAINST" APPROVAL OF
THE PLAN.
UNDER DELAWARE LAW, IN THE EVENT THE COMPANY FAILS TO CREATE AN
ADEQUATE CONTINGENCY RESERVE FOR PAYMENT OF ITS EXPENSES AND LIABILITIES, OR
SHOULD SUCH CONTINGENCY RESERVE (AND THE ASSETS HELD BY ANY LIQUIDATING TRUST)
BE EXCEEDED BY THE AMOUNT ULTIMATELY FOUND TO BE PAYABLE IN RESPECT OF THE
COMPANY'S EXPENSES AND LIABILITIES, EACH STOCKHOLDER COULD BE HELD LIABLE FOR
THE PAYMENT TO THE COMPANY'S CREDITORS OF SUCH STOCKHOLDER'S PRO RATA SHARE OF
SUCH EXCESS, LIMITED TO THE AMOUNTS THERETOFORE RECEIVED BY SUCH STOCKHOLDER
FROM THE COMPANY (AND FROM ANY LIQUIDATING TRUST). ACCORDINGLY, IN SUCH EVENT A
STOCKHOLDER COULD BE REQUIRED TO RETURN ALL DISTRIBUTIONS PREVIOUSLY MADE AND
THUS WOULD RECEIVE NOTHING FROM THE COMPANY AS A RESULT OF THE PLAN. MOREOVER,
IN THE EVENT A STOCKHOLDER HAS PAID TAXES ON AMOUNTS THERETOFORE RECEIVED, A
REPAYMENT OF ALL OR A PORTION OF SUCH AMOUNT COULD RESULT IN A SITUATION IN
WHICH A STOCKHOLDER MAY INCUR A NET TAX COST IF THE REPAYMENT OF THE AMOUNT
DISTRIBUTED DOES NOT CAUSE A REDUCTION IN TAXES PAYABLE IN AN AMOUNT EQUAL TO
THE AMOUNT OF THE TAXES PAID ON AMOUNTS PREVIOUSLY DISTRIBUTED. WHILE THE
POSSIBILITY OF THE OCCURRENCES SET FORTH ABOVE CANNOT TOTALLY BE EXCLUDED, AFTER
A REVIEW OF ITS ASSETS AND LIABILITIES THE COMPANY BELIEVES THAT THE CONTINGENCY
RESERVE WILL BE ADEQUATE AND THAT A RETURN OF AMOUNTS PREVIOUSLY DISTRIBUTED
WILL NOT BE REQUIRED. SEE "CONTINGENCY RESERVE."
THE ANTICIPATED TAX TREATMENT OF THE PLAN IS SET FORTH UNDER "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES." NO RULING HAS BEEN REQUESTED FROM THE INTERNAL
REVENUE SERVICE (THE "IRS") WITH RESPECT TO THE ANTICIPATED TAX TREATMENT OF THE
PLAN, AND THE COMPANY WILL NOT SEEK AN OPINION OF COUNSEL WITH RESPECT TO THE
ANTICIPATED TAX TREATMENT. THE FAILURE TO OBTAIN A RULING FROM THE IRS OR AN
OPINION OF COUNSEL RESULTS IN LESS CERTAINTY THAT THE ANTICIPATED TAX TREATMENT
SUMMARIZED THEREIN WILL BE OBTAINED. IF ANY OF THE CONCLUSIONS STATED UNDER
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" PROVES TO BE INCORRECT, THE RESULT
COULD BE INCREASED TAXATION AT THE CORPORATE AND/OR STOCKHOLDER LEVEL, THUS
REDUCING THE BENEFIT TO THE STOCKHOLDERS AND THE COMPANY FROM THE LIQUIDATION.
If the Plan is not approved by the stockholders, the Board of Directors
will explore the alternatives then available for the future of the Company.
PRINCIPAL PROVISIONS OF THE PLAN
Transfers to the Liquidating Trust. If the Bio-Rad Asset Sale is
consummated (see "Approval of Asset Purchase Agreement"), then, as soon as
practicable following the closing thereof, the Company will transfer
substantially all of the assets of the Company, including the proceeds received
at the closing of the Bio-Rad Asset
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Sale, after deduction of cash amounts for payment of the Company's outstanding
liabilities and obligations and for the funding of the Company's expenses in
liquidation, to the Liquidating Trust. Substantially all of the assets
transferred to the Liquidating Trust will consist of cash, cash equivalents,
accounts receivable and the right of the Company to receive a portion of the
purchase price that will be placed in escrow under the Asset Purchase Agreement
(the "Holdback Amount"). Any assets, other than cash, cash equivalents and
receivables transferred to the Liquidating Trust will be sold for cash on such
terms and at such times as approved by the Liquidating Trustees. At such time or
from time to time as the Company determines that any amounts set aside for the
payment of the Company's outstanding liabilities and obligations and its
expenses in liquidation are not needed for those purposes, such amounts will be
transferred to the Liquidating Trust.
If the Bio-Rad Asset Sale is not consummated and the Asset Purchase
Agreement is terminated, the Board of Directors will determine whether and when
to transfer the Company's assets, including the assets that had been subject to
the Asset Purchase Agreement, to the Liquidating Trust. Such transfer may occur
at any time or from time to time following termination of the Asset Purchase
Agreement. Any assets, other than cash, cash equivalents and accounts
receivable, that are not transferred to the Liquidating Trust will be sold at
such times and on such terms as the Board of Directors determines. Any of the
Company's assets that are not sold or distributed prior to the first anniversary
of the approval of the Plan by the Company's stockholders (including any
Contingency Reserve) must be transferred to the Liquidating Trust.
Distributions. The Liquidating Trust will make distributions of
Available Cash pro rata to the Company's stockholders at such times and in such
amounts as shall be determined by the Liquidating Trustees. "Available Cash"
means the cash held by the Liquidating Trust after deduction for the expenses of
the operation of the Liquidating Trust and a contingency reserve in an amount
determined by the Liquidating Trustees to be sufficient to satisfy any
liabilities, expenses and obligations of the Company not otherwise paid or
provided for and that could be recovered against the stockholders to the extent
of the amounts distributed to them by the Company or the Liquidating Trust (the
"Contingency Reserve"). The Company cannot predict the timing of the
distributions for the Liquidating Trust. It is the intention that Available Cash
will be distributed to stockholders of the Company as promptly as practicable
following the Final Record Date (as defined below). Nevertheless, no
distributions will be made until such time as the Liquidating Trustees have
determined the amount of the Contingency Reserve, which is not expected to occur
before [January 1, 1998].
If the Bio-Rad Asset Sale is not consummated and some or all of the
Company's assets are not transferred to the Liquidating Trust, the net proceeds
of the sale of any such assets, together with any other cash held by the
Company, will be distributed pro rata to stockholders, after deduction for
expenses and a Contingency Reserve, at such times and in such amounts as the
Board of Directors shall determine. The Board of Directors may also determine to
transfer any such proceeds to the Liquidating Trust for distribution to
stockholders.
The Board of Directors believes that the Company and the Liquidating
Trust will have sufficient assets to pay the current and future obligations of
the Company and the Liquidating Trust and to make distributions to stockholders,
but there can be no assurance to that effect. The amount of the distributions
will depend on a number of factors, including, if the closing of the Bio-Rad
Asset Sale occurs, whether any or all of the Holdback Amount will be paid over
to the Company following the conclusion of the escrow period in accordance with
the terms of the Asset Purchase Agreement, and if the closing of the Bio-Rad
Asset Sale does not occur, the amount of the proceeds from the sale, if any, of
the Company's property and assets. The amount of the distributions will also
depend on the accounts payable and other liabilities of the Company existing on
the date of the approval of the Plan (including severance payments and payments
to option holders; see "Certain Compensation Arrangements" and "Stock Options"
below), the expenses of operation of the Company and the Liquidating Trust that
accrue following approval of the Plan and the amount of any claims that may be
asserted against the Company or the Liquidating Trust. The expenses of operation
of the Company and the Liquidating Trust will include professional fees and
other expenses of liquidation and could be substantial.
The Company does not anticipate that property, other than cash, will be
distributed to stockholders by the Liquidating Trust or the Company.
7
<PAGE>
Terms of the Liquidating Trust. If the Bio-Rad Asset Sale is
consummated, the Company will transfer to the Liquidating Trust as soon as
practicable thereafter all of the assets of the Company, other than cash
required to pay the outstanding liabilities and obligations of the Company and
the expenses anticipated to be incurred in connection with the liquidation of
the Company. If the Bio-Rad Asset Sale is not consummated, the Board of
Directors will determine whether and when to transfer assets of the Company to
the Liquidating Trust; provided that if all of the Company's assets are not sold
or distributed prior to the first anniversary of the approval of the Plan by the
Company's stockholders, the Company must transfer all the remaining assets of
the Company (including the Contingency Reserve) to the Liquidating Trust.
The purpose of the Liquidating Trust will be to liquidate any non-cash
assets held by the Liquidating Trust and distribute the proceeds of all
Available Cash to the Company's stockholders of record on the Final Record Date.
The Liquidating Trust will be required to pay the expenses of its operations and
all unsatisfied expenses, liabilities and obligations of the Company. Such
expenses, liabilities and obligations will be paid initially out of the
Contingency Reserve, but if the Contingency Reserve is exhausted, such expenses,
liabilities and obligations will be paid out of the other assets held by the
Liquidating Trust.
Each stockholder on the Final Record Date will receive an interest (an
"Interest") in the Liquidating Trust pro rata to its interest in the outstanding
Common Stock on that date. All distributions from the Liquidating Trust will be
made pro rata in accordance with the Interests. The Interests will not be
transferable except by operation of law or upon death. Because the Interests
will not be transferable, it is anticipated that the Liquidating Trust will not
be required to comply with the periodic reporting and proxy statement
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Liquidating Trustees will, however, maintain books and records of the
Liquidating Trust, which will be available for inspection by holders of
Interests, in accordance with law.
The Plan authorizes the Board of Directors to appoint one or more
individuals or entities to act as Liquidating Trustee or Trustees of the
Liquidating Trust and to cause the Company to enter into a liquidating trust
agreement with such trustee or trustees on such terms and conditions as may be
approved by the Board of Directors. It is anticipated that the Board of
Directors will select such trustee or trustees on the basis of the experience of
such individual or entity in administering and disposing of assets and
discharging liabilities of the kind to be held by the Liquidating Trust and the
ability of such individual or entity to serve the best interests of the
Company's stockholders. Approval of the Plan will constitute the approval by the
Company's stockholders of any such appointment and the execution of a
liquidating trust agreement with the Liquidating Trustee.
As stockholders will be deemed to have received a liquidating
distribution equal to their pro rata share of the value of the net assets
transferred to the Liquidating Trust (see "Certain Federal Income Tax
Consequences"), the transfer to the Liquidating Trust of assets could result in
immediate tax liability to the holders of Interests without their readily being
able to realize the value of such Interests to pay such taxes or otherwise.
Contingency Reserve. Under Delaware law, the Company is required, in
connection with its dissolution, to pay or provide for payment of all of its
expenses, liabilities and obligations. These include known liabilities and
obligations of the Company accrued through the date of the approval of the Plan,
expenses to be incurred by the Company following approval of the Plan in
connection with the winding-up and dissolution of the Company, expenses to be
incurred in connection with the operations of the Liquidating Trust, claims that
have been asserted against the Company but that have not been settled or reduced
to judgment and claims that have not yet been asserted but may be asserted in
the future. Known liabilities and obligations of the Company include accounts
payable, professional fees, salary and severance payments to certain employees
and cash-out payments in respect of certain outstanding stock options. See
"Certain Compensation Arrangements" and "Stock Options" below. Claims that have
been or may be asserted may include, among others, claims by certain terminated
distributors and claims that may arise under the Asset Purchase Agreement. See
"Certain Claims" below and "Approval of Asset Purchase Agreement."
Following approval of the Plan by stockholders, the Company will pay or
set aside an amount that it believes to be adequate for the payment of all then
known liabilities and obligations of the Company and the
8
<PAGE>
expenses expected to be incurred by the Company in connection with its wind-up
and dissolution (the "Expense Reserve"). If the Bio-Rad Asset Sale is
consummated, all other assets of the Company will be transferred to the
Liquidating Trust, which will set aside from such assets a Contingency Reserve
to fund the anticipated operational expenses of the Liquidating Trust and other
possible claims against the Company or the Liquidating Trust. If the Bio-Rad
Asset Sale is not consummated and substantially all of the assets of the Company
are not transferred to the Liquidating Trust, the Board of Directors might
determine to cause the Company to establish the Contingency Reserve.
The Company is currently unable to estimate with precision the amounts
of the Expense Reserve and the Contingency Reserve, and the amounts set forth
above under "Reasons for the Plan; Directors Recommendation" are for
illustrative purposes only. These reserves will initially be based upon the
assessment and estimates of the Board of Directors and/or the Liquidating
Trustees, as the case may be, of the Company's known liabilities and
obligations, future operating expenses and possible claims. Subsequent to the
establishment of the Contingency Reserve, the Liquidating Trustees or the Board
of Directors, as the case may be, may increase or decrease the Contingency
Reserve based on their then current estimate and assessment of the operating
expenses of the Liquidating Trust and/or the Company, the probable value of any
known claims against the Company or the Liquidating Trust and the possibility of
any then unknown claims being asserted against the Company or the Liquidating
Trust. Any increase in the amount of the Contingency Reserve will be funded from
the cash assets of the Liquidating Trust or the Company, as the case may be, and
will reduce the amount available for distribution to stockholders. The amount of
any decrease in the Contingency Reserve will increase the assets available for
distribution to stockholders. After all expenses, liabilities and obligations of
the Company and the Liquidating Trust have been satisfied and the Liquidating
Trustees or the Board of Directors, as the case may be, determines that any
future claims against the Company or the Liquidating Trust are not probable of
occurrence, any remaining funds in the Contingency Reserve will be distributed
pro rata to holders of Interests in the Liquidating Trust.
In the event the Liquidating Trust or the Company fails to create an
adequate Contingency Reserve for payment of expenses, liabilities and
obligations, or should such Contingency Reserve and the assets held by the
Liquidating Trust be exceeded by the amount ultimately found payable in respect
of the Company's expenses, liabilities and obligations, each stockholder could
be held liable for the payment to creditors of such stockholder's pro rata share
of such excess, limited to the amounts theretofore received by such stockholder
from the Liquidating Trust or the Company. In addition, if a court holds at any
time that the Liquidating Trust or the Company has failed to make adequate
provision for expenses, liabilities and obligations, or if the amount ultimately
required to be paid in respect thereof exceeds the amount available from the
Contingency Reserve and the assets of the Liquidating Trust, a creditor of the
Company could seek an injunction against the making of distributions under the
Plan on the ground that the amounts to be distributed are needed to provide for
the payment of the Company's expenses, liabilities and obligations. Any such
action could delay or substantially diminish the cash distributions to be made
to stockholders under the Plan.
Disposition of Certain Assets. The Plan gives to the Board of Directors
of the Company the power to sell all the assets of the Company. The Company has
entered into the Asset Purchase Agreement with Bio-Rad, providing for the sale
to Bio-Rad of substantially all of the assets of the Company other than cash,
cash equivalents and accounts receivable. The Company anticipates that, if the
Asset Purchase Agreement is approved by stockholders, the Bio-Rad Asset Sale
will be consummated in accordance with its terms. However, if for any reason the
Asset Purchase Agreement is terminated or abandoned, the Assets may be retained
by the Company and sold on such terms and in such manner as determined by the
Board of Directors or transferred to the Liquidating Trust and sold by the
Liquidating Trustees. The prices at which the Company or the Liquidating Trust
may be able to sell the Assets will depend on factors that may be beyond the
control of the Company or the Liquidating Trust and may not be as high as the
purchase price payable by Bio-Rad under the Asset Purchase Agreement or the
prices that could be obtained if the Company were not in liquidation. Approval
of the Plan will constitute approval of any such sales. See "Approval of Asset
Purchase Agreement" for a discussion of the Bio-Rad Asset Sale.
Certain Compensation Arrangements. Pursuant to the Plan, the Company
may, in the absolute discretion of the Board of Directors, pay to the Company's
present or former officers, directors, employees, agents and representatives, or
any of them, compensation or additional compensation above their regular
compensation, in
9
<PAGE>
money or other property, in recognition of the extraordinary efforts they, or
any of them, will be required to undertake, or actually undertake or have
undertaken, in connection with the implementation of the Plan. Stephen Blose,
the former president and chief executive officer of the Company and a former
director, resigned his positions with the Company effective August 1, 1997 and
is now employed by Bio-Rad. Alan Chodosh, the former chief financial officer of
the Company, resigned his position with the Company effective June 6, 1997. Mr.
Blose was instrumental in negotiating the Asset Purchase Agreement and in making
the business and operational arrangements in contemplation of the winding-up of
the Company. Mr. Chodosh has continued to assist the Company in fulfilling its
reporting obligations under the Exchange Act. Both Mr. Blose and Mr. Chodosh
have been available on a consulting basis to assist in the settlement of the
Company's outstanding obligations and the winding-up of its affairs. It is
contemplated that if the Bio-Rad Asset Sale is consummated, Mr. Blose will
receive a success fee in the amount of up to $35,000, and Mr. Chodosh will
receive a fee of up to $10,000. In addition, the Company has agreed to pay John
Randall, a former senior software developer of the Company, a fee of up to
$35,000 following consummation of the Bio-Rad Asset Sale. Mr. Randall's
employment with Bio-Rad is a condition to Bio-Rad's obligation to consummate the
Asset Purchase Agreement. Approval of the Plan will also constitute the approval
by the Company's stockholders of the payment of all such compensation.
Stock Options. As of June 30, 1997, the Company had outstanding options
to acquire 555,000 shares of Common Stock at exercises prices of between $0.1193
and $0.75 per share. The options are held by certain current and former
directors, officers and employees of the Company, including the following former
directors and executive officers:
<TABLE>
<CAPTION>
NAME EXERCISE PRICE EXPIRATION DATE NO. OF SHARES
<S> <C> <C> <C>
Stephen H. Blose $0.1193 14-August-02 65,000
0.25 15-Jan-03 67,500
------
132,500
Jon D. Randall 0.1193 14-Aug-02 45,000
0.25 15-Jan-03 67,000
------
112,500
Alan P. Chodosh 0.1193 14-Aug-02 45,000
0.25 15-Jan-03 67,500
------
112,500
Paul J. Collins 0.1193 14-Aug-02 45,000
0.25 15-Jan-03 67,500
------
112,500
Total Stock Options 470,000
=======
</TABLE>
The Plan provides that the options of the above former directors and executive
officers (the "Options") outstanding on the Final Record Date will be settled
for a cash payment in the amount of the positive difference, if any, between the
aggregate liquidation amount per share of Common Stock and the exercise prices
of such Options. The cash-out payment of the Options is expected to occur at the
time of the final liquidating distribution to stockholders. The Options to be
cashed-out include options of certain former employees to acquire 470,000 shares
of Common Stock, which by the terms of the Options would otherwise have lapsed
following the employees' termination of employment. The Board of Directors
determined to cash-out these Options in order to honor certain commitments made
to the holders thereof in order to induce them to perform certain services for
the Company that were necessary to facilitate the liquidation and winding-up of
the Company. Approval of the Plan will constitute the approval of the cash-out
of the Options.
Closing of Transfer Books. The Company will close its transfer books on
the earlier date (the "Final Record Date") to occur of (i) the close of business
on the date fixed by the directors for the final transfer or
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<PAGE>
distribution by the Company of its assets to the Liquidating Trust or the
stockholders, as the case may be, and (ii) the date on which the dissolution of
the Company becomes effective under Delaware law. Thereafter, the Company will
not record any further transfers of Common Stock and will not issue any new
stock certificates, other than replacement certificates. It is anticipated that
no further trading of the Company's shares will occur after the Final Record
Date. All liquidating distributions from the Liquidating Trust or the Company on
or after the Final Record Date will be made to stockholders pro rata according
to their holdings of Common Stock as of the Final Record Date. Subsequent to the
Final Record Date, the Company may, at its election, require stockholders to
surrender certificates representing their shares of Common Stock in order to
receive distributions. Stockholders should not forward their stock certificates
before receiving instructions to do so. If surrender of stock certificates is
required, all distributions otherwise payable by the Liquidating Trust or the
Company, if any, to stockholders who have not surrendered their stock
certificates may be held in trust for such stockholders, without interest, until
the surrender of their certificates (subject to escheat pursuant to the laws
relating to unclaimed property). If a stockholder's certificate evidencing the
Common Stock has been lost, stolen or destroyed, the stockholder may be required
to furnish the Company with satisfactory evidence of the loss, theft or
destruction thereof, together with surety bond or other indemnity, as a
condition to the receipt of any distribution.
Indemnification. Pursuant to the Plan, the Company will indemnify its
officers, directors, employees, agents and representatives for actions taken in
connection with the Plan and the winding up of the affairs of the Company. The
Company's obligation to indemnify such persons may also be satisfied out of
assets of the Liquidating Trust established. The Liquidating Trust will
similarly be authorized to indemnify the Liquidating Trustees and any employees,
agents or representatives of the Liquidating Trust for actions taken in
connection with the operations of the Liquidating Trust. Any claims arising in
respect of such indemnification will be satisfied out of the assets of the
Liquidating Trust.
Dissolution of the Company. At such time as all of the assets of the
Company, other than the Expense Reserve, have been distributed to the
Liquidating Trust or to stockholders, a Certificate of Dissolution will be filed
with the State of Delaware dissolving the Company. The dissolution of the
Company will become effective, in accordance with Delaware law upon the filing
of the Certificate of Dissolution with the Secretary of State of the State of
Delaware or upon such later date as may be specified in the Certificate of
Dissolution. Under Delaware law, the Company will continue to exist for three
years after the dissolution becomes effective or for such longer period as the
Delaware Court of Chancery shall direct, for the purposes of prosecuting and
defending suits, whether civil, criminal or administrative, by or against it,
and enabling the Company gradually to settle and close its business, to dispose
of and convey its property, to discharge its liabilities and to distribute to
its stockholders any remaining assets, but not for the purpose of continuing the
business for which the Company was organized. Except for the requirements of
Delaware law and the Exchange Act in connection with the Meeting of stockholders
to vote on the Plan, and except for the filing of the Certificate of Dissolution
and any required filings under federal or state tax laws, no federal or state
regulatory requirements must be complied with or approvals obtained in
connection with the dissolution.
AMENDMENT AND ABANDONMENT
Under the Plan, if the Board of Directors determines that liquidation
and dissolution are not in the best interests of the Company or its
stockholders, the Board of Directors may direct that the Plan be abandoned. The
Company nevertheless may cause the performance, without further stockholder
approval, of any contract for the sale of assets theretofore executed which the
Board of Directors deems to be in the best interests of the Company (except that
the Company shall not consummate the Asset Purchase Agreement without
stockholder approval thereof). The Board of Directors also may amend or modify
the Plan if it determines such action to be in the best interests of the Company
or its stockholders, without the necessity of further stockholder approval.
CONDUCT OF THE COMPANY FOLLOWING ADOPTION OF THE PLAN
The Company effectively ceased business operations as of June 30, 1997,
except for the collection of receivables, the negotiation, execution and
performance of its obligations under the Asset Purchase Agreement and activities
in connection with the anticipated winding up of the Company. Other than one
administrative manager,
11
<PAGE>
all employees of the Company have resigned or been terminated. Following
approval of the Plan, the Company expects to continue the process of winding-up
its affairs, including, subject to stockholder approval and the satisfaction of
certain other conditions, the consummation of the Bio-Rad Asset Sale, transfer
of the Company's assets to the Liquidating Trust, payment of its obligations,
liabilities and expenses and compliance with law. In the event the Bio-Rad Asset
Sale is not consummated, the Company will seek to liquidate the Assets or
transfer the Assets to the Liquidating Trust.
CERTAIN CLAIMS
Certain of the Company's former distributors who have received notice
of the Company's intended winding-up have either claimed that such winding-up
would be in violation of their contractual rights with the Company or have
otherwise made claims against the Company. The Company has denied liability
under such claims and is in the process of attempting to resolve the claims on a
consensual basis. The Company cannot predict at this time whether such claims
will be resolved, the cost to the Company of any such resolution or, if such
claims were litigated, what the outcome and cost of such litigation would be.
The Company anticipates that the amount of the Contingency Reserve will reflect,
in part, the possible liability of the Company under such claims. See "Unaudited
Pro Forma Statement of Net Assets in Liquidation."
LISTING AND TRADING OF THE COMMON STOCK
The Company currently intends to close its transfer books on the Final
Record Date and at such time cease recording stock transfers and issuing stock
certificates (other than replacement certificates). Accordingly, it is expected
that trading in the shares will cease on or after such date. If the Bio-Rad
Asset Sale is consummated, it is anticipated that the Final Record Date will
occur shortly thereafter at or about the time that all of the Company's assets,
other than the Expense Reserve, are transferred to the Liquidating Trust. In
such case, all liquidating distributions to stockholders will be made by the
Liquidating Trust. If the Bio-Rad Asset Sale is not consummated, the Board of
Directors may determine not to transfer assets to the Liquidating Trust and to
make liquidating distributions to stockholders from the Company. In such case,
the Common Stock will continue to trade, but if any liquidating distributions
are made to stockholders by the Company, the market price of the Common Stock
will likely decline as a result of such distributions. Moreover, as a result of
the adoption of the Plan and/or the resulting reduction in both the market price
of the Common Stock and the Company's assets and stockholders' equity following
stockholder distributions, the Common Stock may no longer satisfy the
requirements for continued listing on the OTC Electronic Bulletin Board of the
NASD. If such listing is terminated, the marketability of the shares of Common
Stock, which have historically been thinly traded, may decline even further.
ABSENCE OF APPRAISAL RIGHTS
Under Delaware law, the stockholders of the Company are not entitled to
appraisal rights for their shares of the Company's capital stock in connection
with the transactions contemplated by the Plan or to any similar rights of
dissenters under Delaware law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal
income tax consequences of the Plan to the Company and its stockholders, but
does not purport to be a complete analysis of all the potential tax effects. The
discussion addresses neither the tax consequences that may be relevant to
particular categories of investors subject to special treatment under certain
federal income tax laws (such as dealers in securities, banks, insurance
companies, tax-exempt organizations, and foreign individuals and entities) nor
any tax consequences arising under the laws of any state, local or foreign
jurisdiction. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, the IRS rulings and judicial
decisions now in effect, all of which are subject to change at any time; any
such changes may be applied retroactively. The following discussion has no
binding effect on the IRS or the courts and assumes that the Company will
liquidate substantially in accordance with the Plan. Distributions pursuant to
the Plan may occur at various times and in more than one tax year. No assurances
can be given that the tax treatment described herein will remain unchanged at
the time of such
12
<PAGE>
distributions. No ruling has been requested from the IRS with respect to the
anticipated tax treatment of the Plan, and the Company will not seek an opinion
of counsel with respect to the anticipated tax treatment. The failure to obtain
a ruling from the IRS or an opinion of counsel results in less certainty that
the anticipated tax treatment summarized herein will be obtained. There can be
no assurance that the Liquidating Trust will be treated as a liquidating trust
for federal income tax purposes or that the distributions made pursuant to the
Plan will be treated as liquidating distributions. If any of the conclusions
stated herein proves to be incorrect, the result could be increased taxation at
the Company and/or stockholder level, thus reducing the benefit to the
stockholders and the Company from the liquidation.
Consequences to the Company. After the approval of the Plan and until
the liquidation is complete, the Company will continue to be subject to tax on
its taxable income. The Company will generally recognize gain or loss on sales
of its property pursuant to the Plan. Upon any distribution of property to
stockholders or to the Liquidating Trust, the Company will generally recognize
gain or loss as if such property was being sold to the stockholders at its fair
market value. If it were determined that distributions made pursuant to the Plan
were not liquidating distributions, the Company may not be able to recognize
loss with respect to distributions of depreciated property to the stockholders
and/or the Liquidating Trust.
Consequences to Stockholders. As a result of the liquidation of the
Company, a stockholder will recognize gain or loss equal to the difference
between (i) the sum of the amount of cash and the fair market value of any
property distributed to such stockholder directly or through the Liquidating
Trust, and (ii) such stockholder's tax basis for his or her shares of Common
Stock. A stockholder's tax basis in his or her shares will depend upon various
factors, including the stockholder's cost and the amount and nature of any
distributions received with respect thereto.
A stockholder's gain or loss will be computed on a "per share" basis.
If the Bio-Rad Asset Sale is consummated, the Company expects to make a single
liquidating distribution to the Liquidating Trust. However, especially if the
Bio-Rad Asset Sale is not consummated, the Company could make more than one
liquidating distribution, each of which will be allocated proportionately to
each share of Common Stock owned by a stockholder. The value of each liquidating
distribution will be applied against and reduce a stockholder's tax basis in his
or her shares of Common Stock. Gain will be recognized by reason of a
liquidating distribution only to the extent that the aggregate value of such
distributions received by a stockholder with respect to a share exceeds his or
her tax basis for that share. Any loss will generally be recognized only when
the final distribution from the Company has been received and then only if the
aggregate value of the liquidating distributions with respect to a share is less
than the stockholder's tax basis for that share. Gain or loss recognized by a
stockholder will generally be treated as capital gain or loss provided the
shares are held as capital assets. Such gain or loss will be subject to tax at
the short-term, mid-term or long-term capital gain tax rate, depending on the
period for which such shares are held by the stockholder. If it were to be
determined, however, that distributions made pursuant to the Plan were not
liquidating distributions, the result could be treatment of the distributions as
dividends taxable at ordinary income rates, subject, in the case of corporate
holders, to a dividends received deduction.
The Company will provide stockholders and the IRS with a statement of
the amount of cash and the fair market value of any property distributed to the
stockholders during that year, at such time and in such manner as required by
the Treasury Regulations.
The Liquidating Trust. If the Company transfers assets to the
Liquidating Trust, stockholders will be treated for tax purposes at the time of
transfer as having received their pro rata share of property transferred to the
Liquidating Trust, reduced by the amount of known liabilities assumed by the
liquidating trust or to which the property transferred is subject. The
Liquidating Trust itself should not be subject to tax, assuming that it is
treated as a liquidating trust for federal income tax purposes. After formation
of the Liquidating Trust, stockholders must take into account for federal income
tax purposes their allocable portion of any income, expense, gain or loss
recognized by the trust. As a result of the transfer of property to the
Liquidating Trust and the ongoing operations of the Liquidating Trust,
stockholders should be aware that they may be subject to tax, whether or not
they have received any actual distributions from the Liquidating Trust with
which to pay such tax.
13
<PAGE>
In addition, as indicated above, the Company has not obtained any IRS
ruling as to the tax status of the Liquidating Trust, and there can be no
assurance, therefore, that the IRS will agree with the Company's conclusions
that the Liquidating Trust should be treated as a liquidating trust for federal
income tax purposes. If it were determined that the Liquidating Trust should be
classified for federal income tax purposes as an association taxable as a
corporation (as a result of a change in law, changes in the IRS ruling
guidelines or administrative positions, a change in facts or otherwise), income
and losses of the Liquidating Trust would be reflected on its own tax return
rather than being passed through to the Stockholders and the Liquidating Trust
would be required to pay federal income taxes at corporate tax rates on its
income. Furthermore, all or a portion of any distribution made to the
Stockholders from the Liquidating Trust could be treated as a dividend subject
to tax at ordinary income tax rates.
Taxation of Non-United States Stockholders. Foreign corporations or
persons who are not citizens or residents of the United States should consult
their tax advisors with respect to the U.S. and non-U.S. tax consequences of the
Plan.
State and Local Income Tax Consequences. Stockholders may also be
subject to liability for state and local taxes with respect to the receipt of
liquidating distributions and their Interests in the Liquidating Trust. State
and local tax laws may differ in various respects from federal income tax law.
Stockholders should consult their tax advisors with respect to the state and
local tax consequences of the Plan.
THE FOREGOING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS
INCLUDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO
ANY STOCKHOLDER. THE TAX CONSEQUENCES OF THE PLAN MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF THE STOCKHOLDER. THE COMPANY RECOMMENDS THAT EACH
STOCKHOLDER CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
THE PLAN.
14
<PAGE>
PROTEIN DATABASES, INC.
UNAUDITED PRO FORMA STATEMENT OF NET ASSETS IN LIQUIDATION
JUNE 30, 1997
The following Unaudited Pro Forma Statement of Net Assets in
Liquidation assumes that the Plan had been approved by the Company's
stockholders, and, accordingly, that the Company has adopted the liquidation
basis of accounting as of June 30, 1997. Under the liquidation basis of
accounting, assets are stated at their estimated net realizable values, and
liabilities are stated at their anticipated settlement amounts.
The valuation of assets and liabilities necessarily requires many
estimates and assumptions by management and there are substantial uncertainties
in carrying out the provisions of the Plan. The actual value of any liquidating
distributions will depend upon a variety of factors including, but not limited
to, if the Bio-Rad Asset Sale is consummated, the portion of the Holdback Amount
that will be released to the Company from escrow and, if the Bio-Rad Asset Sale
is not consummated, the actual proceeds from the sale of the Assets. Such
factors also include the ultimate settlement amounts of the Company's
liabilities and obligations, actual costs incurred in connection with carrying
out the Plan, including management fees and administrative costs during the
liquidation period, and the actual timing of the distributions.
The valuations presented in the accompanying Unaudited Pro Forma
Statement of Net Assets in Liquidation represent estimates, based on present
facts and circumstances, of the estimated net realizable values of assets,
assuming the Bio-Rad Asset Sale is consummated and that the entire Holdback
Amount will be released to the Company, and the estimated cost associated with
carrying out the provisions of the Plan based on the assumptions set forth in
the accompanying notes. The actual values and costs are expected to differ from
the amounts shown herein and could be higher or lower than the amounts
estimated. Accordingly, it is not possible to predict the aggregate net values
ultimately distributable to stockholders, and no assurance can be given that the
amount to be received in liquidation will equal or exceed the price or prices at
which the Common Stock traded historically or is expected to trade in the
future.
The Unaudited Pro Forma Statement of Net Assets in Liquidation should
be read in conjunction with the notes thereto and the Company's financial
statements included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996. The Unaudited Pro Forma Statement of Net Assets in
Liquidation is not necessarily indicative of what the actual financial position
of the Company would have been had the transactions contemplated in the Plan
occurred at June 30, 1997, nor does it purport to represent the future financial
position of the Company.
The historical condensed balance sheet included within the Unaudited
Pro Forma Statement of Net Assets in Liquidation is extracted from the Company's
unaudited June 30, 1997 financial statements. In management's opinion, it
includes all normal recurring adjustments necessary to a fair presentation.
15
<PAGE>
PROTEIN DATABASES, INC.
UNAUDITED PRO FORMA STATEMENT OF NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS
CONDENSED TO RECORD PRO FORMA
BALANCE SHEET ESTIMATED LIQUIDATING
JUNE 30, 1997 REALIZABLE VALUE BALANCE SHEET
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.............................. $145,274 $1,000,000 (1) $1,145,274
Accounts receivable.................................... 139,277 (10,000)(2) 129,277
Inventory.............................................. 28,572 (28,572)(2) 0
Prepaid expenses ...................................... 8,672 (8,672)(2) 0
Property and Equipment................................. 154,365 (154,365)(2) 0
Other assets........................................... 9,020 (9,020)(2) 0
---------- ----------- -----------
Total............................................. $485,180 $789,371 $1,274,551
======== ========== ==========
LIABILITIES
Accounts payable....................................... 87,967 0 (3) 87,967
Accrued expenses....................................... 58,064 0 (3) 58,064
Unearned revenue....................................... 24,520 0 (3) 24,520
Shut down costs and contingency reserve................ 0 550,000 (3) 550,000
------------ ------- -------
170,551 550,000 720,551
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock........................................... 14,597 0 14,597
Additional paid-in capital............................. 8,519,636 0 8,519,636
Accumulated deficit.................................... (8,219,604) 789,371 (2) (7,980,233)
(550,000)(3)
------------- ---------
314,629 239,371 554,000
------- ------- -------
Total............................................. $485,180 $789,371 $1,274,551
======== ======== ==========
ESTIMATED NET ASSETS AVAILABLE FOR
LIQUIDATION.......................................... $91,360(4) $645,360
======= ========
NUMBER OF SHARES ESTIMATED TO BE
OUTSTANDING.......................................... 1,459,724 470,000(4) 1,929,724
========= ======= =========
ESTIMATED NET ASSETS AVAILABLE FOR
LIQUIDATION PER OUTSTANDING SHARE.................... $ 0.33
======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS UNAUDITED PRO FORMA
STATEMENT OF NET ASSETS IN LIQUIDATION.
16
<PAGE>
PROTEIN DATABASES, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF NET ASSETS IN LIQUIDATION
JUNE 30, 1997
(1) Adjustment to record management's estimate of the proceeds received from
the Bio-Rad Asset Sale.
(2) Net estimated loss on disposition of the assets.
(3) Establishment at June 30, 1997 of a contingency reserve, which the Company
believes will be adequate for payment of all expenses and other known
liabilities and possible contingent obligations, as well as an amount
estimated to be required to carry out the Plan.
<TABLE>
<CAPTION>
INCREASE/(DECREASE)
AMOUNT OF TO
CONTINGENCY RESERVE SHAREHOLDERS' EQUITY
<S> <C> <C>
Existing liabilities at June 30, 1997:
Accounts payable ..................................................... $ 87,967
Accrued expenses...................................................... 58,064
Unearned revenue...................................................... 24,520
Shut down costs and estimated operating costs (including
compensation) to administer the Plan through dissolution.............. 250,000 $(250,000)
Reserve for other contingencies......................................... 300,000 (300,000)
--------- -----------
$720,551 $(550,000)
======== ==========
</TABLE>
(4) Represents the aggregate exercise price of the options of certain former
employees of the Company to acquire shares of Common Stock at prices
between $0.1193 to $0.25 per share that will be "cashed-out" in connection
with the final liquidating distribution of the Company's assets to its
stockholders for an amount equal to the positive difference between the
aggregate liquidation amount per share of Common Stock and the exercise
prices of such options. See "Principal Provisions of the Plan--Stock
Options."
17
<PAGE>
RECOMMENDATION AND VOTE
Approval of the Plan requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER CAREFUL REVIEW AND
CONSIDERATION OF THE TERMS OF THE PLAN, BELIEVES THAT THE LIQUIDATION OF THE
COMPANY IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL OF THE
PLAN.
PROPOSAL 2
APPROVAL OF ASSET PURCHASE AGREEMENT
GENERAL
The Board of Directors of the Company is proposing that, at the
Meeting, the stockholders approve the Asset Purchase Agreement, dated as of July
16, 1997, by and between the Company and Bio-Rad. A copy of the Asset Purchase
Agreement is attached as Exhibit B to this Proxy Statement. The material
features of the Asset Purchase Agreement are summarized below; this summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Asset Purchase Agreement.
STOCKHOLDERS ARE URGED TO READ THE ASSET PURCHASE AGREEMENT IN ITS ENTIRETY.
BACKGROUND
See "Approval of Plan of Liquidation and Dissolution--Background" and
"--Reasons for the Plan; Directors' Recommendation" for a discussion of the
background and reasons for the determination by the Board of Directors of the
Company to liquidate and wind-up the affairs of the Company. In accordance with
the Board's determination that it would not be economical to continue the
operations of the Company as an independent entity, the Company began in March
1996 to seek a buyer for the Company or its assets. The Company approached a
number of competitors and major distributors to solicit interest in a possible
business combination. With the exception of Bio- Rad, none of the parties
approached expressed a serious interest in such a transaction. Bio-Rad indicated
that it would be willing to consider an acquisition of the Company, but only if
the transaction were structured as an asset acquisition in which Bio-Rad would
assume only selected liabilities.
The Company and Bio-Rad commenced preliminary discussions concerning
the acquisition transaction in December 1996. On April 8, 1997, the Company
announced that it was in discussions concerning a possible sale of its business
for a purchase price of approximately $1,000,000. During the months of May and
June 1997, the parties exchanged drafts of the Asset Purchase Agreement, and
negotiated the terms of the acquisition, including the price, the Holdback
Amount and the duration and other provisions of the escrow arrangements to which
the Holdback Amount is subject. During this period, the Company also furnished
Bio-Rad with requested due diligence materials. Bio-Rad also requested, and the
Company agreed to, a royalty free software license agreement (the "Interim
License Agreement"), pursuant to which Bio-Rad would be given the right to use
the Company's proprietary software for limited purposes during the period
between the execution of the Asset Purchase Agreement and the consummation of
the Bio-Rad Asset Sale.
The Asset Purchase Agreement and the Interim License Agreement were
approved by the Board of Directors by unanimous written consent dated as of July
14, 1997, and were subsequently executed by the parties. The Company publicly
announced the execution of the Asset Purchase Agreement by press release on July
21, 1997.
18
<PAGE>
REASONS FOR THE ASSET PURCHASE AGREEMENT; DIRECTORS' RECOMMENDATION
The Board of Directors has agreed to the Asset Purchase Agreement for
substantially the same reasons that the Board has determined that it is in the
best interests of stockholders to liquidate and wind-up the affairs of the
Company, including in particular:
o the lack of effective distribution channels for the Company's
products;
o the Company's continuing losses, its loss, and inability to
replace, key personnel and its inability to compete effectively;
o the inability of the Company to continue to develop its products
and the likelihood that without such development the Company's
product's will decline in value unless they are sold promptly;
and
o the lack of serious interest in acquiring the Company's business
by any party other than Bio-Rad.
BASED UPON THE FOREGOING, THE BOARD OF DIRECTORS UNANIMOUSLY RECOM-
MENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL OF THE ASSET PURCHASE AGREEMENT.
If the Asset Purchase Agreement is not approved by the stockholders,
the Board of Directors will explore the alternatives then available with respect
to its assets. In such event, subject to stockholder approval of the Plan, no
further stockholder approval will be sought with regard to the specific terms of
any dispositions of the assets of the Company approved by the Board of Directors
of the Company or, if applicable, the Liquidating Trustees. Approval of the Plan
shall constitute approval of any and all such dispositions.
PRINCIPAL PROVISIONS OF THE ASSET PURCHASE AGREEMENT
The following description of the certain material terms of the Asset
Purchase Agreement is not complete and is qualified in its entirety by reference
to the full text of the agreement, which is attached as Exhibit B to this Proxy
Statement.
Transfer of Assets. The Company will transfer to Bio-Rad substantially
all of the assets of the Company (other than certain excluded assets) used or
held in connection with the Company's business of developing, marketing and
selling software systems for protein and DNA analysis for life science research
and biotechnology applications. The assets to be transferred include
intellectual property, computers and software, inventory, fixed assets,
property, plant and equipment, and certain contract rights. The assets do not
include cash, cash equivalents and accounts receivable.
Assumption of Liabilities. Bio-Rad will assume the liabilities and
obligations of the Company under certain contracts and permits as well as
after-sale and warranty obligations with respect to products manufactured and
sold by the Company prior to the closing. Bio-Rad will not assume any
liabilities of the Company except as explicitly provided.
Purchase Price. In consideration for the sale and transfer of the
assets, Bio-Rad has agreed to pay the Company the sum of $1,000,000 (the
"Purchase Price"). The Purchase Price, less the Holdback Amount, will be paid in
cash at the closing of the Bio-Rad Asset Sale.
Holdback Amount; Escrow. The Asset Purchase Agreement provides for a
Holdback Amount equal to $300,000, to satisfy the Company's indemnification
obligations, if any, under the Asset Purchase Agreement. $200,000 of such
Holdback Amount will be available only for claims, if any, related to or arising
out of a license agreement with a third party, and $100,000 will be available
for the satisfaction of indemnification claims generally. The Holdback Amount
will be placed in escrow with [La Salle National Bank], as escrow agent, and
will be released to the
19
<PAGE>
Company, net of the amount of any claims by Bio-Rad, on the eleventh month
anniversary of the closing of the Bio- Rad Asset Sale.
Representations and Warranties. The Company and Bio-Rad have made
representations and warranties to each other, and have agreed to certain
covenants, which are customary in transactions of this nature.
Conditions to Closing. The respective obligations of the parties to
consummate the transactions contemplated by the Asset Purchase Agreement are
subject to a number of conditions, including, among others, approval of the
Asset Purchase Agreement by the Company's stockholders, the continuing accuracy
of the representations and warranties and compliance with all covenants and
obligations of the respective parties. It is also a condition to the obligation
of Bio-Rad to consummate the transaction that John Randall, a former vice
president of research and development and senior programmer of the Company, be
employed by Bio-Rad on the date of the closing. Mr. Randall has entered into an
employment agreement with Bio-Rad effective July 15, 1997, and will receive a
payment from the Company in the amount of $35,000 upon the closing of the
transaction.
Indemnification. The Company and Bio-Rad have agreed to indemnify and
hold harmless the other against and in respect of any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs, damages, losses,
liabilities, taxes and deficiencies and penalties and interest thereon resulting
from, among other matters, any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on their part. All representations
and warranties of the parties shall survive the execution and delivery of the
Asset Purchase Agreement and shall continue in full force and effect for a
period of eleven months after the closing date. No indemnity shall be payable
based upon, arising out of or otherwise in respect of any inaccuracy or any
breach of representation or warranty with respect to any loss of less than
$14,500.
Termination; Amendment. The Asset Purchase Agreement may be terminated
and the transactions contemplated thereby may be abandoned (i) by mutual consent
of the Company and Bio-Rad; (ii) by the Company or Bio-Rad if the closing shall
not have occurred on or before December 31, 1997; or (iii) by either the Company
or Bio-Rad if there is a material breach of any material representation or
warranty of the other party or if any material covenant or condition be
performed by the other party has not been satisfied or waived. In the event of
any termination of the Asset Purchase Agreement, such agreement shall become
void and have no further force and effect, and there shall be no liability on
the part of any of the parties except for any willful breach of the Asset
Purchase Agreement occurring prior to termination.
Expenses. The parties to the Asset Purchase Agreement shall bear their
respective expenses incurred in connection with the preparation, execution and
performance thereof and the transactions contemplated thereby.
INTERIM LICENSE AGREEMENT
The Company has granted to Bio-Rad a royalty free license to use the
Company's proprietary software which constitutes a portion of the Assets. The
purpose of the license is to enable Bio-Rad to familiarize itself with the
software pending the closing of the Bio-Rad Asset Sale and thereby be positioned
to begin marketing the products that it is acquiring from the Company promptly
upon consummation of the transaction. Under the terms of the license, Bio-Rad is
permitted to use the software only for itself and may not provide the software
to any third party, except for the use of such software to service the existing
customers of the Company.
The Interim License Agreement will terminate on the earliest to occur
of (i) the consummation of the Bio- Rad Asset Sale, (ii) the termination of the
Asset Purchase Agreement by the Company in accordance with its terms; (iii) the
termination of the Asset Purchase Agreement by Bio-Rad for any reason, and (iv)
January 16, 1998, subject to extension to April 16, 1998 if the Asset Purchase
Agreement has not been consummated.
20
<PAGE>
ABSENCE OF APPRAISAL RIGHTS
Under Delaware law, the stockholders of the Company are not entitled to
appraisal rights for their shares of the Company's stock in connection with the
transactions contemplated by the Asset Purchase Agreement or to any similar
rights of dissenters under Delaware law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal
income tax consequences of the Asset Purchase Agreement to the Company, but does
not purport to be a complete analysis of all the potential tax effects. The
discussion does not address any tax consequences arising under the laws of any
state, local or foreign jurisdiction. The discussion is based upon the Code,
Treasury Regulations, IRS rulings and judicial decisions now in effect, all of
which are subject to change at any time; any such changes may be applied
retroactively. The following discussion has no binding effect on the IRS or the
courts and assumes that the Company will consummate the Asset Purchase Agreement
substantially in accordance with its terms.
The Company will recognize taxable gain or deductible loss on the sale
of each asset pursuant to the Asset Purchase Agreement. The amount of such gain
or loss will be the difference between the Company's adjusted tax basis for each
asset and the amount of consideration received for that asset (reduced by the
costs of the transaction allocable to that asset).
It is anticipated that the net taxable income recognized by the Company
as a result of the sale of the Assets pursuant to the Asset Purchase Agreement
will not create a current regular federal income tax liability because of (a)
the Company's anticipated level of operating losses and expenses for the fiscal
year ending December 31, 1997 and (b) the Company's available net operating loss
carry forwards.
The Company also anticipates that its level of operating losses and
expenses for the fiscal year ending December 31, 1997 will cause it to have no
alternative minimum taxable income for such year for purposes of the federal
alternative minimum tax ("AMT"). Since, under the AMT, only 90% of alternative
minimum taxable income can be reduced by net operating loss carry forwards, if
the Company has alternative minimum taxable income for the fiscal year ending
December 31, 1997 (without regard to net operating loss carry forwards), it
would have to pay federal alternative minimum tax on a portion of the net
taxable income recognized as a result of the sale of its assets pursuant to the
Asset Purchase Agreement. It is anticipated that such tax will not exceed 2% of
any such income.
The stockholders will not recognize any gain or loss as a result of the
sale of the Assets pursuant to the Asset Purchase Agreement.
STATE AND LOCAL INCOME TAX CONSEQUENCES
The Company may be subject to liability for state and local taxes with
respect to the consummation of the Asset Purchase Agreement.
RECOMMENDATION AND VOTE
Approval of the Asset Purchase Agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock of the
Company.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER CAREFUL REVIEW AND
CONSIDERATION OF THE TERMS OF THE ASSET PURCHASE AGREEMENT, BELIEVES THAT ITS
CONSUMMATION IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL OF THE
ASSET PURCHASE AGREEMENT.
21
<PAGE>
PROPOSAL 3
APPROVAL OF CHANGE OF NAME
On [_____], the Board of Directors adopted, subject to the approval of
the Company's stockholders, an amendment to the Company's Certificate to
Incorporation to change the name of the Company to "IDP Liquidating Corp." The
current name of the Company is Protein Databases, Inc.
REASONS FOR THE CHANGE OF NAME
Pursuant to the Asset Purchase Agreement, the Company is required to
change its corporate name so as not to include the words "Protein Databases" or
"PDI" or any other name or mark that has such a near resemblance thereto as may
be likely to cause confusion or mistake to the public. The Board of Directors
has determine that the new name -- "IDP Liquidating Corp." -- would satisfy such
restriction.
If the Company's stockholders approve the proposal to change the
Company's name, such proposal will become effective on the date a certificate of
amendment to the Company's Certificate of Incorporation is filed with the
Secretary of State of the State of Delaware, the Company's state of
incorporation.
RECOMMENDATION AND VOTE
Approval of the proposal to change the name of the Company requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company.
THE BOARD OF DIRECTORS BELIEVES THAT IT IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS TO CHANGE ITS CORPORATE NAME AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO CHANGE THE NAME OF
THE COMPANY TO "IDP LIQUIDATING CORP."
22
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of the Company,
certain information as to the shares of Common Stock beneficially owned as of
the Record Date (except as noted below) (i) by each person known by the Company
to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii)
by each of the Company's directors, and (iii) by all executive officers and
directors as a group. The stockholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES APPROXIMATE
NAME AND ADDRESS OF AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES (1)
<S> <C> <C>
Princeton/Montrose Partners........................................... 730,545 (2) 50.05%
243 North Highway 101, Suite 13
Solana Beach, CA 92076
Ronald R. Hahn........................................................ - (3) -
243 North Highway 101, Suite 13
Solana Beach, CA 92076
Joel A. Fontaine...................................................... - -
775 Park Avenue, Suite 255
Huntington, NY 11743
Stephen H. Blose...................................................... 134,813 (4) 8.47%
775 Park Avenue, Suite 255
Huntington, NY 11743
Jon D. Randall........................................................ 112,500 (5) 7.16%
775 Park Avenue, Suite 255
Huntington, NY 11743
Alan P. Chodosh....................................................... 112,500 (5) 7.16%
775 Park Avenue, Suite 255
Huntington, NY 11743
Paul J. Collins....................................................... 112,500 (5) 7.16%
775 Park Avenue, Suite 255
Huntington, NY 11743
All executive officers and directors as a group (2 persons)........... 730,545 (6) 50.05%
</TABLE>
- ----------------
(1) The percentages are calculated on the basis of 1,459,724 shares of Common
Stock outstanding as of the Record Date. For each beneficial owner, shares
of Common Stock subject to convertible securities exercisable within 60
days of the Record Date are deemed outstanding for purposes of computing
the percentage ownership of such beneficial owner.
(2) Princeton/Montrose Partners is controlled by its general partners, Ronald
R. Hahn, Chairman of the Board, President and Secretary of the Company, and
Donald R. Stroben. Mr. Hahn disclaims any beneficial ownership in the
shares of Common Stock owned by Princeton/Montrose Partners.
(3) Does not include shares of Common Stock issuable upon the exercise of
warrants and stock options.
(4) Includes 132,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of the Record Date.
(5) Consists of 112,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of the Record Date.
(6) Includes the shares of Common Stock owned by Princeton/Montrose Partners
(see Note 2 above).
23
<PAGE>
INDEPENDENT AUDITORS
Grant Thornton LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1996. The Board of Directors does not expect any
representative of Grant Thornton LLP to attend the Meeting.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.
This Proxy Statement is accompanied by a copy of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996 and Quarterly
Report on Form 10-QSB for the period ended June 30, 1997.
The Company hereby incorporates by reference into this Proxy Statement
the following documents as filed with the Securities Exchange Commission (the
"SEC") pursuant to Section 13 or 15(d) of the Exchange Act:
(i) the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996, as amended; and
(ii) the Company's Quarterly Report on Form 10-QSB for the period
ended June 30, 1997.
FORM 10-KSB
A copy of the Company's Form 10-KSB for the fiscal year ended December
31, 1996, as filed with the SEC (excluding exhibits), will be forwarded, without
charge, to any stockholder of the Company entitled to vote at the Meeting, upon
written request to the Company at 775 Park Avenue, Suite 255, Huntington, New
York 11743, Attention: Corporate Secretary.
By Order of the Board of Directors
RONALD R. HAHN
Secretary
Huntington, New York
o
24
<PAGE>
EXHIBIT A
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF
PROTEIN DATABASES, INC.
This Plan of Complete Liquidation and Dissolution (the "Plan") of
Protein Databases, Inc., a Delaware corporation (the "Company"), is intended to
accomplish the complete liquidation and dissolution of the Company in accordance
with the Delaware General Corporation Law and Section 331 of the Internal
Revenue Code of 1986, as amended (the "Code"), as follows:
1. The Board of Directors of the Company has adopted this Plan and
called a meeting of the Company's stockholders to take action on the Plan. If at
said meeting of the Company's stockholders a majority of the outstanding common
stock, par value $.01 per share, of the Company (the "Common Stock") votes for
the adoption of this Plan, the Plan shall constitute the adopted Plan of the
Company as of the date on which such stockholder approval is obtained (the
"Adoption Date").
2. The Company has entered into an Asset Purchase Agreement, dated as
of July 16, 1997 (the "Asset Purchase Agreement"), with Bio-Rad Laboratories,
Inc., a Delaware corporation ("Bio-Rad"), providing for the sale to Bio-Rad of
substantially all of its assets other than cash, cash equivalents and accounts
receivable (such sale being referred to as the "Bio-Rad Asset Sale").
3. After the Adoption Date, the Company shall not engage in any
business activities except to the extent necessary to preserve the values of its
assets, wind up its business and affairs and distribute its assets in accordance
with this Plan.
No later than thirty (30) days following the Adoption Date, the Company
shall file Form 966 with the Internal Revenue Service.
4. From and after the Adoption Date, the Company shall complete the
following corporate actions:
(a) If the Bio-Rad Asset Sale is consummated, then, as soon
as practicable following the closing thereof, the Company
shall transfer substantially all of the assets of the
Company, including the proceeds received at the closing of
the Bio-Rad Asset Sale, after deduction of cash amounts for
the payment of the Company's outstanding liabilities and
obligations and for the funding of the Company's expenses in
liquidation, to a liquidating trust (the "Liquidating
Trust") (established pursuant to Section 7 hereof) for the
pro rata benefit of the stockholders of the Company of
record on the date of liquidation or dissolution.
If the Bio-Rad Asset Sale is not consummated and the
Asset Purchase Agreement is terminated, the Board of
Directors shall determine whether and when to (i) transfer
the Company's assets, including the assets that had been
subject to the Asset Purchase Agreement, to the Liquidating
Trust, or (ii) collect, sell, exchange or otherwise dispose
of all of its property and assets (other than cash, cash
equivalents and accounts receivable) in one or more
transactions upon such terms and conditions and for such
consideration as the Board of Directors, in its absolute
discretion, deems expedient and in the best interests of the
Company and its stockholders. In connection with such
collection, sale, exchange or other disposition, the Company
shall marshall its assets and collect or make provision for
the collection of all accounts receivable, debts and claims
owing to the Company.
(b) The Company shall pay or, as determined by the Board of
Directors, make reasonable provision to pay, all claims,
liabilities and obligations of the Company, including all
contingent, conditional or unmatured claims known to the
Company and all
1
<PAGE>
claims which are known to the Company but for which the
identity of the claimant is unknown.
(c) The Company or the Liquidating Trust shall distribute
pro rata to the Company's stockholders all its remaining
property and assets, including the proceeds of any sale,
exchange or disposition, except such property or assets as
are required for paying or making provision for the claims,
liabilities and obligations of the Company. Such
distribution may occur all at once or in a series of
distributions and may be in such manner, and at such time or
times, as the Board of Directors or the Liquidating
Trustees, in their absolute discretion, may determine. If
and to the extent deemed necessary, appropriate or desirable
by the Board of Directors or the Liquidating Trustees, in
their absolute discretion, the Company may establish and set
aside a reasonable amount (the "Contingency Reserve") to
satisfy claims and potential claims against the Company
(other than claims of a stockholder in its capacity as
such), including, without limitation, tax obligations, and
all expenses of the sale of the Company's property and
assets, of the collection and defense of the Company's
property and assets, and of the liquidation and dissolution
provided for in this Plan. The Contingency Reserve may
consist of cash and/or property.
5. The distributions to the Company's stockholders pursuant to Section
4 hereof shall be in complete redemption and cancellation of all of the
outstanding Common Stock of the Company. As a condition to receipt of any
distribution to the Company's stockholders, the Board of Directors or the
Liquidating Trustees, in their absolute discretion, may require stockholders to
(i) surrender their certificates evidencing the Common Stock to the Company or
its agent for recording of such distributions thereon or (ii) furnish the
Company with evidence satisfactory to the Board of Directors or the Liquidating
Trustees of the loss, theft or destruction of their certificates evidencing the
Common Stock, together with such surety bond or other security or indemnity as
may be required by and satisfactory to the Board of Directors or the Liquidating
Trustees ("Satisfactory Evidence and Indemnity"). As a condition to receipt of
any final distribution to the Company's stockholders, the Board of Directors or
the Liquidating Trustees, in their absolute discretion, may require stockholders
to (i) surrender their certificates evidencing the Common Stock to the Company
or its agent for cancellation or (ii) furnish the Company with Satisfactory
Evidence and Indemnity.
The Company will finally close its stock transfer books and discontinue
recording transfers of Common Stock on the earlier to occur of (i) the close of
business on the record date fixed by the Board of Directors for the final
liquidating distribution to the Liquidating Trust or the stockholders, as the
case may be, or (ii) the date on which the Company ceases to exist under the
Delaware General Corporation Law (following any post-dissolution continuation
period thereunder), and thereafter certificates representing Common Stock will
not be assignable or transferable on the books of the Company except by will,
intestate succession, or operation of law.
6. If any distribution to a stockholder cannot be made, whether because
the stockholder cannot be located, has not surrendered its certificates
evidencing the Common Stock as required hereunder or for any other reason, the
distribution to which such stockholder is entitled (unless transferred to the
Liquidating Trust) shall be transferred, at such time as the final liquidating
distribution is made by the Company, to the official of such state or other
jurisdiction authorized by applicable law to receive the proceeds of such
distribution. The proceeds of such distribution shall thereafter be held solely
for the benefit of and for ultimate distribution to such stockholder as the sole
equitable owner thereof and shall be treated as abandoned property and escheat
to the applicable state or other jurisdiction in accordance with applicable law.
In no event shall the proceeds of any such distribution revert to or become the
property of the Company.
7. If deemed necessary, appropriate or desirable by the Board of
Directors, in its absolute discretion, in furtherance of the liquidation and
distribution of the Company's assets to the Company's stockholders, as a final
liquidating distribution or from time to time, the Company shall transfer to the
Liquidating Trust any assets of the Company which are (i) not reasonably
susceptible to distribution to the Company's stockholders, including assets held
on behalf of the Company's stockholders (a) who cannot be located or who do not
tender their certificates
2
<PAGE>
evidencing the Common Stock to the Company or its agent as hereinabove required
or (b) to whom distributions may not be made based upon restrictions under
contract or law, including, without limitation, restrictions of the federal
securities laws and regulations promulgated thereunder or (ii) held as the
Contingency Reserve.
The Board of Directors is hereby authorized to appoint one or more
individuals, corporations, partnerships or other persons, or any combination
thereof, including, without limitation, any one or more officers, directors,
employees, agents or representatives of the Company, to act as the Liquidating
Trustee or Trustees for the benefit of the Company's stockholders and to receive
any assets of the Company. Any Liquidating Trustees appointed as provided in the
preceding sentence shall succeed to all right, title and interest of the Company
of any kind and character with respect to such transferred assets and, to the
extent of the assets so transferred, shall assume all of the liabilities and
obligations of the Company, including, without limitation, any unsatisfied
claims and unascertained or contingent liabilities. Further, the Liquidating
Trustees shall have the full power to liquidate, deal with, give receipt for and
manage all of the property and assets conveyed to the Liquidating Trustees by
the Company, to the exclusion of the Company and its officers and directors. Any
such conveyance to the Liquidating Trustees shall be in trust for the
stockholders of the Company (who shall be considered the owners of the
Liquidating Trust within the meaning of Subpart E of Subchapter J of the Code)
and not for the use or benefit of the Liquidating Trustees or any other person
and any assumption of liabilities and obligations of the Company by the
Liquidating Trustees shall be solely in their capacity as Liquidating Trustee.
The Company, subject to this Section 7 and as authorized by the Board of
Directors, in its absolute discretion, may enter into a liquidating trust
agreement with the Liquidating Trustees, on such terms and conditions as the
Board of Directors, in its absolute discretion, may deem necessary, appropriate
or desirable. Approval of this Plan by a majority of the outstanding Common
Stock shall constitute the approval of the Company's stockholders of any such
appointment and any such liquidating trust agreement as their act and as a part
hereof as if herein written.
8. Whether or not a Liquidating Trust shall have been established
pursuant to Section 7, in the event it should not be feasible for the Company to
make the final distribution to stockholders of all assets and properties of the
Company prior to the date which is one year after the Adoption Date, then, on or
before such date, the Company shall be required to establish a Liquidating Trust
pursuant to Section 6 and transfer any remaining assets and properties
(including, without limitation, any uncollected claims, contingent assets and
the Contingency Reserve) to the Liquidating Trustees as set forth in Section 7.
9. After the Adoption Date, the officers of the Company shall, at such
time as the Board of Directors, in its absolute discretion, deems necessary,
appropriate or desirable, obtain any certificates required from the Delaware tax
authorities and, upon obtaining such certificates, the Company shall file with
the Secretary of State of the State of Delaware a certificate of dissolution
(the "Certificate of Dissolution") in accordance with Section 275 of the
Delaware General Corporation Law.
10. Approval of this Plan by a majority of the outstanding Common Stock
shall constitute the approval of the Company's stockholders of the sale,
exchange or other disposition, in liquidation of all of the property and assets
of the Company not otherwise distributed to the stockholders, whether such sale,
exchange or other disposition occurs in one transaction or a series of
transactions, and shall constitute ratification of all contracts for sale,
exchange or other disposition which are conditioned on approval of this Plan.
11. In connection with and for the purpose of implementing and assuring
completion of this Plan, the Company may, in the absolute discretion of the
Board of Directors, pay any brokerage, agency, professional and other fees and
expenses of persons rendering services to the Company in connection with the
collection, sale, exchange or other disposition of the Company's property and
assets and the implementation of this Plan.
12. In connection with and for the purpose of implementing and assuring
completion of this Plan, the Company may, in the absolute discretion of the
Board of Directors, pay to the Company's present or former officers, directors,
employees, agents and representatives, or any of them, compensation or
additional compensation above their regular compensation, in money or other
property, in recognition of the extraordinary efforts they, or any of them, will
be required to undertake, or actually undertake, in connection with the
implementation of this Plan.
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Approval of this Plan by a majority of the outstanding Common Stock shall
constitute the approval of the Company's stockholders of the payment of any such
compensation.
13. The Company shall continue to indemnify its present and former
officers, directors, employees, agents and representatives in accordance with
its certificate of incorporation, as amended, and by-laws and any contractual
arrangements for actions taken in connection with this Plan and the winding up
of the affairs of the Company. The Company's obligation to indemnify such
persons may be satisfied out of the assets of the Liquidating Trust. The Board
of Directors and the Liquidating Trustees, in their absolute discretion, are
authorized to obtain and maintain insurance as may be necessary to cover the
Company's obligations hereunder.
14. Notwithstanding approval of this Plan and the transactions
contemplated hereby by the Company's stockholders, the Board of Directors may
modify, amend or abandon this Plan and the transactions contemplated hereby
without further action by the Company's stockholders to the extent permitted by
the Delaware General Corporation Law.
15. The Board of Directors of the Company is hereby authorized, without
further action by the Company's stockholders, to do and perform or cause the
officers of the Company, subject to approval of the Board of Directors, to do
and perform, any and all acts, and to make, execute, deliver or adopt any and
all agreements, resolutions, conveyances, certificates and other documents of
every kind which are deemed necessary, appropriate or desirable, in the absolute
discretion of the Board of Directors, to implement this Plan and the
transactions contemplated hereby, including, without limiting the foregoing, all
filings or acts required by any state or federal law or regulation to wind up
its affairs.
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EXHIBIT B
ASSET PURCHASE AGREEMENT
by and between
PROTEIN DATABASES, INC.
as "Seller,"
and
BIO-RAD LABORATORIES, INC.
as "Buyer"
Dated: July , 1997
<PAGE>
EXHIBITS
Exhibit
A Facilities......................................... A-1
B Allocation of Purchase Price....................... B-1
C Bill of Sale....................................... C-1
D Assignment of Leases............................... D-1
E Assignment and Assumption of Contract Rights....... E-1
F Assignment of Patents, Trademarks and Copyrights... F-1
G Required Consents or Approvals of Buyer............ G-1
H Agreement Not to Compete........................... H-1
I Source Code Verification Protocol.................. I-1
J Confidentiality Agreement.......................... J-1
K Escrow Agreement................................... K-1
L John Randall Employment Agreement.................. L-1
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of July , 1997, is by and
between Bio-Rad Laboratories, Inc., a Delaware corporation ("Buyer"), and
Protein Databases, Inc., a Delaware corporation ("Seller").
RECITALS
A. Seller owns certain assets which it uses in the conduct of the
Business (as defined below).
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, such assets upon the terms and subject to the conditions of this
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, litigation, proceeding,
labor dispute, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice charge or complaint.
"Ancillary Agreement" shall mean: Agreement Not to Compete,
substantially in the form attached hereto as Exhibit H.
"Assets" shall mean all of the right, title and interest in and to the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal and constituting, or used or useful in connection
with, or related to, the Business owned by Seller or in which Seller has any
interest, including without limitation all of Seller's right, title and interest
in the following:
(a) all Contract Rights;
(b) Equipment;
(c) all Inventory;
(d) all Proprietary Rights relating to the Business;
<PAGE>
(e) to the extent transferable, all Permits;
(f) all computers and software;
(g) all Insurance Policies, to the extent assignable;
(h) all available supplies, sales literature, promotional literature,
customer, supplier and distributor lists, art work, and display units, related
to the Business;
(i) all rights under or pursuant to all warranties, representations and
guarantees made by suppliers in connection with the Assets or services furnished
to Seller pertaining to the Business or affecting the Assets, to the extent such
warranties, representations and guarantees are assignable;
but excluding therefrom the Excluded Assets.
"Balance Sheet" shall mean the balance sheet of Seller at the date
indicated thereon, together with the notes thereon.
"Books and Records" shall mean (a) all records and lists of Seller
pertaining to the Assets, (b) all records and lists pertaining to the Business,
customers, suppliers or personnel of Seller, and (c) all product, business and
marketing plans of Seller.
"Business" shall mean the Seller's business of the development,
marketing and selling of software systems for protein and DNA analysis for life
science research and biotechnology applications, all as it relates to the Assets
transferred to Buyer hereunder.
"Closing Date" shall mean October 30, 1997, or such earlier date as
Buyer and Seller shall reasonably mutually agree upon if Seller has obtained the
consent of its Shareholders to this Asset Purchase Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"Contract" shall mean any agreement, contract, note, loan, evidence of
indebtedness, purchase, order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, practice, covenant not to compete,
employment agreement, license, instrument, obligation or commitment to which
Seller is a party or is bound and which relates to the Business or the Assets,
whether oral or written, but excluding all Leases.
"Contract Rights" shall mean all of Seller's rights and obligations
under the Contracts listed on Schedule 4.7 and not rejected by Buyer and under
any Contracts not so listed which Buyer, in its sole discretion, elects to
accept and assume.
"Copyrights" shall mean registered copyrights, copyright applications
and unregistered copyrights.
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<PAGE>
"Court Order" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
"Default" shall mean (a) a breach of or default under any Contract or
Lease, (b) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of or default under any
Contract or Lease, or (c) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract or Lease.
"Disclosure Schedule" shall mean a schedule executed and delivered by
Seller to Buyer as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by this Agreement. Unless otherwise specified, each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Disclosure Schedule.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Excluded Assets," notwithstanding any other provision of this
Agreement, shall mean the following assets of Seller which are not to be
acquired by Buyer hereunder:
(a) accounts notes and other receivables;
(b) all cash and cash equivalents held by Seller;
(c) all Permits, to the extent not transferable;
(d) all claims, causes of action, choses in action, rights of recovery
and rights of set-off of any kind against any person or entity arising out of or
relating to the Assets to the extent related to the Excluded Liabilities;
(e) all refunds, deposits, prepayments or prepaid expenses (including
without limitation any prepaid insurance premiums) of Seller;
(f) all Books and Records;
(g) all deposits and prepaid expenses of Seller;
(h) all claims, causes of action, choses in action, rights of recovery
and rights of set-off of any kind, against any person or entity, including
without limitation any liens, security interests, pledges or other rights to
payment or to enforce payment in connection with products delivered by Seller on
or prior to the Closing Date; and
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(i) the equipment listed on Schedule 1.l.
"Facilities" shall mean all plants, offices, manufacturing facilities,
stores, warehouses, improvements, administration buildings, and all real
property and related facilities which are identified or listed on Exhibit "A"
attached hereto.
"Facility Lease(s)" shall mean all of the leases of Facilities listed
on Schedule 4.7.
"Financial Statements" shall mean the 1996 Year-End Financial
Statements and the Quarterly Financial Statements for the quarter ended March
31, 1997.
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
furnishings, machinery, spare parts, supplies, equipment, tooling, molds,
patterns, dies and other tangible personal property owned by Seller and used in
connection with the Business, wherever located and including any such Fixtures
and Equipment in the possession of any of Seller's suppliers, including all
warranty rights with respect thereto.
"Insurance Policies" shall mean the insurance policies related to the
Assets listed on Schedule 4.22.
"Interim Balance Sheet" shall mean the unaudited Balance Sheet dated
the Interim Balance Sheet Date.
"Interim Balance Sheet Date" shall mean March 31, 1997.
"Interim Financial Statements" shall mean the Interim Balance Sheet and
the unaudited statements of operations, changes in shareholders' equity and cash
flow for the period ended on the Interim Balance Sheet Date.
"Inventory" shall mean all of Seller's inventory held for resale and
all of Seller's raw materials, work in process, finished products, wrapping,
supply and packaging items and similar items with respect to the Business, in
each case wherever the same may be located.
"Leased Real Property" shall mean all leased property described in the
Facility Lease.
"Leasehold Estates" shall mean all of Seller's rights and obligations
as lessee under the Lease.
"Leasehold Improvements" shall mean all leasehold improvements situated
in or on the Leased real property and owned by Seller.
"Lease(s)" shall mean the existing lease with respect to the personal
or real property of Seller listed on Schedule 4.7 and not rejected by Buyer.
"Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured or other.
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<PAGE>
"material adverse effect" or "material adverse change" shall mean with
respect to the Business or the Assets any significant adverse effect or change
in the condition prospects, assets, Liabilities or operations of the Business
and/or the Assets or on the ability of Seller to consummate the transactions
contemplated hereby, or any event or condition which would, with the passage of
time, constitute a "material adverse effect" or "material adverse change."
"ordinary course of business" or "ordinary course" or any similar
phrase shall mean the ordinary course of the Business and consistent with
Seller's past practice.
"Patents" shall mean all patents and patent applications and registered
design and registered design applications.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary for the conduct
of the Business.
"Proprietary Rights" shall mean all of Seller's Copyrights (which shall
include registered, unregistered and common law copyright rights), Patents, and
Patent Applications, web sites and web services (including necessary software),
Trademarks, technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating thereto
including, but not limited to, the source and object codes referenced in Exhibit
I-1), trade secrets, franchises, flow charts, customer lists, know-how,
inventions, designs, specifications, plans, drawings and intellectual property
rights.
"Regulations" shall mean any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, principles of
law and orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation Environmental
Laws, energy, public utility, zoning, building and health codes, occupational
safety and health and laws respecting employment practices, employee
documentation, terms and conditions of employment and wages and hours.
"Representative" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"Tax" shall mean any federal, state, local, foreign or other tax, levy,
impost, fee, assessment or other government charge, including without limitation
income, estimated income, business, occupation, franchise, property, payroll,
personal property, sales, transfer, use, employment, commercial rent, occupancy,
franchise or withholding taxes, and any premium, including without limitation
interest, penalties and additions in connection therewith.
"Trademarks" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks and
service marks.
"Year-End Financial Statements" shall mean the audited Balance Sheet
dated December 31, 1996, and the related audited statements of operations,
changes in shareholders' equity and cash flow for the year ended December 31,
1996.
1.2 Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
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<PAGE>
Term Section
---- -------
Adjustment Amount 2.5(b)
Assumed Liabilities 2.2
Assumption Documents 3.2(c)
Bulk Sales Act 10.4
Claim 10.3(d)
Claim Notice 10.3(d)
Closing 3.1
Closing Balance Sheet 2.5(a)
Damages 10.3(a)
Environmental Conditions 4.26(a)
Environmental Laws 4.26(a)
Excluded Liabilities 2.3
Hazardous Substance 4.26(a)
Holdback Amount 2.4(c)
Inventory and Asset Procedures 2.6
Net Book Value 2.5(b)
Permitted Encumbrances 4.6(a)
Proposed Acquisition Transaction 6.2(a)
Purchase Price 2.4(a)
Release 4.28(a)
Rehired Employee 6.6(a)
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets. Upon the terms and subject to the conditions
contained herein, at the Closing, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will acquire from Seller, the Assets, free and clear
of all Encumbrances other than Permitted Encumbrances.
2.2 Assumption of Liabilities. Upon the terms and subject to the conditions
contained herein, at the Closing, Buyer shall assume the following, and only the
following, Liabilities of Seller (the "Assumed Liabilities"):
(a) All Liabilities accruing, arising out of, or relating to events or
occurrences happening after the Closing Date under the Contracts listed on
Schedule 4.7 and not rejected by Buyer, or under Contracts or Leases which are
not listed on Schedule 4.7 but which Buyer, in its sole discretion, elects to
accept and assume, but not including any Liability for any Default under any
such Contract occurring on or prior to the Closing Date; and
2.3 Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, any Liabilities of
Seller, whether liquidated or unliquidated, or known or unknown, whether arising
out of occurrences prior to, at or after the date hereof ("Excluded
Liabilities"), which Excluded Liabilities include, without limitation:
6
<PAGE>
(a) Except as otherwise provided in Section 6.5, any Liability to or in
respect of any employees or former employees of Seller including without
limitation (i) any employment agreement, whether or not written, between Seller
and any person, (ii) any Liability under any employee plan or employee benefit
at any time maintained, contributed to or required to be contributed to by or
with respect to Seller or under which Seller may incur Liability, or any
contributions, benefits or Liabilities therefor, or any Liability with respect
to Seller's withdrawal or partial withdrawal from or termination of any Employee
Plan and (iii) any claim of an unfair labor practice, or any claim under any
state unemployment compensation or worker's compensation law or regulation or
under any federal or state employment discrimination law or regulation, which
shall have been asserted on or prior to the Closing Date or is based on acts or
omissions which occurred on or prior to the Closing Date;
(b) Any Liability of Seller in respect of any Tax, other than sales
taxes as a result of the sale of the Assets pursuant hereto ;
(c) Any Liability arising from any injury to or death of any person or
damage to or destruction of any property, whether based on negligence, breach of
warranty, strict liability, enterprise liability or any other legal or equitable
theory arising from defects in products manufactured or from services performed
by or on behalf of Seller or any other person or entity on or prior to the
Closing Date;
(d) Any Liability of Seller arising out of or related to any Action
against Seller or any Action which adversely affects the Assets and which shall
have been asserted on or prior to the Closing Date or to the extent the basis of
which shall have arisen on or prior to the Closing Date;
(e) Any Liability of Seller resulting from entering into, performing
its obligations pursuant to or consummating the transactions contemplated by,
this Agreement (including without limitation any Liability of Seller pursuant to
Article X hereof), other than sales taxes as a result of the sales of the Assets
pursuant hereto;
(f) Any Liability related to any Facility.
2.4 Purchase Price.
(a) Purchase Price. At the Closing, upon the terms and subject to the
conditions set forth herein, Buyer shall pay to Seller for the sale, transfer,
assignment, conveyance and delivery of the Assets, the aggregate amount of One
Million Dollars ($1,000,000) (the "Purchase Price"), less the Holdback Amount by
wire transfer of immediately available funds to an account designated by Seller
and shall assume the Assumed Liabilities pursuant to this Agreement. The
Purchase Price shall be allocated among the Assets in the manner required by
Section 1060 of the Code and regulations thereunder. Exhibit B attached hereto
sets forth the amount of the Purchase Price allocable to the various Assets.
Buyer and Seller agree to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060" consistent with Exhibit B and which gives effect to any Adjustment Amount
determined in accordance with Section 2.5 hereof.
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(b) Agreement Not to Compete. At the Closing, Buyer shall pay Seller
pursuant to the Agreement Not to Compete attached hereto as Exhibit H, an
aggregate of Ten Dollars ($10.00).
(c) The "Holdback Amount" shall be an amount equal to Three Hundred
Thousand Dollars ($300,000) which Buyer, at the Closing, shall, pursuant to the
Escrow Indemnification Agreement deliver to the Escrow Agent named therein,
pending the determination of Seller's indemnification obligations, if any, as
set forth in Section 10.3; provided, however, that $200,000 of such amount shall
be available only for claims, if any, related to or arising out of the Millipore
License Agreement dated September 15, 1987.
2.5 (Intentionally omitted)
2.6 Inventory and Asset Procedures and Partial Verification of Source Code.
(a) Inventory Procedures. The quantities of Inventory to be purchased
and sold hereunder shall be determined by an itemized inventory to be taken at
such time as Buyer and Seller mutually agree and shall be adjusted to book as of
the Closing Date based upon a physical inventory pursuant to which all Inventory
will be counted as to quantity by personnel of Seller and Buyer using the same
procedures normally used by Seller to take inventories of the type of Inventory
being counted; provided, that if Buyer and Seller shall mutually agree, an
outside inventory service or services (the "Inventory Service") mutually
selected by Seller and Buyer may be selected to take such inventory. Both Buyer
and Seller will have the right to have Representatives present to observe the
physical inventories. Any disputes as to the physical count, usability or
salability of any item of Inventory will, if possible, be resolved while such
physical inventory is being taken. Any unresolved disputes regarding the
foregoing not resolved by the Closing Date will be separately listed and settled
as soon as expeditiously practicable thereafter by the parties or by another
independent third party mutually acceptable to both parties, or if they are
unable to agree then by the Inventory Service. The determination of any third
party so engaged shall be final and binding on the parties. No failure to
resolve any such matters shall prevent the Closing or payment of the Purchase
Price for the Assets. This inventory procedure may be used by Buyer to classify
or itemize any of the other Assets, except for the Proprietary Rights.
(b) Source Code. In order to partially validate the functionality of
the source code, the versions of Seller's source code for producing products
currently in use shall be partially verified prior the Closing at Buyer's
facility in Hercules, California, using the protocol outlined in Exhibit I. The
verification shall be subject to the Confidentiality Agreement set forth in
Exhibit J.
2.8 Closing Costs; Transfer Taxes and Fees. Provided all computer codes in
the Proprietary Rights are transferred to Seller by Buyer hereunder by means of
telephone lines or other electronic transmission mediums, such as satellite or
the internet, Buyer shall be responsible for any documentary and transfer taxes
and any sales, use or other taxes imposed by reason of the transfers of Assets
provided hereunder and any deficiency, interest or penalty asserted with respect
thereto, Buyer shall also pay the fees and costs of recording or filing all
applicable conveyancing instruments described in Section 3.2(a). Buyer shall pay
all costs of applying for new Permits and obtaining the transfer of existing
Permits which may be lawfully transferred.
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2.9 Sale of Equipment Prior to Closing. At any time or from time to time
prior to Closing, Seller may sell any or all of the equipment listed on Schedule
4.5 in accordance with the following procedures:
(i) Seller shall notify Buyer of the equipment that it proposes to sell
and the aggregate sales price that it anticipates receiving therefor.
(ii) If Buyer consents to the sale, which consent shall not be
unreasonably withheld, Seller may sell the equipment for an aggregate price that
is not less than 10% of the aggregate price set forth in the notice of Seller to
Buyer regarding same.
(iii) Following any such sale of equipment, Seller shall notify Buyer
of the consummation of the sale, the equipment sold and the proceeds received.
(iv) Seller shall hold all such proceeds of sale in trust for Buyer,
which proceeds shall be delivered to Buyer at the Closing, or, at Buyer's
election, deducted from the cash Purchase Price to be delivered to Seller at the
Closing.
ARTICLE III
CLOSING
3.1 Closing. The Closing of the transactions contemplated herein (the
"Closing") shall be held at _____ a.m. local time on the Closing Date at the
offices of Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, NY
10022-3903, unless the parties hereto otherwise agree.
3.2 Conveyances at Closing.
(a) Instruments and Possession. To effect the sale and transfer
referred to in Section 2.1 hereof, Seller will, at the Closing, execute and
deliver to Buyer:
(i) one or more bills of sale, in the form attached hereto as
Exhibit C, conveying in the aggregate all of Seller's owned personal property
included in the Assets;
(ii) (Intentionally omitted)
(iii) subject to Section 9.2, Assignments of Contract Rights, each
in the form of Exhibit E attached hereto, with respect to the Contract Rights;
(iv) Assignments of Patents, Copyrights and Trademarks and other
Proprietary Rights (including an assignment of all of Seller's rights, title and
interest to the name(s) Protein Databases, PDI, and all variations thereof) each
in the form attached hereto as Exhibit F, in recordable form to the extent
necessary to assign such rights;
(v) such other instruments as shall be requested by Buyer to vest
in Buyer title in and to the Assets in accordance with the provisions hereof.
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(b) Assumption Document. Upon the terms and subject to the conditions
contained herein, at the Closing Buyer shall deliver to Seller an instrument of
assumption substantially in the form attached hereto as Exhibit E, evidencing
Buyer's assumption, pursuant to Section 2.2, of the Assumed Liabilities (the
"Assumption Document").
(c) Form of Instruments. To the extent that a form of any document to
be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Buyer and Seller.
(d) Certificates; Opinions. Buyer and Seller shall deliver the
certificates, opinions of counsel and other matters described in Articles VII
and VIII.
(e) Consents. Subject to Section 9.2, Seller shall deliver all Permits
and any other third party consents, if any, required for the valid transfer of
the Assets as contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, hereby represent and warrant to Buyer as follows, except as
otherwise set forth on the Disclosure Schedule, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true
and correct:
4.1 Organization of Seller. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to conduct the Business as it is presently being
conducted and to own and lease its properties and assets. Seller is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities make such qualification necessary, except where the
failure to be so qualified or in good standing would not have a material adverse
effect on the Assets or the Business. Copies of the Certificate of Incorporation
and Bylaws of Seller, and all amendments thereto, heretofore delivered to Buyer
are accurate and complete as of the date hereof. Schedule 4.1 contains a true,
correct and complete list of all jurisdictions in which Seller is qualified to
do business as a foreign corporation.
4.2 Subsidiaries. Except as set forth in Schedule 4.2, Seller does not have
any Subsidiaries which are used by Seller in the conduct of the Business or
which own any of the Assets.
4.3 Authorization. Seller has all requisite power and authority, and has
taken all corporate action necessary, to execute and deliver this Agreement and
the Ancillary Agreements, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Ancillary Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly approved by the board of directors, except for the approval of its
shareholders which will be obtained prior to Closing, by Seller. No other
corporate proceedings on the part of Seller are necessary to authorize this
Agreement and the Ancillary Agreement and the transactions contemplated hereby
and thereby. This Agreement has been duly executed and delivered by Seller and
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is, and upon execution and delivery of the Ancillary Agreement will be, legal,
valid and binding obligations of Seller enforceable against Seller in accordance
with their terms.
4.4 No Adverse Change. Since the Interim Balance Sheet Date:
(a) there has been no actual or threatened adverse change in the Assets
or any event, condition or state of facts, in either case that is, or would
result in a material adverse change in the Assets or the Business or the
prospects for the Business; it being understood, however, that Seller has ceased
to develop or sell any of its products or to maintain warranty support for any
of its products, and has terminated all of its programming, marketing, warranty
and financial personnel, effective June 1997; and,
(b) except in the ordinary course of business, there has not been any
sale or other disposition of any of the Assets or any Encumbrance placed on the
Assets; and
(c) Seller will use its best efforts to preserve its relationships with
customers or suppliers having business relationships with it.
4.5 Assets. Excluding the Leased Real Property, Seller has and will
transfer good and marketable title to the Assets and upon the consummation of
the transactions contemplated hereby, Buyer will acquire good and marketable
title to all of the Assets, free and clear of any Encumbrances placed by,
through, or under thereon by Seller. The Assets include without limitation all
material assets necessary for the conduct of the Business as presently
conducted. Schedule 4.5 contains accurate lists and summary descriptions of all
tangible Assets where the value of an individual item exceeds $1,000 or where an
aggregate of similar items exceeds $ 5,000. All tangible assets and properties
which are part of the Assets are in good operating condition and repair and are
usable in the ordinary course of business and conform in all material respects
to all applicable Regulations (including Environmental Laws) relating to their
construction, use and operation, except when a failure to conform would not have
a material adverse effect on such asset or property.
4.6 (Intentionally omitted)
4.7 Contracts and Commitments.
(a) Contracts. Schedule 4.7 sets forth a complete and accurate list of
all Contracts of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) Employment contracts and severance agreements, including
without limitation Contracts (A) to employ or terminate executive officers or
other personnel and other contracts with present or former officers, directors
or shareholders of Seller or (B) that will result in the payment by, or the
creation of any Liability to pay on behalf of Buyer or Seller any severance,
termination, "golden parachute," or other similar payments to any present or
former personnel following termination of employment or otherwise as a result of
the consummation of the transactions contemplated by this Agreement;
(iii) Labor or union contracts;
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(iv) Distribution, franchise, license, technical assistance,
sales, commission, consulting, agency or advertising contracts related to the
Assets or the Business;
(v) Options with respect to any personal property, whether Seller
shall be the grantor or grantee thereunder;
(vi) Contracts involving future expenditures or Liabilities,
actual or potential, in excess of $10,000 or otherwise material to the Business
or the Assets.
(vii) Contracts or commitments relating to commission arrangements
with others;
(viii) Promissory notes, loans, agreements, indentures, evidences
of indebtedness, letters of credit, guarantees, or other instruments relating to
an obligation to pay money, individually in excess of or in the aggregate in
excess of $10,000, whether Seller shall be the borrower, lender or guarantor
thereunder or whereby any Assets are pledged (excluding credit provided by
Seller in the ordinary course of business to purchasers of its products);
(ix) Contracts containing covenants limiting the freedom of Seller
to engage in any line of business or compete with any person;
(x) Any Contract with the United States, state or local government
or any agency or department thereof involving expenditures or Liabilities in
excess of $5,000;
(xi) Leases of real property;
(xii) Leases of personal property not cancelable (without
Liability) within 30 calendar days.
Seller has delivered to Buyer true, correct and complete copies of all of the
Contracts listed on Schedule 4.7, including all amendments and supplements
thereto.
(b) Absence of Defaults. All of the Contracts and Leases to which
Seller is party and by which any of the Assets is bound are valid, binding and
enforceable in accordance with their terms. Seller has fulfilled, or taken all
action necessary to enable it to fulfill when due, all of its material
obligations under each of such Contracts and Leases. To the knowledge of Seller,
after reasonable inquiry, all parties to such Contracts and Leases have complied
in all material respects with the provisions thereof, no party is in Default
thereunder and no notice of any claim of Default has been given to Seller. With
respect to any Leases, Seller has not received any notice of cancellation or
termination under any option or right reserved to the lessor, or any notice of
Default, thereunder.
(c) Product Warranty. Seller has committed no act, and there has been
no omission, which is reasonably likely to result in, and there has been no
occurrence which is reasonably likely to give rise to, material product
liability or material Liability for breach of warranty (whether covered by
insurance or not) on the part of Seller, with respect to products designed,
manufactured, assembled, repaired, maintained, delivered or installed or
services rendered prior to or on the Closing Date.
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(d) Leases. Schedule 4.7 also contains a complete and accurate list of
all Leases described in clauses (xi) and (xii), of Section 4.7(a).
4.8 Permits. (a) Schedule 4.8 sets forth a complete list of all material
Permits used in the operation of the Business. Seller has, and at all times has
had, all material Permits required under any Regulation (including Environmental
Laws) in the operation of its Business or in the ownership of the Assets, and
owns or possesses such Permits free and clear of all Encumbrances, except such
Permits the failure of which to obtain would not have a material adverse effect
on the Assets or the Business. Seller is not in Default, nor has it received any
notice of any claim of Default, with respect to any such Permit. Except as
otherwise governed by law, all such Permits are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees,
and except as set forth on Schedule 4.8, Seller has no reason to believe, after
diligent inquiry, any such Permit will be adversely affected by the completion
of the transactions contemplated by this Agreement. No present or former
shareholder, director, officer or employee of Seller or any affiliate thereof,
or any other person, firm, corporation or other entity, owns or has any
proprietary, financial or other interest (direct or indirect) in any Permit
which Seller uses.
(b) Except as disclosed on Schedule 4.8 hereto, no notice to,
declaration, filing or registration with, or Permit from, any domestic or
foreign governmental or regulatory body or authority, or any other person or
entity, is required to be made or obtained by Seller in connection with the
execution, delivery or performance by Seller of this Agreement and the
consummation of the transactions contemplated hereby.
4.9 No Conflict or Violation. Neither the execution, delivery or
performance by Seller of this Agreement nor the consummation by Seller of the
transactions contemplated hereby, nor compliance by Seller with any of the
provisions hereof, will (a) violate or conflict with any provision of the
Certificate of Incorporation or Bylaws of Seller, (b) violate, conflict with, or
result in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the
Assets under, any of the terms, conditions or provisions of any Contract, Lease
or Permit, (i) to which Seller is a party or (ii) by which the Assets are bound,
(c) violate any Regulation or Court Order, (d) impose any Encumbrance on the
Assets.
4.10 Financial Statements. Seller has heretofore delivered to Buyer the
Financial Statements. The Financial Statements (a) are in accordance with the
books and records of Seller, (b) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
covered thereby, except as disclosed herein, and (c) fairly present in all
material respects the consolidated assets, Liabilities (including all reserves)
and financial position of Seller as of the respective dates thereof and the
results of operations and changes in cash flows for the periods then ended
(subject, in the case of the Interim Financial Statements, to normal year-end
adjustments, and except that the Interim Financial Statements do not contain the
footnotes required by GAAP). The Year-End Financial Statements have been
examined by Grant Thornton, LLP, independent certified public accountants, whose
report thereon is included with such Year-End Financial Statements. At the
respective dates of the Financial Statements, there were no material Liabilities
of Seller, which, in accordance with generally accepted accounting principles,
should have been set forth or reserved for in the Financial Statements or the
notes thereto, which are not set forth or reserved for in the Financial
Statements or the notes thereto.
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4.11 Books and Records. Seller has made and kept (and given
Buyer access to) Books and Records and accounts, which, in reasonable detail,
fairly reflect the activities of Seller. Seller has not engaged in any material
transaction, maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of Seller.
4.12 Litigation. Except as set forth on Schedule 4.12, or to the knowledge
of Seller, after diligent inquiry and consultation with qualified attorneys or
other necessary professionals, there is no Action pending, threatened or
anticipated (a) against, related to or affecting (i) Seller, the Business or the
Assets (including with respect to Environmental Laws), (ii) any officers or
directors of Seller as such, or (iii) any shareholder of Seller in such
shareholder's capacity as a shareholder of Seller, (b) seeking to delay, limit
or enjoin the transactions contemplated by this Agreement (c) that involve the
risk of criminal liability to Seller, or (d) in which Seller is a plaintiff,
including any derivative suits brought by or on behalf of Seller. Seller is not
in Default with respect to or subject to any Court Order, and there are no
unsatisfied judgments against Seller, the Business or the Assets. There is not a
reasonable likelihood of an adverse determination of any pending Actions. There
are no Court Orders or agreements with, or liens by, any governmental authority
or quasi-governmental entity relating to any Environmental Law which regulate,
obligate, or bind Seller.
4.13 Labor Matters. Seller is not a party to any labor agreement with
respect to its employees with any labor organization, union, group or
association and there are no employee unions or any other similar labor or
employee organizations under which the employees of Seller are organized.
4.14 Liabilities. Other than Excluded Liabilities, Seller has no
Liabilities due or to become due, except (a) Liabilities which are set forth or
reserved for on the Interim Balance Sheet, which have not been paid or
discharged since the Interim Balance Sheet Date, and (b) Liabilities arising in
the ordinary course of business, none of which, individually or in the
aggregate, has or is reasonably likely to have a material adverse effect on the
Business or the Assets.
4.15 Compliance with Law. Seller and the conduct of the Business are in
compliance in all material respects with all Regulations and Court Orders
relating to the Assets or the Business. Seller has not received any notice to
the effect that, or otherwise been advised that, it is not in such compliance
with any such Regulations or Court Orders.
4.16 No Brokers. Neither Seller nor any of its respective officers,
directors, employees, shareholders or affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer or any of its affiliates to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.
4.17 No Other Agreements to Sell the Assets. Neither Seller nor any of its
officers, directors, or shareholders have any legal obligation to any other
person or firm other than the Buyer to sell, assign, transfer or effect a sale
of any of the Assets other than inventory in the ordinary course of business, to
sell or effect a sale of the capital stock of Seller, to effect any merger,
consolidation, liquidation, dissolution or other reorganization of Seller, or to
enter into any agreement or cause the entering into of an agreement with respect
to any of the foregoing.
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4.18 Proprietary Rights.
(a) Proprietary Rights. Schedule 4.18 lists all of Seller's Proprietary
Rights. Schedule 4.18 also sets forth: (i) for each Patent, the number, normal
expiration date and subject matter for each country in which such Patent has
been issued, or, if applicable, the application number, date of filing and
subject matter for each country, (ii) for each Trademark, the application serial
number or registration number, if any, the class of goods covered and the
expiration date for each country in which a Trademark has been registered and
(iii) for each Copyright, the number and date of filing for each country in
which a Copyright has been filed and for each unregistered copyright the date of
copyright. The Proprietary Rights listed in the Disclosure Schedule are all
those used by Seller in connection with the Business. True and correct copies of
all Patents (including and all pending applications) owned, controlled, created
or used by or on behalf of Seller or in which Seller has any interest whatsoever
have been provided to Buyer.
(b) Royalties and Licenses. Except as set forth in the Disclosure
Schedule, Seller does not have any obligation to compensate any person for the
use of any such Proprietary Rights nor has Seller granted to any person any
license, option or other rights to use in any manner any of its Proprietary
Rights, whether requiring the payment of royalties or not.
(c) Ownership and Protection of Proprietary Rights. Seller owns or has
a valid right to use each of the Proprietary Rights, and the Proprietary Rights
will not cease to be valid rights of Seller by reason of the execution, delivery
and performance by Seller of this Agreement or the consummation by Seller of the
transactions contemplated hereby. All of the pending Patent applications have
been duly filed. Seller has not received any notice of invalidity or
infringement of any rights of others with respect to the Patents, Copyrights or
Trademarks. Seller has taken all reasonable and prudent steps to protect the
Proprietary Rights from infringement by any other person. Except as set forth in
the Disclosure Schedule, no other person (i) has the right to use any of
Seller's Trademarks on the goods on which they are now being used either in
identical form or in such near resemblance thereto as to be likely, when applied
to the goods of any such person, to cause confusion with such Trademarks or to
cause a mistake or to deceive, (ii) has notified Seller that it is claiming any
ownership of or right to use such Proprietary Rights, or (iii) to the best of
Seller's Knowledge, is infringing upon any such Proprietary Rights in any way.
Except as set forth in the Disclosure Schedule, Seller'S use of the Proprietary
Rights does not conflict with, infringe upon or otherwise violate the valid
rights of any third party in or to such Proprietary Rights, and no Action has
been instituted against or notices received by Seller that are presently
outstanding alleging that Seller'S use of the Proprietary Rights infringes upon
or otherwise violates any rights of a third party in or to such Proprietary
Rights. There are not, and it is reasonably expected that after the Closing
there will not be, any restrictions on Seller's, or Buyer's, as the case may be,
right to sell products manufactured by Seller or Buyer, as the case may be, in
connection with the Business.
4.19 Employee Benefit Plans.
(a) Buyer is not under any obligation for any pension plan, welfare
plan, or Benefit Arrangement as defined below. Seller shall be solely
responsible for all such obligations and liabilities.
(i) Benefit Arrangement. "Benefit Arrangement" shall mean any
employment, consulting, severance or other similar contract, arrangement or
policy and each plan, arrangement (written or oral), program, agreement or
commitment providing for insurance coverage
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(including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses, stock options,
stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits.
4.20 Tax Matters.
(a) Filing of Tax Returns. Seller has timely filed with the
appropriate taxing authorities all returns in respect of Taxes required to be
filed through the date hereof and will timely file any such returns required to
be filed on or prior to the Closing Date. The returns and other information
filed are complete and accurate in all material respects. Except as specified in
Schedule 4.21, neither Seller, nor any group of which Seller now or was a
member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes.
(b) Payment of Taxes. All Taxes, in respect of periods beginning
before the Closing Date, have been timely paid, or will be timely paid, or an
adequate reserve has been established therefor, as set forth in the Disclosure
Schedule or the Financial Statements, and Seller does not have any material
Liability for Taxes in excess of the amounts so paid or reserves so established.
(c) Audits, Investigations or Claims. The consolidated federal income
tax returns of Seller have never been examined by the Internal Revenue Service.
Except as set forth in the Disclosure Schedule, there are no pending or to the
best of Seller's Knowledge, threatened audits, investigations or claims for or
relating to any material additional Liability in respect of Taxes, and there are
no matters under discussion with any governmental authorities with respect to
Taxes that in the reasonable judgment of Seller, or its accountants, is likely
to result in a material additional Liability for Taxes. Except as set forth in
the Disclosure Schedule, Seller has not been notified that any taxing authority
intends to audit a return for any period.
(d) Lien. There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the Assets.
(e) Safe Harbor Lease Property. None of the Assets is property that is
required to be treated as being owned by any other person pursuant to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the Code.
(f) Security for Tax-Exempt Obligations. None of the Assets directly
or indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
(g) Tax-Exempt Use Property. None of the Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(h) Foreign Person. Seller is not a person other than a United States
person within the meaning of the Code.
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4.21 Insurance. Schedule 4.22 contains a complete and accurate list of all
policies or binders of fire, liability, title, worker's compensation, product
liability and other forms of insurance maintained by Seller on the Business, the
Assets or its employee Assets. All insurance coverage applicable to Seller, the
Business and the Assets is in full force and effect, insures Seller in
reasonably sufficient amounts against all risks with respect to the Assets
usually insured against by persons operating similar businesses or properties of
similar size in the localities where such businesses or properties are located,
provides coverage as may be required by applicable Regulation and by any and all
Contracts to which Seller is a party and has been issued by insurers of
recognized responsibility. There is no Default under any such coverage nor has
there been any failure to give notice or present any claim under any such
coverage in a due and timely fashion. There are no outstanding unpaid premiums
except in the ordinary course of business and no notice of cancellation or
nonrenewal of any such coverage has been received.
4.22 (Intentionally omitted)
4.23 Inventory. Schedule 4.23 contains a complete list of all Inventory set
forth on the Interim Balance Sheet.
4.24 Purchase Commitments and Outstanding Bids. As of the date of this
Agreement, the aggregate of all accepted and unfulfilled orders for the sale of
merchandise entered into by Seller is less than $10,000, and the aggregate of
all orders or commitments for the purchase of supplies by Seller does not exceed
$10,000, all of which orders and commitments were made in the ordinary course of
business. As of the date of this Agreement, there are no claims against Seller
to return merchandise by reason of alleged overshipments, defective merchandise
or otherwise, or of merchandise in the hands of customers under an understanding
that such merchandise would be returnable. There is no outstanding bid,
proposal, Contract or unfilled order which relates to the Assets which will or
would, if accepted, have a material adverse effect, individually or in the
aggregate, on the Business or the Assets.
4.25 Customers, Distributors and Suppliers. Schedule 4.25 sets forth
a complete and accurate list of the names and addresses of Seller's (i) ten
largest customers, distributors and other agents and representatives showing the
approximate total sales in dollars by Seller to each such customer during 1996;
and (ii) ten largest suppliers showing the approximate total purchases in
dollars by Seller from each such supplier during the 1996 fiscal year. Since the
Interim Balance Sheet Date, there has been no adverse change in the business
relationship of Seller with any customer, distributor or supplier named on
Schedule 4.25.
4.26 Compliance With Environmental Laws.
(a) Definitions. The following terms, when used in this Section 4.26,
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, used in the singular or the plural depending on the
reference.
(i) "Release" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment or the workplace of any
Hazardous Substance, and otherwise as defined in any Environmental Law.
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(ii) "Hazardous Substance" shall mean any pollutants,
contaminants, chemicals, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitible or flammable chemical or chemical compound or
hazardous substance, material or waste, whether solid, liquid or gas, including
without limitation any quantity of asbestos in any form, urea formaldehyde,
PCB's, radon gas, crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products or derivatives, radioactive substance, waste
waters, sludges, slag and any other substance, material or waste that is subject
to regulation, control or remediation under any Environmental Laws.
(iii) "Environmental Laws" shall mean all Regulations which
regulate or relate to the protection or clean-up of the environment, the use,
treatment, storage, transportation, generation, manufacture, processing,
distribution, handling or disposal of, or emission, discharge or other release
or threatened release of, Hazardous Substances or otherwise dangerous
substances, wastes, pollution or materials (whether, gas, liquid or solid), the
preservation or protection of waterways, groundwater, drinking water, air,
wildlife, plants or other natural resources, or the health and safety of persons
or property, including without limitation protection of the health and safety of
employees. Environmental Laws shall include without limitation the Federal Water
Pollution Control Act, Resource Conservation & Recovery Act ("RCRA"), Clean
Water Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and
Health Act, Toxic Substances Control Act, Clean Air Act, Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), Hazardous
Materials Transportation Act and all analogous or related federal, state or
local law, each as amended.
(iv) "Environmental Conditions" means the introduction into the
environment of any pollution, including without limitation any contaminant,
irritant or pollutant or other Hazardous Substance (whether or not upon any
Facility or Former Facility or other property and whether or not such pollution
constituted at the time thereof a violation of any Environmental Law as a result
of any Release of any kind whatsoever of any Hazardous Substance) as a result of
which Seller has or may become liable to any person or by reason of which any
Facility, former facility or any of the Assets may suffer or be subjected to any
lien.
(b) Facilities. The Facilities are, and at all times have been, when
leased or operated by Seller, leased and operated in compliance in all material
respects with all Environmental Laws and in a manner that will not give rise to
any Liability under any Environmental Laws.
(c) Environmental Conditions. To the best of Seller's knowledge, after
reasonable inquiry, there are no present or past Environmental Conditions in any
way relating to the Business or at any Facility.
4.27 (Intentionally omitted)
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
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Buyer hereby represents and warrants to Seller as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct, to Seller as follows:
5.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Buyer has all requisite corporate power and authority,
and has taken all corporate action necessary, to execute and deliver this
Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly approved by the board of
directors of Buyer. No other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the Ancillary Agreement and the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Buyer and is, and upon execution and delivery the
Ancillary Agreement will be, legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
5.3 No Brokers. Neither Buyer nor any of its officers, directors,
employees, shareholders or affiliates has employed or made any agreement with
any broker, finder or similar agent or any person or firm which will result in
the obligation of Seller to pay any finder's fee, brokerage fees or commission
or similar payment in connection with the transactions contemplated hereby.
5.4 No Conflict or Violation. Neither the execution, delivery or
performance by Buyer of this Agreement nor the consummation by Buyer of the
transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof, will (a) violate or conflict with any provision of the
Certificate of Incorporation or Bylaws of Buyer, or (b) violate, conflict with,
constitute a Default or result in the acceleration or termination of rights or
creation of any Encumbrance under the provisions of any Contract, lease, Permit,
Regulation or Court Order to which Buyer is subject or by which it or its assets
are bound, in each case except as would not materially and adversely affect,
limit or delay the ability of Buyer to consummate the transactions contemplated
by this Agreement.
5.5 Litigation. To the knowledge of Buyer, after diligent inquiry and
consultation with qualified attorneys or other necessary professionals, there is
no Action pending, threatened or anticipated against, related to or affecting
(i) Buyer, (ii) any officers or directors of Buyer as such, or (iii) any
shareholder of Buyer in such shareholder's capacity as a shareholder of Buyer,
in each case except as would not materially and adversely affect, limit or delay
the ability of Buyer to consummate the transactions contemplated by this
Agreement.
5.6 Purchase Price in Cash. Buyer has on hand and will have at Closing in
cash one million dollars ($1,000,000) for the full amount of the Purchase Price.
ARTICLE VI
COVENANTS OF SELLER AND BUYER
Seller and Buyer each covenant with the other as follows:
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6.1 Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree, both before and after the Closing, (i) to
use all reasonable efforts without the expenditure of material funds, to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, (ii) to execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder, and (iii) to cooperate with
each other in connection with the foregoing. Without limiting the foregoing, the
parties agree to use their respective best efforts (A) to obtain all necessary
waivers, consents and approvals from other parties to the Contracts and Leases
to be assumed by Buyer; provided, however that neither Seller nor Buyer shall be
required to make any payments, commence litigation or agree to modifications of
the terms thereof in order to obtain any such waivers, consents or approvals;
and (B) to obtain all necessary Permits as are required to be obtained under any
Regulations.
6.2 Notification of Certain Matters. From the date hereof through the
Closing, Seller and Buyer shall give prompt notice to the other of (a) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty of Seller or Buyer, as the
case may be, contained in this Agreement or in any exhibit or schedule hereto to
be untrue or inaccurate in any material respect.
6.3 Investigation by Buyer.
From the date hereof through the Closing Date:
(a) Seller shall, and shall cause its officers, directors, employees
and agents to afford the Representatives of Buyer and its affiliates reasonable
access during normal business hours and on reasonable notice to the Assets for
the purpose of inspecting the same, and to the officers, attorneys, accountants,
properties, Books and Records and Contracts of Seller, and shall furnish Buyer
and its Representatives at Buyer's cost and expense all financial, operating and
other data and information as Buyer or its affiliates, through their respective
Representatives, may reasonably request.
6.4 Conduct of Business. From the date hereof through the Closing, Seller
shall not, except as specifically contemplated by this Agreement or as
consented to by Buyer in writing:
(a) (Intentionally omitted)
(a) enter into, extend, materially modify, terminate or renew any
Contract related to the Business or Assets being required by Buyer, except in
the ordinary course of business;
(b) sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein,
except in the ordinary course of business;
(i) (Intentionally omitted)
(c) acquire by merger or consolidation with, or merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire any
material assets or business of any corporation, partnership, association or
other business organization or division thereof;
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(d) (Intentionally omitted);
(e) fail to pay its accounts payable and any debts owed or obligations
due to it, or pay or discharge when due any Liabilities, in the ordinary course
of business; or
(f) fail to maintain the Assets in substantially their current state
of repair, excepting normal wear and tear;
(g) fail to comply in any material respect with all Regulations
applicable to it, the Assets and the Business;
(h) intentionally do any other act which would cause any
representation or warranty of Seller in this Agreement to be or become untrue in
any material respect;
(i) fail to use its best efforts to preserve the goodwill of the
Business and the favorable attitude of the Company's customers towards the
Company's Business and products, it being understood, however, that Seller has
ceased to develop or sell any of its products or to maintain warranty support
for any of its products, and has terminated all of its programming, marketing,
warranty and financial personnel, effective June 1997; or
(j) enter into any agreement, or otherwise become obligated, to do any
action prohibited hereunder.
6.5 Employee Matters.
(a) Buyer shall extend offers of employment to those of Seller's
employees whom it desires to hire (such employees who accept Buyer's offer are
hereinafter referred to as the "Rehired Employees"), which offers shall be on
terms and conditions which Buyer shall determine in its sole discretion. Seller
shall terminate the employment of all Rehired Employees prior to the Closing and
shall cooperate with and use its best efforts to assist Buyer in its efforts to
secure satisfactory employment arrangements with those employees of Seller to
whom Buyer makes offers of employment.
(b) Nothing contained in this Agreement shall confer upon any Rehired
Employee any right with respect to continuance of employment by Buyer, nor shall
anything herein interfere with the right of Buyer to terminate the employment of
any of the Rehired Employees at any time, with or without cause, or restrict
Buyer in the exercise of its independent business judgment in modifying any of
the terms and conditions of the employment of the Rehired Employees.
(c) Seller shall not, directly or indirectly, hire or offer employment
to any employee of Seller whose employment is continued by Buyer after the
Closing Date or any employee of Buyer or any successor or affiliate of Buyer
which is engaged in the Business, unless Buyer first terminates the employment
of such employee or gives its written consent to such employment or offer of
employment.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
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The obligations of Seller to consummate the transactions provided for
hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Seller:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and Buyer shall have performed and
satisfied in all material respects all agreements and covenants required hereby
to be performed by it prior to or on the Closing Date.
7.2 Consents; Regulatory Compliance and Approval. All consents, approvals
and waivers from governmental authorities and other parties necessary to permit
Seller to transfer the Assets to Buyer as contemplated hereby shall have been
obtained.
7.3 No Actions or Court Orders. No Action by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Seller if the transactions contemplated hereby
are consummated.
7.4 Opinion of Counsel. Buyer shall have delivered to Seller an opinion of
the General Counsel of Buyer, dated as of the Closing Date, in form and
substance reasonably satisfactory to Seller, to the effect that:
(a) Incorporation. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware;
(b) Corporate Power and Authority. Buyer has the necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreement and
to consummate the transactions contemplated hereby and thereby;
(c) Corporate Action and Enforceability. The execution, delivery and
performance of this Agreement and the Ancillary Agreement by Buyer have been
duly authorized by all necessary corporate action of Buyer, and this Agreement
and the Ancillary Agreement have been duly executed and delivered by Buyer, and
with appropriate and customary exceptions, constitute legally valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms.
(d) No Breach of Contracts. Neither the execution and delivery of this
Agreement or the Ancillary Agreements by Buyer nor the consummation by Buyer of
the transactions contemplated hereby or thereby will (i) violate the Articles of
Incorporation or Bylaws of Buyer, or (ii) to the best knowledge of such counsel,
violate any Court Order applicable to Buyer; and
(e) No Violation of Law. Neither the execution and performance of this
Agreement or the Ancillary Agreement by Buyer nor the consummation by Buyer of
the transactions contemplated hereby or thereby will violate or result in a
failure to comply with any Regulation or Court Order, applicable to Buyer.
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7.5 Certificates. Buyer shall furnish Seller with such certificates of its
officers and others to evidence compliance with the conditions set forth in this
Article VII as may be reasonably requested by Seller.
7.6 Corporate Documents. Seller shall have received from Buyer resolutions
adopted by the board of directors of Buyer approving this Agreement, the
Ancillary Agreement and the transactions contemplated hereby or thereby,
certified by Buyer's corporate secretary.
7.7 Assumption Document. Buyer shall have executed the Assumption Document.
7.8 Ancillary Agreements. Buyer shall have executed and delivered the
Ancillary Agreement.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, any of which may be
waived by Buyer:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as of
the Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and Seller shall have performed and
satisfied in all material respects all agreements and covenants required hereby
to be performed by it prior to or on the Closing Date.
8.2 Consents; Regulatory Compliance and Approval. All Permits, consents,
approvals and waivers from governmental authorities, or pursuant to the Contract
Rights, and other parties necessary to permit Buyer to purchase the Assets
pursuant to this Agreement, shall have been obtained. Buyer shall be reasonably
satisfied that all approvals required under any Regulations to carry out the
transactions contemplated by this Agreement shall have been obtained and that
the parties shall have complied with all Regulations applicable to the
transactions contemplated by this Agreement.
8.3 No Actions or Court Orders. No Action by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer, or the Assets or the Business materially
if the transactions contemplated hereby are consummated, including without
limitation any material adverse effect on the right or ability of Buyer to own,
operate, possess or transfer the Assets after the Closing. There shall not be
any Regulation or Court Order that makes the purchase and sale of the Business
or the Assets contemplated hereby illegal or otherwise prohibited.
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8.4 Opinion of Counsel. Seller shall have delivered to Buyer an opinion of
counsel to Seller, dated as of the Closing Date, in form and substance
reasonably satisfactory to Buyer, to the effect that:
(a) Incorporation. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware;
(b) Corporate Power and Authority. Seller has the necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreement and
to consummate the transactions contemplated hereby and thereby; and Seller has
all material Permits, licenses, franchises and other authority required under
federal and applicable state law to conduct the Business as not being conducted,
and Seller has the necessary corporate power and authority to own, lease and
operate the Assets and its other properties and to conduct the Business as
presently conducted;
(c) Corporate Action and Enforceability. The execution, delivery and
performance of this Agreement and the Ancillary Agreement by Seller have been
duly authorized by all necessary corporate action of Seller, and this Agreement
and the Ancillary Agreement have been duly executed and delivered by Seller, and
any approval of the stockholders of Seller which is required have been obtained,
and with appropriate and customary exceptions, this Agreement and each Ancillary
Agreement constitute legally valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
(d) No Breach of Contracts. Neither the execution and delivery of this
Agreement or the Ancillary Agreement by Seller nor the consummation by Seller of
the transactions contemplated hereby or thereby will (i) violate the Articles of
Incorporation or Bylaws of Seller, or (ii) to the best knowledge of such
counsel, violate any Court Order applicable to Seller;
(e) No Violation of Law. Neither the execution and performance of this
Agreement or the Ancillary Agreements by Seller nor the consummation of the
transactions contemplated hereby or thereby will violate or result in a failure
to comply with any Regulation or Court Order, applicable to the Business; and no
Permit of, or filing with, any federal, New York State, or Delaware Corporate
Law governmental authority is required for the execution and delivery of this
Agreement or the Ancillary Agreement by Seller or the consummation by Seller of
the transactions contemplated hereby and thereby, except as set forth in this
Agreement, the Disclosure Schedule, the exhibits hereto or the Ancillary
Agreement;
(f) Transfer and Assignment. The documents to be delivered by Seller at
the Closing to effect the transfer and assignment to Buyer of all right, title
and interest in and to the Assets are in form legally sufficient to do so.
8.5 Certificates. Seller shall furnish Buyer with such certificates of its
officers and others to evidence compliance with the conditions set forth in this
Article VIII as may be reasonably requested by Buyer.
8.6 Material Changes. Since the Interim Balance Sheet Date, there shall not
have been any material adverse change with respect to the Business or the
Assets, except as contemplated by this Agreement.
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8.7 Corporate Documents. Buyer shall have received from Seller resolutions
adopted by the board of directors of Seller approving this Agreement and the
Ancillary Agreement and the transactions contemplated hereby and thereby,
certified by Seller's corporate secretary, as applicable.
8.8 Conveyancing Documents; Release of Encumbrances. Seller shall have
executed and delivered each of documents described in Section 3.2 hereof so as
to effect the transfer and assignment to Buyer of all right, title and interest
in and to the Assets and Seller shall have filed (where necessary) and delivered
to Buyer all documents necessary to release the Assets from all Encumbrances,
which documents shall be in a form reasonably satisfactory to Buyer's counsel.
Seller shall have obtained, prior to the execution of this Agreement, the
consent required to assign to Buyer all rights, title and interest of Seller in
the Cold Spring Harbor Laboratory Exclusive Know-How License dated December 1,
1983, including any amendments thereto.
8.9 Name Change. Seller shall have filed an amendment to its Articles of
Incorporation to change its corporate name so as not to include the words
"Protein Databases or PDI" or any other name or mark that has such a near
resemblance thereto as may be likely to cause confusion or mistake to the
public, or to otherwise deceive the public. Such amendment shall be in a form
acceptable for filing with the Secretary or other appropriate office of the
State of Delaware.
8.10 Other Agreements and Actions. Seller shall have executed and delivered
the Ancillary Agreements in the form attached as an exhibit hereto. Buyer shall
have entered into employment agreement with Mr. John Randall, as attached
hereto, on such terms as may be mutually agreeable to Buyer and such parties and
such employment agreements shall be in full force and effect as of the Closing.
Mr. John Randall shall be in the employ of Buyer prior to the execution of this
Agreement and shall not have terminated such employment with Buyer as of the
Closing date other than on account of the breach of his Employment Agreement by
Buyer.
8.12 (Intentionally omitted)
ARTICLE IX
RISK OF LOSS; CONSENTS TO ASSIGNMENT
9.1 Risk of Loss. From the date hereof until the Closing, all risk of loss
or damage to the property included in the Assets shall be borne by Seller, and
thereafter shall be borne by Buyer. If any portion of the Assets is destroyed or
damaged by fire or any other cause on or prior to the Closing Date, other than
use, wear or loss in the ordinary course of business, Seller shall give written
notice to Buyer as soon as practicable after, but in any event within five (5)
calendar days of, discovery of such damage or destruction, the amount of
insurance, if any, covering such Assets and the amount, if any, which Seller is
otherwise entitled to receive as a consequence. Prior to the Closing, Buyer
shall have the option, which shall be exercised by written notice to Seller
within ten (10) calendar days after receipt of Seller's notice or if there is
not ten (10) calendar days prior to the Closing Date, as soon as practicable
prior to the Closing Date, of (a) accepting such Assets in their destroyed or
damaged condition in which event Buyer shall be entitled to the proceeds of any
insurance or other proceeds payable with respect to such loss and to such
indemnification for any uninsured portion of such loss pursuant to Section 10.3,
and the full Purchase Price shall be paid for
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such Assets, (b) excluding such Assets from this Agreement, in which event the
Purchase Price shall be reduced by the amount allocated to such Assets, as
mutually agreed between the parties or (c) terminating this Agreement in
accordance with Section 11.1. If Buyer accepts such Assets, then after the
Closing, any insurance or other proceeds shall belong, and shall be assigned to,
Buyer without any reduction in the Purchase Price; otherwise, such insurance
proceeds shall belong to Seller.
9.2 Consents to Assignment. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract, Lease, Permit or any claim or right or any benefit arising thereunder
or resulting therefrom if an attempted assignment thereof, without the consent
of a third party thereto, would constitute a Default thereof or in any way
adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller will cooperate with Buyer, in all reasonable respects, but at Buyer's
sole cost and expense, to provide to Buyer the benefits under any such Contract,
Lease, Permit or any claim or right, including without limitation enforcement
for the benefit of Buyer of any and all rights of Seller against a third party
thereto arising out of the Default or cancellation by such third party or
otherwise. Nothing in this Section 9.2 shall affect Buyer's right to terminate
this Agreement under Sections 8.2 and 11.1 in the event that any consent or
approval to the transfer of any Asset is not obtained.
ARTICLE X
ACTIONS BY SELLER AND BUYER
AFTER THE CLOSING
10.1 Books and Records; Tax Matters.
(a) Books and Records. Each party agrees that it will cooperate with
and make available to the other party, during normal business hours, and on
reasonable notice, all Books and Records, information and employees (without
substantial disruption of employment) retained and remaining in existence after
the Closing which are necessary or useful in connection with the preparation of
any tax returns or any tax inquiry, audit, investigation or dispute, any
litigation or investigation or any other matter requiring any such Books and
Records, information or employees for any reasonable business purpose. The party
requesting any such Books and Records, information or employees shall bear all
of the out-of-pocket costs and expenses (including without limitation attorneys'
fees, but excluding reimbursement for salaries and employee benefits) reasonably
incurred in connection with providing such Books and Records, information or
employees.
(b) Cooperation and Records Retention. Seller and Buyer shall (i) each
provide the other with such assistance as may reasonably be requested by any of
them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to Liability for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period.
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(c) Payment of Liabilities. Following the Closing Date, Seller shall
pay when due all of the debts and Liabilities of Seller, including any Liability
for Taxes, other than Assumed Liabilities; provided, however, this covenant
shall not apply to that portion (or all) of any debt that Seller is contesting
in good faith.
10.2 Survival of Representations, Etc. All of the representations,
warranties, covenants and agreements made by each party in this Agreement or in
any attachment, Exhibit, the Disclosure Schedule, certificate, document or list
delivered by any such party pursuant hereto shall survive the Closing for a
period of (and claims based upon or arising out of such representations,
warranties, covenants and agreements may be asserted at any time before the date
which shall be) eleven months following the Closing. Each party hereto shall be
entitled to rely upon the representations and warranties of the other party set
forth in this Agreement. Buyer's due diligence review shall have no effect
whatsoever on the liability of Seller to Buyer under this Agreement or otherwise
for breach of any representation, warranty or covenant of Seller hereunder. The
termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any Claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
10.3 Indemnifications.
(a) By Seller. Seller shall indemnify, save and hold harmless Buyer,
its affiliates and subsidiaries, and its and their respective Representatives,
from and against any and all costs, losses, Taxes, Liabilities, obligations,
damages, lawsuits, deficiencies, claims, demands, and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, reasonable costs of mitigation, losses in connection with any
Environmental Law (including without limitation any clean-up or remedial
action), lost profits and other losses resulting from any shutdown or
curtailment of operations, damages to the environment, attorneys' fees and all
amounts paid in investigation, defense or settlement of any of the foregoing
(herein, "Damages"), actually suffered by Buyer as a result of (i) any material
breach of any representation or warranty or the inaccuracy of any
representation, made by Seller in or pursuant to this Agreement that directly
results in a material diminution in value of the Assets or Business Agreement;
(ii) any material breach of any covenant or agreement made by Seller in or
pursuant to this Agreement that directly results in a material diminution in
value of the Assets or Business; (iii) any material Excluded Liability or (iv)
any Liability imposed upon Buyer by reason of Buyer's status as transferee of
the Business or the Assets; provided, however, that Seller shall not be
responsible to Buyer under this Section 10.3 (a) unless the aggregate Damages
are $14,500, and in the event that such Damages exceed $14,500, Seller shall be
responsible for all Damages.
(b) By Buyer. Buyer shall indemnify and save and hold harmless Seller
from and against any and all Damages incurred in connection with, arising out
of, resulting from or incident to (i) any breach of any representation or
warranty or the inaccuracy of any representation, made by Buyer in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by Buyer in
or pursuant to this Agreement; or (iii) from and after the Closing, any Assumed
Liability.
(c) Cooperation. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and
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any appeal arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be made
by a party entitled to indemnification hereunder against the indemnifying party,
the party claiming such indemnification shall give written notice (a "Claim
Notice") to the indemnifying party as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought under this
Section 10.3. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and in any event
within fifteen (15) calendar days after the service of the citation or summons).
The failure of any indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure. After such
notice, the indemnified party shall be entitled, if it so elects, (i) to take
control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice reasonably acceptable to the
indemnifying party to handle and defend the same, and (iii) to compromise or
settle such claim, which compromise or settlement shall be made only with the
written consent of the indemnifying party, such consent not to be unreasonably
withheld or delayed. In the event that the indemnified party has not elected to
assume the defense and investigation of any lawsuit or action within 30 days
after the service of the citation or summons, then at any time thereafter,
unless the indemnified party shall have previously assumed such defense, the
indemnifying party shall have the right to assume such defense and
investigation, in which case the indemnifying party shall not be responsible for
any costs and expenses of the indemnified party thereafter incurred in
connection with the defense or investigation of such lawsuit or action. If the
indemnifying party shall assume the defense of any lawsuit or action, the
indemnifying party shall not settle or compromise such lawsuit or action except
in such manner as will provide a full and complete release of the indemnified
party. The indemnifying party shall be liable for any settlement of any action
effected pursuant to and in accordance with this Section 10.3 and for any final
judgment (subject to any right of appeal), and the indemnifying party agrees to
indemnify and hold harmless an indemnified party from and against any Damages by
reason of such settlement or judgment.
(e) (Intentionally omitted)
(f) (Intentionally omitted)
(g) Brokers and Finders. Pursuant to the provisions of this Section
10.3, each of Buyer and Seller shall indemnify, hold harmless and defend the
other party from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or payable
from or by the indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the negotiation
and execution hereof and the consummation of the transactions contemplated
hereby.
10.4 Bulk Sales. It may not be practicable to comply or attempt to comply
with the procedures of the "Bulk Sales Act" or similar law of any or all of the
states in which the Assets are situated or of any other state which may be
asserted to be applicable to the transactions contemplated hereby. Accordingly,
to induce Buyer to waive any requirements for compliance with any or all of such
laws, Seller hereby agrees that the indemnity provisions of Section 10.3 hereof
shall apply to any Damages of Buyer arising out of or resulting from the failure
of Seller or Buyer to comply with any such laws.
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10.5 Taxes. Except for sales taxes on the Purchased Assets, subject to
Section 2.8, Seller shall pay, or cause to be paid, when due all Taxes for which
Seller is or may be liable or that are or may become payable with respect to all
taxable periods ending on or prior to the Closing Date.
10.6 Name. Seller hereby grants to Buyer, effective as of the Closing Date,
the right for a period of six months to use the name "Protein Databases, Inc.,
or PDI" on stationery, invoices, and the like, pursuant to a non-exclusive,
royalty free license in favor of Seller in connection with the winding up of the
Business and the liquidation of Seller.
10.7 Holdback. Buyer and Seller shall enter into an Escrow Indemnification
Agreement, by and among Buyer, Seller and the Escrow Agent named therein,
substantially in the form of Exhibit K attached hereto. The parties agree and
acknowledge that the Holdback Amount shall not be Buyer's exclusive method of
receiving indemnification from Seller pursuant to this Article X.
ARTICLE XI
MISCELLANEOUS
11.1 Termination.
(a) Termination. This Agreement may be terminated at any time prior to
Closing:
(i) By mutual written consent of Buyer and Seller;
(ii) By Buyer or Seller if the Closing shall not have occurred on
or before December 31, 1997; provided however, that this provision shall not be
available to Buyer if Seller has the right to terminate this Agreement under
clause (iv) of this Section 11.1, and this provision shall not be available to
Seller if Buyer has the right to terminate this Agreement under clause (iii) of
this Section 11.1, in each case because of a material breach by the other party;
(iii) By Buyer if there is a material breach of any material
representation or warranty set forth in Article IV hereof or any material
covenant or agreement to be complied with or performed by Seller pursuant to the
terms of this Agreement or the failure of a material condition set forth in
Article VIII to be satisfied (and such condition is not waived in writing by
Buyer) on or prior to the Closing Date, or the occurrence of any event which
results or would result in the failure of a material condition set forth in
Article VIII to be satisfied on or prior to the Closing Date, provided that
Buyer may not terminate this Agreement prior to the Closing if Seller has not
had an adequate notice of and opportunity to cure such failure; or
(iv) By Seller if there is a material breach of any material
representation or warranty set forth in Article V hereof or of any material
covenant or agreement to be complied with or performed by Buyer pursuant to the
terms of this Agreement or the failure of a material condition set forth in
Article VII to be satisfied (and such condition is not waived in writing by
Seller) on or prior to the Closing Date, or the occurrence of any event which
results or would result in the failure of a condition set forth in Article VII
to be satisfied on or prior to the Closing Date; provided that,
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Seller may not terminate this Agreement prior to the Closing Date if Buyer has
not had adequate notice of and an opportunity to cure such failure.
(b) In the Event of Termination. In the event of termination of this
Agreement:
(i) No party hereto shall have any Liability to any other party
to this Agreement, except for any willful breach of this Agreement occurring
prior to the proper termination of this Agreement. The foregoing provisions
shall not limit or restrict the availability of specific performance or other
injunctive relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.
11.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and no other person shall have any right,
benefit or obligation under this Agreement as a third party beneficiary or
otherwise.
11.3 Notices; Transfer of Funds. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
If to Seller, addressed to:
Protein Databases, Inc.
405 Oakwood Road
Huntington Station
New York, NY 11746-7296
Attention: Steven Blose
With a copy to:
Peter S. Kolevzon
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022-3903
If to Buyer, addressed to:
Bio-Rad Laboratories, Inc.
1000 Alfred Nobel Drive
Hercules, CA 94547
Attention: Sanford Wadler
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or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
Payments to be made to Seller hereunder shall be made by wire
transferred funds to be delivered to Seller's account number 411-006490, routing
number 021000018, at The Bank of New York, 501 Walt Whitman Road, Melville, NY
11747, or to such other account or place as Seller may designate by written
notice as provided herein.
11.4 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of New
York applicable to contracts made and to be performed entirely within such
state.
11.5 Entire Agreement; Amendments and Waivers. This Agreement, the
Ancillary Agreement, together with all exhibits and schedules hereto and thereto
(including the Disclosure Schedule), constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
11.6 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Expenses. Except as otherwise specified in this Agreement, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
11.8 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9 Publicity. Except as may be required by applicable Securities Law,
neither Buyer nor Seller shall issue any press release or make any public
statement regarding the transactions contemplated hereby, without prior written
approval of the other party, which approval will not be unreasonably withheld or
delayed. Buyer and Seller may, at their discretion, issue or make an appropriate
press release or public announcement after the Closing.
11.10 Cumulative Remedies. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
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11.11 Service of Process, Consent to Jurisdiction.
(a) Service of Process. Each party hereto irrevocably consents to the
service of any process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid, to
such party at such party's address set forth herein, or by any other method
provided or permitted under New York law.
(b) Consent and Jurisdiction. Each party hereto irrevocably and
unconditionally (1) agrees that any suit, action or other legal proceeding
arising out of this Agreement may be brought in the United States District Court
for the District in which Seller is currently located; (2) consents to the
jurisdiction or any such court in any such suit, action or proceeding; and (3)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any such court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, all as of the day and year first above written.
BIO-RAD LABORATORIES, INC.
By
--------------------------------------------------------
Name: Sanford Wadler
Its Vice President and General Counsel
PROTEIN DATABASES, INC.
By
--------------------------------------------------------
Name:
Its
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PROTEIN DATABASES, INC.
SPECIAL MEETING OF STOCKHOLDERS
------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Protein Databases, Inc. (the "Company"),
hereby appoints Ronald R. Hahn and Joel A. Fontaine, and each of them, proxies
of the undersigned with full power of substitution and resubstitution, for and
in the name, place and stead of the undersigned, to vote all of the shares of
Common Stock of the Company which the undersigned is entitled to vote at the
Special Meeting of Stockholders of the Company to be held at
_____________________________________ on ___________________, 1997, at
_____a.m., and at any adjournment thereof, as instructed below and in their
discretion with respect to any other matter that may properly come before such
Special Meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED (I) "FOR" THE APPROVAL OF THE PLAN OF
COMPLETE LIQUIDATION AND DISSOLUTION, (II) "FOR" THE APPROVAL OF THE ASSET
PURCHASE AGREEMENT, AND (III) "FOR" THE APPROVAL OF THE CHANGE OF NAME OF THE
COMPANY, AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
(See reverse side.)
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<PAGE>
(reverse side of proxy card)
a. Approval of the Plan of Complete Liquidation and Dissolution attached as
Exhibit A to the accompanying Proxy Statement.
FOR |_| AGAINST |_| ABSTAIN |_|
b. Approval of the Asset Purchase Agreement between the Company and Bio-Rad
Laboratories, Inc. attached as Exhibit B to the accompanying Proxy
Statement.
FOR |_| AGAINST |_| ABSTAIN |_|
c. Approval of the change of the Company's name to "IDP Liquidating Corp."
FOR |_| AGAINST |_| ABSTAIN |_|
d. Upon such other matters which may properly come before the meeting or any
adjournment thereof.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Dated: ..................................., 1997
.....................................................
Signature
.....................................................
Signature
Please sign exactly as your name(s) appears on this card. If
shares are registered in the names of two or more persons,
each should sign. Executors, administrators, guardians,
attorneys and corporate officers should add their titles.
The undersigned hereby revokes any proxy previously given
and acknowledges receipt of written notice of, and the proxy
statement for, the Special Meeting of Stockholders.
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