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
Filed by the registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use
[X] Definitive Proxy Statement of the Commission Only
[ ] Definitive Additional Materials (as permitted by Rule
[ ] Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c)or Rule 14a-12
BIOPOOL INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its 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 transactions 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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[X] Fee paid previously with preliminary materials:
$1,743.00
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[ ] 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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<PAGE>
BIOPOOL INTERNATIONAL, INC.
June 23, 2000
Dear Stockholders:
We are pleased to invite you to attend Biopool's Annual Meeting of Stockholders
to be held August 10, 2000, at 9:00 a.m. Pacific time at the Radisson Hotel
Oxnard, 600 East Esplanade Drive, Oxnard, California, 93030.
At the meeting, you will be asked to consider and vote on a proposal to approve
the merger of Biopool International and Xtrana. Immediately following the
merger, Xtrana stockholders will hold approximately 50% and Biopool stockholders
will hold approximately 50% of the outstanding shares of capital stock of the
surviving corporation. This document gives you detailed information on the
proposed transaction. We encourage you to read it carefully.
We believe that the proposed merger offers significant potential benefits that
would otherwise be unavailable to Biopool and its stockholders, including:
o Access to Xtrana's intellectual property base and product pipeline that
expand Biopool's opportunities far beyond human diagnostics,
o Enhanced management strength,
o Strengthened R&D capabilities,
o Entry into markets that investors give greater valuation to, and
o Revenue growth in exciting new areas with large market potential.
We expect the combined company to continue to grow by developing:
o New analytical methods for use in human diagnostics,
o Tools for genome discovery companies, and
o Products for a multitude of microbial tests for environmental and food
processing use.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE
MERGER AND CONCLUDED IT IS IN THE BEST INTERESTS OF BIOPOOL AND ITS
STOCKHOLDERS.
We enthusiastically support this combination of our two companies and join with
the Board of Directors in recommending that you vote in favor of the merger. It
is important that your shares be voted whether or not you plan to be present at
the annual meeting. Please complete, sign, date and return the enclosed form of
proxy promptly.
YOUR VOTE IS VERY IMPORTANT!
Sincerely,
Biopool International, Inc. Xtrana, Inc.
/s/ MICHAEL D BICK, PH.D /s/ JOHN H. WHEELER
Michael D. Bick, Ph.D. John H. Wheeler
Chief Executive Officer Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF BIOPOOL INTERNATIONAL, INC.
TO BE HELD AUGUST 10, 2000
------------------
TO THE STOCKHOLDERS
OF BIOPOOL INTERNATIONAL, INC.:
Notice is hereby given that an annual meeting ("Annual Meeting") of
stockholders of Biopool International, Inc. ("Biopool") will be held at the
Radisson Hotel Oxnard, 600 East Esplanade Drive, Oxnard, California, 93030, on
August 10, 2000, at 9:00 a.m. for the following purposes:
1. The election of four directors;
2. To ratify the appointment of Ernst & Young LLP, as our independent
public accountants for the year ending December 31, 2000;
3. To consider and vote on a proposal to approve the proposed merger of
Xtrana, Inc. ("Xtrana") with and into Biopool (the "Merger") pursuant
to the Agreement and Plan of Reorganization, dated as of May 3, 2000,
by and among Xtrana and Biopool (the "Merger Agreement");
4. To ratify the adoption of the Biopool International, Inc. 2000 Stock
Incentive Plan; and
5. To transact such other business as may properly come before the Annual
Meeting or any postponement or adjournment thereof.
The Board of Directors has fixed the close of business on June 22, 2000
as the record date for determination of the stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof. The four nominees
for directors who receive the highest number of votes will be elected.
Ratification of the appointment of the independent accountants and the adoption
of the stock incentive plan require the affirmative vote of a majority of the
total votes cast on the proposal. Approval of the matters to be voted upon in
connection with the Merger requires the affirmative vote of a majority of the
outstanding shares of common stock as of the record date.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE
MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO
ATTEND THE MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
In connection with the proposed Merger, if you wish to exercise
appraisal rights under the Delaware General Corporation Law, you must send a
notice that we receive on or before the date of the Biopool Annual Meeting, and
you must not vote in favor of the approval of the Merger. Your failure to vote
against the Merger will not constitute a waiver of your appraisal rights, and a
vote against approval of the Merger will not be deemed to be a written demand by
you for appraisal rights. See "SUMMARY-Appraisal Rights" and "Appraisal Rights."
<PAGE>
The accompanying Proxy Statement and the Appendices thereto (including
the Merger Agreement attached as Appendix A thereto) form a part of this notice.
By Order of the Board of Directors
/s/ MICHAEL D. BICK, PH.D.
Michael D. Bick, Ph.D.
Chief Executive Officer
6025 Nicolle Street
Ventura, California 93003
(805) 654-0643
Dated: June 23, 2000
<PAGE>
BIOPOOL INTERNATIONAL, INC.
6025 Nicolle Street
Ventura, California 93003
(805) 654-0643
-------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to you as a holder of
outstanding shares of Biopool common stock, par value $0.01 per share, in
connection with the solicitation of proxies by the Board of Directors of Biopool
International, Inc. ("Biopool"), for use at the Annual Meeting of Stockholders
to be held at the Radisson Hotel Oxnard, 600 East Esplanade Drive, Oxnard,
California 93030, on August 10, 2000 at 9:00 a.m. Accompanying this Proxy
Statement is the Board of Directors' Proxy for the Annual Meeting, which you may
use to indicate your vote as to the proposals described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to us
prior to the Annual Meeting, and which have not been revoked, will be voted in
favor of the proposals described in this Proxy Statement unless otherwise
directed. You may revoke a Proxy given to us at any time before it is voted
either by filing with the Secretary of Biopool, at our executive offices, a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and expressing a desire to vote your shares in
person.
The close of business on June 22, 2000, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting or any adjournments of the Annual Meeting. As of the record
date, we had outstanding 8,319,951 shares of common stock, par value $.01 per
share, the only outstanding voting security of Biopool. As of the record date,
we had approximately 204 stockholders of record. A stockholder is entitled to
cast one vote for each share held on the record date on all matters to be
considered at the Annual Meeting.
Our principal executive offices are located at 6025 Nicolle Street,
Ventura, California 93003. This Proxy Statement and the accompanying proxy were
mailed to our stockholders on or about June 26, 2000.
At the Annual Meeting, the stockholders will consider and vote upon
proposals to (i) elect four directors, (ii) ratify the appointment of Ernst &
Young LLP as our independent public accountants for the fiscal year ended
December 31, 2000, (iii) approve the Merger of Xtrana with and into Biopool
pursuant to the Merger Agreement dated May 3, 2000 by and between Biopool and
Xtrana, (iv) ratify the adoption of our 2000 Stock Incentive Plan and (v) such
other proposals as may properly come before the Annual Meeting or any
adjournment thereof.
The Biopool board of directors has unanimously approved the Merger
Agreement. Pursuant to the Merger Agreement, Xtrana will be merged with and into
Biopool, with Biopool surviving and the separate existence of Xtrana ceasing.
Upon consummation of the Merger, Biopool will issue 9,369,461 shares of common
stock in exchange for all outstanding common and preferred stock of Xtrana. As a
result, immediately following the Merger, the former Xtrana stockholders will
hold approximately 50% and Biopool stockholders will hold approximately 50% of
the outstanding shares of capital stock of the surviving corporation, on a fully
diluted basis. Additional information about the Merger and the parties to the
Merger is contained in this Proxy Statement, which should be reviewed carefully.
THE BIOPOOL BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS A VOTE "FOR" ELECTION OF THE NOMINATED
<PAGE>
DIRECTORS, RATIFICATION OF APPOINTMENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS,
RATIFICATION OF THE ADOPTION OF 2000 STOCK INCENTIVE PLAN, AND APPROVAL OF THE
MERGER AND THE MERGER AGREEMENT.
<PAGE>
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT.
BIOPOOL HAS NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROXY STATEMENT. NEITHER THE DELIVERY OF THIS PROXY STATEMENT
NOR THE CONSUMMATION OF THE MERGER OF XTRANA WITH AND INTO BIOPOOL MEANS THAT
INFORMATION CONTAINED IN THIS PROXY STATEMENT IS CORRECT AFTER THE DATE OF THIS
PROXY STATEMENT. THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR
SOLICITATION IS UNLAWFUL.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Summary....................................................................... 1
The Annual Meeting of Biopool Stockholders.................................... 5
PROPOSAL NO. 1: Election of Directors......................................... 7
Executive Compensation........................................................ 9
Section 16(a) Beneficial Ownership Reporting Compliance....................... 10
PROPOSAL NO. 2: Ratification of Independent Public Accountants................ 10
PROPOSAL NO. 3: The Proposed Merger........................................... 11
Description of Biopool Capital Stock.......................................... 23
Biopool Business and Financial Information.................................... 24
Xtrana Business and Financial Information..................................... 24
Management of the Surviving Corporation....................................... 28
Market Price and Dividend Information......................................... 30
Appraisal Rights.............................................................. 31
PROPOSAL NO. 4: Adoption of New Stock Incentive Plan......................... 32
Beneficial Ownership of Common Stock ......................................... 35
Certain Relationships and Related Transactions................................ 35
Stockholder Proposals......................................................... 36
Other Matters................................................................. 36
Incorporation of Certain Documents by Reference............................... 36
Appendix A: Agreement and Plan of Reorganization.............................. A-1
Appendix B: Delaware General Corporation Law, Section 262; Appraisal Rights... B-1
Appendix C: Financial Statements of Xtrana, Inc............................... C-1
Appendix D: Unaudited Pro Forma Combined Condensed Financial Data............. D-1
Appendix E: Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.. E-1
Appendix F: Biopool International, Inc. 2000 Stock Incentive Plan............. F-1
Appendix G: Form of Proxy..................................................... G-1
</TABLE>
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS APPEARING
ELSEWHERE IN THIS PROXY STATEMENT OR DELIVERED WITH THIS PROXY STATEMENT.
THE COMPANIES
BIOPOOL INTERNATIONAL, INC.
We were incorporated in Delaware in 1987. We are engaged in the research,
development, manufacture, and marketing of in vitro (outside the body)
diagnostic products for use in disease detection and prevention. We sell over
100 products on a worldwide basis to hospitals, clinical laboratories,
commercial reference laboratories, and research institutions. Our corporate
office is located at 6025 Nicolle Street, Ventura, California 93003. We have one
wholly-owned operating subsidiary, Biopool AB, located in Umea, Sweden, where we
also carry on product development, manufacturing, and sales and marketing
activities.
XTRANA, INC.
Xtrana was incorporated in Delaware in 1998. Xtrana has developed new
proprietary nucleic acid (DNA/RNA) testing technology, which it plans to
commercialize. Potential markets for this testing technology include the
detection of food and environmental contamination, forensics and paternity
identity testing, infectious human disease testing including bacterial warfare,
and research and other clinical applications. Xtrana's corporate office is
located at 717 Yosemite Circle, Denver, Colorado 80220.
THE PROPOSED MERGER
THE EFFECT OF THE MERGER
On May 3, 2000, Xtrana and Biopool entered into the Merger Agreement.
Pursuant to the Merger Agreement:
o Xtrana will be merged with and into us;
o we will be the surviving corporation;
o the separate existence of Xtrana will end;
o each share of Xtrana common stock and preferred stock issued and
outstanding at the closing of the merger (other than treasury stock
and dissenters' shares) will be converted into shares of newly issued
Biopool common stock; and
o immediately following the Merger, the Xtrana shareholders will hold
approximately 50% and our stockholders will hold approximately 50% of
the outstanding shares of capital stock of the surviving corporation
on a fully diluted basis.
See "THE PROPOSED MERGER."
MERGER CONSIDERATION
Upon approval and consummation of the merger, we will issue 9,369,461
shares of our common stock in exchange for all outstanding shares of Xtrana
common and preferred stock. Of these shares, 1,873,892 shares will be issued and
placed in an escrow account, and may be cancelled if Xtrana suffers any
liabilities under the indemnification provisions of the Merger Agreement or if
the Xtrana
Page 1
<PAGE>
business fails to meet the gross revenue targets agreed to in the Merger
Agreement. In the future, we may have to issue additional shares of common stock
to Xtrana stockholders if we suffer any liability under the indemnification
provisions set forth in the Merger Agreement or if the Xtrana business meets
certain gross revenue targets agreed to in the Merger Agreement. See "THE
PROPOSED MERGER--Merger Consideration."
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR
Completion of the merger is subject to various conditions (any of which may
be waived by the party benefited by the condition), including:
o the truth and accuracy of the representations and warranties of us and
of Xtrana;
o performance of all covenants by us and Xtrana;
o delivery of officer's certificates and opinions of counsel of each of
us and Xtrana;
o approval by our stockholders and the stockholders of Xtrana;
o delivery of certificates of good corporate standing of us and Xtrana;
o the absence of litigation concerning the Merger;
o the receipt of all required third party consents; and
o the execution of an employment agreement between us and John H.
Wheeler, the current Chief Executive Officer of Xtrana.
See "THE PROPOSED MERGER--The Merger Agreement, Conditions of the Merger."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated, and the Merger abandoned, subject
to certain exceptions:
o by written mutual consent of us and Xtrana;
o due to material breach that is not cured within ten days;
o due to permanent injunction or court order that prevents the Merger;
o if necessary governmental approvals cannot be obtained; and
o if the Merger is not consummated on or before November 15, 2000.
See "THE PROPOSED MERGER--The Merger Agreement, Termination."
CONDITIONAL WARRANTS
In connection with the discussions and negotiations regarding the proposed
Merger and prior to execution of the Merger Agreement, Biopool and Xtrana
exchanged conditional warrants to purchase up to 19.9% of the fully diluted
common stock of the other. These warrants become exercisable only if the merger
is not consummated for any of the reasons described in further detail in this
Proxy Statement. See "THE PROPOSED MERGER--Background of the Merger, Conditional
Warrants."
EXPENSES OF THE MERGER
Whether or not the Merger is consummated, except as otherwise provided in
the Merger Agreement, each party bears its own costs and expenses related to the
Merger. See "THE PROPOSED MERGER--The Merger Agreement, Expenses."
FEDERAL INCOME TAX CONSIDERATIONS
The merger is intended to be a tax-free reorganization in which no gain or
loss will be recognized by us or our stockholders. For a further discussion of
the federal income tax consequences of the merger, see "THE PROPOSED MERGER -
Material Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Merger is intended to be treated as a "purchase" in accordance with
generally accepted accounting principals. See "THE PROPOSED MERGER--Accounting
Treatment."
REGULATORY REQUIREMENTS
Other than the following actions, we are not aware of any governmental or
regulatory requirements with which we must comply in completing the Merger:
o compliance with the general corporation law of the State of Delaware;
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<PAGE>
o filing of a Form D with the Securities and Exchange Commission; and
o compliance with any applicable state securities laws.
See "THE PROPOSED MERGER--Regulatory Approvals."
THE ANNUAL MEETING OF STOCKHOLDERS
ANNUAL MEETING
Our Annual Meeting will be held on August 10, 2000 at 9:00 a.m.
(local time) at the Radisson Hotel Oxnard, 600 East Esplanade Drive, Oxnard,
California, 93030. The purpose of the Annual Meeting is to consider and vote on,
among other things, the election of directors, the ratification of the
independent public accountants, the approval of the Merger and ratification our
new stock incentive plan. Holders of record of our common stock at the close of
business on June 22, 2000 will be entitled to notice of and to vote at the
Annual Meeting. Each share of our common stock is entitled to one vote for each
share held of record upon each matter properly presented to the stockholders for
a vote at the Biopool Annual Meeting. See "THE ANNUAL MEETING OF BIOPOOL
STOCKHOLDERS - Votes Required; Quorum" and "-Voting of Proxies."
For additional information relating to the Biopool Annual Meeting, see "THE
ANNUAL MEETING OF BIOPOOL SHAREHOLDERS."
VOTE REQUIRED
Approval of the matters to be voted upon in connection with the merger by
our stockholders requires the affirmative vote of the holders of a majority of
the outstanding shares of our capital stock entitled to vote. As a result, the
failure to vote in person or by proxy on any such proposal at our Annual Meeting
or abstaining on the Merger proposal has the same effect as voting against the
Merger proposal. Other matters to be voted on at the Annual Meeting require the
affirmative vote a majority of votes cast. See "THE ANNUAL MEETING OF BIOPOOL
STOCKHOLDERS--Votes Required; Quorum".
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
Our board of directors unanimously approved the Merger Agreement and the
transactions contemplated thereby. The members of the board of directors
unanimously believe that the Merger and the transactions contemplated by the
Merger Agreement are fair to, and in the best interests of, our stockholders and
unanimously recommend a vote "FOR" the matters to be voted upon by such
shareholders in connection with the Merger. The conclusion of our board of
directors with respect to the Merger was based upon a number of factors. See
"THE MERGER-- Board of Directors' Reasons for the Merger."
APPRAISAL RIGHTS
You may be entitled to appraisal rights under Section 262 of the Delaware
General Corporation Law. Section 262 of the Delaware corporate law is attached
to this Proxy Statement as Appendix B. Stockholders who do not vote in favor of
the proposed merger and who comply with the provisions of Section 262 have the
right to an appraisal of the fair value of the shares of our common stock held
by them, and the right to require the purchase of their shares of common stock
at such value. Under Section 262, the fair value of those shares will not
include any element of value that results from the Merger. IF YOU CHOOSE TO
EXERCISE APPRAISAL RIGHTS WITH RESPECT TO YOUR SHARES OF OUR COMMON STOCK, YOUR
FAILURE TO COMPLY STRICTLY WITH THE PROVISIONS OF SECTION 262 OF THE DELAWARE
CORPORATE LAW MAY RESULT IN A WAIVER OR FORFEITURE OF THOSE APPRAISAL RIGHTS.
Page 3
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA
Biopool is providing the following financial information to aid you in
your analysis of the financial aspects of the Merger. The information is only a
summary and you should read it in conjunction with the historical financial
statements and related notes contained in the annual reports and other
information that Biopool has filed with the Securities and Exchange Commission,
the historical financial statements of Xtrana attached to this Proxy Statement
as Appendix C, and the unaudited pro forma condensed consolidated financial
statements of Biopool and Xtrana attached to this Proxy Statement as Appendix D.
Biopool's Annual Report on Form 10-KSB is being furnished with this Proxy
Statement.
The following unaudited pro forma financial data give effect to the
consummation of the Merger of Xtrana with Biopool. The unaudited pro forma data
should be read in conjunction with the historical consolidated financial
statements of Biopool and the historical financial statements of Xtrana, which
are included in or attached to this Proxy Statement.
The unaudited pro forma financial data has been prepared utilizing
Biopool's audited consolidated financial statements for the year ended December
31,1999 and the audited financial statements of Xtrana for the year ended
December 31, 1999.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------------------
Pro Forma Biopool Xtrana
<S> <C> <C> <C>
Operating revenues $ 9,767,000 $ 8,842,000 $ 925,000
Income (loss) from continuing operations 574,000 400,000 (864,000)
Income (loss) from continuing operations (0.03)(1) 0.05(2)
Cash dividends declared per common share 0 0 0
Total assets 20,076,000 11,033,000 200,000
Long term obligations and redeemable 0 0 7,000
preferred stock
<FN>
(1) Based on 8,374,512 weighted average basic shares of Biopool common stock
plus the 9,369,461 to be issued upon consummation of the Merger.
(2) Based upon 8,399,327 weighted average diluted shares of Biopool common
stock.
</FN>
</TABLE>
Page 4
<PAGE>
THE ANNUAL MEETING OF BIOPOOL STOCKHOLDERS
DATE, TIME, PLACE
This Proxy Statement is furnished in connection with the solicitation by
the Biopool board of directors of proxies representing Biopool common stock to
be voted at the Annual Meeting to be held at 9:00 a.m., on August 10, 2000, at
the Radisson Hotel Oxnard, 600 East Esplanade Drive, Oxnard, California, 93030.
MATTERS TO BE CONSIDERED
At the Annual Meeting, holders of Biopool common stock will consider and
vote upon (i) the election of four directors, (ii) ratification of the
appointment of Ernst & Young LLP as Biopool's independent public accountants,
(iii) the approval of the Merger with Xtrana pursuant to the Merger Agreement,
(iv) ratification of the 2000 Stock Incentive Plan and (v) such other matters as
may properly come before the Biopool Annual Meeting.
RECORD DATE; STOCK ENTITLED TO VOTE
The Biopool board has fixed the close of business on June 22, 2000, as
the Record Date. Only holders of record of shares of Biopool common stock are
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 8,319,951 shares of Biopool common stock outstanding and entitled to
vote by approximately 204 common stockholders of record. Each holder of record
as of the Record Date of common stock is entitled to cast one vote per share.
VOTES REQUIRED; QUORUM
The four nominees for election to the board of directors who receive the
greatest number of votes will be elected. The affirmative vote of the holders of
at least a majority of the total number of outstanding shares of capital stock
of Biopool entitled to vote at the Annual Meeting is required to approve the
Merger and the Merger Agreement. Action by the stockholders on any other matter
other than the election of directors is approved if the number of votes cast in
favor of the action exceeds the number of votes cast in opposition to the
action.
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, constitutes
a quorum at the Annual Meeting. If a quorum is not present or represented at the
Annual Meeting, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented all proxies will be voted in the same manner as such
proxies would have been voted at the original convening of the Annual Meeting
and any business may be transacted which might have been transacted at the
Annual Meeting as originally notified.
VOTING OF PROXIES
This Proxy Statement is being furnished to Biopool stockholders in
connection with the solicitation of proxies by and on behalf of the board of
directors for use at the Annual Meeting, and is accompanied by a form of proxy.
All shares of Biopool common stock which are entitled to vote and are
represented at the Annual Meeting by properly executed proxies received prior to
or at the Annual Meeting, and not revoked, will be voted at the Annual Meeting
in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted for election of the
board's nominees for directors
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<PAGE>
and for approval of the ratification of the appointment of the independent
public accountants, the ratification of adoption of the 2000 Stock Incentive
Plan, and approval of the Merger and the Merger Agreement.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies or allowing
additional time for the satisfaction of conditions of the Merger), the persons
named in the enclosed forms of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their best judgment.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of Biopool, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy originally filed, (ii) duly executing a later dated proxy relating to the
same shares and delivering it to the Secretary of Biopool before the taking of
the vote at the Annual Meeting or (iii) attending the Annual Meeting and voting
in person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent to Biopool at 6025 Nicolle Street, Ventura,
California 93003, Attention: Secretary, or hand delivered to the Secretary of
Biopool at or before the taking of the vote at the Annual Meeting.
Solicitation of PROXIES
All expenses of Biopool's solicitation of proxies, including the cost of
mailing this Proxy Statement to Biopool stockholders, will be borne by Biopool.
In addition to solicitation by use of the mails, proxies may be solicited from
stockholders by directors, officers and employees of Biopool in person or by
telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. Biopool
may retain a proxy solicitation firm for assistance in connection with the
solicitation of proxies for the Annual Meeting. Arrangements will also be made
with brokerage houses, custodians, nominees and fiduciaries for the forwarding
of proxy solicitation materials to beneficial owners of shares held of record by
such brokerage houses, custodians, nominees and fiduciaries, and Biopool will
reimburse such brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection therewith.
Board RECOMMENDATIONS
THE BOARD OF DIRECTORS OF BIOPOOL UNANIMOUSLY RECOMMENDS THAT THE
BIOPOOL STOCKHOLDERS VOTE "FOR" THE PERSONS NOMINATED FOR ELECTION AS
DIRECTORS, RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT PUBLIC
ACCOUNTANTS AND RATIFICATION OF THE NEW STOCK INCENTIVE PLAN. FOR THE
REASONS SET FORTH HEREIN, THE BOARD OF DIRECTORS OF BIOPOOL HAS
CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF BIOPOOL AND THE
BIOPOOL STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE BIOPOOL
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREIN.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with Biopool's Certificate of Incorporation and Bylaws,
the board of directors consists of not less than three nor more than seven
members, the exact number to be determined by the board of directors. At each
annual meeting of the stockholders of Biopool, directors are elected for a one
year term. The board of directors is currently set at four members. At the 2000
Annual Meeting, each director will be elected for a term expiring at the 2001
Annual Meeting. The board of directors proposes the nominees named below.
Unless marked otherwise, proxies received will be voted FOR the election
of the each of the nominees named below. If any such person is unable or
unwilling to serve as a nominee for the office of director at the date of the
Annual Meeting or any postponement or adjournment thereof, the proxies may be
voted for a substitute nominee, designated by the proxy holders or by the
present board of directors to fill such vacancy. The board of directors has no
reason to believe that any such nominee will be unwilling or unable to serve if
elected a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE DIRECTORS NOMINATED HEREIN.
The board of directors proposes the election of the following nominees
as members of the board of directors:
Michael D. Bick, Ph.D.
Douglas L. Ayer
N. Price Paschall
James H. Chamberlain
Information with Respect to EACH Director, Nominee and Certain Officers.
The following table sets forth certain information with respect to each
director, nominee and other officers of Biopool as of April 20, 2000.
<TABLE>
<CAPTION>
DIRECTOR/
OFFICER
NAME AGE POSITION SINCE
--------------------------- ------ ----------------------------------------- ----------
<S> <C> <C> <C>
Michael D. Bick, Ph.D. 55 President, Chief Executive Officer, 1991
Director
Douglas L. Ayer 62 Director 1993
N. Price Paschall 51 Director 1997
James H. Chamberlain 52 Director 1998
Robert K. Foote 55 Chief Financial Officer, Corporate
Secretary 1996
Clayton H. Duke 58 Vice President Marketing and Business 1998
Development
</TABLE>
All officers are appointed by and serve at the discretion of the board
of directors. There are no family relationships between any directors or
officers of Biopool.
MICHAEL D. BICK, PH.D. was elected Chief Executive Officer in August
1991, Chairman of the Board in July 1993 and President in January 1996. In 1988,
Dr. Bick founded Biopool's former subsidiary, MeDiTech, and was President and
Chief Executive Officer thereof until it was acquired by Biopool in January
1992. Prior to that date, he was co-founder and president of a privately-held
medical
Page 7
<PAGE>
device firm for ten years. Dr. Bick received a Ph.D. in molecular biology from
the University of Southern California in 1971 and was affiliated with the
Harvard Medical School and Children's Hospital Medical Center in Boston carrying
out research in human genetics from 1971 to 1974. Dr. Bick was a staff member of
the Roche Institute of Molecular Biology from 1974 to 1978. Dr. Bick currently
serves on the Board of Counselors of the School of Pharmacy, University of
Southern California. Dr. Bick is also on the Board of Directors of Biotech.com,
a privately-held company that supplies goods and services to the
biotech/biopharma industry.
DOUGLAS L. AYER is currently President and Managing Partner of
International Capital Partners of Stamford, CT. Mr. Ayer was previously Chairman
and Chief Executive Officer of Cametrics, a manufacturer of precision metal
components, and has held executive positions at Paine Webber and McKinsey & Co.,
Inc. Mr. Ayer also serves as a director of Mission Critical Software, Inc., a
developer of enterprise-scale Windows NT systems administration and management
software products.
N. PRICE PASCHALL is the founder and Managing Partner of Context Capital
Group (formerly HealthCare Capital Advisors) since 1993. Context Capital Group
provides merger and acquisition advice to middle market companies, focusing on
the medical service industry. Prior to Context Capital Group, Mr. Paschall was a
Vice Chairman and founder of Shea, Paschall and Powell-Hambros Bank (SPP Hambros
& Co.), a firm specializing in mergers and acquisitions. Mr. Paschall holds a
degree in business administration from California Polytechnic University in
Pomona. Since 1994, Mr. Paschall has served on the Board of Directors and
provided certain corporate financial services to Advanced Materials Group, a
manufacturer and fabricator of specialty foams, foils, films and
pressure-sensitive adhesive components.
JAMES H. CHAMBERLAIN is the founder of BioSource International, Inc., a
California-based, Nasdaq National Market System company dedicated to the
research, development, manufacturing, and marketing of biomedical products to
the diagnostic and research markets. Mr. Chamberlain founded BioSource in 1989,
is a director of BioSource and currently serves as its Chairman, President, and
Chief Executive Officer. Prior to BioSource, Mr. Chamberlain was the Manager of
Business Development for Amgen, Inc. Mr. Chamberlain received a B.S. degree in
biology and chemistry from West Virginia University in 1969 and completed an MBA
Executive Program at Pepperdine University in 1981.
ROBERT K. FOOTE, CPA, joined Biopool as Chief Financial Officer on
November 1, 1996. He was appointed Corporate Secretary on January 14, 1997.
Prior to joining Biopool, he was the CFO and Corporate Secretary of H&H Oil Tool
Co., Inc., which traded on the Nasdaq National Market System. Mr. Foote received
a B.S. degree in accounting and business administration from Brigham Young
University in 1974.
CLAYTON H. DUKE joined Biopool as Vice President Marketing and Business
Development on August 1, 1998. Prior to joining Biopool, he was Vice President
of Braun Medical. He has also held executive positions at Cymed, Abbott
Laboratories, and E.R. Squibb & Sons. Mr. Duke received a B.S. degree in
microbiology and business administration from California State University, San
Francisco.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended December 31, 1999, the board of directors
met seven times. Each director attended in excess of 75% of all meetings of the
board of directors held during the year. The board of directors has an Audit
Committee that met once during 1999. This committee oversees the work of
Biopool's auditors with respect to financial and accounting matters. Messrs.
Ayer, Paschall, and Chamberlain are members of the Audit Committee. The board of
directors also has a Compensation Committee, which met once during fiscal year
1999. The function of the Compensation Committee is to review and make
recommendations with respect to compensation of executive officers and key
employees. Messrs. Ayer, Paschall, and Chamberlain are members of the
Compensation Committee.
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<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth certain information as to the Company's
Chief Executive Officer, Vice President Marketing and Business Development, and
Chief Financial Officer. No other executive officer of the Company had
compensation in excess of $100,000 during the period:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATIONS
NAME AND PRINCIPAL ---------------------------------------------------
POSITION YEAR SALARY BONUS OTHER(1) OPTIONS
--------------------------- ---------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Michael D. Bick, Ph.D. 1999 $ 160,000 $ 12,000
Chief Executive Officer 1998 160,000 10,800 32,465
1997 135,700 $25,000 10,000 35,000
Clayton H. Duke 1999 125,000 7,950
Vice President Marketing 1998 (2) 45,700 2,100 200,000
and Business Development
Robert K. Foote 1999 100,000 7,200
Chief Financial Officer 1998 100,000 7,200
1997 85,000 15,000 5,300
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to executive officers in the 1999 fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME OPTIONS AT YEAR-END YEAR-END(3)
------------------------- ------------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
------------------------- ------------------------- ------------------------
<S> <C> <C>
Michael D. Bick, Ph.D. 83,699 / 42,766 $ 0 / 0
Clayton H. Duke 50,000 / 160,000 0 / 0
Robert K. Foote 123,330 / 76,670 0 / 0
------------------------
<FN>
(1) Represents payment of a car allowance and contributions to the Company's
401(k) profit sharing plan.
(2) Mr. Duke's hire date was August 1, 1998.
(3) Determined as the difference between the closing trade price on December
31, 1999 ($0.75/share) and the aggregate price of the options covering such
shares.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
Non-employee directors receive $6,000 per calendar year, plus $500 for
each board of directors meeting attended. Biopool pays all out-of-pocket fees of
attendance. In addition, non-employee directors receive 15,000 non-qualified
stock options to purchase Biopool's common stock under the 1993 Incentive
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<PAGE>
Stock Option Plan per year. In addition, Price Paschall earned a broker's fee of
$145,000 in 1999 for services rendered in connection with the sale of the BCA
Division.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
In July 1999, Biopool entered into an executive employment agreement
with Michael D. Bick, Ph.D. The agreement becomes effective at the earlier to
occur of (i) the date upon which a new Chief Executive Officer satisfactory to
the Board of Directors of Biopool commences employment with Biopool, or (ii) the
date of a change of control of Biopool. The executive employment agreement would
become effective if the Merger is consummated. Under the executive employment
agreement, Dr. Bick will no longer serve as our President and Chief Executive
Officer, but will continue to be Biopool's Chairman for a term of three years.
The agreement provides for compensation to Dr. Bick of $150,000 during each year
of the term, inclusive of a car allowance and dues to a club. Under the
agreement, Dr. Bick is not required to provide more than 50 hours of services
per month, and may terminate the agreement and receive all consideration due to
him thereunder if there is a change in control of Biopool that results in a
material modification to Dr. Bick's duties under the agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, requires our
executive officers, directors, and persons who own more than ten percent of a
registered class of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Executive officers, directors and greater-than-ten percent stockholders are
required by SEC regulations to furnish us with all Section 16(a) forms they
file. Based solely on our review of the copies of the forms received by us and
written representations from certain reporting persons that they have complied
with the relevant filing requirements, we believe that, during the year ended
December 31, 1999, all our executive officers, directors and greater-than-ten
percent stockholders complied with all Section 16(a) filing requirements.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the board of directors recommended and the board
has selected, subject to ratification by a majority vote of the shareholders in
person or by proxy at the annual meeting, the firm of Ernst & Young LLP (the
"Auditors") to continue as our independent public accountant for the current
fiscal year ending December 31, 2000. The Auditors served as the principal
independent public accounting firm utilized by us during the year ended December
31, 1999. We anticipate that a representative of the Auditors will attend the
Annual Meeting for the purpose of responding to appropriate questions. At the
Annual Meeting, a representative of the Auditors will be afforded an opportunity
to make a statement if the Auditors so desire.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFYING THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS.
Page 10
<PAGE>
PROPOSAL NO. 3
THE PROPOSED MERGER
GENERAL
The Biopool board of directors has unanimously approved the Merger
Agreement dated May 3, 2000, by and between Biopool and Xtrana. Pursuant to the
Merger Agreement, Xtrana will be merged with and into Biopool, with Biopool
surviving and the separate existence of Xtrana ceasing. Upon consummation of the
Merger, Biopool will issue 9,369,461 shares of common stock in exchange for all
outstanding common and preferred stock of Xtrana. As a result, immediately
following the Merger, the former Xtrana stockholders will hold approximately 50%
and Biopool stockholders will hold approximately 50% of the outstanding shares
of capital stock of the surviving corporation. Of these shares, 1,873,892 shares
will be issued and placed in an escrow account, and may be cancelled if Xtrana
suffers any liabilities under the indemnification provisions of the Merger
Agreement or if Xtrana fails to meet the gross revenue targets agreed to in the
Merger Agreement. In the future, we may have to issue additional shares of
common stock to Xtrana stockholders if we suffer any liability under the
indemnification provisions set for the in the Merger Agreement or if Xtrana
meets certain gross revenue targets agreed to in the Merger Agreement.
BACKGROUND OF THE MERGER
In January 2000, N. Price Paschall, a member of the board of directors
of Biopool, introduced the business of Xtrana to Michael Bick, Ph.D. and the
rest of the Biopool management. Dr. Bick and Mr. Paschall met with Jack Wheeler,
CEO and a director of Xtrana, at Xtrana's executive offices in Denver, Colorado
to discuss possible synergies. Mr. Wheeler and some his staff presented a
demonstration of some of the Xtrana technologies at work. Dr. Bick and Mr.
Paschall were impressed with the demonstration and became intrigued with the
possibilities of combining the companies.
After several telephonic conferences, Mr. Wheeler and Steve Schultheis,
another member of the Xtrana board of directors, visited the Biopool offices in
Ventura, California. All parties were impressed with the concept of a business
combination, and a follow up meeting was scheduled. On March 3, 2000, the entire
Biopool board of directors and three Xtrana directors, Mr. Wheeler, Mr.
Schultheis and John Gerdes, met in Los Angeles. At this meeting the parties
explored the mutual benefits of combining their companies and discussed the
structure of a potential merger. Biopool and Xtrana signed a letter of intent,
as of March 10, 2000, outlining the terms under which they would pursue a
merger.
Subsequent to the initial discussions and negotiations regarding the
terms of the Merger, the Biopool board of directors, after consultation with its
financial advisors, determined that Biopool's stockholders required additional
protection against the risk of the uncertainty and timing of Xtrana's future
revenues. In order to provide adequate protection for the Biopool stockholders,
Biopool and Xtrana agreed to include an "earnout" provision in the Merger
Agreement. Pursuant to this earnout provision, which is described in further
detail below, the Merger consideration to be received by Xtrana may be increased
or decreased depending on the ability of Xtrana's business to achieve certain
gross revenue targets agreed to in the Merger Agreement.
After further negotiations, Biopool and Xtrana entered into the Merger
Agreement, as described in this Proxy Statement, on May 3, 2000. The boards of
directors of Biopool and Xtrana have each approved the Merger Agreement and the
transactions that it contemplates.
CONDITIONAL WARRANTS. In connection with the discussions and
negotiations surrounding the proposed merger and prior to execution of the
Merger Agreement, Biopool and Xtrana exchanged conditional warrants to purchase
common stock of the other. These warrants become exercisable if the merger is
not consummated for any of the reasons described in further detail below.
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<PAGE>
On March 30, 2000, Biopool granted Xtrana conditional warrants to
purchase 1,658,588 shares of Biopool common stock, representing 19.9% of
Biopool's outstanding common stock on a fully diluted basis. The per share
exercise price of these warrants is equal the average closing bid price of
Biopool's common stock over the ten trading day period ending on the day prior
to either the execution of the Merger Agreement or a warrant trigger event, as
applicable. These warrants will become exercisable if, among other things, (i)
Biopool breaches a provision of the Merger Agreement that would permit Xtrana to
terminate the Merger Agreement, (ii) any person acquires beneficial ownership
of, or Biopool enters into an agreement with another person entitling that
person to acquire ownership of, 20% or more of Biopool's common stock or (iii)
Biopool terminates or abandons the Merger Agreement for any reason other than
"for cause." A termination of the Merger Agreement "for cause," which shall not
trigger the warrants, includes termination resulting from, without limitation,
(i) Biopool's breach of any of any of its covenants and agreements in the Merger
Agreement that would permit Xtrana to terminate the Merger Agreement, (ii) the
fact that any of the representations and warranties made by Biopool in the
Merger Agreement were not true and accurate in all material respects as of the
time they were made, (iii) failure of the parties to obtain all material
governmental authorizations, consents and approvals necessary for consummation
of the Merger or (iv) the entry by a court of competent jurisdiction of a
permanent injunction or other legal restraint to the Merger.
On March 30, 2000, Xtrana granted Biopool conditional warrants to
purchase 25,278 shares of Xtrana common stock, representing 19.9% of Xtrana's
outstanding common stock on a fully diluted basis. The per share exercise price
of these warrants is equal the average closing bid price of Biopool's common
stock over the ten trading day period ending on the day prior to either the
execution of the Merger Agreement or a warrant trigger event, as applicable,
subject to adjustment pursuant to the terms of the warrant. These warrants will
become exercisable if, among other things, (i) Xtrana breaches a provision of
the Merger Agreement that would permit Biopool to terminate the Merger
Agreement, (ii) any person acquires beneficial ownership of, or Xtrana enters
into an agreement with another person entitling that person to acquire ownership
of, 20% or more of Xtrana's common stock or (iii) Xtrana terminates or abandons
the Merger Agreement for any reason other than "for cause." A termination of the
Merger Agreement "for cause," which shall not trigger the warrants, includes
termination resulting from, without limitation, (i) Xtrana's breach of any of
any of its covenants and agreements in the Merger Agreement that would permit
Biopool to terminate the Merger Agreement, (ii) the fact that any of the
representations and warranties made by Xtrana in the Merger Agreement were not
true and accurate in all material respects as of the time they were made, (iii)
failure of the parties to obtain all material governmental authorizations,
consents and approvals necessary for consummation of the Merger or (iv) the
entry by a court of competent jurisdiction of a permanent injunction or other
legal restraint to the Merger.
THE MERGER AGREEMENT
The following brief description of the terms of the Merger Agreement
contains summaries of certain provisions of the Merger Agreement. This summary
description does not purport to be complete and is qualified in its entirety by
the full text of the Merger Agreement, which is incorporated into this Proxy
Statement by reference and is attached as Appendix A.
MERGER EFFECT. At the effective time of the Merger, Xtrana will merge
with and into Biopool, with Biopool surviving the Merger and the separate
corporate existence of Xtrana ceasing. All of the properties, rights,
privileges, powers and franchises of Xtrana will vest in the surviving
corporation. Furthermore, all debts, liabilities and duties of Xtrana will
become the debts, liabilities and duties of the surviving corporation. The
Certificate of Incorporation and Bylaws of Biopool will be the certificate of
incorporation and bylaws of the surviving corporation.
Page 12
<PAGE>
EFFECTIVE TIME. The effective time of the Merger will occur on the date
and at the time the Certificate of Merger is filed with the Secretary of State
of the State of Delaware. It is anticipated that the effective time of the
Merger will occur on or about August 10, 2000
CONVERSION OF XTRANA CAPITAL STOCK. At the effective time of the Merger,
all outstanding shares of Xtrana common and preferred stock (except dissenting
shares under section 262 of the DGCL) will be exchanged for an aggregate total
of 9,369,461 shares of Biopool common stock. Of these shares, 936,946 shares
will be deposited in escrow for the purposes of satisfying Xtrana's
indemnification obligations under the Merger Agreement. At the effective time,
all shares of Xtrana common and preferred stock will be automatically cancelled
and will cease to exist. All certificates representing shares of Xtrana common
or preferred stock will be exchanged for certificates representing shares of
Biopool common stock. Each share of Xtrana common and preferred stock will be
converted into the right to receive approximately 3.26 shares of Biopool common
stock.
Prior to the effective time of the Merger, each outstanding Xtrana
convertible note shall be either repaid in full or converted into shares of
Xtrana common or preferred stock.
XTRANA EARNOUT PROVISION. Pursuant to the Merger Agreement, in addition
to the 936,946 shares of Biopool common stock that will be issued and deposited
in escrow to satisfy indemnification obligations, an additional 936,946 shares
of the Merger consideration will be placed in escrow to be released or cancelled
conditioned on the amount of future gross revenues to be earned by the Xtrana
business. The Merger Agreement sets a target of $7,300,000 in gross revenues for
the Xtrana business for the period from October 1, 2000 through September 30,
2001. If the Xtrana business' actual gross revenues for this period are at least
85% of the target, the 936,946 shares will be released from escrow and
distributed to Xtrana stockholders and the escrow will terminate as to those
shares. If the Xtrana business' actual gross revenues for the period are at
least 115% of the target, Biopool has agreed to issue an additional 1,030,641
shares of common stock to the Xtrana stockholders as further consideration in
the Merger. However, if the Xtrana business earns actual gross revenues which
are less than 85% of the target, then the 936,946 shares will remain in escrow
for an additional twelve months and the Xtrana stockholders will receive the
escrow shares if the Xtrana business earns gross revenues in this extended two
year period of at least 85% of $29,300,000. If the escrow period is extended,
Biopool has agreed to issue an additional 1,030,641 shares of common stock to
the Xtrana stockholders as additional consideration in the Merger if Xtrana's
gross revenues are at least 115% of this two year target. If the Xtrana business
fails to earn gross revenues of at least 85% of the target amount over the
extended two year period, then Biopool will permanently cancel the 936,946
shares being held in escrow.
EXCHANGE OF XTRANA STOCK CERTIFICATES. As soon as practicable after the
consummation of the Merger, Biopool shall mail to each holder of record of
Xtrana stock immediately prior to the effective time a letter of transmittal and
instructions for surrendering the Xtrana stock certificates in exchange for
Biopool stock certificates. Biopool will not be required to issue any fractional
shares, instead fractional share amounts of 0.5 or greater will be rounded up to
a full share of Biopool common stock and fractional share amounts of less than
0.5 will be rounded down the next whole share of Biopool common stock.
CONDUCT OF BUSINESS PRIOR TO THE MERGER. Concurrently with the execution
of the Merger Agreement, Biopool entered into an employment agreement with John
H. Wheeler, pursuant to which he will act as chief operating officer until the
consummation of the Merger. In addition, from the date of the Merger Agreement
until the effective time of the Merger, Biopool and Xtrana each agree, among
other things, not to:
o merge or consolidate with another entity or sell all or substantially
all of their assets to another entity;
o amend their certificates of incorporation or bylaws;
o make changes in accounting practices;
o sell, consume or dispose of property outside of the ordinary course of
business;
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<PAGE>
o authorize or issue additional capital stock;
o declare dividends on or redeem or repurchase its capital stock;
o pay, discharge, settle or satisfy any claims or liabilities outside
the ordinary course of business;
o form any subsidiary;
o take certain actions with respect to employee benefit plans;
o cancel or allow to expire any insurance policy listed in the schedules
to the Merger Agreement; or
o enter into any exclusive license agreement not in the ordinary course
of business.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains customary
representations and warranties relating to, among other things, (a) organization
and similar corporate matters; (b) the capital structure of each of Xtrana and
Biopool; (c) authorization, execution, delivery, performance and enforceability
of the Merger Agreement and related matters; (d) conflicts under articles or
bylaws, required consents or approvals, and violations of any agreements or law;
(e) no consent or approval required by governmental or regulatory agencies; (f)
financial statements, liabilities and dividends; (g) absence of certain material
adverse events, changes, effects or undisclosed liabilities; (h) accounts
receivable; (i) litigation; (j) retirement and other employee plans and matters
relating to the Employee Retirement Income Security Act of 1974, as amended; (k)
material contracts; (l) environmental compliance; (m) ownership of property; (n)
intellectual property; (o) taxes; (p) title to assets; and (q) disclosure.
COVENANTS. Biopool and Xtrana each agreed to seek stockholder approval
of the Merger by annual meeting of stockholders and solicitation of written
consents, respectively. Biopool and Xtrana each further agreed to use reasonable
best efforts to cause to occur all conditions within its control in order to
consummate the Merger. Biopool and Xtrana each agreed to allow the other access
to its books and records and officers, attorneys and accountants and to provide
other necessary financial information and operating data. Neither Biopool nor
Xtrana will solicit or entertain any acquisition proposal and will inform the
other party upon receipt of any such solicitation from a third party. Under the
Merger Agreement, Biopool and Xtrana further agreed, among other things, to
cooperate in preparing this Proxy Statement and issue mutually agreeable press
releases concerning the Merger.
CONDITIONS OF THE MERGER. The respective obligations of Xtrana and
Biopool to consummate the Merger are subject to certain conditions, or waiver of
those conditions including, without limitation (a) the truth of the
representations and warranties contained in the Merger Agreement; (b)
performance in all material respects by each of Biopool and Xtrana of all
covenants; (c) the delivery of officer's certificates at the closing date; (d)
the delivery of an opinion of counsel of each of Biopool and Xtrana; (e)
approval by the stockholders of each of Biopool and Xtrana; and (f) receipt of a
certificate of corporate good standing with respect to Biopool and Xtrana. In
addition, Biopool and John H. Wheeler shall have entered into an employment
agreement pursuant to which he will serve as the chief executive officer of
Biopool subsequent to the Merger.
TERMINATION. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the closing for any of the following reasons,
without limitation, (a) by written mutual consent of the parties; (b) by either
party if there is a material breach that is not cured within ten days; (c) by
either party if there is a permanent injunction or court order preventing the
Merger; (d) by either party if necessary governmental approvals cannot be
obtained despite reasonable efforts; and (e) by either party which is not in
material default of its obligations if the Merger is not consummated on or
before November 15, 2000.
TERMINATION FEE. In the event of a termination of the Merger Agreement
by either party, there shall be no liability or obligation on the part of either
Biopool or Xtrana or their respective officers or directors, except with respect
to a willful material breach.
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<PAGE>
EXPENSES. Biopool and Xtrana will each pay all of its own costs and
expenses incurred in connection with the transactions contemplated hereby
including, without limitation, all fees and expenses of attorneys, accountants
and financial advisors.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Biopool will be the surviving corporation in the merger, and at the
effective time of the merger Xtrana will cease to exist as a separate corporate
entity. The Certificate of Incorporation and Bylaws of Biopool will be the
certificate of incorporation and bylaws of the combined corporation. Pursuant to
the Merger Agreement, John H. Wheeler will be the Chief Executive Officer of the
surviving corporation. After the effective time of the Merger, the board of
directors of the surviving corporation will consist of seven members. Initially,
Biopool and Xtrana will each have the right to designate three directors, and
together they will select one additional mutually agreeable director. For
further discussion of the director and officers of the surviving corporation and
other related matters, see "MANAGEMENT OF THE SURVIVING CORPORATION."
MERGER CONSIDERATION
Upon consummation of the Merger, Biopool will issue an aggregate of
9,369,461 shares of Biopool common stock in exchange for all the issued and
outstanding shares of Xtrana common stock and Xtrana preferred stock. As a
result of the Merger, Biopool stockholders will hold approximately 50% of the
stock of the surviving corporation and the Xtrana stockholders will hold
approximately 50% of the stock of the surviving corporation. No fractional
shares of Biopool common stock will be issued. Instead, any fractional share
amounts of 0.5 or higher will be rounded up to a full share of Biopool common
stock and fractional share amounts of less than 0.5 will be rounded down to the
next whole share. According to the Merger Agreement, all shares of Xtrana common
and preferred stock will automatically be cancelled and shall cease to exist.
Pursuant to the Merger Agreement, of the total Merger consideration,
936,946 shares of Biopool common stock will be issued and deposited in escrow to
satisfy indemnification obligations, and an additional 936,946 shares of the
Merger consideration will be placed in escrow to be released or cancelled
conditioned on the amount of future gross revenues to be earned by Xtrana. The
Merger Agreement sets a target of $7,300,000 in gross revenues for the Xtrana
business for the period from October 1, 2000 through September 30, 2001. If the
Xtrana business' actual gross revenues for this period are at least 85% of the
target, the 936,946 shares will be released from escrow and distributed to
Xtrana stockholders and the escrow will terminate as to those shares. If the
Xtrana business' actual gross revenues for the period are at least 115% of the
target, Biopool has agreed to issue an additional 1,030,641 shares of common
stock to the Xtrana stockholders as further consideration in the Merger.
However, if the Xtrana business' actual gross revenues are less than 85% of the
target, then the 936,946 shares will remain in escrow for an additional twelve
months and the Xtrana stockholders will receive the escrow shares if Xtrana
earns gross revenues in this extended two year period of at least 85% of
$29,300,000. If the escrow period is extended, Biopool has agreed to issue an
additional 1,030,641 shares of common stock to the Xtrana stockholders as
additional consideration in the Merger if Xtrana's business earns gross revenues
of at least 115% of this two year target. If the Xtrana business fails to earn
gross revenues of at least 85% of the target amount over the extended two year
period, then Biopool will permanently cancel the 936,946 shares being held in
escrow.
BOARD OF DIRECTORS' REASONS FOR THE MERGER
Biopool has spent twelve years as a public company, building a solid
financial base and corporate infrastructure. It is now in a position to leverage
this strength by investing in a partnership with Xtrana, whose technology for
developing compelling tools for genomic analysis and identification are expected
to
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have a profound impact in the 21st century. We expect the combined company to
continue to grow by developing new analytical methods for use in human
diagnostics, developing tools for widespread use by genome discovery companies,
and developing products for a multitude of microbial tests for environmental and
food processing use. All areas offer rapid growth and large market potential,
which would otherwise be unavailable to Biopool in its present form. We believe
this combination will achieve acceptable levels of revenue growth in exciting
new markets, thereby delivering greater valuation to shareholders.
The global market for diagnostic products based upon nucleic acid
testing technologies is one of the most rapidly growing segments in clinical
diagnostics, and we believe it will have ever increasing importance as new
genetic data becomes available. Areas of importance to us are infectious disease
diagnosis, antiviral drug therapy monitoring, drug therapy guidance, cancer
diagnostics, and genetic disease management. Xtrana is developing new detection
methods that will allow the cost of these tests to be significantly reduced and,
thereby, be available for routine use by the clinician.
Biopool's nearly twenty years of experience in developing test kits and
marketing them to the diagnostics industry allows an opportunity for the
combined company to capitalize on this experience in developing and introducing
Xtrana's new technologies to human diagnostic testing.
Biopool's shareholders will be benefited by gaining access to Xtrana's:
o intellectual property base and product pipeline;
o scientific research into developing test procedures for genomic
identification; and
o technology platform and potential products that expand
opportunities far beyond human diagnostics into environmental,
food processing, and water testing for microbial contamination.
Further, the combined company will benefit from:
o enhanced management strength by, among other things, increasing
the board of directors to seven members;
o strong research and development capabilities, including
application of the technology platforms to certain genetic
determinants in Biopool's core business of
hemostasis/cardiovascular occlusion; and
o entry into markets that investors give greater valuation to,
resulting in real benefits to shareholders.
The Biopool board of directors, by unanimous vote, has approved the
Merger and has determined that the Merger is fair and in the best interests of
Biopool and its stockholders. The Biopool board of directors believes that the
synergies created by the Merger will provide long term value to Biopool's
stockholders.
The decision of the Biopool board of directors to enter into the Merger
Agreement was based on an analysis of a number of factors including, but not
limited to, the following:
o a review of Biopool's and Xtrana's results of operations and
financial condition;
o review of potential benefits and opportunities of the combined
business including a greater customer base, greater resources and
increased operating efficiencies;
o the belief by Biopool's board of directors and management that
combined resources and capital of Biopool and Xtrana will serve
as a foundation for the surviving company to become an
increasingly aggressive and effective competitor in all aspects
of the industry;
o Biopool's strategic alternatives and alternatives for enhancement
of stockholder value;
o the opinion of Biopool's financial advisor that the Merger is
fair to the Biopool stockholders from a financial point of view;
and
o the terms and conditions of the Merger Agreement and all related
transactions.
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The Biopool board of directors also considered certain risks attendant
to the Merger, including the risk that the benefits sought in the Merger would
not be fully achieved, the risks attendant to the integration of the two
companies, and the other risks. The Biopool board of directors believes that
these risks were outweighed by the potential significant benefits to be gained
by the Merger.
The foregoing discussion of material factors considered by the Biopool
board of directors is not intended to be exhaustive, as the Biopool board of
directors considered a number of other factors. In reaching the determination to
APPROVE and recommend approval and adoption of the Merger Proposal, in view of
the wide variety of factors considered in connection with its evaluation
thereof, the Biopool board of directors did not assign any relative or specific
weights to the factors set forth above, and individual directors may have given
differing weights to the different factors.
VOTE REQUIRED FOR APPROVAL OF THE MERGER
The affirmative vote a majority of all outstanding shares of Biopool
common stock entitled to vote is required to approve the Merger and the Merger
Agreement. The board of directors has fixed June 22, 2000 as the Record Date for
stockholders entitled to vote at the Annual Meeting. The Biopool common stock is
the only outstanding security entitled to vote at the Annual Meeting.
MATERIAL DIFFERENCES IN RIGHTS OF BIOPOOL STOCKHOLDERS
Pursuant to the Merger Agreement, Xtrana will be merged with and into
Biopool, with Biopool surviving and the corporate existence of Xtrana ceasing.
Upon consummation of the Merger, the Biopool stockholders will hold
approximately 50% of the surviving corporation and the Xtrana stockholders will
hold approximately 50%. According to the terms of the Merger Agreement, the
Certificate of Incorporation and Bylaws of Biopool will be the certificate of
incorporation and bylaws of the surviving corporation. As a result, the rights
of Biopool stockholders will not be materially altered as a result of the
Merger.
ACCOUNTING TREATMENT
The Merger is intended to be treated as a "purchase" in accordance with
generally accepted accounting principles whereby the purchase price will be
allocated based on the fair values of the assets acquired and the liabilities
assumed. Any excess of such purchase price over the amounts so allocated will be
allocated to intangible assets.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO BIOPOOL STOCKHOLDERS
The following general discussion summarizes certain material federal
income tax consequences of the Merger to Biopool stockholders. This discussion
is based on the Internal Revenue Code of 1986, as amended (the Code), the
related treasury regulations, existing administrative interpretations and court
decisions, all of which are subject to change, possibly for retroactive effect.
We understand that the Merger will have the federal income tax
consequences discussed below, but our understanding of the material federal
income tax consequences of the Merger to Biopool and its stockholders is based
upon the advice of our tax advisor. We cannot assure you that the Internal
Revenue Service or a court will not adopt contrary positions if the issues are
litigated.
The Merger has been structured with the intent that it be treated as a
reorganization for federal income tax purposes within the meaning of section
368(a) of the Code. We understand that current stockholders of Biopool will not
recognize gain or loss for federal income tax purposes as a result of the
Merger. We also understand that Biopool should not recognize gain or loss for
federal income tax purposes as a result of the Merger.
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THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, PERSONS WHO
RECEIVED PAYMENT IN RESPECT OF OPTIONS TO ACQUIRE COMMON STOCK, STOCKHOLDERS WHO
ACQUIRED COMMON STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR
OTHERWISE AS COMPENSATION, PERSONS OWNING COMMON STOCK AS PART OF A "STRADDLE,"
"HEDGE" OR "CONVERSION TRANSACTION," INDIVIDUALS WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED
TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE
MINIMUM TAX, AND STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES
IN SUCH TAX LAWS.
REGULATORY APPROVALS
Biopool is not aware of any material governmental or regulatory approval
required for completion of the Merger, other than compliance with applicable
corporate law of the State of Delaware. The issuance of Biopool common stock to
Xtrana pursuant to the Merger Agreement is intended to be a transaction exempt
from registration under Regulation D of the Securities Act of 1933, as amended.
If the Merger is consummated, Biopool will file a Form D with the Securities
Exchange Commission in order to comply with Regulation D and will undertake any
other actions and/or filings required by any applicable state securities laws.
OPINION OF FINANCIAL ADVISORS
Biopool's board of directors retained the investment banking firm of
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. to pass on the fairness
of the Merger, from a financial point of view, including the consideration to be
received by Biopool and its stockholders. Houlihan Lokey Howard & Zukin is a
nationally recognized investment banking firm and, as part of its investment
banking activities, is regularly engaged in the evaluation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and other purposes.
The board of directors selected Houlihan Lokey Howard & Zukin because of its
expertise and reputation and because its investment banking professionals have
substantial expertise in transactions similar to the Merger.
OPINION OF HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
On May 3, 2000, Houlihan Lokey delivered to Biopool's Board of Directors
its opinion that, as of that date and based on the considerations set forth in
the opinion, the number of Biopool shares to be issued for each share of Xtrana
common stock or common stock equivalent (or the "exchange ratio") was fair to
Biopool from a financial point of view.
THE FULL TEXT OF THE HOULIHAN LOKEY OPINION, WHICH STATES THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY HOULIHAN LOKEY IS ATTACHED AS APPENDIX E TO THIS PROXY
STATEMENT. BIOPOOL STOCKHOLDERS ARE URGED TO READ THE HOULIHAN LOKEY OPINION
CAREFULLY AND IN ITS ENTIRETY. THE HOULIHAN LOKEY OPINION IS DIRECTED TO THE
BIOPOOL BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO
TO BIOPOOL FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION.
HOULIHAN LOKEY HAS NOT BEEN RETAINED TO UPDATE ITS ANALYSIS PRIOR TO THE
CLOSING. ADDITIONALLY, THE OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
BIOPOOL
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STOCKHOLDER AS TO HOW HE OR SHE SHOULD VOTE AT THE BIOPOOL ANNUAL MEETING. THE
SUMMARY OF THE HOULIHAN LOKEY OPINION SET FORTH IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
The Houlihan Lokey opinion does not address:
o any other aspects of the Merger;
o the underlying business decision of the Biopool board of
directors to proceed with the Merger; or
o the relative merits of the Merger and the other business
strategies that the Biopool board of directors has considered or
may be considering.
In arriving at its opinion, Houlihan Lokey, among other matters:
o reviewed Biopool's annual reports to stockholders and on Form
10-K for the fiscal year ended December 31, 1999 and Biopool
prepared interim financial statements for the three-month periods
ended March 31, 1999 and March 31, 2000, which Biopool's
management has identified as being the most current financial
statements available;
o reviewed a draft copy of the Merger Agreement;
o reviewed a draft of this Proxy Statement;
o held discussions with certain members of the senior management of
Biopool and Xtrana, respectively, to discuss the operations,
financial condition, future prospects and projected operations
and performance of Biopool and Xtrana, and held discussions with
representatives of Biopool's counsel to discuss certain matters;
o visited certain facilities and business offices of Biopool;
o reviewed forecasts and projections prepared by Biopool's
management with respect to Biopool for the years ended December
31, 2000 through 2003;
o reviewed forecasts and projections prepared by Xtrana's
management with respect to Xtrana for the years ended December
31, 2000 through 2003;
o reviewed the Molecular Innovations, Inc. (predecessor company to
Xtrana) $10,000,000 Series D Convertible Preferred Stock
Confidential Private Placement Memorandum dated, June 1999, and a
proposed term sheet relating to a $4,000,000 Series D Convertible
Preferred Stock offering, dated February 23, 2000;
o reviewed the historical market prices and trading volume for
Biopool's publicly traded securities;
o reviewed certain other publicly available financial data for
certain companies that we deem comparable to Biopool and Xtrana,
and publicly available prices and premiums paid in other
transactions that we considered similar to the Merger;
o reviewed drafts of certain documents to be delivered at the
closing of the Merger; and
o conducted such other studies, analyses and inquiries as we have
deemed appropriate.
In connection with its review, Houlihan Lokey, among other matters:
o did not assume any responsibility for independent verification of
any of the foregoing information and relied upon its being
complete and accurate in all material respects;
o assumed that the final executed form of the Merger Agreement will
not differ in any material respect from the draft that Houlihan
Lokey examined, and that Biopool and Xtrana will comply with all
the material terms of the Merger Agreement;
o assumed that the financial forecasts had been reasonably prepared
on bases reflecting the best currently available estimates and
judgments of Biopool and Xtrana management as to the future
financial performance of Biopool and Xtrana, respectively, after
taking into effect the potential synergies and strategic benefits
anticipated to result from the Merger;
o did not make an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of Biopool or Xtrana;
o was not furnished with any evaluations or appraisals of the
assets or liabilities (contingent or otherwise) of Biopool or
Xtrana;
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o did not independently verify the future commercial viability of
certain products and technologies currently under development by
Biopool and Xtrana and therefore relied upon the best currently
available estimates of management of Biopool and Xtrana regarding
the commercialization of such products and technologies and the
cash flows resulting therefrom; and
o assumed that the Merger will be treated as a tax-free
reorganization for federal income tax purposes.
In addition, Houlihan Lokey was not requested to, and did not, solicit
third-party indications of interest in acquiring all or any part of either
Biopool or Xtrana. Houlihan Lokey did not express any opinion as to the actual
value of Biopool or Xtrana shares following the Merger or the prices at which
shares may be purchased or sold subsequent to the Merger. The Houlihan Lokey
opinion was necessarily based upon financial, economic, market and other
conditions as they existed and could be evaluated on the date of the opinion.
In preparing its opinion, Houlihan Lokey performed a variety of
financial and comparative analyses. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Houlihan Lokey believes that its analyses must be
considered as a whole and that selecting portions of its analyses and portions
of the factors considered by it, without considering all analyses and factors,
could create a misleading view of the processes underlying its opinion. In
performing its analyses, Houlihan Lokey made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Biopool and Xtrana. In
addition, Houlihan Lokey made qualitative judgments as to the significance and
relevance of each analysis and factor. The analyses performed by Houlihan Lokey
do not purport to be appraisals or to necessarily reflect the prices at which
businesses or assets may be actually sold and are not necessarily indicative of
actual values or actual future results. Actual values or actual future results
may be significantly more or less favorable than suggested by these analyses.
Accordingly, such analyses are inherently subject to substantial uncertainty.
The analyses performed were prepared solely as part of Houlihan Lokey's analysis
of the fairness of the exchange ratio to Biopool from a financial point of view,
and were conducted in connection with the delivery of its opinion to the Biopool
board of directors.
In assessing the financial fairness of the exchange ratio, Houlihan
Lokey valued the common equity of Biopool using widely accepted valuation
methodologies. Houlihan Lokey also analyzed the reasonableness of the value of
the shares of Xtrana common stock to be exchanged for shares of Biopool common
stock in the Merger under a variety of scenarios based upon certain assumptions
related to the realization of revenue targets defined in the Merger Agreement.
The following is a brief summary of the material financial analyses performed by
Houlihan Lokey in connection with rendering its fairness opinion to the Biopool
board of directors. The brief summary of the financial analyses is not a
complete description of all of the analyses performed by Houlihan Lokey. The
Houlihan Lokey opinion is based upon the totality of the various analyses
performed by Houlihan Lokey and no particular portion of the analyses has any
merit standing alone.
VALUATION OF BIOPOOL INTERNATIONAL, INC.
To determine the valuation of Biopool, Houlihan Lokey employed four
widely used valuation analyses: a comparable company analysis, a discounted cash
flow analysis, a comparable transactions analysis and an implied public market
value analysis.
COMPARABLE COMPANY ANALYSIS. Using publicly available information,
Houlihan Lokey compared selected financial data of Biopool with similar data of
various companies engaged in businesses considered to be comparable to that of
Biopool, including:
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o Diagnostic Products Corporation;
o Immucor Inc.;
o Meridian Diagnostics Inc.;
o Medtox Scientific Inc.;
o Diametrics Medical Inc.;
o Hycor Biomedical Inc.;
o Hemagen Diagnostics, Inc.; and
o Biomerica Inc.
For each of the comparable companies, Houlihan Lokey calculated,
reviewed and analyzed numerous financial and operating performance ratios, as
well as numerous market capitalization ratios such as enterprise value
(aggregate equity value plus total interest bearing debt) to: (a) latest twelve
months revenues; (b) latest twelve month and projected earnings before interest,
taxes, depreciation and amortization (also known as EBITDA); and (c) earnings
before interest and taxes (also known as EBIT). The purpose of the comparable
company analysis was to establish a range of potential equity values for
Biopool. This was accomplished by applying appropriate risk-adjusted multiples
to various earnings and cash flow metrics of comparative companies. Earnings and
cash flow multiples were calculated for these comparative companies based upon
daily trading prices and a comparative risk analysis between Biopool and the
comparative companies formed the basis for the selection of the risk adjusted
multiple for Biopool. No company compared in the comparable companies analysis,
however, is identical to Biopool. The comparable companies analysis involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading and other values of the comparable companies. The analysis is not
entirely mathematical. The risk analysis incorporated both quantitative and
qualitative risk factors which relate to, among other things, the nature of the
industry in which Biopool and the other comparative companies are engaged.
Excluding certain non-meaningful results, Houlihan Lokey observed
enterprise value to EBITDA multiples for the comparative companies ranging from
approximately 7.5x to 7.7x, based on data for the latest twelve month, and
enterprise value to EBITDA multiples ranging from 4.2x to 6.4x, based on
available projected next fiscal year data. After consideration of several
qualitative factors, a comparative risk analysis and consideration of the
current trading multiples of the comparative companies, Houlihan Lokey believed
an EBITDA multiple ranging between 4.5x to 5.0x the latest twelve month adjusted
EBITDA was appropriate for the Company.
DISCOUNTED CASH FLOW ANALYSIS. Houlihan Lokey also employed a discounted
cash flow analysis of the after-tax free cash flows projected by Biopool's
management and the estimated terminal value for Biopool at the end of the
forecast period. The purpose of the discounted cash flow analysis was to
establish a range for the potential equity value of Biopool by determining a
range for the net present value of Biopool's projected future cash flows.
Houlihan Lokey utilized projections furnished by management which were analyzed
and then adjusted to reflect, among other matters, Biopool's historical growth
rates and profit margins as well as the risk of achieving certain growth
initiatives.
Houlihan Lokey first determined the discounted value of adjusted
projected, after-tax cash flows of Biopool through December 31, 2004 using
discount rates ranging from 13% to 17%. Houlihan Lokey then added the present
value of the estimated terminal value of Biopool at December 31, 2004 calculated
using a range of exit EBITDA multiples between 4.5x and 5.5x, which were
discounted back at the same range of discount rates. The range of discount rates
used to calculate the present value of the cash flows and the terminal value
were primarily developed through an analysis of the rates of return on
alternative investment opportunities in comparative companies.
COMPARABLE TRANSACTION ANALYSIS. Houlihan Lokey also analyzed certain
financial performance measures for numerous merger and acquisition transactions
involving companies in the biomedical industry. No transaction used in the
analysis was directly comparable to the Merger. The comparable
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acquisition analysis involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that
could affect the acquisition, public trading and other values of the comparable
companies. The analysis is not entirely mathematical.
In its analysis, Houlihan Lokey observed multiples of revenue ranging
from 0.36x to 86.25x with a median of 1.73. In light of the broad range of
multiples and the inherent differences between the transactions being compared,
however, Houlihan Lokey believed that it was inappropriate to, and therefore did
not, solely rely on the quantitative results of the comparable transaction
analysis.
IMPLIED PUBLIC MARKET VALUATION ANALYSIS. In rendering its opinion,
Houlihan Lokey considered the implied valuation based upon the current trading
price of Biopool common stock. In connection with this analysis, Houlihan Lokey
considered, among other things, several items relating to the Biopool's common
stock including:
o historical trading prices for the Biopool common stock, which
closed on April 26, 2000 at $0.81 per share and has ranged from a
low of $0.66 per share to a high of $1.78 per share since January
1, 2000;
o historical daily trading volume, which has averaged approximately
53,000 shares since January 1, 2000; and
o certain information regarding ownership of the common stock.
In light of the limited trading volume, lack of institutional ownership,
and lack of analyst coverage of Biopool common stock, Houlihan Lokey believed
that it was inappropriate to, and therefore did not, solely rely on the
quantitative results of the implied public market valuation of Biopool based on
its current and historical stock prices.
VALUATION OF XTRANA INC.
To determine the reasonableness of the value of the Xtrana common stock
to be exchanged for shares of Biopool common stock in connection with the
Merger, Houlihan Lokey primarily used a discounted cash flow analysis and an
implied value analysis to analyze Xtrana under a variety of scenarios based upon
the realization of certain revenue targets defined in the Merger Agreement.
DISCOUNTED CASH FLOW ANALYSIS. Houlihan Lokey employed a discounted cash
flow analysis of the after-tax free cash flows projected by Xtrana's management
and the terminal value for Xtrana at the end of the forecast period. The purpose
of the discounted cash flow analysis was to establish a range for the potential
equity value of Xtrana by determining a range for the net present value of
Xtrana's projected future cash flows.
Houlihan Lokey first determined the discounted value of after-tax cash
flows of Xtrana through December 31, 2004 using discount rates ranging from 55%
to 65%. Houlihan Lokey then added the present value of the estimated terminal
value of Xtrana at December 31, 2004 calculated using a range of exit EBITDA
multiples between 5.0x and 7.0x, which were discounted back at the same discount
rate. The range of discount rates used to calculate the present value of the
cash flows and the terminal value were primarily developed through an analysis
of the rates of return on alternative investment opportunities in comparative
companies.
IMPLIED VALUE ANALYSIS. In rendering its opinion, Houlihan Lokey
considered certain other factors and conducted certain other comparative
analyses, including, among other matters, a review of the Series D convertible
preferred stock private placement at $4.00 per share in February 2000 which
implied a value for Xtrana of approximately $10.8 million.
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MISCELLANEOUS.
QUALIFICATION. Houlihan Lokey is a nationally recognized investment
banking firm that provides financial advisory services in connection with
mergers and acquisitions, leveraged buyouts, business valuations for a variety
of regulatory and planning purposes, recapitalizations, financial
restructurings, and private placements of debt and equity securities.
SERVICES, FEES AND EXPENSES. Houlihan Lokey was retained by the Biopool
board of directors, pursuant to a letter agreement dated April 11, 2000 solely
to analyze the fairness of the exchange ratio to Biopool from a financial point
of view. For its services, Houlihan Lokey is entitled to receive an opinion fee
of $100,000 and will also be reimbursed by Biopool for reasonable out-of-pocket
expenses incurred by Houlihan Lokey in connection with the rendering of the
opinion. Biopool also has agreed to indemnify Houlihan Lokey and its affiliates
against certain liabilities under federal securities laws that arise out of its
engagement. No portion of Houlihan Lokey's fee is contingent upon the successful
completion of the Merger.
INTEREST OF CERTAIN PERSONS IN THE MERGER
Pursuant to the terms of the Merger Agreement, after the consummation of
the Merger, Michael D. Bick, Ph.D. will be the Chairman of the board of
directors and N. Price Paschall, Douglas L. Ayer and James H. Chamberlain will
each be a director of the surviving corporation.
As a finder's fee in connection with the Merger, N. Price Paschall, a
member of the board of directors of Biopool, was granted warrants to purchase
225,000 shares of Biopool common stock at an exercise price equal to the average
closing price of Biopool common stock over the ten day period ending two days
prior to the signing of the Merger Agreement. These warrants vest and become
exercisable upon the consummation of the Merger.
DESCRIPTION OF BIOPOOL CAPITAL STOCK
COMMON STOCK. Biopool is authorized to issue 50,000,000 shares of common
stock, par value $0.01 per share. As of June 15, 2000, Biopool had issued and
outstanding 8,319,951 shares of common stock. The holders of common stock are
entitled to one vote for each share held of record on all matters on which the
holders of common stock are entitled to vote. The holders of common stock are
entitled to receive dividends in proportion to their ownership when, as and if
declared by the board of Directors out of legally available funds. In the event
of our liquidation, dissolution or winding up, the holders of common stock are
entitled, subject to the rights of holders of preferred stock issued by Biopool,
if any, to share proportionally in all assets remaining available for
distribution to them after payment of liabilities and after provision is made
for each class of stock, if any, having preference over the common stock.
The holders of common stock have no preemptive or conversion rights, and
they are not liable for further calls or assessments by Biopool. There are no
redemption or sinking fund provisions applicable to the common stock. The
outstanding shares of common stock are, and the common stock issuable in the
Merger will be, when issued, fully paid and nonassessable.
OPTIONS. As of June 15, 2000, Biopool had issued and outstanding options
covering an aggregate of 1,088,333 shares of common stock of Biopool.
WARRANTS. As of June 15, 2000, Biopool had issued and outstanding
warrants for the purchase of an aggregate of 335,000 shares of common stock.
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BIOPOOL BUSINESS AND FINANCIAL INFORMATION
Business and financial information about Biopool and information
concerning the board of directors, management and significant stockholders may
be found in Biopool's 1999 Annual Report to Stockholders on Form 10-KSB, which
is being mailed to you with this Proxy Statement and is incorporated herein by
reference. Our current report on Form 8-K, which was filed with the SEC on April
5, 2000, and our quarterly report on Form 10-QSB, which was filed with the SEC
on May 15, 2000, contain additional information regarding Biopool and are also
incorporated herein by reference. Any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, until the date of the Annual Meeting of Stockholders shall be deemed to
be incorporated herein by reference.
Biopool files annual, quarterly and special reports, proxy statements
and other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC's web site at http://www.sec.gov. You may also read
and copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for additional information on the public reference rooms.
Biopool's common stock currently trades on the OTC Bulletin Board(R). Our
periodic reports, proxy statements and other information can be inspected at the
offices of Nasdaq at 1735 K Street, NW, Washington, DC, 20006.
XTRANA BUSINESS AND FINANCIAL INFORMATION
Xtrana was incorporated in 1998 under the laws of the State of Delaware.
In 1998, a core group of scientists at Immunological Associates of Denver
("IAD"), a wholly owned subsidiary of Bonfils Blood Center, formed Molecular
Innovations, Inc., which subsequently became Xtrana, Inc. Xtrana was formed to
continue the development of and to commercialize certain patent and other
intellectual property rights relating to nucleic acid detection technology,
which had originally been developed by IAD. Xtrana has developed new proprietary
nucleic acid (DNA/RNA) testing technology and plans to commercialize this
technology. Potential markets for the testing technology include the detection
of food and environmental contamination, forensics and paternity identity
testing, infectious human disease testing (including bacterial warfare) and
research and other clinical applications. Specific pathogens for which tests are
currently being developed at Xtrana include E. COLI, Listeria and Salmonella in
food; Cryptosporidium and coliforms in water; and chlamydia. Broader
applications are contemplated for genetic predisposition to disease and the
human diagnostic markets.
COMPANY OVERVIEW
Xtrana has developed novel proprietary nucleic acid (DNA/RNA) testing
technologies, which it plans to commercialize in markets for genomic research,
high throughput screening in drug discovery, testing of genetic predisposition
to disease, human identity testing for areas such as forensics and paternity,
clinical pathogen diagnostic testing, detection of food and environmental
contaminants including biological warfare agents, and other clinical and
research applications.
Xtrana's technology permits the development of rapid, easy to use and
low cost hand-held nucleic acid testing devices that can be employed in place of
complex and time consuming laboratory-based procedures.
Nucleic acid testing involves three steps: extraction of the genetic
material, amplification of the material, and detection of the desired gene
sequence. Xtrana has introduced its initial commercial product, the Xtra Amp(TM)
Extraction System (the "Xtra Amp(TM) System"), which performs the "extraction"
step in the nucleic acid testing process, and a follow-on product line will
encompass all three steps. The Xtra Amp(TM) System is sold for use with
amplification and detection products and processes currently available in the
marketplace. Xtrana believes that the Xtra Amp(TM) System offers a competitive
advantage
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over existing extraction technologies because it requires fewer steps, reduces
testing times and permits the sample to be archived and re-tested.
Xtrana's proprietary technology also offers the opportunity to combine
the three steps of nucleic acid testing - extraction, amplification and
detection - into a single, self-contained unit known as the SCIP(TM)
(Self-Contained Integrated Particle) device. The SCIP(TM) device is expected to
allow faster, more cost-effective testing than is available under traditional
testing methods, which generally require multiple technicians, elaborate
equipment and days or weeks to complete. SCIP(TM) technology is also expected to
greatly decrease the risk of contamination of DNA and RNA samples, which is a
common problem with current testing methods. Xtrana has developed a preliminary
prototype for the SCIP technology and anticipates marketing the SCIP(TM) device
for various commercial applications in the next twelve to eighteen months.
Xtrana's goal is to become the leader in the development of rapid, easy
to use, low cost nucleic acid-based technology products with a focus on
applications for physician's offices and field use. Xtrana's technology is
applicable to nearly any nucleic acid testing situation, and thus offers an
extremely broad range of potential commercial and research.
MARKET OPPORTUNITY
The growing understanding of genetics and the genetic basis of
biological activity is driving renewed growth in the research and commercial
testing markets. Genomics research is being applied to identify specific genes
and to use the identity of the gene to identify its source, as in forensics,
paternity and pathogen testing, or to reveal possible linkages between the gene
and biologic activity and disease, as in diagnostic testing. Highly specific
detection tests and, where applicable, precisely targeted therapeutic approaches
are being designed to address not only human disorders but also veterinary,
environmental, food safety, forensics and other applications. These new tests
and approaches require specialized research reagents, supplies, tools and
instruments. Currently, demand for these reagents, supplies, tools and
instruments arises from both academic and industrial researchers and from
commercial testing applications, such as forensics, paternity and diagnostic
testing. The nucleic acid-based research market is currently approximately $750
million annually, and is expected to grow to $1.8 billion annually by the year
2004. The commercial market currently amounts to approximately $560 million in
sales annually and is expected to grow to $5.6 billion annually by 2004.
In order to capitalize on increasing demand generated by both the
research and commercial markets, Xtrana and other industry participants are
developing a wide range of products and services including genomic information,
diagnostic tests and assays, testing services, drugs and gene therapies and
environmental services. Xtrana is already participating in both the commercial
and research segments of the genetics market. Further, one segment of the
commercial market - human diagnostic testing - offers particular opportunities
due to the size of the market and the limited development of nucleic acid-based
testing products to date.
FINANCIAL INFORMATION
Certain financial information of Xtrana for the years ended December 31,
1998 and 1999, and for the quarters ended March 31, 1998 and 1999, is attached
to this Proxy Statement as Appendix C.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FOR FISCAL YEAR
ENDED DECEMBER 31, 1999
SALES AND REVENUE
Xtrana's sales and revenues were $924,888 for the fiscal year ended
December 31,1999,
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compared with $317,202 for the year ended December 1998. This represents an
increase of $607,684 or 192%.
Xtrana received significant benefit from its continued success in
government grants and contract awards. During 1999, Xtrana received a USDA Phase
II grant for the continued development of a rapid test for the food pathogen E.
coli 0157:H7, a National Institute of Health Phase I grant for the development
of a gene expression detection system for cancer research, a USDA Phase I grant
for the development of a rapid test system for Coliforms in water, a USDA grant
for the development of a rapid test for the detection of the food pathogen
Listeria and a Center of Disease Control grant for the development of a rapid
test for the detection of the sexually transmitted disease Chlamydia. Grant
revenue for 1999 totaled $918,897, representing a significant portion of
Xtrana's revenue base.
International distributors were identified and contracted to sell
Xtrana's Xtra Amp(TM) Nucleic Acid Extraction System in the United Kingdom,
Switzerland, and China. Ansys Diagnostics Inc., Xtrana's manufacturing partner
for Xtra Amp(TM), initiated selling efforts in North America. Additional
distributors are currently being identified and qualified for greater
international representation.
Market penetration for Xtrana's initial nucleic acid extraction products
is considered one of Xtrana's top priorities. The product is currently being
critically evaluated in the marketplace for multiple applications in order to
develop a substantial set of product performance claims.
COSTS AND EXPENSES
Total direct cost of sales rose from $259,432 in 1998 to $437,492 in
1999. As a percent of sales, costs dropped from 82% to 47% reflecting the
favorable cost structure in Department of Defense contracts as compared to
smaller and less profitable government grants. As Xtrana moves its product mix
towards the sale of diagnostic tests and extraction systems, it is anticipated
that a favorable benefit will continue to be seen in the gross margin.
Total operating expenses rose from $446,654 in 1998 to $1,234,065 in
1999 representing a 176% increase. This growth in expenses reflects Xtrana's
efforts beyond that of government grants and contracts with significant
resources being directed toward the support of product development and
organizational expansion.
Net losses grew from $390,605 in 1998 to $864,087 in 1999. This reflects
the cost of continued expansion of the organization and its research efforts in
advance of product introduction. It is expected that Xtrana will continue to
operate in a loss situation throughout the 2000 fiscal year. Revenue is expected
to offer favorable benefits to the operation as new strategic partners are
identified and products released.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FOR THE QUARTER
ENDED MARCH 31, 2000
SALES AND REVENUE
Sales and revenues were $325,033 for the quarter ended March 31,2000
compared with $123,192 for the quarter ended March 1999. This represents an
increase of $201,841 or 164%.
Xtrana continues to benefit from its continued success in government
grants and contract awards. Year to date, the company received the benefit of
funding through the United States Department of Defense for the continued
development of two bacterial detection systems for battlefield use, the USDA
Phase II grant for the continued development of a rapid test for the food
pathogen E. coli 0157:H7, a National Institute of Health Phase I grant for the
development of a gene expression detection system for
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cancer research, a USDA Phase I grant for the development of a rapid test system
for Coliforms in water, a USDA grant for the development of a rapid test for the
detection of the food pathogen Listeria and a Center of Disease Control grant
for the development of a rapid test for the detection of the sexually
transmitted disease Chlamydia. Total grant revenue totaled $322,958,
representing a significant portion of Xtrana's 2000 first quarter revenue base.
Market penetration for Xtrana's initial nucleic acid extraction products
is considered one of Xtrana's top priorities. The product is currently being
critically evaluated in the marketplace for multiple applications in order to
develop a substantial set of product performance claims. Initial sales for the
quarter totaled $2,075.
COSTS AND EXPENSES
Total direct cost of sales rose from $74,284 during the first quarter of
1999 to $154,964 in the first quarter of 2000. As a percent of sales, costs
dropped from 60% to 48% reflecting the continued favorable cost structure in
Department of Defense contracts as compared to smaller and less profitable
government grants. As Xtrana moves its product mix towards the sale of
diagnostic tests and extraction systems, it is anticipated that a favorable
benefit will continue to be seen in the gross margin.
Total operating expenses declined from $227,994 in the first quarter of
1999 to $177,188 in the first quarter of 2000, representing a 22% decrease. This
reduction in operating expenses reflects Xtrana's ability to pass more of the
research and development costs back to the government contracts.
Net operating loss fell from $179,086 in the first quarter of 1999 to
$7,118 in the first quarter of 2000. This reflects a significant improvement in
cost recovery from grants during the quarter. It is expected that Xtrana will
continue to operate in a loss situation throughout the fiscal year. Revenue is
expected to offer favorable benefits to the operation as new strategic partners
are identified and products released.
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MANAGEMENT OF THE SURVIVING CORPORATION
DIRECTORS AND EXECUTIVE OFFICERS OF THE SURVIVING CORPORATION
The following table sets forth information, as of April 20, 2000,
regarding those individuals who will serve as directors and executive officers
of the surviving corporation after the Merger.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
John H. Wheeler 53 Chief Executive Officer and Director
Michael D. Bick, Ph.D. 55 Chairman of the Board of Directors
John C. Gerdes, Ph.D. 51 Director and Vice President, Research &
Development
Douglas L. Ayer 62 Director
James H. Chamberlain 52 Director
N. Price Paschall 51 Director
Stephen Schultheis 54 Director
</TABLE>
For biographical information of current Biopool directors and executive
officers, see "PROPOSAL NO. 1: ELECTION OF DIRECTORS; Information with Respect
to each Director, Nominee and Certain Officers."
JOHN H. WHEELER. Mr. Wheeler brings twenty-seven years of business
experience in the biomedical and diagnostics fields to the management team. He
joined Xtrana from Xenometrix, Inc., where he served as Vice President of Sales,
Marketing and Business Development from 1993 to 1997. Previously, Mr. Wheeler
was Director of Sales and Marketing for Research Biochemicals, Ltd. From 1987 to
1992, Mr. Wheeler was employed by Charles River Laboratories where he held
positions including Director of Operations and Vice President of Sales and
Marketing. Mr. Wheeler received his MBA from Pace University, New York in 1986
and his B.A. in Biology from the University of Bridgeport in 1970
JOHN C. GERDES, PH.D. Dr. Gerdes is the Vice President of Research and
Development for Xtrana. In 1996, he conceived of a unique point of care approach
for DNA diagnostics, the development of which resulted in the formation of
Xtrana. From 1988 to 1998 he was the Director of Paternity Analysis and Clinical
Director at IAD where he supervised clinical testing and introduced PCR and
other nucleic acid based clinical tests. He has twenty-one publications
primarily focused on molecular methods of virus detection. He has recently filed
four patents that provide the technical foundation of the Xtrana business plan.
Dr. Gerdes received a B.S. in Microbiology from the University of Wyoming in
1970, and a Ph.D. in Microbial Genetics from the University of California at Los
Angeles (UCLA) in 1974. After completing a four-year post-doctoral fellowship in
Virology again at UCLA, he spent four years as an assistant professor at the
University of Colorado Health Sciences Center in Denver before accepting a
position at Immunological Associates of Denver (IAD), a specialty reference
testing laboratory.
STEPHEN SCHULTHEIS. Mr. Schultheis is currently a director of Xtrana. He
is the President and Chief Executive Officer of Ansys Diagnostics. Prior to
joining Ansys Diagnostics, Mr. Schultheis was Vice President of Research and
Development for Bennet Industries. Prior to that, Mr. Schultheis was Vice
President - Engineering and Operations with Orangematic, Inc. Mr. Schultheis
received a B.S. in Mechanical Engineering in 1968 from California State
University, San Jose and a Master of Science Degree in Mechanical Engineering in
1972 from the University of Southern California.
BOARD OF DIRECTORS
The board of directors will consist of seven members immediately
following the consummation of the Merger. The board of directors will maintain
an audit committee and a compensation committee.
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The audit committee will oversee the work of the surviving corporation's
auditors with respect to financial and accounting matters. The function of the
compensation committee will be to review and make recommendations with respect
to compensation of executive officers and key employees.
DIRECTOR COMPENSATION
Non-employee directors receive $6,000 per calendar year, plus $500 for
each board of directors meeting attended. Biopool will pay all out-of-pocket
fees of attendance. In addition, non-employee directors will receive 15,000
non-qualified stock options to purchase Biopool common stock under the Biopool
1993 Incentive Stock Option Plan per year.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Concurrently with the execution of the Merger Agreement, we entered in
an employment agreement with John H. Wheeler. Under the employment Mr. Wheeler
will serve as Chief Executive Officer of the surviving entity for a term of
three years. The agreement provides for base compensation to Mr. Wheeler of
$197,500 during each year of the term, subject to a cost of living increase each
year.
In July 1999, Biopool entered into an executive employment agreement
with Michael D. Bick, Ph.D. The agreement becomes effective at the earlier to
occur of (i) the date upon which a new Chief Executive Officer satisfactory to
the Board of Directors of Biopool commences employment with Biopool, or (ii) the
date of a change of control of Biopool. The executive employment agreement will
become effective at the effective time of the Merger. Under the executive
employment agreement, Dr. Bick will no longer serve as our President and Chief
Executive Officer, but will continue to be Biopool's Chairman for a term of
three years. The agreement provides for compensation to Dr. Bick of $150,000
during each year of the term, inclusive of a car allowance and dues to a club.
Under the agreement, Dr. Bick is not required to provide more than 50 hours of
services per month, and may terminate the agreement and receive all
consideration due to him thereunder if there is a change in control of Biopool
that results in a material modification to Dr. Bick's duties under the
agreement.
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MARKET PRICE AND DIVIDEND INFORMATION
BIOPOOL
Biopool's common stock currently trades on the OTC Bulletin Board(R)
(OTCBB) under the symbol "BIPL." The following sets forth the high and low trade
prices for our common stock for the periods indicated as reported by Nasdaq and
the OTCBB.
<TABLE>
<CAPTION>
Biopool Common Stock
----------------------------
High Low
----------- -----------
<S> <C> <C>
Quarter Ended:
March 31, 2000....................... $ 1.9375 $ 0.6562
FISCAL YEAR 1999
Quarter Ended:
March 31, 1999....................... $ 1.375 $ 0.594
June 30, 1999........................ 1.000 0.563
September 30, 1999................... 0.906 0.750
December 31, 1999.................... 1.000 0.719
FISCAL YEAR 1998
Quarter Ended:
March 31, 1998....................... $ 2.375 $ 1.625
June 30, 1998........................ 2.938 1.125
September 20, 1998................... 1.375 0.688
December 31, 1998.................... 1.125 0.500
</TABLE>
On June 15, 2000 the closing trade price of our common stock, as
reported by the OTCBB, was $0.875.
To date, Biopool has not declared or paid any cash dividends on its
common stock. Biopool does not intend to declare or pay cash dividends on its
common stock in the foreseeable future, but rather to retain any earnings to
finance the growth of its business. Any future determination to pay dividends
will be at the discretion of the Board of Directors and will depend on results
of operations, financial condition, contractual and legal restrictions and other
factors the Board of Directors deems relevant.
On June 3, 1998, the Biopool Board of Directors declared a dividend of
one common stock purchase right for each of our issued and outstanding shares of
common stock. The purchase rights are subject to the terms and conditions of,
the Right Agreement dated June 12, 1998, filed with the Securities and Exchange
Commission on June 26, 1998, on Form 8-A. The purchase rights are not
represented by separate certificates, but, instead, initially will be evidenced
by the certificates representing our outstanding common stock.
XTRANA
The securities of Xtrana have not been admitted to trading on a
securities exchange and no market exists for such securities. Xtrana has not
paid any cash dividends since inception and has no present plans to do so. Based
on information supplied by Xtrana, as of June 15, 2000, Xtrana had approximately
35 stockholders of record.
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APPRAISAL RIGHTS
In connection with the Merger, Biopool's stockholders may be entitled to
appraisal rights under Section 262 of the DGCL attached hereto as Appendix B.
The description of appraisal rights contained in this Proxy Statement is
qualified in its entirety by reference to Section 262 of the DGCL. IN ORDER FOR
A STOCKHOLDER TO EXERCISE APPRAISAL RIGHTS, A NOTICE OF SUCH STOCKHOLDER'S
INTENTION TO EXERCISE HIS OR HER APPRAISAL RIGHTS AS PROVIDED IN THE DGCL MUST
BE RECEIVED BY BIOPOOL ON OR BEFORE THE DATE OF THE BIOPOOL ANNUAL MEETING. IN
ADDITION, SUCH STOCKHOLDER MUST NOT VOTE IN FAVOR OF THE APPROVAL OF THE MERGER
AGREEMENT AND MUST COMPLY WITH THE OTHER PROCEDURES REQUIRED BY THE DGCL, AS
MORE FULLY DESCRIBED BELOW. A VOTE IN FAVOR OF THE MERGER PROPOSAL OR FAILURE TO
SEND SUCH NOTICE OR FOLLOW SUCH OTHER PROCEDURES WILL RESULT IN A WAIVER OF SUCH
STOCKHOLDER'S APPRAISAL RIGHTS.
The consummation of the plan of merger of Xtrana with and into Biopool
is a corporate action that requires approval by Biopool stockholders. As a
result, Biopool stockholders who do not vote in favor of the proposed merger and
who comply with the provisions of Section 262 of the DGCL have the right to an
appraisal of the fair value of the shares of Biopool common stock held by them,
excluding any element of value arising from the proposed Merger, and the right
to require the purchase of their shares of common stock at such value.
Furthermore, because Biopool's common stock is not listed on a national
securities exchange nor the Nasdaq National Market, nor held by at least 2,000
stockholders of record, the appraisal rights are not otherwise limited.
Stockholders wishing to exercise appraisal rights must follow the
procedure set forth in Section 262 of the DGCL. Each stockholder electing to
demand the appraisal of such stockholder's shares must deliver to Biopool,
before the Annual Meeting, a written demand for appraisal of such stockholder's
shares and must not vote in favor of the proposed Merger.
Any demands, notices, certificates or other documents delivered by
Biopool stockholders to Biopool prior to or after the completion of the proposed
Merger may be sent to the attention of the Robert Foote, Secretary, at Biopool's
principal executive offices.
In the event the proposed Merger is consummated, within 10 days after
the effective date of the Merger, Biopool must notify each stockholder who has
complied with the requirements of Section 262 and who has not voted in favor of
the Merger of the date that the Merger became effective.
Within 120 days after the effective date of the Merger, any stockholder
entitled to appraisal rights may file a petition in the Delaware Court of
Chancery demanding a determination of the value of the stock of all Biopool
stockholders. At the hearing on such a petition, the Court will determine the
stockholders who have complied with Section 262 of the DGCL and who are entitled
to appraisal rights. After determining the stockholders entitled to an
appraisal, the Court will appraise the shares, determining their fair value, not
including any element of value arising from the consummation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount the
Court determines to be the fair value. The Court may direct the interest to be
simple or compound.
FAILURE TO TAKE ANY NECESSARY STEP WILL RESULT IN A TERMINATION OR
WAIVER OF THE RIGHTS OF THE HOLDER UNDER SECTION 262 OF THE DGCL.
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PROPOSAL NO. 4
ADOPTION OF NEW STOCK INCENTIVE PLAN
The board of directors has approved the Biopool International, Inc. 2000
Stock Incentive Plan, subject to stockholder approval. The plan authorizes the
granting of awards of stock or stock purchase rights and options to purchase an
aggregate of 3,000,000 shares of our common stock. Under the plan, stock options
and purchase rights may be granted to employees, consultants, officers and
directors who will contribute to our long range success and to provide
incentives which are linked directly to increases in share value which will
inure to the benefit of all of our stockholders.
The vote required for the adoption the 2000 Stock Incentive Plan is the
affirmative vote of a majority of the holders of common stock present, in person
or by proxy, and entitled to vote at the Annual Meeting. If the plan is not
approved by the holders of our common stock, it will not become effective. The
principal provisions of the plan are summarized below. However, this summary is
not complete and is qualified in its entirety by the terms of the plan. A copy
of our 2000 Stock Plan is attached as Appendix E and is incorporated into this
Proxy Statement by reference.
ADMINISTRATION OF THE 2000 STOCK PLAN
The plan provides for administration by the board of directors or a
committee of the board of directors. Initially, the Compensation Committee of
the board of directors will administer the plan, including, without limitation,
selecting the persons who will be granted stock awards and/or stock options, the
number of shares and options to be awarded to each person, the purchase price or
exercise price of any awards and the vesting requirements of awards of stock or
options. The board of directors may amend, suspend or terminate the plan at any
time for any reason, although some amendments may by applicable law require
stockholder approval. Options and awards for a maximum of 1,500,000 shares of
common stock may be granted in any one calendar year.
OPTIONS
Options granted under the plan may be either incentive stock options as
defined in section 422(b) of the Internal Revenue Code of 1986, as amended from
time to time, or non-qualified stock options. Only employees are eligible to
receive incentive stock options. Each grant of options under the plan must be
evidenced by a stock option agreement. The term of a stock option granted under
the plan may not exceed ten years and is determined by the Compensation
Committee. The exercise price of options granted under the plan is determined by
the Compensation Committee, but cannot be less 100% of the fair market value in
the case of incentive stock options and 85% of the fair market value in the case
of non-qualified stock options. In the case of 10% stockholders, the exercise
price of any options must be at least 110% of the fair market value of the
common stock and the term of any incentive stock options may not exceed five
years. Options granted to officers, directors and consultants vest according to
a schedule as determined by the Compensation Committee. Options granted to other
employees must vest at least as rapidly as 20% per year over the five year
period beginning on the date of grant.
If an optionee's employment is terminated for any reason other than
death, disability or termination for cause, options granted to him or her under
the plan will only be exercisable until the earlier of three months from the
date of termination or their expiration date. If termination of employment is
due to the death or disability of an optionee, his or her options will be
exercisable for one year after the date of termination. Where employment is
terminated for cause, as defined in the plan, all options of the terminated
optionee will expire as of the date of termination.
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<PAGE>
AWARDS OR SALES OF STOCK
Awards or sales of stock under the plan must be evidenced by a stock
purchase agreement between Biopool and the purchaser. Any rights to acquire
shares granted under the plan, other than options, will expire if not exercised
within thirty days after the grant date. Awards or sales of shares of common
stock may be made under the plan at a price per share to be determined by the
Compensation Committee, provided that the price per share is at least 85% of the
fair market value. Under this plan, the purchase price per share of any sales of
common stock to a 10% stockholder must be at least 100% of the fair market
value.
TRANSFER RESTRICTIONS
A recipient under the plan may not assign, sell or transfer their
options or awards other than by will or by operation of the laws of descent and
distribution. However, the Compensation Committee may permit transfers of
non-qualified stock options to the optionee's immediate family or a trust that
provides for transfer of the options to beneficiaries upon death of the trustor.
The plan gives Biopool the right to repurchase options and awards for a
period of ninety days subsequent to the recipient's termination of service with
us. Under the plan, each stock option agreement and stock purchase agreement may
also give Biopool the right of first refusal in connection with any proposed
sale, hypothecation or other disposition of common stock acquired under the
stock option agreement or stock purchase agreement.
REORGANIZATIONS AND RECAPITALIZATIONS
The number of shares of common stock covered by each outstanding option
or purchase right, and the exercise or purchase price per share, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend on the common stock or any other increase or
decrease in the number of such shares effected without receipt of consideration
by us.
In the event of a dissolution, liquidation, sale of all or substantially
all Biopool's assets, merger or consolidation or similar occurrence, Biopool may
provide for (i) the continuation of outstanding options and purchase rights if
Biopool is the surviving corporation in a merger, (ii) the assumption of the
outstanding options and purchase rights by the surviving corporation, (iii) the
substitution by the surviving corporation of substantially similar options or
purchase rights or (iv) the cancellation of outstanding options and purchase
rights. If Biopool elects to cancel the outstanding options and purchase rights,
the optionee or award recipient will have the opportunity to exercise his or her
options or purchase rights.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain federal income tax
consequences of option grants and exercises under the plan based upon the
federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
The grant of incentive stock options to an employee does not result in
any income tax consequences. The exercise of an incentive stock option does not
result in any income tax consequences to the employee if the incentive stock
option is exercised by the employee during his or her employment with us, or
within a specified period after termination of employment due to death or
retirement for age or disability. However, the excess of the fair market value
of the shares of stock as of the date of exercise over the option price is a tax
preference item for purposes of determining an employee's alternative minimum
tax. An employee who sells shares acquired pursuant to the exercise of an
incentive stock
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option after the expiration of (i) two years from the date of grant of the
incentive stock option, and (ii) one year after the transfer of the shares to
him or her will generally recognize long term capital gain or loss on the sale.
An employee who disposes of his or her incentive stock option shares prior to
the expiration of the waiting period generally will recognize ordinary income in
the year of sale in an amount equal to the lesser of (i) the fair market value
of the shares as of the date of exercise or (ii) the amount realized on the
sale, over the option price. Any additional amount realized on an early
disposition should be treated as capital gain to the employee, short or long
term, depending on the employee's holding period for the shares. If the shares
are sold for less than the option price, the employee will not recognize any
ordinary income but will recognize a capital loss, short or long term, depending
on the holding period.
Biopool will not be entitled to a deduction as a result of the grant of
an incentive stock option, the exercise of an incentive stock option, or the
sale of incentive stock option shares after the waiting period. If an employee
disposes of his or her incentive stock option shares in an early disposition,
Biopool will be entitled to deduct the amount or ordinary income recognized by
the employee.
The grant of non-qualified stock options under the plan will not result
in the recognition of any taxable income by the participants. A participant may
recognize ordinary income on the date of exercise of the non-qualified stock
option equal to the difference between the fair market value on that date of the
shares acquired and the exercise price. The tax basis of these shares for
purpose of a subsequent sale includes the option price paid and the ordinary
income reported on exercise of the option. The income reportable on exercise of
the option by an employee is subject to federal and state income and employment
tax withholding.
Generally, Biopool will be entitled to a deduction in the amount
reportable as income by the participant on the exercise of a non-qualified stock
option.
As of June 22, 2000, no option or stock awards have been granted under
the 2000 Stock Incentive Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE ADOPTION OF THE 2000 STOCK INCENTIVE PLAN.
Page 34
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of June 1, 2000, certain information
regarding the ownership of Biopool's common stock by (i) each person known by
Biopool to be the beneficial owner of more than 5% of the outstanding shares of
common stock, (ii) each of Biopool's directors, (iii) each named executive and
(iv) all of Biopool's executive officers and directors as a group. Unless
otherwise indicated, the address of each person shown is c/o Biopool, 6025
Nicolle Street, Ventura, California 93003. References to options to purchase
common stock are either currently exercisable or will be exercisable within 60
days of June 1, 2000.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENT OF CLASS
------------------ ----------------
<S> <C> <C>
Michael D. Bick, Ph.D. 1,087,482(1) 13.1
Biotech International, Ltd. 744,200(2) 8.9
N. Price Paschall 320,000(3) 3.8
Douglas L. Ayer 207,884(4) 2.5
Robert K. Foote 171,662(5) 2.1
Clayton H. Duke 90,000(6) 1.1
James H. Chamberlain 34,000(7) *
All executive officers and
directors as a group (6 persons) 1,911,028(8) 23.0
------------------------
* Less than 1%.
<FN>
(1) Includes 64,482 shares of common stock subject to options.
(2) As disclosed in the Schedule 13D/A filed by Biotech International, Ltd.
with the Securities Exchange Commission on February 9, 2000.
(3) Includes 275,000 shares of common stock subject to a currently exercisable
warrant and 45,000 shares of common stock subject to options.
(4) Includes 207,884 shares of common stock subject to options held by ICP,
Inc., of which Mr. Ayer is a stockholder.
(5) Includes 146,662 shares of common stock subject to options.
(6) Represents 10,000 shares of common stock subject to warrants and 80,000
shares of common stock subject to options.
(7) Includes 4,000 shares of common stock held in the Chamberlain Family Trust,
for which Mr. Chamberlain serves as trustee, and 30,000 shares of common
stock subject to options.
(8) Includes 574,028 shares of common stock subject to options and 285,000
shares of common stock subject to currently exercisable warrants.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal year 1999, there were no transactions or series of related
transactions to which Biopool was a party, in which the amount involved exceeded
or will exceed $60,000 and in which any director, executive officer, holder or
more than 5% of our common stock or any member of the immediate family of any of
the foregoing persons had or will have a direct or indirect material interest.
Page 35
<PAGE>
PROPOSALS OF STOCKHOLDERS
A proper proposal submitted by a stockholder for presentation at
Biopool's 2001 Annual Meeting and received at Biopool's executive offices no
later than December 31, 2000, will be included in Biopool's proxy statement and
form of proxy relating to the 2001 Annual Meeting.
OTHER MATTERS
Biopool management knows of no other matters to be submitted to the
Biopool Annual Meeting. If any other matters properly come before the meeting,
it is the intention that the persons named in the enclosed form of proxy vote
the proxies in accordance with their judgment.
INCORPORATION ON CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them. This Proxy Statement incorporates important business and financial
information about us, which may not included in or delivered with this
prospectus. The information incorporated by reference is an important part of
this Proxy Statement, and information that we file later with the SEC will
automatically update and supersede this information.
We incorporate by reference:
(1) Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999;
(2) Our Current Report on Form 8-K, filed on April 5, 2000 (reporting
Item 5);
(3) Our Quarterly Report on Form 10-QSB, filed on May 15, 2000; and
(4) Future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act until the date of the
Annual Meeting.
You may obtain a copy of these filings without charge by writing or
calling us at:
Biopool International, Inc.
6025 Nicolle Street, Ventura, California 93003
Attention: Robert Foote, Corporate Secretary
(805) 654-0643
You should rely only on the information incorporated by reference or
provided in this Proxy Statement. We have not authorized anyone else to provide
you with different information. You should not assume that the information in
this Proxy Statement or the documents we have incorporated by reference is
accurate as of any date other than the date on the front of those documents.
ON BEHALF OF THE BOARD OF DIRECTORS
/s/ MICHAEL D. BICK, PH.D.
Michael D. Bick, Ph.D.
Chief Executive Officer
June 23, 2000
Page 36
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "AGREEMENT") is made and
entered into as of May 3, 2000, by and between Biopool International, Inc., a
Delaware corporation ("BIOPOOL") and Xtrana, Inc. ("XTRANA"), a Delaware
corporation. The capitalized terms in this Agreement not elsewhere defined have
the meanings given them in Article X.
RECITALS
A. The Boards of Directors of Biopool and Xtrana have determined that
the merger of Xtrana with and into Biopool on the terms set forth herein (the
"MERGER"), with Biopool to be the surviving corporation, is advisable and in the
best interests of their respective corporations and stockholders and have
approved this Agreement.
B. The parties hereto desire to adopt a plan of reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "CODE").
C. The parties desire to sign this Agreement for the purpose of setting
forth certain representations, warranties and agreements in connection with the
Merger.
AGREEMENT
ARTICLE I
THE MERGER AND REORGANIZATION
1.1 CLOSING. The closing under this Agreement shall take place at the
offices of Troop Steuber Pasich Reddick & Tobey, LLP, 2029 Century Park East,
24th Floor, Los Angeles, CA 90067, within one (1) business day after the
satisfaction (or waiver by the party entitled to waive) of all conditions stated
in Sections 5 and 6, or at such other place and date as the parties may agree
upon in writing (the "CLOSING").
1.2 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time and in accordance with the DGCL, Xtrana
shall be merged with and into Biopool in accordance with this Agreement (the
"MERGER") and the separate existence of Xtrana shall cease. Biopool shall be the
surviving corporation in the Merger (hereinafter sometimes referred to as the
"SURVIVING CORPORATION").
1.3 FILINGS; EFFECTIVE TIME OF THE MERGER. On the Closing Date, Biopool
and Xtrana shall cause the Merger to be consummated by executing, delivering and
filing a certificate of merger with the Secretary of State of the State of
Delaware (the "DELAWARE SECRETARY OF STATE") in accordance with Section 251 of
the DGCL. The parties shall on the Closing Date file such other documents with
the Delaware Secretary of State as may be required by the provisions of the DGCL
and as are necessary to cause the Merger to become effective. The Merger shall
become effective when the certificate of merger, the agreement of merger and
such other necessary documents are so filed with the Delaware Secretary of
State, as applicable, or at such other time thereafter as provided in the
certificate of merger and the agreement of merger. The time at which the Merger
becomes effective is herein referred to as the "EFFECTIVE TIME."
Page A-1
<PAGE>
1.5 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all of the properties, rights, privileges,
powers and franchises of Xtrana shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Xtrana shall become the debts, liabilities and
duties of the Surviving Corporation. At the Effective Time of the Merger:
(a) the Certificate of Incorporation of the Surviving Corporation shall
be Biopool's Amended Certificate of Incorporation, a form of which is attached
hereto as EXHIBIT "A".
(b) the Bylaws of the Surviving Corporation shall be Biopool's Bylaws, a
form of which is attached hereto as EXHIBIT "B";
(c) the Board of Directors of the Surviving Corporation shall consist of
the following 7 members at the Effective Time, in each case until their
successors shall have been elected and qualified or until otherwise provided by
law:
Michael Bick, Ph.D.
Douglas Ayer
Price Paschall
John C. Gerdes
Stephen Schultheis
John H. Wheeler
James Chamberlain
(d) the Officers of the Surviving Corporation shall be as follows:
John H. Wheeler Chief Executive Officer
John C. Gerdes Vice President, Research and Development,
and such additional officers as the Board of Directors of the Surviving
Corporation shall appoint. All such officers shall serve at the pleasure of the
Board of Directors of the Surviving Corporation and may be removed from such
office by the Board at any time in its sole and absolute discretion. Nothing
contained herein is intended, however, to modify or amend any employment
agreement that may exist between the corporation and any such officer, and the
rights and remedies available to either party in the event of any material
breach of the terms of any such employment agreement by the other party shall
not be affected by this Agreement.
(e) the Merger shall, from and after the Effective Time, have all the
effects provided by applicable law.
1.6 EFFECT OF THE MERGER ON BIOPOOL'S CAPITAL STOCK AND OPTIONS.
(a) BIOPOOL COMMON STOCK. At the Effective Time, each outstanding share
of Biopool Common Stock shall be an outstanding share of Common Stock in the
Surviving Corporation.
(b) BIOPOOL OPTIONS. At the Effective Time, each outstanding Biopool
Option shall remain in effect and without modification, except as called for by
the terms and conditions of the Biopool
Page A-2
<PAGE>
Stock Option Plan attached as EXHIBIT C, and shall continue to vest according to
the vesting schedule set forth in the option grant for each Biopool Option.
(c) BIOPOOL WARRANTS. At the Effective Time, each outstanding Biopool
Warrant shall remain in effect and without modification, except as called for by
the terms and conditions of such warrant, and shall be exercisable for shares of
Common Stock of the Surviving Corporation.
1.7 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF XTRANA.
(a) AGGREGATE CONSIDERATION TO BE RECEIVED AND ESCROW. The aggregate
merger consideration (the "MERGER CONSIDERATION") issued at the Effective Time
to existing Xtrana stockholders and all other parties will be 9,369,461 fully
paid, nonassessable shares of the Surviving Corporation's Common Stock (or with
respect to Claremont, the Claremont Warrant) which number includes (in addition
to the Claremont Shares) the Escrow Shares (as defined below) and the Holdback
Shares (as defined below). Under no circumstances will the aggregate Merger
Consideration exceed 9,369,461 shares of the Surviving Corporation's Common
Stock, excluding the Xtrana Indemnification Shares, if any, and the Additional
Shares, if any. Notwithstanding anything in this Section 1.7(a) to the contrary,
the Merger Consideration shall not be reduced by any cash fee paid by Xtrana to
its financial advisers to the extent that such fee is negotiated and paid on an
arm's length basis and does not exceed the cash proceeds received by Xtrana from
the sale of its Series D Preferred Stock. From the Merger Consideration, 936,946
shares shall be deposited in escrow (the "ESCROW SHARES") for purposes of
satisfying Xtrana's indemnification obligations set forth in ARTICLE VII hereof
and an additional 936,946 shares shall be deposited in escrow (the "HOLDBACK
SHARES") to be released or cancelled pursuant to the provisions of SECTION 1.12
hereof. The Escrow Shares and the Holdback Shares shall be deposited in escrow
pursuant to an escrow agreement generally in the form attached hereto as EXHIBIT
D, including such changes as may be requested by the escrow agent (the "ESCROW
AGREEMENT"), which agreement shall treat each such deposit as a separate and
distinct escrow for purposes of this Agreement. As a result of the Merger and
without any action on the part of the holders thereof, at the Effective Time,
all shares of Xtrana Common Stock and Xtrana Preferred Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of shares of Xtrana Common Stock and Xtrana Preferred
Stock shall thereafter cease to have any rights with respect to such shares of
Xtrana Common Stock and Xtrana Preferred Stock, except the right to receive,
without interest, the Merger Consideration upon the surrender of a certificate
that, immediately prior to the Effective Time, represented an outstanding share
or shares of Xtrana Common Stock or Xtrana Preferred Stock (in each such case, a
"CERTIFICATE").
(b) XTRANA PREFERRED. Each share of Xtrana Series A, Series B, Series C
and Series D Preferred Stock outstanding immediately prior to the Effective Time
(other than shares held by stockholders who properly exercise any dissenters'
rights available under applicable law), shall be converted into the right to
receive approximately 3.15 fully paid, nonassessable shares of Biopool Common
Stock, subject to the Escrow Agreement, and subject further to the number of
shares of Series D Preferred stock issued by Xtrana prior to the Effective Time;
PROVIDED, HOWEVER, that in no case shall such adjustment require the issuance of
a number of Merger Shares in excess of the Merger Consideration.
(c) XTRANA COMMON. Each share of Xtrana Common Stock outstanding
immediately prior to the Effective Time (other than shares held by shareholders
who properly exercise any dissenters' rights available under applicable law)
shall be converted at the Effective Time into the right to receive approximately
3.15 shares of Biopool Common Stock, subject to the Escrow Agreement, and
subject further to the number of shares of Series D Preferred stock issued by
Xtrana prior to the Effective Time; PROVIDED, HOWEVER, that in no case shall
such adjustment require the issuance of a number of Merger Shares in excess of
the Merger Consideration.. No fractional shares of Biopool Common Stock will be
issued in the Merger. Fractional share amounts of .5 or higher will be rounded
up to a full share of Biopool Common Stock, and fractional share amounts of less
than .5 will be rounded down to the next whole share.
Page A-3
<PAGE>
(d) CONVERTIBLE NOTES AND WARRANTS. Prior to the Effective Time, each
outstanding Xtrana convertible note listed on SCHEDULE 2.1 (the "CONVERTIBLE
SECURITIES") shall either be repaid in full or converted to shares of Xtrana
Common Stock or Preferred Stock, according to its terms. No Merger Consideration
will be paid with respect to any unconverted Convertible Security. Xtrana has no
warrants outstanding, other than the Xtrana Warrant and the Gould Warrant.
(i) Immediately prior to the Effective Time, Xtrana will issue a
warrant to Arthur P. Gould & Co., substantially in the form attached hereto as
EXHIBIT E (the "GOULD WARRANT"), exercisable for such number of shares of Xtrana
Common Stock that would immediately prior to the Effective Time be exchangeable
for 180,000 shares (the "GOULD SHARES") of the Surviving Corporation's Common
Stock, subject to adjustment as set forth in Sections 1.1 and 2 of the Gould
Warrant. The Gould Shares are not included within the Merger Consideration
described in SECTION 1.7(A) hereof. Notwithstanding anything herein or in the
Escrow Agreement to the contrary, in the event that for any reason the Gould
Warrant becomes exercisable for a number of shares of Xtrana Common Stock
immediately prior to the Effective Time that would entitle the holder to receive
more than 180,000 shares of the Surviving Corporation's Common Stock, then the
Escrow Shares shall be permanently reduced by such additional number of shares
of the Surviving Corporation's Common Stock (the "ADDITIONAL WARRANT SHARES"),
up to a maximum of 10,000 Additional Warrant Shares, and such shares shall be
treated for all purposes as if they had been cancelled and removed from escrow
pursuant to SECTION 7.2 hereof; PROVIDED, HOWEVER, that if the number of
Additional Warrant Shares exceeds 10,000, the Merger Consideration shall be
reduced share for share by such excess. In the event that the Gould Warrant
expires without the issuance in full of the Additional Warrant Shares, the
Surviving Corporation shall use its reasonable efforts to distribute on a pro
rata basis any unissued Additional Warrant Shares to its stockholders that were
pre-Merger Xtrana stockholders.
(ii) Immediately prior to the Effective Time, the Surviving
Corporation will issue a warrant to Claremont, substantially in the form
attached hereto as EXHIBIT F (the "CLAREMONT WARRANT"), exercisable for 540,000
shares (the "CLAREMONT SHARES") of the Surviving Corporation's Common Stock,
subject to adjustment as set forth in Section 2 of the Claremont Warrant.
(e) TREASURY SHARES. Notwithstanding anything contained in this SECTION
1.7 to the contrary, each share of Xtrana Stock issued and held in Xtrana's
treasury immediately prior to the Effective Time shall, by virtue of the Merger,
cease to be outstanding and shall be cancelled and retired and shall cease to
exist without payment of any consideration therefore.
1.8 DELIVERY OF CONSIDERATION.
(a) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall mail to each holder of record of Xtrana Stock
immediately prior to the Effective Time (i) a letter of transmittal (the "LETTER
OF TRANSMITTAL") (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Surviving Corporation and shall be in such form and have
such other customary provisions as the Surviving Corporation may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration with respect to the shares
of Xtrana Stock formerly represented thereby.
(b) Upon surrender of a Certificate for cancellation to the Surviving
Corporation or to any agent or agents as may be appointed by the Surviving
Corporation, together with a Letter of Transmittal, duly completed and executed,
and such other documents as the Surviving Corporation or any such agent may
reasonably request, the holder of such Certificate shall be entitled to receive
in exchange therefore, a certificate representing the number of Merger Shares
which such holder has the right to receive pursuant to the provisions of SECTION
1.7 (the "MERGER SHARE CERTIFICATES") and the Certificate so surrendered shall
forthwith be cancelled. Until surrendered as contemplated by this SECTION
1.8(B), each
Page A-4
<PAGE>
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration with respect to the shares of
Xtrana Stock formerly represented thereby.
1.9 CLOSING OF TRANSFER BOOKS. At and after the Effective Time,
transfers of the shares of Xtrana Stock outstanding immediately prior to the
Effective Time shall not be made on the stock transfer books of Xtrana.
1.10 LOST CERTIFICATES. Notwithstanding the provisions of SECTION 1.8,
in the event any Certificate representing Xtrana Stock has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and an agreement to indemnify
the Surviving Corporation against any claim that may be made against it with
respect to such Certificate, the Surviving Corporation will issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration into
which such Xtrana Stock would have been converted.
1.11 FEDERAL INCOME TAX CONSEQUENCES. The parties intend that, for
federal income tax purposes, the Merger shall constitute a reorganization within
the meaning of Section 368 of the Code.
1.12 XTRANA EARNOUT. The parties have agreed that the consideration to
be received by the Xtrana stockholders with respect to the Merger will be
subject to upward or downward adjustment as set forth in this SECTION 1.12,
based on Xtrana's actual Gross Revenues for the one year period commencing on
October 1, 2000 and ending on September 30, 2001 (the "EARNOUT PERIOD") relative
to the projected Gross Revenues of $7,300,000 for this same period (the "EARNOUT
TARGET"). If Gross Revenues received by the Surviving Corporation during the
Earnout Period equal at least eighty five percent (85%) of the Earnout Target
(the "THRESHOLD TARGET") but less than one hundred and fifteen percent (115%) of
the Earnout Target (the "MAXIMUM TARGET"), then the Holdback Shares shall be
released promptly from escrow for distribution to the pre-merger Xtrana
stockholders on the same basis as the Merger Consideration. In the event that
Gross Revenues during the Earnout Period equal or exceed the Maximum Target, the
pre-Merger Xtrana stockholders shall receive, in addition to the Holdback
Shares, 1,030,641 shares of the Surviving Corporation's Common Stock (the
"ADDITIONAL SHARES," and together with the Holdback Shares, the "EARNOUT
SHARES"), to be distributed on the same basis as the Merger Consideration. In
the event that Gross Revenues during the Earnout Period are less than the
Threshold Target, the Earnout Period shall be extended to include an additional
12-month period (such 24-month period, the "EXTENDED EARNOUT PERIOD"). If Gross
Revenues during the Extended Earnout Period equal at least eighty five percent
(85%) of $29,300,000 (the "EXTENDED THRESHOLD TARGET") but less than one hundred
and fifteen percent (115%) of the Extended Earnout Target (the "EXTENDED MAXIMUM
TARGET"), then the Holdback Shares shall be released promptly from escrow for
distribution to the pre-merger Xtrana stockholders, on the same basis as the
Merger Consideration. If Gross Revenues during the Extended Earnout Period are
less than the Extended Threshold Target, then the Holdback Shares shall be
permanently cancelled and removed from escrow. In the event that Gross Revenues
during the Extended Earnout Period equal or exceed the Extended Maximum Target,
the pre-Merger Xtrana stockholders shall receive the Earnout Shares, to be
distributed on the same basis as the Merger Consideration. The number of
Holdback Shares and Additional Shares shall be equitably adjusted into a
different number of shares in order to maintain the Xtrana stockholders rights
hereunder in the event of any stock splits, dividends or reclassifications of
the shares of the Surviving Corporation. Notwithstanding anything in this
Agreement to the contrary, no adjustment to the number of shares to be issued
upon the exercise of the Gould Warrant or the Claremont Warrant will be made as
a result of Xtrana's performance under this Section 1.12.
Page A-5
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF XTRANA
Except as disclosed in the Xtrana Disclosure Schedule attached as
EXHIBIT G, Xtrana represents and warrants to Biopool as set forth below:
2.1 CAPITAL STOCK.
(a) CAPITALIZATION. The authorized capital stock of Xtrana consists of
4,000,000 shares of Common Stock and 1,250,000 shares of preferred stock, par
value $0.01 per share ("XTRANA PREFERRED STOCK") of which 400,000 shares have
been designated Series A Preferred Stock, 460,000 shares have been designated
Series B Preferred Stock, which 60,000 shares have been designated Series C
Preferred Stock, and 300,000 shares have been designated Series D Preferred
Stock. As of the date hereof, (i) 1,710,000 shares of Common Stock were
outstanding, all of which were validly issued, fully paid and nonassessable and
not subject to preemptive rights; (ii) 400,000, 262,880 and 40,000 shares of
Series A, Series B and Series C shares, respectively, of Xtrana Preferred Stock
were issued and outstanding; (iii) no shares of Common Stock and no shares of
Xtrana Preferred Stock were held in the treasury of Xtrana; (iv) no shares of
Common Stock were reserved for issuance upon the exercise of outstanding stock
options granted pursuant to any Xtrana stock option plan; and (v) there were no
securities of any subsidiary of Xtrana or any other Person outstanding which are
convertible into or exercisable or exchangeable for capital stock of Xtrana.
Except as set forth above, no shares of capital stock or other voting securities
of Xtrana have been issued, are reserved for issuance or are outstanding.
(b) OTHER SECURITIES. Except for the Xtrana Warrant and the Gould
Warrant or as otherwise disclosed in SCHEDULE 2.1 of Disclosure Schedule, there
are no existing rights, options, warrants, calls, subscriptions, convertible
securities or other securities, agreements, commitments, or obligations which
would require Xtrana to issue or sell shares of Common Stock, Preferred Stock or
any other equity securities, or securities convertible into or exchangeable or
exercisable for shares of Common Stock, Preferred Stock or any other equity or
debt securities of Xtrana, other than Xtrana's commitment to issue the Series D
Preferred Stock. Except as disclosed in SCHEDULE 2.1 of the Disclosure Schedule,
Xtrana has no commitments or obligations to purchase or redeem any shares of
Common Stock. Except for the Xtrana Warrant and the Gould Warrant, SCHEDULE 2.1
of the Disclosure Schedule contains a complete and accurate list of all
outstanding Options and warrants and the exercise price thereof.
(c) DIVIDENDS. Xtrana has not declared or paid any dividend or made any
distribution in respect of any of its capital stock, or directly or indirectly
redeemed, purchased or otherwise acquired any capital stock issued by it, and no
Person has any right to require Xtrana to redeem, purchase or otherwise
reacquire any capital stock issued by Xtrana.
(d) VALIDITY OF SHARES. All of the issued and outstanding capital stock
of Xtrana has been duly and validly authorized and issued (including, without
limitation, issued in compliance with applicable federal and state securities
laws) and is fully paid and nonassessable and free and clear of all Liens
imposed by or through Xtrana.
2.2 CORPORATE ORGANIZATION. Xtrana is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business and is in good standing in all jurisdictions in
which such qualification is required and where the failure to be so qualified
would have a Material Adverse Effect. Xtrana has all requisite power and
authority to own and operate its Property and to carry on its business as now
conducted or as presently proposed to be conducted.
Page A-6
<PAGE>
2.3 AUTHORITY; ENFORCEABILITY. Xtrana has all requisite power and
authority under applicable corporate law to execute and deliver this Agreement
and to perform the transactions contemplated hereby and, upon approval of the
execution and delivery of this Agreement and consummation of the Merger by the
Board of Directors and the stockholders of Xtrana as contemplated by SECTION 4.1
(the "XTRANA STOCKHOLDER APPROVAL"), the transactions contemplated hereby will
have been duly authorized by all requisite corporate action on the part of
Xtrana and its stockholders and will constitute a legal, valid and binding
obligation of Xtrana, enforceable against Xtrana in accordance with its terms,
subject to general limitations on the availability of equitable remedies and the
effect of bankruptcy, insolvency, reorganization and other laws of general
application affecting the enforcement of creditors' rights.
2.4 NO VIOLATION AND NO CONSENTS REQUIRED.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not and will not violate or conflict
with the Xtrana Certificate of Incorporation or the bylaws of Xtrana, or, to the
best of Xtrana's knowledge, violate any Legal Requirement or Order applicable to
Xtrana. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not and will not: (i) except as disclosed in
SCHEDULE 2.4, require any Third-Party Action with respect to Xtrana; or (ii)
conflict with or constitute a default under, or result in the acceleration or
right of acceleration of any obligations, or any termination or right of
termination under any Contract where such failure to secure Third-Party Action,
conflict, default, acceleration or termination would have a Material Adverse
Effect; or (iii) result in the creation or imposition of any material Lien,
claim, charge, restriction, equity or encumbrance of any kind upon, or give any
Person any interest or right in or with respect to, any of the Properties,
assets, business or Contracts of Xtrana.
(b) There are no approvals, authorizations, consents, orders or other
actions of, or filings or registrations with, any Person that are required to be
obtained or made by Xtrana in connection with the execution of, and the
consummation of the transactions contemplated under, this Agreement, other than
the Xtrana Stockholder Approval and the filings with the Delaware Secretary of
State as set forth in SECTION 1.3, or as set forth in Schedule 2.4. Xtrana
currently has contracts with or is performing work under grants from only those
Governmental Agencies, and to the best of its knowledge its genetic and
biomedical research and product development activities are only regulated by
those Governmental Agencies, listed on Schedule 2.4 hereof.
2.5 SUBSIDIARIES, OTHER INTERESTS. Xtrana owns no equity or beneficial
interest (except as a creditor in the ordinary course of business), directly or
indirectly, in any Person.
2.6 FINANCIAL INFORMATION.
(a) FINANCIAL STATEMENTS. Xtrana has provided Biopool with its statement
of financial position, statement of operations and statement of cash flows as of
and for the years ended December 31, 1998 and December 31, 1999, (the "XTRANA
ANNUAL STATEMENTS") and with its statement of financial position and statement
of operations as of and for the monthly periods ending on January 31, 2000,
February 29, 2000 and March 31, 2000 (collectively, the "XTRANA INTERIM
STATEMENT" and, together with Xtrana Annual Statements, the "XTRANA FINANCIAL
STATEMENTS"). Xtrana Financial Statements have been derived from Xtrana's books
and records maintained in the ordinary course of business, and fairly present in
all material respects the financial position of Xtrana as of the date thereof
and for the period then ended, in accordance with GAAP consistently applied
(except as may be stated therein), and with Xtrana's internal accounting
policies and, in the case of Xtrana Interim Statement, normal year-end
adjustments.
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(b) ABSENCE OF CERTAIN LIABILITIES. Xtrana has no Liabilities required
to be disclosed or accrued in financial statements prepared in accordance with
GAAP, other than those: (i) accrued or disclosed in Xtrana Financial Statements;
(ii) incurred in the ordinary course of business after the date of the Xtrana
Interim Statement; (iii) for legal and accounting fees and expenses incurred by
Xtrana in connection with the transactions contemplated hereby; (iv) expressly
set forth in this Agreement (including without limitation disclosures in
Schedules hereto) or (v) which are, in the aggregate, not material to the
financial condition of Xtrana. To Xtrana's knowledge, the Liabilities of Xtrana
that are not required to be disclosed or accrued in financial statements
prepared in accordance with GAAP, and that are not disclosed in Xtrana Financial
Statements or in this Agreement, are not likely to have, individually or in the
aggregate, a Material Adverse Effect on Xtrana.
(c) ABSENCE OF CERTAIN CHANGES. Other than as set forth in Schedule 2.6,
since the date of Xtrana Interim Statement:
(i) Xtrana has operated its business in the ordinary course;
(ii) there has been no change or changes which, individually or in
the aggregate, has or have had or is or are reasonably likely to have a Material
Adverse Effect on Xtrana;
(iii) there has not been any damage, destruction or condemnation
known to Xtrana with respect to Property having an aggregate net book value on
Xtrana Financial Statements in excess of $50,000 net of any insurance
recoveries;
(iv) there has not been any material change in the accounting
methods, practices or principles of Xtrana;
(v) Except for the shares of its Series D Preferred Stock issued
upon conversion of the Convertible Notes, Xtrana has not sold, transferred or
otherwise disposed of (or agreed or committed to sell, transfer or otherwise
dispose of) any Property other than the sale of inventory in the ordinary
course, or canceled, compromised, released or assigned any note or claim in its
favor, where the aggregate amount of such sales, transfers, dispositions,
cancellations, compromises, releases or assignments exceeds $50,000;
(vi) Xtrana has not instituted, settled or agreed to settle any
litigation, action or proceeding before any Governmental Agency;
(vii) Xtrana has not assumed, guaranteed, endorsed or otherwise
become responsible (or otherwise agreed to become responsible) for the
obligations of any other Person, except for the endorsement of negotiable
instruments in the ordinary course of business;
(viii) Xtrana has not granted (or agreed or committed to grant) any
increase in compensation or fringe benefits of its employees and consultants
other than normal salary increases consistent with prior periods; and
(ix) Xtrana has not entered into any license or other Contract with
regard to the acquisition or disposition of any material Intellectual Property
other than non-exclusive licenses granted in the ordinary course of business
consistent with past practice.
2.7 TAXES.
(a) Xtrana has filed all Tax Returns that it has been required to file.
All such Tax Returns were correct and complete in all material respects. All
Taxes owed by Xtrana (whether or not shown on any Tax Return) have been paid.
For any Taxes that have not been paid, Xtrana has established
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reserves on its books that equal or exceed those required by GAAP. No claim has
ever been made by a Governmental Agency in a jurisdiction where Xtrana does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of Xtrana that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) Xtrana has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other Person, except for
amounts not due as of the Closing for which Xtrana has withheld but not yet
paid.
(c) To the best of Xtrana's knowledge, no Governmental Agency is
expected to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no pending or, to the best of Xtrana's knowledge,
threatened dispute or claim of any Governmental Agency relating to any Tax
liability of Xtrana.
(d) No consent has been filed under Section 341(f) of the Code with
respect to Xtrana.
(e) There is no Contract covering any Person that, individually or
collectively, as a consequence of the Merger could give rise to the payment of
any amount that would not be deductible by Xtrana by reason of Section 280G of
the Code.
2.8 TITLE TO PROPERTIES.
(a) SCHEDULE 2.8(A) contains a true and complete listing of all real
property and material interests in real property owned by Xtrana.
(b) SCHEDULE 2.8(B) contains a true and complete listing based on the
books and records of Xtrana of all other items of personal property owned by
Xtrana with a net book value at the date of Xtrana Interim Statement in excess
of $50,000 per item.
(c) Xtrana has good and marketable title to all of its Properties, and
has good title to all its leasehold interests, in each case subject to no Lien.
With respect to the Property and assets it leases, Xtrana is in compliance with
such leases and holds valid leasehold interests free of all Liens.
2.9 ACCOUNTS RECEIVABLE. The accounts receivable of Xtrana: (a) are bona
fide and arose from valid sales in the ordinary course of business; and (b) to
Xtrana's knowledge, are not subject to any material offsets or counterclaims
(other than routine billing inquiries of customers), and do not represent
guaranteed sale, sell-or-return transactions or any other similar understanding.
No accounts receivable have been pledged as collateral to any other Person. The
carrying amount for accounts receivable in Xtrana Interim Statement reflects
adjustments in accordance with GAAP consistently applied as an allowance for
doubtful accounts receivable.
2.10 LEASES. SCHEDULE 2.10 lists or incorporates by reference to
SCHEDULE 2.14 all leases, rental agreements, conditional sales contracts and
other similar Contracts with rental payments exceeding $50,000 per year ("XTRANA
DISCLOSABLE LEASES") under which Xtrana holds any real or personal Property or
leases any of the same to others. All Xtrana Disclosable Leases are, in all
material respects, valid, in good standing and enforceable by Xtrana in
accordance with their terms except: (i) as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors' rights generally; and (ii) as the remedy of specific
performance and other forms of injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. To Xtrana's knowledge, neither Xtrana nor any other party to any
Xtrana Disclosable Lease is in material breach thereof.
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2.11 INSURANCE. SCHEDULE 2.11 lists and describes briefly all binders
and policies of liability, theft, fire and other forms of property/casualty
insurance and surety bonds, insuring Xtrana or its Properties, assets and
business as of the date hereof. All policies and binders listed in SCHEDULE 2.11
are valid and in good standing and in full force and effect and the premiums
have been paid. With the exception of those claims listed in SCHEDULE 2.11(B),
there are no outstanding claims under such policies or binders and Xtrana has
not received any notice of cancellation, general disclaimer of liability or
non-renewal of any such policy or binder.
2.12 FACILITIES, EQUIPMENT. Xtrana owns or leases all material land,
buildings, equipment or other Properties used in the operation of its business.
Xtrana has not received any notice of any material violation of any Legal
Requirement or Order by Xtrana's facilities which has not been corrected, and,
to Xtrana's knowledge, no facilities of Xtrana are in material violation of any
Legal Requirement or Order.
2.13 EMPLOYMENT AND BENEFIT MATTERS; CONTRACTORS.
(a) SCHEDULE 2.13(A) lists all of Xtrana's employment contracts,
arrangements, plans with any agent, employee, officer, director or shareholder,
and contracts or arrangements providing for bonuses, profit sharing payments,
deferred compensation, stock options, stock purchase rights, retainer,
consulting, incentive, severance pay or retirement benefits, life, medical or
other insurance or any other employee benefits or any other payments, "fringe
benefits" or perquisites which are not terminable at will without liability to
Xtrana.
(b) Xtrana has not entered into any union contracts, collective
bargaining agreements or similar agreements with employee organizations or
groups, nor, to Xtrana's knowledge, has Xtrana ever participated in or
contributed to any single employer defined benefit plan or multi-employer plan
within the meaning of ERISA Section 3(37), nor is Xtrana currently engaged in
any labor negotiations, excepting minor grievances, nor is Xtrana the subject of
any union organization effort. There is no labor dispute, strike, or work
stoppage pending against Xtrana business. Xtrana has no ERISA Affiliates.
(c) True and correct copies of each plan listed in Schedule 2.13(c) that
is subject to ERISA (an "XTRANA ERISA PLAN") and related trust agreements,
insurance contracts, summary descriptions, and Xtrana Option Plan have been
delivered or made available to Biopool by Xtrana. To Xtrana's knowledge, nothing
has occurred prior to or since the issuance of such letters to cause the loss of
qualification under the Code of any of such plans.
(d) To Xtrana's knowledge, none of the Xtrana ERISA Plans has
participated in, engaged in or been a party to any prohibited transaction as
defined in ERISA or the Code, and there are no material claims, pending (with
service or other notice) or overtly threatened, involving any plan listed in
Schedule 2.13(d). To Xtrana's knowledge, there have been no violations of any
reporting or disclosure requirements with respect to any Xtrana ERISA Plan that
would have a Material Adverse Effect on Xtrana.
(e) Xtrana has no material liability for any excise tax imposed by
Sections 4971, 4972, 4974, 4975, 4976, 4977, 4978, 4978B, 4979, 4979A, 4980 or
4980B of the Code.
(f) Other than as disclosed in SCHEDULE 2.13(C), Xtrana does not
maintain any plans providing benefits within the meaning of Section 3(1) of
ERISA (other than group health plan continuation coverage under 601 of ERISA and
4980B(f) of the Code) to former employees or retirees.
2.14 CONTRACTS. SCHEDULE 2.14 lists all Contracts that affect Xtrana,
its business, Properties, assets, operations or financial condition, other than
Contracts entered into in the ordinary course of Xtrana's business and no one of
which contemplates performance by Xtrana during a period of more than one year
or involves commitments for sale or purchase in excess of $50,000 and except for
Contracts
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fully performed or terminable at will without liability to Xtrana. To Xtrana's
knowledge, each Contract disclosable on SCHEDULE 2.14 ("XTRANA DISCLOSABLE
CONTRACT") is, in all material respects, valid and enforceable by Xtrana in
accordance with its terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors' rights generally, and (ii) as the remedy of specific
performance and other forms of injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. To Xtrana's knowledge, neither Xtrana nor any other party to any
Xtrana Disclosable Contract, is in breach of any Xtrana Disclosable Contract,
except for such breaches as, taken in the aggregate, would not have a Material
Adverse Effect on Xtrana.
2.15 OFFICERS AND DIRECTORS; BANK ACCOUNTS. SCHEDULE 2.15 is a true and
complete list of:
(a) the names and addresses of Xtrana's officers and directors;
(b) the name of each bank or other financial institution in which Xtrana
has an account, deposit or safe deposit box and the names of all Persons
authorized to draw thereon or to have access thereto; and
(c) the name of each bank or other financial institution in which Xtrana
has a line of credit or other loan facility.
2.16 CORPORATE DOCUMENTS. Xtrana has furnished or made available to
Biopool or its representatives true, correct and complete copies of: (a) the
Xtrana Certificate of Incorporation and Bylaws of Xtrana in effect as of the
date hereof; (b) the minute books of Xtrana containing all records required to
be set forth of all proceedings, consents, actions and meetings of the
shareholders and board of directors of Xtrana; (c) all material Permits and
Orders with respect to Xtrana; and (d) the stock ledger of Xtrana setting forth
all issuances and transfers of any capital stock of Xtrana.
2.17 LEGAL PROCEEDINGS.
(a) Except as disclosed in SCHEDULE 2.17, to the best of Xtrana's
knowledge there is no action, suit, proceeding or investigation pending in any
court or before any arbitrator or before or by any Governmental Agency against
Xtrana or any of its Properties or business and, to the best of Xtrana's
knowledge, there is no such action, suit, proceeding or investigation
threatened.
(b) Xtrana has never been notified in writing that it has been subject
to an audit, compliance review, investigation or like contract review by the
U.S. General Services Administration or any other Governmental Agency in
connection with any government contract (a "GOVERNMENT AUDIT"), other than
routine and recurring audits to which government contractors are generally
subject. To Xtrana's knowledge, no Government Audit is threatened and no basis
exists for a finding of noncompliance with any material provision of any
government contract or for a material refund of any amounts paid or owed to
Xtrana by any Governmental Agency pursuant to such government contract.
2.18 COMPLIANCE WITH INSTRUMENTS, ORDERS AND LEGAL REQUIREMENTS. To the
best of Xtrana's knowledge, Xtrana is not in material violation of, or in
default in any material respect with respect to, any term or provision of the
Xtrana Certificate of Incorporation or Bylaws, or any Order or any Legal
Requirement known by Xtrana to be applicable to it. No investigation by any
Governmental Agency of any alleged violation or noncompliance with any Legal
Requirement is pending, or, to the best of Xtrana's knowledge, threatened.
2.19 PERMITS. Xtrana holds all Permits material to the conduct of its
business as and where now conducted. To the best of Xtrana's knowledge, each of
such Permits is in full force and effect. No
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violation of any of such Permits has occurred, and to the best of Xtrana's
knowledge, no proceedings to terminate, revoke, limit or impair any material
Permit are pending or threatened.
2.20 CUSTOMERS AND SUPPLIERS. SCHEDULE 2.20 sets forth the: (a) top ten
customers of Xtrana, based on net sales for the year ended December 31, 1999;
and (b) top five suppliers of Xtrana, based on dollar volume of purchases for
the year ended December 31, 1999.
2.21 INTELLECTUAL PROPERTY.
(a) Except for Third-Party Intellectual Property licensed to Xtrana
pursuant to an agreement listed in SCHEDULE 2.21(C)(II) and Xtrana Intellectual
Property licensed to Third Parties, as disclosed in SCHEDULE 2.21(C)(I), Xtrana
owns, solely and exclusively, and free and clear of any Third-Party Right, all
title to and rights in all Xtrana Intellectual Property that is used in the
business of Xtrana as currently conducted.
(b) SCHEDULE 2.21(B) lists all patents, patent applications, trademarks,
trade names, service marks and copyrights included in Xtrana Intellectual
Property which have been registered, issued or applied for and the jurisdictions
in which such Xtrana Intellectual Property right has been issued, registered or
applied for.
(c) SCHEDULE 2.21(C)(I) lists all licenses, sublicenses and other
agreements, written or unwritten, to which Xtrana is a party and pursuant to
which any Person is authorized to use, resell, sublicense, or market or
distribute any product currently marketed or presently planned to be marketed by
Xtrana or any component or predecessor of any such product. SCHEDULE 2.21(C)(II)
lists all Third-Party Intellectual Property which is incorporated in or is a
part of any products which Xtrana has sold, resold, licensed or sublicensed, or
which is material to the current operations of Xtrana, other than (in the case
of Third-Party Intellectual Property used internally only) readily obtainable,
standard products with wide retail distribution. Xtrana has, and at the relevant
times in the past had, all necessary rights to resell or distribute any
hardware, software or products produced by a third party which it resells or
distributes or has resold or distributed. Xtrana is not in material violation of
any license, sublicense or agreement described in SCHEDULE 2.21(C)(I) OR (II).
To the best of Xtrana's knowledge, neither Xtrana nor any of its products or
operations is in material violation of or materially infringes any Third-Party
Intellectual Property. Xtrana has not received any claim that it has lost or
will lose any rights of Xtrana under any licenses to Third-Party Intellectual
Property to which Xtrana is a party. The execution and delivery of this
Agreement by Xtrana and the consummation of the transactions contemplated hereby
will not cause Xtrana to be in violation or default under any such license,
sublicense or agreement nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Xtrana has not assigned or licensed to any third party any right,
title or interest in Xtrana Intellectual Property. Xtrana is not contractually
obligated to pay any compensation to any third party for the use of Xtrana
Intellectual Property or the Third-Party Intellectual Property.
(d) To Xtrana's knowledge, there is no material unauthorized use,
disclosure, infringement or misappropriation of any Xtrana Intellectual Property
or any Third-Party Intellectual Property licensed by or through Xtrana by any
third party, including without limitation any employee or former employee of
Xtrana. Xtrana has not entered into any agreement to indemnify any other person
against any charge of infringement of any Third-Party Intellectual Property,
other than indemnification provisions contained in purchase orders arising in
the ordinary course of business.
(e) To Xtrana's knowledge, all patents, registered trademarks,
registered service marks and registered copyrights held by Xtrana are valid and
subsisting. To Xtrana's knowledge, there is no assertion or claim (or basis
therefor) challenging the validity of any Xtrana Intellectual Property. Xtrana
has not been sued in any suit, action or proceeding, or otherwise notified of
any claim, which involves a claim of infringement of any patent, trademark,
service mark, copyright or violation of any
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trade secret or other proprietary right of any third party. Neither the conduct
of the business of Xtrana as currently conducted nor the manufacture, sale,
licensing or use of any of the products of Xtrana as now manufactured, sold or
licensed or used, infringes on or conflicts with, in any way, any trademark,
trademark right, trade name, trade name right, service mark or copyright, or, to
Xtrana's knowledge, any patent, patent right, industrial model or invention, of
any third party that individually or in the aggregate has or is reasonably
likely to have a Material Adverse Effect. To Xtrana's knowledge and except as
set forth on SCHEDULE 2.21(E), no third party is challenging the ownership by
Xtrana, or the validity or effectiveness of, any of Xtrana Intellectual
Property. Xtrana has not brought any action, suit or proceeding for infringement
of Xtrana Intellectual Property or breach of any license or agreement involving
Xtrana Intellectual Property against any third party. There are no pending, or
to Xtrana's knowledge, threatened interference, re-examinations, oppositions or
nullities involving any patents, patent rights or applications therefor of
Xtrana. To Xtrana's knowledge, there is no breach or violation by a third party
of, or actual or threatened, loss of rights under, any licenses to which Xtrana
is a party.
(f) Xtrana has secured written assignments from all current and former
consultants and employees who contributed to the creation or development of
Xtrana Intellectual Property currently being provided or marketed to customers
or currently being used by Xtrana of the rights to such contributions that
Xtrana does not already own by operation of law, recognizing Xtrana's ownership
of all such Xtrana Intellectual Property and agreeing to hold such of it as is
not protected by patents, patent applications or copyright (the "XTRANA
CONFIDENTIAL INFORMATION") in confidence and not to use any such Confidential
Information except in connection with such consultant's or employee's work for
Xtrana.
(g) Xtrana has taken all commercially reasonable steps to protect and
preserve the confidentiality of all Xtrana Confidential Information. All use,
disclosure or appropriation of Xtrana Confidential Information by or to a third
party has been pursuant to the terms of a written confidentiality or
nondisclosure agreement between Xtrana and such third party.
2.23 ENVIRONMENTAL MATTERS. There are no Hazardous Materials used or
present at any location used by Xtrana in the conduct of its business, except
for (i) any Hazardous Materials constituting normal office supplies and (ii)
those Hazardous Materials listed on SCHEDULE 2.23 (the "PERMITTED HAZARDOUS
MATERIALS"). To the best of Xtrana's knowledge, no location currently or
previously used by Xtrana is contaminated by any Hazardous Material, other than,
with respect to Xtrana's current facilities, the presence of the Permitted
Hazardous Materials; PROVIDED, HOWEVER, that all Permitted Hazardous Materials
are used, stored and maintained in compliance with all governmental safety
standards and usual and customary standards applied in the biotechnology
industry. There are no environmental materials or conditions, including on-site
or off-site disposal or releases of Hazardous Materials that could reasonably be
expected to have a Material Adverse Effect. To the best of Xtrana's knowledge,
no event has occurred and no activity has been or is being conducted by Xtrana
or any other Person which has resulted or could reasonably result in
contamination of any location currently or previously used by Xtrana by any
Hazardous Material, other than, with respect to Xtrana's current facilities, the
presence of the Permitted Hazardous Materials; PROVIDED, HOWEVER, that all
Permitted Hazardous Materials are used, stored and maintained in compliance with
all governmental safety standards and usual and customary standards applied in
the biotechnology industry. Xtrana has not received any written communication
from any Governmental Agency alleging that Xtrana or any premises currently or
previously occupied by Xtrana is contaminated by any Hazardous Materials or in
violation of any Environmental Requirement. To the best of Xtrana's knowledge,
no Government Agency has commenced any investigation or proceeding with respect
to the contamination of any location currently or previously used by Xtrana by
any Hazardous Material.
2.24 ILLEGAL PAYMENTS. To the best of Xtrana's knowledge, none of Xtrana
or any director, officer, employee, or agent of Xtrana has, directly or
indirectly, paid or delivered any fee, commission, or other sum of money or item
of property however characterized to any broker, finder, agent, government
official, or other person, in the United States or any other country, in any
manner related to the business
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or operations of Xtrana, which Xtrana or any such director, officer, employee,
or agent knows or has reason to believe to have been illegal under any law.
2.25 BOARD OF DIRECTORS APPROVAL. The Board of Directors of Xtrana has
unanimously approved this Agreement and the Merger and unanimously recommended
this Agreement and the Merger to Xtrana's stockholders. Such approval and
recommendation have not been modified or withdrawn and are in full force and
effect on the date hereof.
2.26 REPRESENTATIONS. No representation or warranty by Xtrana in this
Agreement (including without limitation the Schedules and Exhibits attached
hereto), or in any document furnished by Xtrana at the Closing pursuant hereto
contains any untrue statement of a material fact or omits to state a fact
necessary to make the statements contained in such representation or warranty
not misleading.
2.27 BROKERS. Except with respect to its retention of Arthur P. Gould &
Co. and Claremont York Capital ("CLAREMONT"), Xtrana has not retained or
otherwise engaged or employed any broker, finder or any other Person, or paid or
agreed to pay any fee or commission to any agent, broker, finder or other
Person, for or on account of acting as a finder or broker in connection with
this Agreement or the transactions contemplated hereby.
2.28 PROXY STATEMENT. None of the information supplied by Xtrana or its
attorneys specifically for inclusion in the Proxy Statement (the "XTRANA PROXY
INFORMATION") shall, as of the date such information is supplied, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and, to
the extent that any Xtrana Proxy Information becomes false or misleading due to
the passage of time, Xtrana shall timely supplement such information so as to
correct any material false or misleading statements contained therein.
2.29 KNOWLEDGE OF XTRANA. For the purposes of this Agreement, references
to "THE BEST OF XTRANA'S KNOWLEDGE" shall mean the actual knowledge of those
individuals set forth in SCHEDULE 2.29 (the "XTRANA PRINCIPALS"), or knowledge
that a person in the Principal's position would be reasonably expected to know,
after appropriate consultation with the employees, directors and stockholders of
Xtrana most likely to have knowledge of the subject matter of such
representation and warranty; provided, however, if in the course of such
consultation, a Xtrana Principal becomes aware of an omission or fact that in
his or her reasonable judgment warrants further investigation, that such Xtrana
Principal shall perform whatever further investigation he or she deems
appropriate and the information obtained in such investigation becomes actual
knowledge of such Principal.
ARTICLE III
BIOPOOL REPRESENTATIONS AND WARRANTIES
Except as disclosed in Biopool Disclosure Schedule attached as EXHIBIT
F, Biopool represents and warrants to Xtrana as set forth below:
3.1 CAPITAL STOCK.
(a) CAPITALIZATION. The authorized capital stock of Biopool consists of
50,000,000 shares of Common Stock. As of the date hereof, (i) 8,319,951 shares
of Biopool Common Stock were outstanding, all of which were validly issued,
fully paid and nonassessable and not subject to preemptive rights; (ii) no
shares of Common Stock and no shares of Preferred Stock were held in the
treasury of the Biopool; (iii) 1,088,333 shares of Common Stock were reserved
for issuance upon the exercise of outstanding stock options granted pursuant to
the Biopool Stock Option Plan; (iv) 335,000 shares of Common Stock were reserved
for issuance upon the exercise of outstanding warrants (other than the
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Biopool Warrant); (v) no Biopool Subsidiary owned any shares of Biopool's
capital stock; and (vi) there were no securities of any subsidiary of Biopool or
any other Person outstanding which are convertible into or exercisable or
exchangeable for capital stock of Biopool. Except as set forth above, no shares
of capital stock or other voting securities of Biopool have been issued, are
reserved for issuance or are outstanding.
(b) OTHER SECURITIES. Except for the Biopool Warrant and the Claremont
Warrant, and as otherwise disclosed in SCHEDULE 3.1(B) of the Biopool Disclosure
Schedule, there are no existing rights, options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments, or
obligations which would require Biopool or any of its subsidiaries to issue or
sell shares of Common Stock, Preferred Stock or any other equity securities, or
securities convertible into or exchangeable or exercisable for shares of Common
Stock, Preferred Stock or any other equity or debt securities of Biopool or any
of its subsidiaries. Except as disclosed in SCHEDULE 3.1(B), Biopool has no
commitments or obligations to purchase or redeem any shares of Common Stock.
SCHEDULE 3.1(B) of the Biopool Disclosure Schedule contains a complete and
accurate list of all outstanding Options and warrants and the exercise price
thereof.
(c) DIVIDENDS. Biopool has not declared or paid any dividend or made any
distribution in respect of any of its capital stock, or directly or indirectly
redeemed, purchased or otherwise acquired any capital stock issued by it, and no
Person has any right to require Biopool to redeem, purchase or otherwise
reacquire any capital stock issued by Biopool.
(d) VALIDITY OF SHARES. All of the issued and outstanding capital stock
of Biopool has been duly and validly authorized, validly issued (including,
without limitation, issued in compliance with applicable federal and state
securities laws), and is fully paid and nonassessable and free and clear of all
Liens imposed by or through Biopool.
3.2 CORPORATE ORGANIZATION. Biopool is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is qualified to do business and is in good standing in all jurisdictions in
which such qualification is required and where the failure to be so qualified
would have a Material Adverse Effect. Biopool has all requisite power and
authority to own and operate its Property and to carry on its business as now
conducted or as presently proposed to be conducted.
3.3 AUTHORITY; ENFORCEABILITY. Biopool has all requisite power and
authority under applicable corporate law to execute and deliver this Agreement
and to perform the transactions contemplated hereby and, subject to approval of
the Merger by the shareholders of Biopool as contemplated by Section 4.1 (the
"BIOPOOL STOCKHOLDER APPROVAL"), to consummate the Merger. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of Biopool (subject to the Biopool Shareholder Approval), and no other approval
on the part of Biopool is necessary under applicable corporate law for the
execution, delivery and performance of this Agreement. This Agreement
constitutes a legal, valid and binding obligation of Biopool, enforceable
against Biopool in accordance with its terms, subject to general limitations on
the availability of equitable remedies and the effect of bankruptcy, insolvency,
reorganization and other laws of general application affecting the enforcement
of creditors' rights.
3.4 INTELLECTUAL PROPERTY.
(a) Except for Third-Party Intellectual Property licensed to Biopool
pursuant to an agreement listed in SCHEDULE 3.4(C)(II) and Biopool Intellectual
Property licensed to Third Parties, as disclosed in SCHEDULE 3.4(C)(I), Biopool
owns, solely and exclusively, and free and clear of any Third-Party Right, all
title to and rights in all Biopool Intellectual Property that is used in the
business of Biopool as currently conducted.
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(b) SCHEDULE 3.4(B) lists all patents, patent applications, trademarks,
trade names, service marks and copyrights included in Biopool Intellectual
Property which have been registered, issued or applied for and the jurisdictions
in which such Biopool Intellectual Property right has been issued, registered or
applied for.
(c) SCHEDULE 3.4(C)(I) lists all licenses, sublicenses and other
agreements, written or unwritten, to which Biopool is a party and pursuant to
which any Person is authorized to use, resell, sublicense, or market or
distribute any product currently marketed or presently planned to be marketed by
Biopool or any component or predecessor of any such product. SCHEDULE 3.4(C)(II)
lists all Third-Party Intellectual Property which is incorporated in or is a
part of any products which Biopool has sold, resold, licensed or sublicensed, or
which is material to the current operations of Biopool, other than (in the case
of Third-Party Intellectual Property used internally only) readily obtainable,
standard products with wide retail distribution. Biopool has, and at the
relevant times in the past had, all necessary rights to resell or distribute any
hardware, software or products produced by a third party which it resells or
distributes or has resold or distributed. Biopool is not in material violation
of any license, sublicense or agreement described in SCHEDULE 3.4(C)(I) OR (II).
To the best of Biopool's knowledge, neither Biopool nor any of its products or
operations is in material violation of or materially infringes any Third-Party
Intellectual Property. Other than the Agen Patent Claim, Biopool has not
received any claim that it has lost or will lose any rights of Biopool under any
licenses to Third-Party Intellectual Property to which Biopool is a party. The
execution and delivery of this Agreement by Biopool and the consummation of the
transactions contemplated hereby will not cause Biopool to be in violation or
default under any such license, sublicense or agreement nor entitle any other
party to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement. Biopool has not assigned or licensed to any
third party any right, title or interest in Biopool Intellectual Property.
Biopool is not contractually obligated to pay any compensation to any third
party for the use of Biopool Intellectual Property or the Third-Party
Intellectual Property.
(d) To Biopool's knowledge, there is no material unauthorized use,
disclosure, infringement or misappropriation of any Biopool Intellectual
Property or any Third-Party Intellectual Property licensed by or through Biopool
by any third party, including without limitation any employee or former employee
of Biopool. Biopool has not entered into any agreement to indemnify any other
person against any charge of infringement of any Third-Party Intellectual
Property, other than indemnification provisions contained in purchase orders
arising in the ordinary course of business.
(e) To Biopool's knowledge, all patents, registered trademarks,
registered service marks and registered copyrights held by Biopool are valid and
subsisting. To Biopool's knowledge, there is no assertion or claim (or basis
therefore) challenging the validity of any Biopool Intellectual Property. Other
than the Agen Patent Claim, Biopool has not been sued in any suit, action or
proceeding, or otherwise notified of any claim, which involves a claim of
infringement of any patent, trademark, service mark, copyright or violation of
any trade secret or other proprietary right of any third party. Neither the
conduct of the business of Biopool as currently conducted nor the manufacture,
sale, licensing or use of any of the products of Biopool as now manufactured,
sold or licensed or used, infringes on or conflicts with, in any way, any
trademark, trademark right, trade name, trade name right, service mark or
copyright, or, to Biopool's knowledge, any patent, patent right, industrial
model or invention, of any third party that individually or in the aggregate has
or is reasonably likely to have a Material Adverse Effect. To Biopool's
knowledge and except as set forth on SCHEDULE 3.4(E), no third party is
challenging the ownership by Biopool, or the validity or effectiveness of, any
of Biopool Intellectual Property. Biopool has not brought any action, suit or
proceeding for infringement of Biopool Intellectual Property or breach of any
license or agreement involving Biopool Intellectual Property against any third
party. There are no pending, or to Biopool's knowledge, threatened interference,
re-examinations, oppositions or nullities involving any patents, patent rights
or applications therefore of Biopool. To Biopool's knowledge, there is no breach
or violation by a third party of, or actual or threatened, loss of rights under,
any licenses to which Biopool is a party.
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(f) Biopool has secured written assignments from all current and former
consultants and employees who contributed to the creation or development of
Biopool Intellectual Property currently being provided or marketed to customers
or currently being used by Biopool of the rights to such contributions that
Biopool does not already own by operation of law, recognizing Biopool's
ownership of all such Biopool Intellectual Property and agreeing to hold such of
it as is not protected by patents, patent applications or copyright (the
"BIOPOOL CONFIDENTIAL INFORMATION") in confidence and not to use any such
Confidential Information except in connection with such consultant's or
employee's work for Biopool.
(g) Biopool has taken all commercially reasonable steps to protect and
preserve the confidentiality of all Biopool Confidential Information. All use,
disclosure or appropriation of Biopool Confidential Information by or to a third
party has been pursuant to the terms of a written confidentiality or
nondisclosure agreement between Biopool and such third party.
3.5 NO CONSENTS REQUIRED. Other than the Biopool Stockholder Approval,
there are no approvals, authorizations, consents, orders or other actions of, or
filings with, any Person that are required to be obtained or made by Biopool in
connection with the execution of, and the consummation of the transactions
contemplated under, this Agreement.
3.6 VALIDITY OF MERGER SHARES. Upon delivery of the certificates for the
Merger Shares pursuant to the terms of this Agreement, due countersignature of
the certificates by Biopool's transfer agent and delivery to Xtrana Shareholders
receiving Merger Shares pursuant to this Agreement, the Merger Shares to be
issued by Biopool represented thereby will be duly authorized and validly
issued, fully paid and nonassessable.
3.7 SEC REPORTS. Since the date Biopool became subject to the reporting
requirements of the Exchange Act, Biopool has filed all required forms, reports
and documents with the Securities and Exchange Commission (the "SEC") required
to be filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder (collectively, the "SEC REPORTS"), all of which have
complied as of their respective filing dates in all material respects with all
applicable requirements of the Securities Act of 1933 (the "SECURITIES ACT") and
the Securities Exchange Act of 1934 (the "EXCHANGE ACT"), and the rules
promulgated thereunder. None of the SEC Reports at the time filed contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.8 FINANCIAL STATEMENTS. The financial statements of Biopool included
in SEC Reports (including the notes thereto) (the "BIOPOOL FINANCIAL
STATEMENTS") at the time filed complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of Biopool and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (and include, in the case of any unaudited interim financial
statements, reasonable accruals for normal year-end adjustments). No
subsidiaries of Biopool are required to file periodic reports with the SEC under
the Exchange Act. Except as disclosed in the SEC Reports, since December 31,
1999, there has not occurred any change or event which has resulted in a
Material Adverse Effect on the business condition of Biopool.
3.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3.9 of
the Disclosure Schedule, since December 31, 1999 Biopool has no Liabilities
required to be disclosed or accrued in financial statements prepared in
accordance with GAAP, other than those: (i) accrued or disclosed in the Biopool
Financial Statements; (ii) incurred in the ordinary course of business after
December 31, 1999,
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(iii) for legal and accounting fees and expenses incurred by Biopool in
connection with the transactions contemplated hereby, (iv) expressly set forth
in this Agreement (including without limitation disclosures in Schedules hereto)
or (v) which are, in the aggregate, not material to the financial condition of
Biopool. To Biopool's knowledge, the Liabilities of Biopool that are not
required to be disclosed or accrued in financial statements prepared in
accordance with GAAP, and that are not disclosed in Biopool Financial Statements
or in this Agreement, are not likely to have, individually or in the aggregate,
a Material Adverse Effect on Biopool.
3.10 LEGAL PROCEEDINGS.
(a) Except for the Agen Patent Claim and as disclosed in the SEC Reports
filed prior to the date hereof, to the best of Biopool's knowledge there is no
action, suit, proceeding or investigation pending in any court or before any
arbitrator or before or by any Governmental Agency against Biopool or any of its
Properties or business and, to the best of Biopool's knowledge there is no such
action, suit, proceeding or investigation threatened.
(b) Biopool has never been notified in writing that it has been subject
to an audit, compliance review, investigation or like contract review by the
U.S. General Services Administration or any other Governmental Agency in
connection with any government contract (a "GOVERNMENT AUDIT"). To Biopool's
knowledge, no Government Audit is threatened and no basis exists for a finding
of noncompliance with any material provision of any government contract or for a
material refund of any amounts paid or owed to Biopool by any Governmental
Agency pursuant to such government contract.
3.11 INSURANCE. SCHEDULE 3.11 lists and describes briefly all binders
and policies of liability, theft, fire and other forms of property/casualty
insurance and surety bonds, insuring Biopool or its Properties, assets and
business as of the date hereof. All policies and binders listed in SCHEDULE 3.11
are valid and in good standing and in full force and effect and the premiums
have been paid. With the exception of those claims listed in SCHEDULE 3.11(B),
there are no outstanding claims under such policies or binders and Biopool has
not received any notice of cancellation, general disclaimer of liability or
non-renewal of any such policy or binder.
3.12 COMPLIANCE WITH INSTRUMENTS, ORDERS AND LEGAL REQUIREMENTS. To the
best of Biopool's knowledge, Biopool is not in material violation of, or in
default in any material respect with respect to, any term or provision of its
Certificate of Incorporation or Bylaws, or any Order or any Legal Requirement
known by Biopool to be applicable to it. No investigation by any Governmental
Agency of any alleged violation or noncompliance with any Law is pending, or, to
the best of Biopool's knowledge, threatened.
3.13 REPRESENTATIONS. No representation or warranty by Biopool in this
Agreement (including without limitation the Schedules and Exhibits attached
hereto), or in any document furnished by Biopool at the Closing pursuant hereto
contains any untrue statement of a material fact or omits to state a fact
necessary to make the statements contained in such representation or warranty
not misleading.
3.14 EMPLOYMENT AND BENEFIT MATTERS; CONTRACTORS.
(a) SCHEDULE 3.14(A) lists all of Biopool's employment contracts,
arrangements, plans with any agent, employee, officer, director or shareholder,
and contracts or arrangements providing for bonuses, profit sharing payments,
deferred compensation, stock options, stock purchase rights, retainer,
consulting, incentive, severance pay or retirement benefits, life, medical or
other insurance or any other employee benefits or any other payments, "fringe
benefits" or perquisites which are not terminable at will without liability to
Biopool or which are subject to ERISA.
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(b) Biopool has not entered into any union contracts, collective
bargaining agreements or similar agreements with employee organizations or
groups, nor, to Biopool's knowledge, has Biopool ever participated in or
contributed to any single employer defined benefit plan or multi-employer plan
within the meaning of ERISA Section 3(37), nor is Biopool currently engaged in
any labor negotiations, excepting minor grievances, nor is Biopool the subject
of any union organization effort. There is no labor dispute, strike, or work
stoppage pending against Biopool business. Biopool has no ERISA Affiliates.
(c) True and correct copies of each plan listed in SCHEDULE 3.14(c) that
is subject to ERISA (a "BIOPOOL ERISA PLAN") and related trust agreements,
insurance contracts, summary descriptions, and Biopool Option Plan have been
delivered or made available to Xtrana by Biopool. Biopool has also delivered or
made available to Xtrana a copy of, in the case of each Biopool ERISA Plan
intended to qualify under Section 401(a) of the Code, the most recent Internal
Revenue Service letter as to its qualification under Section 401(a) of the Code.
To Biopool's knowledge, nothing has occurred prior to or since the issuance of
such letters to cause the loss of qualification under the Code of any of such
plans.
(d) To Biopool's knowledge, none of the Biopool ERISA Plans has
participated in, engaged in or been a party to any prohibited transaction as
defined in ERISA or the Code, and there are no material claims, pending (with
service or other notice) or overtly threatened, involving any plan listed in
Schedule 3.14(c). To Biopool's knowledge, there have been no violations of any
reporting or disclosure requirements with respect to any Biopool ERISA Plan that
would have a Material Adverse Effect on Biopool.
(e) Biopool has no material liability for any excise tax imposed by
Sections 4971, 4972, 4974, 4975, 4976, 4977, 4978, 4978B, 4979, 4979A, 4980 or
4980B of the Code.
(f) Other than as disclosed in SCHEDULE 3.14, Biopool does not maintain
any plans providing benefits within the meaning of Section 3(1) of ERISA (other
than group health plan continuation coverage under 601 of ERISA and 4980B(f) of
the Code) to former employees or retirees.
3.15 BOARD OF DIRECTORS APPROVAL. The Board of Directors of Biopool has
unanimously approved this Agreement and the Merger and will recommended this
Agreement and the Merger to Biopool's stockholders. Such approval has not been
modified or withdrawn and is in full force and effect on the date hereof.
3.16 BROKERS. Other than as disclosed in SCHEDULE 3.16, Biopool has not
retained or otherwise engaged or employed any broker, finder or any other
Person, or paid or agreed to pay any fee or commission to any agent, broker,
finder or other Person, for or on account of acting as a finder or broker in
connection with this Agreement or the transactions contemplated hereby.
3.17 CONTRACTS. Except to the extent disclosed in the SEC Reports,
SCHEDULE 3.17 lists all Contracts that affect Biopool, its business, Properties,
assets, operations or financial condition, other than Contracts entered into in
the ordinary course of Biopool's business and no one of which contemplates
performance by Biopool during a period of more than one year or involves
commitments for sale or purchase in excess of $50,000 and except for Contracts
fully performed or terminable at will without liability to Biopool. To Biopool's
knowledge, each Contract disclosable on SCHEDULE 3.17 or disclosed in the SEC
Reports (a "BIOPOOL DISCLOSABLE CONTRACT") is, in all material respects, valid
and enforceable by Biopool in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally, and (ii) as the remedy of specific performance and other forms of
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefore may be brought. To Biopool's
knowledge, neither Biopool nor any other party to any Biopool Disclosable
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Contract, is in breach of any Biopool Disclosable Contract, except for such
breaches as, taken in the aggregate, would not have a Material Adverse Effect on
Biopool.
3.18 CORPORATE DOCUMENTS. Biopool has furnished or made available to
Xtrana or its representatives true, correct and complete copies of: (a) the
Certificate of Incorporation and Bylaws of Biopool in effect as of the date
hereof; (b) the minute books of Biopool containing all records required to be
set forth of all proceedings, consents, actions and meetings of the shareholders
and board of directors of Biopool from January 1, 1997 through the present; (c)
all material Permits and Orders with respect to Biopool; and (d) the stock
ledger of Biopool setting forth all issuances and transfers of any capital stock
of Biopool.
3.19 PROXY STATEMENT. The Proxy Statement will comply in all material
respects with the Exchange Act, except that no representation or warranty is
made by Biopool with respect to information supplied by or on behalf of Xtrana,
or any affiliate of Xtrana, specifically for inclusion in the Proxy Statement.
None of the information supplied by Biopool or its attorneys specifically for
inclusion in the Proxy Statement (the "BIOPOOL PROXY INFORMATION") shall, as of
the date such information is supplied, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, to the extent
that any Biopool Proxy Information becomes false or misleading due to the
passage of time, Biopool shall timely supplement such information so as to
correct any material false or misleading statements contained therein. The
letter to stockholders, notice of meeting, proxy statement and form of proxy to
be distributed to stockholders in connection with the Merger, and any schedule
required to be filed with the SEC in connection therewith, together with any
amendments or supplements thereto, are collectively referred to herein as the
"PROXY STATEMENT."
3.20 TAXES.
(a) Biopool has filed all Tax Returns that it has been required to file.
All such Tax Returns were correct and complete in all material respects. All
Taxes owed by Biopool (whether or not shown on any Tax Return) have been paid.
For any Taxes that have not been paid, Biopool has established reserves on its
books that equal or exceed those required by GAAP. No claim has ever been made
by a Governmental Agency in a jurisdiction where Biopool does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Liens on any of the assets of Biopool that arose in connection with any
failure (or alleged failure) to pay any Tax.
(b) Biopool has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other Person, except for
amounts not due as of the Closing for which Biopool has withheld but not yet
paid.
(c) To the best of Biopool's knowledge, no Governmental Agency is
expected to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no pending or, to the best of Biopool's knowledge,
threatened dispute or claim of any Governmental Agency relating to any Tax
Liability of Biopool.
(d) No consent has been filed under Section 341(f) of the Code with
respect to Biopool.
(e) There is no Contract covering any Person that, individually or
collectively, as a consequence of the Merger could give rise to the payment of
any amount that would not be deductible by Biopool by reason of Section 280G of
the Code.
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3.21 KNOWLEDGE OF BIOPOOL.For the purposes of this Agreement, references
to "THE BEST OF BIOPOOL'S KNOWLEDGE" shall mean the actual knowledge of those
individuals set forth in SCHEDULE 3.21 (the "BIOPOOL PRINCIPALS"), or knowledge
that a person in the Principal's position would be reasonably expected to know,
after appropriate consultation with the employees, directors and stockholders of
Biopool most likely to have knowledge of the subject matter of such
representation and warranty; provided, however, if in the course of such
consultation, a Biopool a Principal becomes aware of an omission or fact that in
his or her reasonable judgment warrants further investigation, that such Biopool
Principal shall perform whatever further investigation he or she deems
appropriate and the information obtained in such investigation becomes actual
knowledge of such Principal.
ARTICLE IV
COVENANTS
4.1 SPECIAL MEETING. Each of Biopool and Xtrana shall (a) call and hold,
in accordance with the DGCL, a special meeting of stockholders (or, if
appropriate, an annual meeting of stockholders); or (b) in the case of Xtrana,
solicit written consents of each of its respective stockholders, for the purpose
of considering and voting upon the adoption of this Agreement and the approval
of the Merger in accordance with the DGCL.
4.2 REASONABLE BEST EFFORTS, NO INCONSISTENT ACTION. Each party will use
its reasonable best efforts to cause the conditions over which it has control to
be satisfied on or before the Closing. No party will take any action which will
foreseeably result in the nonsatisfaction of any conditions stated in SECTION 5
or SECTION 6 on or before the Closing. The parties hereto will use their
respective reasonable best efforts to (a) obtain all material consents,
authorizations, orders and approvals of or from private parties or Governmental
Agencies, required, proper or advisable in connection with this Agreement and
the Merger; and (b) resolve any action, suit, proceeding or investigation which
shall have been instituted or which a Governmental Agency shall have indicated
its intention to institute which jeopardizes the Merger.
4.3 ACCESS. Subject to the terms of that certain Non-Disclosure
Agreement between the parties, dated March 2, 2000, between the date of this
Agreement and the Closing or any earlier termination of this Agreement in
accordance with its terms, each of Biopool and Xtrana will (a) give the other
and its authorized representatives access to its books, records, Properties,
officers, attorneys and accountants and permit the other to make inspections and
copies of such books and records; and (b) furnish the other with such financial
information and operating data and other information with respect to its
business and Properties, and to discuss with the other and its authorized
representative its affairs, all as the other may from time to time reasonably
request for the purposes of this Agreement, during normal office hours. Any
on-site visit shall be subject to reasonable advance notice and to being
accompanied by an officer or designated employee of the party receiving the
on-site visit. No information furnished pursuant to this SECTION 4.3 or
otherwise known shall affect any representation, warranty or condition in this
Agreement.
4.4 NO SOLICITATION OR NEGOTIATION. Until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, neither party nor
any of its officers, employees, agents, and representatives (including, without
limitation, any investment banker, attorney or accountant) shall, directly or
indirectly, take any action to (a) encourage, solicit, entertain, initiate or
accept the submission of any Acquisition Proposal or any inquiries with respect
thereto; (b) enter into any agreement for or relating to a Third-Party
Transaction; or (c) participate in any way in discussions or negotiations with,
or furnish any non-public information to, any Person in connection with any
Acquisition Proposal. Each of Biopool and Xtrana are obligated to (a) inform the
other immediately upon receipt of any third party solicitation, proposal or bona
fide inquiry that either party or any of their respective representatives may
receive regarding an Acquisition Proposal; or of any request for such
information, including in each case
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a copy thereof and all other particulars thereof, (b) keep the other fully
apprised of all developments therein on a current basis; and (c) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Person conducted heretofore with respect to any
Acquisition Proposal.
4.6 INTERIM FINANCIAL INFORMATION. Each of Biopool and Xtrana will
supply to the other unaudited consolidated monthly financial statements within
30 business days of the end of each month ending between the date of the
respective party's interim statements and the Closing or any earlier termination
of this Agreement in accordance with its terms, prepared on a basis consistent
with the unaudited consolidated financial statements for the preceding months.
For purposes of these statements, employee bonuses and similar expenses may be
accrued based on actual results for the year to date and budgeted results for
the balance of the year.
4.7 INTERIM CONDUCT OF BUSINESS. Concurrently with the execution of this
Agreement, Biopool will enter into a Management Services Agreement with Xtrana,
pursuant to which John H. Wheeler will act as Biopool's chief operating officer
until the Effective Time, in the form attached hereto as EXHIBIT I. Except as
set forth immediately above or disclosed in SCHEDULE 2.6, from the date of this
Agreement until the Closing or any earlier termination of this Agreement in
accordance with its terms, unless approved by the other party in writing, each
of Biopool and Xtrana will operate its business consistently with past practice
and in the ordinary course of business, and will not:
(a) merge or consolidate with or agree to merge or consolidate with, or
sell or agree to sell all or substantially all of its Property to, or purchase
or agree to purchase all or substantially all of the Property of, or otherwise
acquire, any other Person or a division thereof, except as provided in this
Agreement;
(b) amend its certificate of incorporation or by-laws;
(c) make any changes in its accounting methods, principles or practices,
except as required by GAAP;
(d) sell, consume or otherwise dispose of any Property, except in the
ordinary course of business consistent with past practice;
(e) authorize for issuance, issue, sell or deliver any additional shares
of its capital stock of any class or any securities or obligations convertible
into shares of its capital stock or issue or grant any option, warrant or other
right to purchase any shares of its capital stock of any class, other than, in
each case, the issuance of common stock pursuant to the exercise of the options
and warrants disclosed in such party's Schedules to this Agreement;
(f) declare any dividend on, make any distribution with respect to, or
redeem or repurchase, its capital stock except under existing repurchase
agreements or obligations disclosed in such party's Schedules to this Agreement;
(g) pay, discharge, settle or satisfy any claims, Liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction in the
ordinary course of business consistent with past practice or in accordance with
their terms, of claims, liabilities or obligations reflected or reserved against
on the latest Financial Statement and other than the payment of expenses
incurred in connection with the transactions contemplated hereby, or waive any
material benefits of, or agree to modify in any materially adverse respect, any
confidentiality, standstill or similar agreements;
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(h) form any subsidiary;
(i) except as otherwise contemplated by this Agreement or as required to
comply with Legal Requirements or Contracts existing on the date hereof, (i)
terminate, adopt, enter into or amend any collective bargaining agreement or
Benefit Plan; (ii) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any director, officer or employee (except in the case
of employees who are not directors or officers for normal increases of cash
compensation or cash bonuses in the ordinary course of business consistent with
past practice); (iii) pay any benefit not provided for under any Benefit Plan;
(iv) increase in any manner the severance or termination pay of any director,
officer or employee, (v) enter into (1) any employment, severance, termination
or indemnification agreement; or consulting agreement with any current or former
director, officer, employee or consultant or (2) any agreements with any current
or former director, officer, employee or consultant the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction of the nature contemplated by this Agreement; (vi) grant any
awards under any Benefit Plan (including the grant of options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock or the removal of existing restrictions in any Benefit Plans or
agreements or awards made thereunder); (vii) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, contract, agreement or arrangement or Benefit Plan; or (viii) except to
the extent required under any Benefit Plan on the date hereof, take any action
to accelerate the vesting of payment of any compensation or benefit under any
Benefit Plan;
(j) cancel or allow to expire or be cancelled any insurance policy or
binder listed in SCHEDULE 2.11 or SCHEDULE 3.11, as applicable, unless such
policy or binder is replaced with a policy or binder providing comparable
coverage;
(k) enter into any exclusive license agreement or other license
agreement having material terms not usually agreed to by such party in the
ordinary course of its business.
(l) authorize or enter into an agreement to do any of the foregoing.
The transactions contemplated as part of the closing conditions, as set
forth in Articles V and VI, shall not be deemed to be a violation of this
SECTION 4.7.
4.8 EXPENSES. Each party to this Agreement will each pay all of its own
costs and expenses incurred in connection with the transactions contemplated
hereby including, without limitation, all fees and expenses of attorneys,
accountants and financial advisors.
4.9 EXCHANGE ACT REPORTING. Biopool will use its best efforts to remain
a "reporting person" for purposes of the Exchange Act.
4.10 STRUCTURE OF MERGER. In the event that after the Effective Time
Biopool reasonably determines that in order to eliminate the need to obtain
Third Party Action or for other proper reasons it would be desirable to
effectuate the transactions described herein by means of a "reverse triangular
merger" in which a subsidiary of Biopool is merged with and into Xtrana, with
Xtrana to be the surviving corporation in such merger, and provided that such a
structure will not materially prejudice Xtrana or its stockholders, then this
Agreement will be revised accordingly and the parties will take such actions as
are necessary to accomplish this alternative structure.
4.11 PROXY STATEMENT. Biopool will prepare the Proxy Statement with such
assistance from Xtrana as may be required.
4.12 INFORMATION SUPPLIED. Each party to this Agreement will promptly
inform the other of the occurrence of any event which should be included in an
amendment or supplement to the Proxy
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Statement or any other such filing, agreement or document and of any discovery
that any information supplied as described in this SECTION 4.12 no longer
conforms with the requirements of this SECTION 4.12.
4.13 PRESS RELEASES. Promptly after the Effective Time, Biopool and
Xtrana will issue a mutually agreeable press release concerning the transactions
contemplated hereby. The parties hereto will consult and cooperate with each
other and agree upon the terms and substance of all press releases,
announcements and public statements with respect to this Agreement and the
Merger, PROVIDED, HOWEVER, that such consultation and cooperation shall not
interfere with any obligation of either party hereto to disclose any information
as required by applicable law.
4.14 LOAN TO XTRANA. Following the execution of this Agreement, Biopool
will, if requested by Xtrana, promptly make the $1 million principal amount loan
to Xtrana described in that certain letter agreement between such parties, dated
March 10, 2000, on the terms and conditions set forth in such letter agreement.
4.15 RULE 145 AFFILIATES. Prior to the Effective Time, Xtrana shall
deliver to Biopool a letter identifying all persons who were, in Xtrana's
reasonable judgment, at the record date for its stockholders meeting (or the
record date for receipt of a written consent) to approve this Agreement and the
Merger, "affiliates" of Xtrana for purposes of Rule 145 under the Securities Act
("RULE 145 AFFILIATES"). Each of such Rule 145 Affiliates will deliver to
Biopool on or prior to the Effective Time a written agreement (the "AFFILIATE
LETTER") in a usual and customary form for transactions of this type to the
effect that such person will not offer to sell, sell or otherwise dispose of any
Merger Shares except pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
which, in the opinion of legal counsel reasonably satisfactory to Biopool, is
exempt from the registration requirements of the Securities Act. Biopool shall
be entitled to place legends as specified in such Affiliate Letters on the
certificate evidencing any Merger Shares to be received by such Rule 145
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Biopool Common Stock,
consistent with the terms of such Affiliate Letters.
4.16 REORGANIZATION. From and after the date hereof and until the
Effective Time, none of Biopool, Xtrana or any of their respective Subsidiaries
or other Affiliates shall knowingly take any action, or knowingly fail to take
any action, that would jeopardize qualification of the Merger as a
reorganization with the meaning of Section 368(a) of the Code. Following the
Closing, the Surviving Corporation shall not take any action which would cause
the Merger to fail to qualify as a "reorganization" within the meaning of
Section 368 of the Code. Each of Biopool and Xtrana shall reflect the Merger on
their respective federal income tax returns as a Section 368(a)(1)(A)
reorganization.
4.17 MERGER TAX MATTERS. The parties hereto agree that neither of them,
nor any of their respective Affiliates, nor their officers, directors, agents,
or representatives have made any representation or warranty with respect to the
tax consequences of the Merger for the shareholders of the other party.
ARTICLE V
CONDITIONS TO BIOPOOL'S OBLIGATIONS
The obligations of Biopool hereunder are subject to the satisfaction at
or prior to the Closing of each of the following conditions, except as Biopool
may have waived the same in writing in accordance with SECTION 9.1.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Section 2 shall have been true in all material respects on the date
of this Agreement and shall be true in all material respects at and as of
immediately prior to the Closing with the same effect as though made at and as
of immediately prior to the Closing. The updating of Schedules to disclose any
changes in the
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underlying matters disclosed therein occurring from the date hereof to the
Effective Time, which changes do not involve a reasonable possibility of a
material loss to or restriction on Xtrana taken as a whole or a Material Adverse
Effect, shall not constitute a failure of the condition set forth in this
SECTION 5.
5.2 PERFORMANCE. Xtrana shall have performed and complied in all
material respects with all covenants required under this Agreement to be
performed or complied with by it on or before the Closing.
5.3 CLOSING CERTIFICATE. Xtrana shall have delivered to Biopool a
certificate dated as of the date of the Closing and signed by an officer of
Xtrana representing and warranting that the conditions specified in SECTION 5.1
and SECTION 5.2 above are satisfied. Such certificate shall be deemed a
representation and warranty of Xtrana under SECTION 2 for all purposes of this
Agreement.
5.4 THIRD-PARTY ACTION. All Third-Party Action (including, without
limitation, the Hart-Scott Rodino waiting period, if any) required to be
obtained by Xtrana in order to consummate the transactions contemplated hereby,
other than any the absence of which, singularly or in the aggregate, would not
have a material effect on the transactions contemplated hereby or a Material
Adverse Effect on Biopool or Xtrana, shall have been taken.
5.5 TRANSACTIONAL LITIGATION. No action, suit or proceeding before any
Governmental Agency shall have been commenced and not dismissed, and no
investigation by any Governmental Agency shall have been commenced or overtly
threatened, against the parties hereto or any of their officers, directors or
stockholders seeking to restrain, prevent or change the transactions
contemplated hereby or questioning the validity or legality of any of such
transactions or seeking damages in connection with any of such transactions.
5.6 CORPORATE OR OTHER PROCEEDINGS. All corporate and other proceedings
on the part of Xtrana in connection with the transactions to be consummated at
the Closing, and all documents and instruments incident to such transactions,
shall have been taken.
5.7 OPINION OF COUNSEL. Biopool shall have received an opinion of Hogan
& Hartson LLP, counsel to Xtrana, dated as of the Effective Time, substantially
in the form attached hereto as EXHIBIT K.
5.8 STOCKHOLDER APPROVAL. The Biopool Stockholder Approval and the
Xtrana Stockholder Approval shall have been obtained in accordance with SECTION
4.1.
5.9 GOOD STANDING. Biopool shall have received a good standing
certificate for Xtrana from the Secretary of State of Delaware dated as of a
date not earlier than ten (10) days prior to the Closing and an oral "bring
down" from Secretary of State of Delaware on the date of the Closing.
5.10 WHEELER EMPLOYMENT AGREEMENT. Biopool and John H. Wheeler shall
have entered into an Employment Agreement, substantially in the form attached
hereto as EXHIBIT L, pursuant to which Mr. Wheeler shall serve as the Surviving
Corporation's chief executive officer immediately following the Effective Time.
ARTICLE VI
CONDITIONS TO XTRANA'S OBLIGATIONS
The obligations of Xtrana hereunder are subject to the satisfaction at
or prior to the Closing of each of the following conditions, except as Xtrana
may have waived the same in writing in accordance with Section 9.1.
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6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Section 3 shall have been true in all material respects on the date
of this Agreement and shall be true in all material respects at and as of
immediately prior to the Closing with the same effect as though made at and as
of immediately prior to the Closing. The updating of Schedules to disclose any
changes in the underlying matters disclosed therein occurring from the date
hereof to the Effective Time, which changes do not involve a reasonable
possibility of a material loss to or restriction on Biopool taken as a whole or
a Material Adverse Effect, shall not constitute a failure of the condition set
forth in this Section 6.
6.2 PERFORMANCE. Biopool shall have performed and complied in all
material respects with all covenants required under this Agreement to be
performed or complied with by it on or before the Closing.
6.3 CLOSING CERTIFICATE. Biopool shall have delivered to Xtrana a
certificate dated as of the date of the Closing and signed by officers of
Biopool representing and warranting that the conditions specified in SECTION 6.1
and SECTION 6.2 above are satisfied. Such certificate shall be deemed a
representation and warranty of Biopool under SECTION 3 for all purposes of this
Agreement.
6.4 THIRD-PARTY ACTION. All Third-Party Action (including, without
limitation, the Hart-Scott Rodino waiting period, if any) required to be
obtained by Biopool in order to consummate the transactions contemplated hereby,
other than any the absence of which, singularly or in the aggregate, would not
have a material effect on the transactions contemplated hereby or a Material
Adverse Effect on Biopool or Xtrana, shall have been taken.
6.5 TRANSACTIONAL LITIGATION. No action, suit or proceeding before any
Governmental Agency shall have been commenced and not dismissed, and no
investigation by any Governmental Agency shall have been commenced or overtly
threatened, against the parties or any of their officers, directors or
shareholders seeking to restrain, prevent or change the transactions
contemplated hereby or questioning the validity or legality of any of such
transactions or seeking damages in connection with any of such transactions.
6.6 CORPORATE OR OTHER PROCEEDINGS. All corporate and other proceedings
on the part of Biopool in connection with the transactions to be consummated at
the Closing, and all documents and instruments incident to such transactions,
shall have been taken.
6.7 OPINION OF COUNSEL. Xtrana shall have received an opinion of Troop
Steuber Pasich Reddick & Tobey, LLP, counsel to Biopool, dated as of the
Closing, substantially in the form attached hereto as EXHIBIT M.
6.8 SHAREHOLDER APPROVAL. The Biopool Stockholder Approval shall have
been obtained in accordance with SECTION 4.1.
6.9 GOOD STANDING. Xtrana shall have received a good standing
certificate for Biopool from the Secretary of State of Delaware dated as of a
date not earlier than ten (10) days prior to the Closing, and an oral "bring
down" from the Secretary of State of Delaware on the date of the Closing.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION WITH RESPECT TO REPRESENTATIONS AND WARRANTIES.
After the Effective Time, all rights, obligations and claims with respect to the
representations and warranties made
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in or pursuant to this Agreement shall be determined exclusively in accordance
with this ARTICLE VII. Such representations and warranties shall survive the
Effective Time and any investigation made by the other party with respect
thereto for a period of twelve months, in accordance with this SECTION 7.1.
After the Effective Time, Arthur Harrison or such other individual as may be
selected by the former Xtrana stockholders ("XTRANA'S POST-MERGER
REPRESENTATIVE") shall act as the agent of Xtrana's pre-Merger stockholders for
purposes of representing and protecting their interests under this ARTICLE VII.
After the Effective Time, a committee consisting of the Biopool Continuing
Directors ("BIOPOOL'S POST-MERGER REPRESENTATIVE") shall act as the agent of
Biopool for purposes of representing and protecting its interests under this
SECTION 7.1. The Surviving Corporation shall cooperate with Xtrana's Post-Merger
Representative and Biopool's Post-Merger Representative in connection with their
reasonable performance of their responsibilities hereunder, including by
providing them with access to information about the Surviving Corporation that
is reasonably necessary for them to determine whether a claim for
indemnification hereunder should be made.
(a) Subject to SECTION 7.1(C), the Surviving Corporation will indemnify
the Xtrana Indemnitee Parties (as defined below) and hold them harmless against
and in respect of any and all Losses, which arise out of, result from or relate
to:
(i) the operation of the Surviving Corporation of the business of
Xtrana, or the use or disposition by the Surviving Corporation of all or any
part of the assets of Xtrana, after the Effective Time, assuming no material
breach by Xtrana of any representations and/or warranties and no breach by
Xtrana at or prior to the Effective Time of any of its covenants contained in
this Agreement,
(ii) any breach of or inaccuracy in any of the representations and
warranties or covenants made by Biopool to Xtrana in this Agreement or in any
certificate delivered by Biopool pursuant to this Agreement. As used herein, the
"XTRANA INDEMNITEE PARTIES" means Xtrana's stockholders, Affiliates, officers,
directors, employees and their respective successors, assigns, heirs and
personal representatives.
(b) Subject to SECTION 7.1(C), Xtrana will indemnify Biopool and hold it
harmless against and in respect of any and all Losses, which arise out of,
result from or relate to any breach of or inaccuracy in any of the
representations and warranties or covenants made by Xtrana to Biopool in this
Agreement or in any certificate delivered by Xtrana pursuant to this Agreement.
(c) LIMITATIONS ON CLAIMS. No claim shall be payable under this Section
7.1 with respect to any representation or warranty unless and until the
aggregate Losses owing under this SECTION 7.1 in respect of an Indemnitee (as
defined below) and all claims against Biopool or the Xtrana Indemnitee Parties,
as applicable (an "INDEMNITOR") exceed $50,000, in which case the Indemnitee
shall be entitled to indemnification from the Indemnitor for all Losses without
regard to such threshold. As used herein, an "INDEMNITEE" means either Biopool
or one or more of the Xtrana Indemnitee Parties to the extent that such parties
seek indemnification from the other pursuant to this SECTION 7.1.
Notwithstanding the foregoing, Biopool's sole and exclusive remedy for
indemnification claims against Xtrana under this Agreement shall consist of its
right to set off any Losses against the Escrow Shares, and the Xtrana Indemnitee
Parties' sole and exclusive remedy for indemnification claims against Biopool
under this Agreement shall consist of their right to receive additional shares
of the Surviving Corporation's Common Stock, PROVIDED, HOWEVER, in no event
shall the aggregate number of such shares exceed 1,030,641 (the "XTRANA
INDEMNIFICATION SHARES"), in either case pursuant to the procedure described in
SECTION 7.2 hereof. No claim shall be payable with respect to any representation
or warranty unless such claim is asserted within twelve months after the
Effective Time (the "INDEMNIFICATION TERMINATION PERIOD"). For the purposes of
this SECTION 7.1(C), a month shall be deemed to elapse at 5:00 p.m. California
time on the day of the month on which the Effective Time occurred. (For example,
if the Effective Time occurs on June 26, 2000, the sixth month would be deemed
to elapse at 5:00 p.m. California time on December 26, 2000.) All Escrow Shares
not then subject to indemnification claims
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under SECTION 7.1 hereof shall be released to the Xtrana's pre-Merger
stockholders upon the expiration of the Indemnification Termination Period.
7.2 COMPENSATION FOR INDEMNIFIED LOSSES.
(a) Losses for which Indemnitees are entitled to indemnification under
SECTION 7.1 shall, after the Merger, be reimbursed as determined pursuant to
this Section 7.2. To initiate a claim, the Indemnitee shall deliver a notice of
claim to the Xtrana Post-Merger Representative or Biopool Post-Merger
Representative, as applicable. The notice shall include a description in
reasonable detail of the amount and nature of any Losses that the Indemnitee
claims have been suffered and the amount thereof sought to be indemnified. If
the Indemnitor decides to dispute the claim, it shall, within 30 days after
receipt of the notice or claim, give counter-notice to the Indemnitee setting
forth in reasonable detail the basis for disputing the claim. If, within 30 days
after the giving of a counter-notice by Indemnitor, the parties have not reached
agreement as to the indemnification claim in question, then the claim for
indemnification shall be submitted to and be settled by arbitration as provided
below. If the Xtrana Post-Merger Representative submitted the claim, and no
counter-notice is given, the Xtrana Indemnitee Party shall receive such number
of Xtrana Indemnification Shares that when multiplied by the Market Price (as of
the date the counter-notice was due, or if the parties subsequently settle their
dispute, as of the date of such settlement) is equal to the amount of the award,
up to a maximum of the number of Xtrana Indemnification Shares not previously
issued pursuant to this ARTICLE VII (for purposes of this SECTION 7.2, the
"MARKET PRICE" shall mean the average of the closing bid and asked prices for
the Surviving Corporation's Common Stock, as reported by Nasdaq for the over the
counter market, for the ten trading day period ending on the day such
determination is made). If Biopool's Post-Merger Representative submitted the
claim, and no counter-notice is given, the number of Escrow Shares shall be
permanently reduced by that number of shares, that when multiplied by the Market
Price (as of the date the counter-notice was due, or if the parties subsequently
settle their dispute, as of the date of such settlement) is equal to the amount
of the award, up to a maximum of the number of Escrow Shares not previously
cancelled and removed from escrow as a result of indemnification awards pursuant
to SECTION 7.1 hereof.
(b) Any dispute arising out of ARTICLE VII shall be settled by binding
arbitration conducted in accordance with the commercial arbitration rules of the
American Arbitration Association then in effect, and the exclusive venue for
such arbitration shall be Denver, Colorado. Upon resolution of the dispute, if
an Xtrana Indemnitee Party is determined to be entitled to an indemnification
award, such party shall receive such number of Indemnification Shares that when
multiplied by the Market Price (as of such date) is equal to the amount of the
award, up to a maximum of the number of Xtrana Indemnification Shares not
previously issued pursuant to this ARTICLE VII. If Biopool is determined by the
arbitrator to be entitled to an indemnification award, it shall permanently
reduce the number of Escrow Shares by that number of Escrow Shares, that when
multiplied by the Market Price (as of such date) is equal to the amount of the
award, up to a maximum of the number of Escrow Shares not previously cancelled
and removed from escrow as a result of indemnification awards pursuant to
SECTION 7.1 hereof.
7.3 INDEMNIFICATION OF POST-MERGER REPRESENTATIVES. Each of the Xtrana
Post-Merger Representative and the Biopool Post-Merger Representative shall be
indemnified and held harmless by the Surviving Corporation for all actions taken
in connection with this ARTICLE VII to the fullest extent permitted by Delaware
law. Prior to the Effective Time, the Surviving Corporation shall enter into an
indemnification agreement with each such Representative, to become effective as
of the Effective Time, effectuating this indemnification obligation.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
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(a) by written mutual agreement of the parties upon the authorization of
their respective Boards of Directors, notwithstanding approval of this Agreement
by their shareholders or stockholders, as the case may be;
(b) by either party if there shall have been a material breach of any
representation, warranty, covenant, condition or agreement set forth in this
Agreement on the part of the other, which breach shall not have been cured
within ten (10) days following receipt by the breaching party of notice of such
breach
(c) by either party if any permanent injunction or other Order of a
court of other competent authority preventing the consummation of the Merger
shall have become final and nonappealable;
(d) by either party if the parties fail to obtain all material
governmental, authorizations, consents and approvals necessary for the valid
consummation of the Merger; despite the exercise of their reasonable best
efforts to do so, or
(e) by either party if the Merger shall not have been consummated on or
before November 30, 2000, PROVIDED that the initiating party is not in material
default of its obligations under this Agreement.
In the event of a termination of this Agreement by either party as
provided in subsections (a)-(e) above, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of the parties or
their respective officers or directors, except with respect to willful material
breach of any provision of this Agreement prior to such termination and except
that SECTION 4.2 (Non-Disclosure) and SECTION 4.8 (Expenses) hereof shall
continue in effect.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 COMPLETE AGREEMENT; WAIVER AND MODIFICATION; NO THIRD PARTY
BENEFICIARIES. This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties other than the
Biopool Warrant, the Xtrana Warrant and the Letter Agreement dated March 10,
2000 between Biopool and Xtrana, which Letter Agreement shall continue in effect
until the Closing, and will thereafter be superseded. There are no
representations or warranties by any party except those expressly stated or
provided for herein, any implied warranties being hereby expressly disclaimed.
There are no covenants or conditions except those expressly stated herein. No
amendment, supplement or termination of or to this Agreement, and no waiver of
any of the provisions hereof, shall be binding on a party unless made in a
writing signed by such party. This Agreement may be modified by mutual agreement
of the parties as authorized by their respective boards of directors,
notwithstanding approval hereof and thereof by the stockholders of the parties.
Nothing in this Agreement shall be construed to give any Person other than the
express parties hereto any rights or remedies.
9.2 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be given by delivery (by
mail or otherwise) or transmitted to the address or facsimile number listed
below, and will be effective (in all cases) upon receipt. Without limiting the
generality of the foregoing, a mail, express, messenger or other receipt signed
by any Person at such address shall conclusively evidence delivery to and
receipt at such address, and any printout showing successful facsimile
transmission of the correct total pages to the correct facsimile number shall
conclusively evidence transmission to and receipt at such facsimile number.
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(a) If to Xtrana:
XTRANA, INC.
717 Yosemite Circle
Denver, CO 80230
Attention: John H. Wheeler
Facsimile:
with a copy to:
Hogan & Hartson, LLP
1800 Broadway, Suite 200
Boulder, Colorado 80302
Attention: William Roberts
Facsimile: (720) 406-5301
(b) If to Biopool:
BIOPOOL INTERNATIONAL, INC.
6025 Nicolle Street
Ventura, CA 93003
Attention: Michael Bick, Ph.D.
Facsimile:
with a copy to:
TROOP STEUBER PASICH REDDICK & TOBEY, LLP
2029 Century Park East, 24th Floor
Los Angeles, CA 90067
Attention: Scott Alderton
Facsimile: (310) 728-2222
Any party may change its address or facsimile number for purposes of
this Section 9.2 by giving the other party written notice of the new address or
facsimile number in accordance with this Section 9.2, PROVIDED it is a normal
street address, or normal operating facsimile number, in the continental United
States.
9.3 LAW GOVERNING. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of Delaware, without regard to
principles of conflicts of laws. The exclusive venue for all disputes arising
hereunder shall be in Denver, Colorado.
9.4 HEADINGS; REFERENCES; "HEREOF;" INTERPRETATION. The Article and
Section headings in this Agreement are provided for convenience only, and shall
not be considered in the interpretation hereof. References herein to Articles,
Sections, Exhibits or Schedules refer, unless otherwise specified, to the
designated Article, Section of or Exhibit or Schedule to this Agreement. Terms
such as "HEREIN," "HERETO" and "HEREOF" refer to this Agreement as a whole. This
Agreement has been negotiated at arm's length between parties sophisticated and
knowledgeable in the matters addressed in this Agreement. Each of the parties
has been represented by experienced and knowledgeable legal counsel.
Accordingly, any rule of law or legal decision that would require interpretation
of any ambiguities in this Agreement against the party that has drafted it is
not applicable and is waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the purpose of the parties and this
Agreement.
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9.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the heirs, executors, administrators and successors of the
parties hereto, but no right or liability or obligation arising hereunder may be
assigned by any party hereto.
9.6 COUNTERPARTS, SEPARATE SIGNATURE PAGES. This Agreement may be
executed in any number of counterparts, or using separate signature pages. Each
such executed counterpart and each counterpart to which such signature pages are
attached shall be deemed to be an original instrument, but all such counterparts
together shall constitute one and the same instrument.
9.7 SEVERABILITY. In the event any of the provisions of this Agreement
shall be declared by a court or arbitrator to be void or unenforceable, then
such provision shall be severed from this Agreement without affecting the
validity and enforceability of any of the other provisions hereof, and the
parties shall negotiate in good faith to replace such unenforceable or void
provisions with a similar clause to achieve, to the extent permitted under law,
the purpose and intent of the provisions declared void and unenforceable.
9.8 [INTENTIONALLY OMITTED]
9.9 FURTHER ASSURANCES. From time to time following the Closing, the
parties will execute and deliver such instruments and take such other actions
(each at the requesting party's expense, limited to the reasonable out of pocket
costs of the performing party) as may be reasonably required to (i) carry out
the intent of this Agreement and the Merger, and (ii) confirm the consummation
of the transactions contemplated hereby.
ARTICLE X
GLOSSARY
ACQUISITION PROPOSAL - any proposed Acquisition Transaction.
ACQUISITION TRANSACTION - any merger, acquisition, sale, consolidation
or similar transaction involving all or any significant portion of the assets or
ownership of the designated party or a transaction in which any Person shall
acquire Beneficial Ownership or the right to acquire Beneficial Ownership, or
any Group shall have been formed which has Beneficial Ownership or has the right
to acquire Beneficial Ownership, of more than 50 percent of the outstanding
shares of common stock of the designated party.
ADDITIONAL SHARES - 1.7(a) hereof.
ADDITIONAL WARRANT SHARES - 1.7(d) hereof.
AFFILIATE LETTER - 4.15 hereof.
AFFILIATES - a person or entity within the meaning of Rule 144 under the
1933 Act.
AGEN PATENT CLAIM - the claims and causes of action set forth in the
Complaint styled "Agen Biomedical Ltd v. Biopool International, Inc.", filed on
or about March 10, 2000, in the United States District Court for the Northern
District of California, docket no. C 00 0852 PJH.
BENEFICIAL OWNERSHIP - the meanings stated in Regulation 13D-G under the
Securities Exchange Act of 1934, as amended.
BENEFIT PLAN - contracts or arrangements providing for bonuses, profit
sharing payments, deferred compensation, stock options, stock purchase rights,
retainer, consulting, incentive, severance pay
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or retirement benefits, life, medical or other insurance or any other employee
benefits or any other payments, "fringe benefits" or perquisites which are not
terminable at will without liability.
BIOPOOL COMMON STOCK - the common stock, par value $0.01 per share, of
Biopool.
BIOPOOL CONFIDENTIAL INFORMATION - 3.4(f) hereof.
BIOPOOL CONTINUING DIRECTORS - Michael Bick, Ph.D., Douglass Ayer and
Price Paschall.
BIOPOOL DISCLOSABLE CONTRACT - has the meaning given in Section 3.17.
BIOPOOL ERISA PLAN - 3.14(c) hereof.
BIOPOOL FINANCIAL STATEMENTS - 3.8 hereof.
BIOPOOL INTELLECTUAL PROPERTY - Intellectual Property used in the
business of Biopool as currently conducted and presently planned to be
conducted, other than Third-Party Intellectual Property.
BIOPOOL OPTIONS - options to purchase Biopool Common Stock issued
pursuant to the Biopool Stock Option Plan or any predecessor plan.
BIOPOOL POST-MERGER REPRESENTATIVE - 7.2 hereof.
BIOPOOL PRINCIPALS - 3.21 hereof.
BIOPOOL PROXY INFORMATION - 3.19 hereof.
BIOPOOL STOCKHOLDER APPROVAL - 3.3 hereof.
BIOPOOL STOCK OPTION PLAN - the 1993 Stock Option Plan of Biopool.
BIOPOOL WARRANT - a warrant to purchase 1,658,588 shares of Biopool
Common Stock, dated March 30, 2000, granted to Xtrana.
CERTIFICATE - 1.7(a) hereof.
CLAREMONT - 2.27 hereof
CLAREMONT SHARES - 1.7(d) hereof.
CLAREMONT WARRANT - 1.7(d) hereof.
CLOSING - 1.1 hereof.
CLOSING DATE - the date on which the Closing occurs.
CONTRACT - any agreement, contract, lease, license, promissory note,
conditional sales contract, indenture, mortgage, deed of trust, stipulation,
consent decree, consent order, settlement, accord, commitment, undertaking,
instrument or arrangement of any kind, whether or not in writing, and whether
with a private party or a Governmental Agency.
CONVERTIBLE SECURITIES - 1.7(d) hereof.
DELAWARE SECRETARY OF STATE - 1.3 hereof.
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DGCL - General Corporation Law of the State of Delaware.
EARNOUT PERIOD - 1.12 hereof.
EARNOUT SHARES - 1.12 hereof.
EARNOUT TARGET - 1.12 hereof.
EFFECTIVE TIME - 1.3 hereof.
ENVIRONMENTAL REQUIREMENT - any Legal Requirement relating to pollution,
waste, disposal, industrial hygiene, land use or the protection of human health,
safety or welfare, plant life or animal life, natural resources, wetlands,
endangered or threatened species or habitat, the environment or property,
including without limitation those pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges,
releases or threatened releases of Hazardous Materials, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, generation, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Material,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.
ERISA AFFILIATE - any company which, as of the relevant measuring date
under ERISA, is or was a member of a controlled group of corporations or trades
or businesses (as defined in Sections 414(b), (c), (m) or (o) of the Code) of
which the designated party either is or was a member.
ESCROW AGREEMENT - 1.7(a) hereof.
ESCROW SHARES - 1.7(a) hereof.
EXCHANGE ACT - 3.7 hereof. EXTENDED EARNOUT PERIOD - 1.12 hereof.
EXTENDED EARNOUT TARGET - 1.12 hereof.
EXTENDED MAXIMUM TARGET - 1.12 hereof.
GAAP - generally accepted accounting principles applied on a consistent
basis, as set forth in authoritative pronouncements which are applicable to the
circumstances as of the date in question. The requirement that such principles
be applied on a "CONSISTENT BASIS" means that accounting principles observed in
the period in question are comparable in all material respects to those applied
in the preceding periods, except as change is permitted or required under or
pursuant to such accounting principles.
GOULD SHARES - 1.7(d) hereof.
GOULD WARRANT - 1.7(d) hereof.
GOVERNMENTAL AGENCY - any agency, department, board, commission,
district or other public organ, whether federal, state, local or foreign.
GOVERNMENT AUDIT - 2.17(b) hereof.
Page A-33
<PAGE>
GROSS REVENUES - (i) all revenues received by the Surviving Corporation
from grants and contracts between it and any Person, other than grants or
contracts in existence at the Effective Time between Biopool and any Person or
grants or contracts that Biopool was negotiating or had applied for as of the
Effective Time and (ii) all revenues from the sales of products not currently
offered or under development by Biopool as of the date hereof, less shipping
costs, charge-backs, customs duties, taxes (other than income taxes), third
party license fees and other similar items that do not actually represent
revenue to the Surviving Corporation.
HAZARDOUS MATERIAL - all or any of the following: (i) any substance the
presence of which requires investigation or remediation under any applicable law
or regulation; (ii) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as "HAZARDOUS
SUBSTANCES," "HAZARDOUS MATERIALS," "HAZARDOUS WASTES," "TOXIC SUBSTANCES," or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity;" (iii) any petroleum
products, explosives or radioactive materials; and (iv) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
HOLDBACK SHARES - 1.7(a) hereof
INDEMNIFICATION TERMINATION PERIOD - 7.1(c) hereof.
INDEMNITEE - 7.1(c) hereof.
INDEMNITOR - 7.1(c) hereof.
INTELLECTUAL PROPERTY - any or all of the following and all rights
associated therewith: (i) all domestic and foreign patents and applications
therefore and all reissues, divisions, renewals, extensions, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
proprietary rights and processes, know how, technology rights and licenses,
research and development in progress, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyrights
registration and applications therefore, and all other rights corresponding
thereto throughout the world; (iv) all mask works, mask work registrations and
applications therefore; (v) all industrial designs and any registrations and
applications therefore; (vi) all trade names, logos, common law trademarks and
service marks; trademark and service mark registrations and applications
therefore and all goodwill associated therewith; and (vii) all computer software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded, all
documentation related to any of the foregoing.
LEGAL REQUIREMENT - a statute, regulation, ordinance or similar legal
requirement, whether federal, state, local or foreign, or any requirement of a
permit or other authorization issued by a Governmental Agency.
LETTER OF TRANSMITTAL - 1.8(a) hereof.
LIABILITIES - all liabilities, including without limitation any direct
or indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known
or unknown, fixed or contingent, asserted or unasserted, liquidated or
unliquidated, secured or unsecured.
LIEN - any lien, security interest, mortgage, deed of trust, pledge,
hypothecation, capitalized lease or interest or right for security purposes.
Page A-34
<PAGE>
LOSSES - all losses, costs, claims, demands, actions, suits,
proceedings, assessments, expenses, liabilities, damages and judgments
(including interest, penalties and reasonable attorneys' fees and reasonable
out-of-pocket costs and the reasonable fees and out-of-pocket costs of other
professional advisors).
MAXIMUM TARGET - 1.12 hereof.
MARKET PRICE - 7.2(a) hereof.
MATERIAL ADVERSE EFFECT - a material adverse effect on the business,
assets, Properties, Liabilities, financial condition, results of operations or
business of the designated party.
MERGER - Recitals.
MERGER CONSIDERATION - 1.7(a) hereof.
MERGER SHARE CERTIFICATES - the stock certificates to be issued to the
former Xtrana stockholders evidencing the Merger Shares.
MERGER SHARES - the shares of Common Stock of the Surviving Corporation
to be received as the Merger Consideration, including the Xtrana Indemnification
Shares, if any, and the Additional Shares, if any.
ORDER - any judgment, injunction, order or similar mandatory direction
of, or stipulation or agreement filed with, a Governmental Agency, court,
judicial body, arbitrator or arbitrage body.
PERMIT - a permit, license, franchise, certificate of authority or
similar instrument issued by a Governmental Agency.
PERMITTED HAZARDOUS MATERIALS - 2.23 hereof.
PERSON - a natural individual, corporation, partnership, limited
liability company, trust, business trust, association or entity of any kind,
including without limitation a Governmental Agency.
PROPERTY - any interest in real, personal or mixed property, whether
tangible or intangible, including without limitation cash.
PROXY STATEMENT - the proxy statement the be prepared by Xtrana and
Biopool relating to the solicitation of votes of the shareholders of Biopool
approving this Agreement, the Merger and the transactions contemplated by this
Agreement.
RULE 145 AFFILIATES - 4.15 hereof.
SEC - 3.7 hereof.
SEC REPORTS - 3.7 hereof.
SECURITIES ACT - 3.7 hereof.
SURVIVING CORPORATION - 1.2 hereof.
TAX - any federal, state, local or foreign tax, assessment, duty, fee
and other governmental charge or imposition of any kind, whether measured by
properties, assets, wages, payroll, purchases, value
Page A-35
<PAGE>
added, payments, sales, use, business, capital stock, surplus or income, and any
addition, interest, penalty, deficiency imposed with respect to any Tax.
TAX RETURNS - all returns, reports, estimates, information returns and
statements required to be filed in respect of any Taxes.
THIRD-PARTY ACTION - any consent, waiver, approval, license or other
authorization of, or notice to, or filing with, any other Person, whether or not
a Governmental Agency, and the expiration of any associated mandatory waiting
period.
THIRD-PARTY INTELLECTUAL PROPERTY - all written, and all material
unwritten, licenses, sublicenses and other agreements pursuant to which the
designated party is authorized to use, resell or distribute any third-party
Intellectual Property, including without limitation software, open-source,
freeware, shareware and hardware.
THIRD-PARTY RIGHT - any Lien on any Property of the Person in question,
or any right (other than the rights of the designated party hereunder) (i) to
acquire, lease, use, dispose of, vote or exercise any right or power conferred
by any Property of such Person, or (ii) restricting the Person's right to lease,
use, dispose of, vote or exercise any right or power conferred by any Property
of such Person.
THIRD-PARTY TRANSACTION - an Acquisition Transaction with a Person
unrelated to this Agreement and the transactions contemplated hereunder.
THRESHOLD TARGET - 1.12 hereof.
XTRANA ANNUAL STATEMENTS - 2.6(a) hereof.
XTRANA CERTIFICATE OF INCORPORATION - that certain Certificate of
Incorporation of Molecular Innovations, Inc. filed with the Delaware Secretary
of State on October 7, 1997 and that certain Certificate of Amendment To The
Certificate of Incorporation of Molecular Innovations, Inc., filed with the
Delaware Secretary of State on January 31, 2000.
XTRANA COMMON STOCK - the common stock, par value $0.01 per share, of
Xtrana.
XTRANA CONFIDENTIAL INFORMATION - 2.21(f) hereof.
XTRANA DISCLOSABLE CONTRACTS - 2.14 hereof.
XTRANA DISCLOSABLE LEASES - 2.10 hereof.
XTRANA ERISA PLAN - 2.13(c) hereof.
XTRANA FINANCIAL STATEMENTS - 2.6(a) hereof.
XTRANA INDEMNIFICATION SHARES - 7.1(c) hereof.
XTRANA INDEMNITEE PARTIES - 7.1(a)(ii) hereof.
XTRANA INTELLECTUAL PROPERTY - Intellectual Property used in the
business of Xtrana as currently conducted and presently planned to be conducted,
other than Third-Party Intellectual Property.
XTRANA INTERIM STATEMENT - 2.6(a) hereof.
XTRANA PREFERRED STOCK- Section 2.1.
Page A-36
<PAGE>
XTRANA'S POST-MERGER REPRESENTATIVE - 7.2 hereof.
XTRANA PRINCIPALS - 2.29 hereof.
XTRANA'S PROXY INFORMATION - 2.28 hereof.
XTRANA STOCKHOLDER APPROVAL - 2.3 hereof.
XTRANA WARRANT - that certain warrant to purchase 25,278 shares of
Xtrana Common Stock, dated March 30, 2000, granted to Biopool.
[Signature Page Follows]
Page A-37
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Reorganization as of the date first written above.
BIOPOOL INTERNATIONAL, INC. XTRANA, INC.
/S/ MICHAEL D. BICK, PH.D. /S/ JOHN H. WHEELER
------------------------------ ------------------------------
Name: Michael D. Bick, Ph.D. Name: John H. Wheeler
Title: Chief Executive Officer Title: Chief Executive Officer
Page A-38
<PAGE>
APPENDIX B
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstick corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstick corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Security Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or
consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264
of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in
respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
Page B-1
<PAGE>
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss. 253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsection (b) or (c)
hereof that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such
notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger of
consolidation, a written demand for appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger
or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to ss.
228 or ss. 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or
series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and
that appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of
stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger
or consolidation, either (i) each such constituent corporation shall
send a second notice before the
Page B-2
<PAGE>
effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective
date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is
given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (b) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demand for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
Page B-3
<PAGE>
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
Page B-4
<PAGE>
APPENDIX C
FINANCIAL STATEMENTS
OF
XTRANA, INC.
PAGE
Unaudited Condensed Financial
Statements for the period
ended March 31, 2000................................. C-2
Financial Statements for the Years Ended
December 31, 1999 and 1998 and
Independent Auditors' Report......................... C-5
Page C-1
<PAGE>
XTRANA, INC.
(formerly Molecular Innovations, Inc.)
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
AS OF MARCH 31, 2000 AND 1999
(in thousands)
UNAUDITED
2000 1999
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 48 $ 351
Accounts receivable 129 88
Prepaid expenses and other current assets 8 1
------ -------
Total current assets 185 440
Property and equipment, net 3
Intellectual property, net 22 25
------ -------
TOTAL ASSETS $ 210 $ 465
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 167 $ 60
Accrued expense and other current liabilities 402 155
Notes payable 412 412
------ -------
Total current liabilities 981 627
Stockholder's equity 491 408
Accumulated deficit (1,262) (570)
------ -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 210 $ 465
====== =======
</TABLE>
Page C-2
<PAGE>
XTRANA, INC.
(formerly Molecular Innovations, Inc.)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(in thousands)
UNAUDITED
2000 1999
------ -------
<S> <C> <C>
REVENUES $ 325 $ 123
COST OF REVENUES 155 74
------ -------
GROSS PROFIT 170 49
OPERATING EXPENSES:
General and administrative 163 147
Sales and marketing 10 15
Research and development 4 66
------ -------
Total operating expenses 177 228
------ -------
LOSS FROM OPERATIONS (7) (179)
------ -------
LOSS BEFORE PROVISION FOR INCOME TAXES (7) (179)
PROVISION FOR INCOME TAXES - -
------ -------
NET LOSS $ (7) $ (179)
======= =======
</TABLE>
Page C-3
<PAGE>
XTRANA, INC.
(formerly Molecular Innovations, Inc.)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
(in thousands)
UNAUDITED
2000 1999
------- --------
<S> <C> <C>
Operating activities $ 2 $ (165)
Investing activities - -
Financing activities - 412
-------- ---------
Net increase in cash $ 2 $ 247
======== =========
</TABLE>
Page C-4
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
AND INDEPENDENT AUDITORS' REPORT
Page C-5
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheets, December 31, 1999 and 1998 2-3
Statements of Operations
For the Years Ended December 31, 1999 and 1998 4
Statements of Stockholders' Deficit
For the Years Ended December 31, 1999 and 1998 5
Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998 6-7
Notes to Financial Statements 8-14
</TABLE>
-----------------------------------------------------------------
Page C-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
May 26, 2000
To the Board of Directors of
Xtrana, Inc.:
We have audited the accompanying balance sheets of Xtrana, Inc. (formerly
Molecular Innovations, Inc.) (the "Company") as of December 31, 1999 and 1998
and the related statements of operations, stockholders' deficit and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Xtrana, Inc. as of December 31, 1999 and
1998 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses from operations since
inception, has a working capital deficit of $790,962 and has stockholders'
deficit of $763,852. These conditions raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note 8. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Farber & Hass LLP
Oxnard, California
Page C-7
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
--------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 46,333 $ 104,238
Accounts receivable 115,982 87,680
Prepaid expenses and other current assets 10,135 1,242
----------- ---------
Total current assets 172,450 193,160
----------- ---------
EQUIPMENT:
Computer equipment 1,761
Office equipment 3,189
-----------
Total equipment 4,950
Less accumulated depreciation (1,225)
-----------
Property and equipment, net 3,725
-----------
OTHER ASSETS - Intellectual property,
net of amortization 23,385 24,592
----------- ---------
TOTAL ASSETS $ 199,560 $ 217,752
=========== =========
</TABLE>
(Continued)
Page C-8
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
BALANCE SHEETS - CONTINUED
DECEMBER 31, 1999 AND 1998
1999 1998
----------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 208,863 $ 63,929
Accrued payroll and bonuses 281,710 101,995
Notes payable 412,000
Accrued expenses and other current liabilities 11,322 33,993
Accrued interest 32,950
Deferred income 16,567
----------- ---------
Total current liabilities 963,412 199,917
----------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value; 1,250,000
shares authorized; 706,880 shares
issued and outstanding 7,069 7,069
Common stock, $.01 par value; 4,000,000
shares authorized; 1,710,000 shares
issued and outstanding 17,100 17,100
Paid-in capital 466,671 384,271
Accumulated deficit (1,254,692) (390,605)
----------- ---------
Total stockholders' equity (deficit) (763,852) 17,835
----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 199,560 $ 217,752
=========== =========
</TABLE>
See accompanying notes to the financial statements.
------------------------------------------------------------------------
Page C-9
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ---------
<S> <C> <C>
REVENUES $ 924,888 $ 317,204
COST OF REVENUES 437,492 259,432
---------- ---------
GROSS PROFIT 487,396 57,772
---------- ---------
OPERATING EXPENSES:
General and administrative 520,527 240,229
Sales and marketing 104,160 18,057
Research and development 609,378 188,368
---------- ---------
Total operating expenses 1,234,065 446,654
---------- ---------
LOSS FROM OPERATIONS (746,669) (388,882)
---------- ---------
OTHER INCOME (EXPENSE):
Other income 44
Interest expense (33,502) (163)
Convertible debentures - beneficial
conversion feature (82,400)
---------- ---------
Other expense, net (115,858) (163)
---------- ---------
LOSS BEFORE PROVISION FOR INCOME TAXES (862,527) (389,045)
PROVISION FOR INCOME TAXES 1,560 1,560
---------- ---------
NET LOSS $ (864,087) $(390,605)
=========== =========
</TABLE>
See accompanying notes to the financial statements.
------------------------------------------------------------------------
Page C-10
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
PREFERRED STOCK COMMON STOCKd
-------------------- ------------------- PAID-IN ACCUMULATED
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL DEFICIT TOTAL
----------- ------ ----------- ------ ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
COMMON STOCK ISSUED:
Intellectual property 830,000 $8,300 $(3,300) $ 5,000
Founders' shares 970,000 9,700 (9,215) 485
PREFERRED STOCK
ISSUED:
Class A for I.P. 400,000 $4,000 16,000 20,000
Class B for cash 262,880 2,629 325,371 328,000
Class C for cash 40,000 400 49,600 50,000
Class D for services 4,000 40 4,960 5,000
COMMON SHARES (90,000) (900) 855 (45)
NET LOSS $ (390,605) (390,605)
----------------------------------------------------------------------------------------
BALANCE, DECEMBER
31, 1998 706,880 7,069 1,710,000 17,100 384,271 (390,605) 17,835
FAIR VALUE OF
BENEFICIAL
CONVERSION 82,400 82,400
NET LOSS (864,087) (864,087)
----------------------------------------------------------------------------------------
BALANCE, DECEMBER
31, 1999 706,880 $7,069 1,710,000 $17,100 $466,671 $(1,254,692) $(763,852)
========================================================================================
</TABLE>
See accompanying notes to the financial statements.
------------------------------------------------------------------------
Page C-11
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(864,087) $ (390,605)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 1,225
Amortization 1,207 848
Stock issued for services 5,000
Interest expense:
Convertible debentures and notes 82,400
Changes in operating assets
and liabilities:
Accounts receivable (28,302) (87,680)
Prepaid expenses and other assets (8,893) (1,242)
Accounts payable and accrued expenses 122,263 97,967
Interest payable 32,950
Accrued payroll and related party 179,715 101,995
Deferred income 16,567
--------- ---------
Net cash used by operating activities (464,955) (273,717)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (4,950)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes 412,000
Payments for treasury shares (45)
Proceeds from issuance of preferred stock 378,000
--------- ---------
Net cash provided by financing activities 412,000 377,955
---------- ---------
NET INCREASE (DECREASE) IN CASH (57,905) 104,238
CASH, BEGINNING OF YEAR 104,238
---------- ---------
CASH, END OF YEAR $ 46,333 $ 104,238
========== =========
</TABLE>
(Continued)
Page C-12
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 551 $ 163
Income taxes $ 3,120 $ -0-
</TABLE>
In July 1998, the Company exchanged 400,000 shares of preferred stock and
830,000 shares of common stock for intellectual property valued at $25,000.
------------------------------------------------------------------------
Page C-13
<PAGE>
XTRANA, INC.
(FORMERLY MOLECULAR INNOVATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Xtrana, Inc. (formerly Molecular Innovations,
Inc.) (the "Company") is engaged in the research and development of DNA
analysis. The Company's approach enables DNA testing methods to be applied
in industries and for applications where demand for a more sensitive
approach previously was impractical. Inventing solutions to address the
roadblocks of the practical use of Nucleic Acid Detection, proving
feasibility and commercializing applications is the mission of the Company.
For 1998 and 1999, the majority of the Company's revenue was derived from
Government grants.
The Company has incurred net operating losses since inception and expects
to continue to incur such losses until the Company's business plan of
transforming the Company from a research company to a commercial company is
achieved. These and other factors have caused a liquidity problem at the
Company. As discussed in Note 8, management of the Company plans to effect
a merger with a California company engaged in the research, development,
manufacture and marketing of diagnostic products sold on a worldwide basis.
The accompanying financial statements were prepared assuming the Company
will continue to operate on a going-concern basis and do not include any
adjustments to the recorded amounts of assets or to the recorded amounts or
classification of liabilities which would be required if the Company were
unable to realize its assets and satisfy its liabilities and obligations in
the normal course of business.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
accounts receivable. Amounts due from Government agencies account for 100%
of accounts receivable. The Company receives periodic progress payments on
most contracts.
Page C-14
<PAGE>
PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Based on borrowing rates currently
available to the Company, the carrying value of all financial instruments
potentially subject to valuation risk approximates fair value.
OPERATING SEGMENT INFORMATION - The Company predominantly operates in one
industry segment, bio-medical research. Substantially all of the Company's
assets and employees are located at the Company's headquarters in Denver,
Colorado.
ACCOUNTING FOR CONVERTIBLE DEBT SECURITIES - The Company has issued
convertible debt securities with a non-detachable conversion feature. The
Company accounts for such securities in accordance with Emerging Issues
Task Force Topic D-60. The Company has recorded the fair value of the
beneficial conversion feature as interest expense and an increase to
capital.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost with
depreciation provided over the estimated useful life of 3 to 5 years using
the straight-line method.
OTHER ASSETS - Other assets consist of intellectual property for which the
Company is amortizing, using the straight-line method over 15 years.
REVENUE RECOGNITION - The Company, for the years ended 1999 and 1998,
records income based on a percentage of cost or milestone method for all
Government contracts and grants. Costs are accumulated by contract or
grant. Each contract is billed bi-weekly or monthly, based on incurred
costs and estimated annual indirect rates. Actual indirect rate adjustments
are then made at year-end, by contract or grant. Where costs exceed
accumulated billings, the Company records an unbilled receivable, in excess
of any billed receivables. Where billings exceed costs, the Company records
a deferred revenue.
RESEARCH AND DEVELOPMENT - The Company incurs research and development
costs relating to DNA analysis. Research and development costs are expensed
as incurred.
Page C-15
<PAGE>
INCOME TAXES - The Company accounts for its income taxes under the
provisions of Statement of Financial Accounting Standards 109 ("SFAS 109").
The method of accounting for income taxes under SFAS 109 is an asset and
liability method. The asset and liability method requires the recognition
of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between tax bases and financial
reporting bases of other assets and liabilities. The provision for income
taxes represents the Delaware corporate minimum franchise tax.
NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 130, "Reporting Comprehensive
Income", establishes standards for reporting and displaying comprehensive
income and its components in financial statements. The Company adopted the
provisions of SFAS No. 130 in 1998, but has had no elements of
comprehensive income since inception.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", establishes a new model for segment reporting, called the
"management approach" and requires certain disclosures for each segment.
The management approach is based on the way the chief operating
decision-maker organizes segments within a company for making operating
decisions and assessing performance. The Company adopted the provisions of
SFAS No. 131 in 1998, but currently operates in only one industry segment.
2. AGREEMENTS
INTELLECTUAL PROPERTY
In July 1998, the Company entered into Intellectual Property Agreements
with six employees of the Company. In exchange for assigning the Company
all of the rights, title and interest in certain intellectual property and
other rights relating to the development and commercialization of patent
rights, the Company issued 830,000 shares of common stock.
MEMORANDUM OF UNDERSTANDING
In November 1997, the Company entered into an agreement with Bonfils Blood
Center ("BBC") of Colorado and Immunilogical Associates of Denver ("IAD").
BBC and IAD received 400,000 shares of Series A Preferred stock of the
Company in 1998, in consideration for the assignment to the Company of all
rights of Intellectual Property relating to Nucleic Acid Detection
technology, National Institute of Science and Technology ("NIST") grants
and certain other property rights.
As part of certain other property rights, BBC would make available to the
Company, laboratory space on a temporary basis and certain equipment
associated with the NIST grants.
EMPLOYMENT AGREEMENTS
In January 1998, the Company entered into several employment and memorandum
agreements. Three employment agreements provide for a subjective and
objective bonus of up to 30% of base salary. For the period ending December
31, 1999, the Company accrued $131,000 in bonuses which included amounts
negotiated in the employment agreements.
LICENSE
The Company has license agreements with three companies. The agreements
relate to certain proprietary rights relating to technology and marketing.
For the period ending December 31,
Page C-16
<PAGE>
1999, no royalty payments were due based on the terms of the agreements.
3. CONVERTIBLE NOTES PAYABLE
In January 1999, the Board approved the sale of up to $788,640 of 9%
convertible notes due July 31, 2000. The notes are convertible into the
common stock of the Company. The conversion to capital will be equal to
120% of the face amount of the notes. The notes range in face value from
$10,000 to $300,000. Seven notes were issued for a total of $412,000.
4. EQUITY
SERIES A PREFERRED STOCK
In July 1998, the Company created a new class of preferred stock entitled
"Series A Preferred Stock". The Company issued 400,000 shares in exchange
for assignment of intellectual property. This class has a $1 per share
liquidation price, receives dividends based on an equivalent common
dividend, may vote with the holders of common stock as a single class and
has a mandatory conversion to common stock on a date of a qualified IPO or
a conversion to common at the option of the holder, based on certain
criteria.
SERIES B PREFERRED STOCK
In July 1998, the Company created a new class of preferred stock entitled
"Series B Preferred Stock". The Company may issue up to 460,000 shares at a
purchase price of $25.00 per share. The issue was opened and closed on July
10, 1998, of which 262,880 shares were sold. This class receives dividends
based on an equivalent common dividend, may vote with holders of common as
a single class, and may be converted to common at the option of the holder,
based on certain criteria.
SERIES C PREFERRED STOCK
In July 1998, the Company created a new class of preferred stock entitled
"Series C Preferred Stock". The Company may issue up to 60,000 shares at a
purchase price of $25.00 per share. The issue was opened and closed on July
10, 1998, of which 40,000 shares were sold and 4,000 shares exchanged for
services. This class receives dividends based on an equivalent common
dividend, may vote with holders of common as a single class and has a
mandatory conversion to common on a date of a qualified IPO or a conversion
to common at the option of the holder, based on certain criteria.
STOCK SPLIT
In May 2000, the Board of Directors designated a 20-to-1 stock split to
holders of record for Common stock, Preferred Series A, Preferred Series B
and Preferred Series C. In conjunction with the split, the Board authorized
an increase in capital to 5,250,000 shares at $.01 per share; 4,000,000
shares were designated as Common and 1,250,000 were designated as
Preferred. The stock split has been retroactively reflected in the
financial statements.
Page C-17
<PAGE>
5. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1999 are substantially
composed of the Company's net operating loss carryforward, for which the
Company has made a full valuation allowance.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax assets, projected future
taxable income and tax planning strategies in making this assessment.
At December 31, 1999, the Company had a net operating loss carryforward for
Federal income tax purposes of approximately $1.2 million, which is
available to offset future taxable income, if any, through 2019.
6. COMMITMENTS AND CONTINGENCIES
The Company rents its facility on a month-to-month basis. Total rent
expense in 1999 and 1998 was $34,180 and $17,095, respectively.
The Company entered into a lease agreement for equipment starting July 31,
1998. The agreement expires in July 2001. Minimum lease payments due under
the non-cancelable operating lease are as follows:
2000 $4,880
2001 2,847
------
Total $7,727
======
7. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company utilizes computer hardware and software in its operations. Any
of the Company's programs that recognize a date using "00" as the year 1900
rather than the year 2000 could result in errors or system failures.
The Company has completed an evaluation of its computer hardware and
software and believes that its mission critical systems are Year 2000
compliant.
8. MANAGEMENT PLANS (UNAUDITED)
In April 2000, the shareholders of the Company initiated an agreement and
plan of reorganization to merge with a publicly-held company in a related
industry. The effect of the merger would be that all of the proprietary
rights, privileges, powers and franchises of the Company would vest in the
publicly-held company. All of the assets, debts, liabilities and duties of
the Company would become those of the publicly-held company. Immediately
following the merger, the shareholders of the Company will hold
approximately 50% of the outstanding shares of the publicly-held company.
Page C-18
<PAGE>
In connection with the agreement, each company received a warrant to
purchase approximately 20 percent of the other company should the merger
not be effected.
9. SUBSEQUENT EVENTS (UNAUDITED)
SERIES D PREFERRED STOCK
In April 2000, the Company created a new class of preferred stock entitled
"Series D Preferred Stock". The Company may issue up to 200,000 shares at a
purchase price of $4.00 per share. The issue was opened and closed in April
2000 of which, 168,500 shares were sold. This class receives dividends
based on an equivalent common dividend, may vote with holders of common as
a single class and has a mandatory conversion to common on a date of a
qualified IPO or a conversion to common at the option of the holder, based
on certain criteria.
On April 25, 2000, the Board of Directors repriced the Series D issue to
$3.00 per share. Each holder was given a proportionate increase in shares
to a total of 224,667 shares.
SETTLEMENT AGREEMENT
In February 1999, the Company entered into a financing, advisory and
consulting agreement for the acquisition of working capital. As a result of
such agreement, the Company subsequently initiated a merger agreement (see
Note 8). In May 2000, the Board approved a settlement agreement with two
companies in connection with the merger.
One agreement allows for a 10-year warrant for 540,000 shares of the merged
company, at a specified formula price, plus $300,000 which is payable by
the Company.
The second agreement allows for a 5-year warrant for 180,000 shares of the
merged company, at a specified formula price, plus $175,000 which was paid
by the Company.
-----------------------------------------------------------------------
Page C-19
<PAGE>
APPENDIX D
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
OF BIOPOOL INTERNATIONAL, INC.
AND XTRANA, INC.
The following pro forma condensed consolidated financial statements set
forth certain summary unaudited pro forma combined financial data for Biopool
after giving effect to the Merger, as if it had occurred as of the beginning of
each of the periods presented. This information should be read in conjunction
with the historical consolidated financial statements of Xtrana and Biopool
including the notes thereto appearing elsewhere in this Proxy Statement or
furnished with this Proxy Statement. The unaudited pro forma combined condensed
balance sheets are not necessarily indicative of the actual financial position
that would have existed had the Merger been consummated on the dates indicated
or that may be achieved in the future. Assuming the consummation of the Merger,
the actual financial position and results of operations will differ, perhaps
significantly, from the pro forma amounts reflected herein because of a variety
of factors, including changes in value and changes in operating results between
the dates of the unaudited pro forma financial data and the date on which the
Merger takes place.
D-1
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC. AND XTRANA, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
UNAUDITED
(in thousands)
<CAPTION>
-------------- -------------------------------
BIPL Adjustments Consol'd
-------------- -------------------------------
ASSETS
Current assets
<S> <C> <C> <C>
Cash and equivalents $2,567 (152) $2,415
Accounts receivable, net 1,925 2,054
Inventories 2,078 2,078
Prepaid expense and other current assets 262 8 270
Deferred tax benefits 109 109
Net assets of discontinued operations 2,064 2,064
-------------- -------------
Total current assets 9,005 8,990
Property and equipment - net 1,080 3 1,083
Other assets 1,040 9,072 10,112
-------------- ----------- -------------
TOTAL ASSETS $11,125 9,060 $20,185
============== =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 970 569 $1,539
Deferred tax liability 126 126
Commitments and contingencies - -
Stockholders' equity
Common stock 83 94 177
Additional paid-in capital 10,621 19,018
Accumulated deficit (347) (347)
Accumulated other comprehensive loss (328) (328)
-------------- -------------
Total stockholders' equity 10,029 18,520
-------------- ----------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,125 9,060 $20,185
============== =========== =============
</TABLE>
D-2
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC. AND XTRANA, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
(in thousands except per share data)
<CAPTION>
--------------------------- --------------------------
Income Statements Pro Forma
--------------------------- --------------------------
BIPL XTRANA Adjust Ref Consol'd
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Sales $ 2,409 $2,409
Contract revenues $ 325 325
--------------------------- -----------
Total sales and revenues 2,409 325 2,734
Cost of sales 1,162 155 1,317
--------------------------- -----------
Gross profit 1,247 170 1,417
Operating expenses:
Selling, general and administrative 886 173 113 a 1,172
Research and development 81 4
--------------------------- -----------
Total operating expenses 967 177 1,257
Other income, net 35 35
--------------------------- -----------
Income (loss) from continuing operations before taxes 315 (7) 195
Income tax expense 115 (37) b 78
--------------------------- -----------
Net income (loss) $ 200 $ (7) $ 117
=========================== ===========
Weighted average shares outstanding
Basic 8,294 9,369 17,663
Effect of dilutive shares 42 42
-------------- -----------
Diluted 8,336 17,705
============== ===========
Diluted and basic earnings per share
Net income $ 0.02 $ 0.01
============== ===========
</TABLE>
D-3
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC. AND XTRANA, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
(in thousands except per share data)
<CAPTION>
------------------------- -------------------------
Income Statements Pro Forma
------------------------- -------------------------
BIPL XTRANA Adjust Ref Consol'd
------------------------- -------------------------
<S> <C> <C> <C> <C>
Sales $ 8,842 $ 8,842
Contract revenues $ 925 925
------------------------- ------------
Total sales and revenues 8,842 925 9,767
Cost of sales 4,681 437 5,118
------------------------- ------------
Gross profit 4,161 488 4,649
Operating expenses:
Selling, general and administrative 3,113 625 452 a 4,190
Research and development 322 609 931
------------------------- ------------
Total operating expenses 3,435 1,234 5,121
Other income (expense), net 14 (116) (102)
------------------------- ------------
Income (loss) from continuing operations before taxes 740 (862) (574)
Income tax expense 340 2 (342) b -
------------------------- ------------
Income (loss) from continuing operations 400 (864) (574)
Discontinued operations - net of income tax effect 314 314
------------------------- ------------
Net income (loss) $ 714 $(864) $ (260)
========================= ============
Weighted average shares outstanding
Basic 8,375 9,369 17,744
Effect of dilutive shares 24 N/A
------------- ------------
Diluted 8,399 N/A
============= ============
Diluted and basic earnings per share
Continuing operations $ 0.05 $ (0.03)
Discontinued operations 0.04 0.02
------------- ------------
Net income $ 0.09 $ (0.01)
============= ============
</TABLE>
D-4
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
The unaudited pro forma condensed consolidated statement of income for the
twelve months ended December 31, 1999 gives effect to the consolidated results
of operations as if the merger occurred at January 1, 1999. The unaudited pro
forma condensed consolidated statement of income for the three months ended
March 31, 2000 gives effect to the consolidated results of operations as if the
merger occurred at January 1, 2000. These results are not necessarily indicative
of the consolidated results of operations of the Company as they may be in the
future, or as they might have been had these events been effective at January 1,
1999 and 2000, respectively. The unaudited pro forma condensed consolidated
balance sheet gives effect to the financial position at March 31, 2000 as if the
merger occurred at March 31, 2000. Such consolidated financial position of the
Company as it may be in the future, or as it might have been had these events
been effective at March 31, 2000. The unaudited pro forma condensed consolidated
financial information should be read in conjunction with the historical
financial statements of the Company and Xtrana, Inc. and the related notes
thereto.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND THE THREE
MONTHS ENDED MARCH 31, 2000:
a) Gives effect to the amortization of goodwill of $9,050,000 over 20 years as
if the merger had occurred at January 1 for each of the periods presented.
b) Gives effect to taxes for the Xtrana losses and the amortization of
goodwill as noted in footnote (a) above such that the pro forma income tax
provision is at the statutory rate for the period presented with pretax
income.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEET AT MARCH 31, 2000:
Reflects preliminary purchase price allocation for the Xtrana merger
consisting of cash, inventory, accounts receivable, equipment, intangible
assets and liabilities in exchange for 9,369,461 shares of Biopool common
stock and capital expenditures of approximately $200,000 cash.
NOTE: The Company is still in the process of evaluating the fair value of the
assets acquired and the liabilities assumed in order to make a final
determination of the excess purchase price, including allocation to the
intangibles other than goodwill. Accordingly, the purchase accounting
information is preliminary and has been made solely for the purpose of
developing such pro forma condensed consolidated financial information. Based on
current information, the preliminary determination of the cost in excess of the
net assets acquired and the allocation to goodwill should not materially differ
from the final determination.
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APPENDIX E
[HOULIHAN LOKEY LETTERHEAD]
May 3, 2000
Board of Directors
Biopool International, Inc.
c/o Michael Bick, Ph.D
President & Chief Executive Officer
6025 Nicolle Street
Ventura, CA 93003
Dear Dr. Bick:
We understand that Biopool International, Inc. (hereinafter "Biopool or the
"Company") and Xtrana, Inc., formerly known as Molecular Innovations, Inc.
(hereinafter "Xtrana"), propose to enter into an Agreement and Plan of
Reorganization, substantially in the form of the draft dated as of May 3, 2000
(the "Agreement"), whereby Xtrana shall be merged with and into Biopool, with
Biopool as the surviving corporation ("Surviving Corporation"). We understand
that the aggregate merger consideration to be issued to existing Xtrana
stockholders and other parties in exchange for substantially all of the equity
interests of Xtrana will be 9,369,461 shares of the Surviving Corporation's
Common Stock, which number includes shares held in escrow for the purposes of
satisfying Xtrana's indemnification obligations (the "Escrow Shares"), shares
held in escrow based on the achievement of certain revenue targets by Xtrana
(the "Holdback Shares") and shares issued to other parties. The number of shares
of the Surviving Corporation's Common Stock to be issued for each share of
Xtrana's common stock or common stock equivalent shall represent the "Exchange
Ratio."
We also understand that such shares issued to Xtrana stockholders and other
parties represent, in aggregate, approximately 50 percent of the Surviving
Corporation's common stock on a fully diluted basis, subject to certain
adjustments discussed below, and that the remaining approximately 50 percent of
the Surviving Corporation's common stock on a fully diluted basis will initially
continue to be owned by existing Biopool stockholders. Furthermore, we
understand that the parties to this transaction have agreed that the merger
consideration to be received by the Xtrana stockholders and other parties will
be subject to upward or downward adjustment based on Xtrana's actual gross
revenues, the effect of which could vary the aggregate merger consideration to
the Xtrana stockholders and other parties from a minimum of approximately 45
percent to a maximum of approximately 55 percent of the Surviving Corporation's
common stock on a fully diluted basis. In addition, we understand that as part
of the transaction, the Company has agreed to advance Xtrana $1.0 million and
that both Xtrana and the Company have granted each other warrants to purchase up
to 19.9 percent of their respective shares, exercisable at fair market value by
the failure of either granting party to consummate the merger. Such transactions
and other related transactions are collectively referred to herein as the
"Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it. In rendering the Opinion, we have
assumed, with your consent, that the final executed form of the Agreement will
not differ in any material respect from the draft that we have examined, and
that the Company and Xtrana will comply with all the material terms of the
Agreement.
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In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual reports to stockholders and on Form 10-K
for the fiscal year ended December 31, 1999 and Company-prepared
interim financial statements for the 3-month periods ended March 31,
1999 and March 31, 2000, which the Company's management has identified
as being the most current financial statements available;
2. reviewed a copy of the Agreement and Plan of Reorganization dated May
3, 2000 between Biopool and Xtrana;
3. reviewed a draft copy of the proxy statement, dated May 3 2000;
4. held discussions with certain members of the senior management of the
Company and Xtrana, respectively, to discuss the operations, financial
condition, future prospects and projected operations and performance
of the Company and Xtrana, and held discussions with representatives
of the Company's independent counsel to discuss certain matters;
5. visited certain facilities and business offices of the Company;
6. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the years ended December
31, 2000 through 2003;
7. reviewed forecasts and projections prepared by Xtrana's management
with respect to Xtrana for the years ended December 31, 2000 through
2003;
8. reviewed the Molecular Innovations, Inc. $10,000,000 Series D
Convertible Preferred Stock Confidential Private Placement Memorandum
dated June 1999 and a proposed term sheet relating to a $4,000,000
Series D Convertible Preferred Stock offering dated February 23, 2000;
9. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
10. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company and Xtrana, and
publicly available prices and premiums paid in other transactions that
we considered similar to the Transaction;
11. reviewed drafts of certain documents to be delivered at the closing of
the Transaction; and
12. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have not assumed any responsibility for independent verification of any of
the foregoing information and have relied upon it being complete and accurate in
all material respects. We have relied upon and assumed, without independent
verification, that the financial forecasts and projections provided to us have
been reasonably prepared and reflect the best currently available estimates of
the future financial results and condition of the Company and Xtrana after
taking into effect the potential synergies and strategic benefits anticipated to
result from the Transaction, and that there has been no material change in the
assets, financial condition, business or prospects of the Company or Xtrana
since the date of the most recent financial statements made available to us. In
addition, we have assumed with your approval that the future financial results
referred to above will be achieved at the times and in the amounts projected by
the management of the Company and Xtrana.
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We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company or Xtrana and do not
assume any responsibility with respect to it. We have not made an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company or Xtrana and were not furnished with any evaluations or
appraisals of the assets or liabilities (contingent or otherwise) of the Company
or Xtrana. In particular, we have not independently verified the future
commercial viability of certain products and technologies currently under
development by the Company and Xtrana and therefore relied upon the best
currently available estimates of management of the Company and Xtrana regarding
the commercialization of such products and technologies and the cash flows
resulting therefrom. We also have assumed with your consent that the Transaction
will be treated as a tax-free reorganization for Federal income tax purposes.
Our opinion is necessarily based on business, economic, market and other
conditions as they exist and can be evaluated by us at the date of this letter.
Furthermore, our advisory services and the Opinion expressed herein were
prepared for the use of the Company's Board of Directors and do not constitute a
recommendation to the Company's stockholders as to how they should vote at the
stockholders' meeting in connection with the Transaction. We hereby consent
however, to the inclusion of the Opinion as an exhibit to any proxy statement
used in connection with the Transaction so long as the Opinion letter is quoted
in full in such proxy statement.
Based upon and subject to the foregoing, and in reliance thereon, it is our
opinion that, as of the date hereof, the Exchange Ratio is fair to the Company
from a financial point of view.
/s/ HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
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APPENDIX F
BIOPOOL INTERNATIONAL, INC.
2000 STOCK INCENTIVE PLAN
SECTION 1: GENERAL PURPOSE OF PLAN
The name of this plan is the Biopool International, Inc. 2000 Stock
Incentive Plan (the "PLAN"). The purpose of the Plan is to enable Biopool
International, Inc., a Delaware corporation (the "COMPANY"), and any Parent or
any Subsidiary to obtain and retain the services of the types of employees,
consultants, officers and Directors who will contribute to the Company's long
range success and to provide incentives which are linked directly to increases
in share value which will inure to the benefit of all shareholders of the
Company.
SECTION 2: DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"ADMINISTRATOR" shall have the meaning as set forth in Section 3, hereof.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means (i) failure by an Eligible Person to substantially perform
his or her duties and obligations to the Company (other than any such failure
resulting from his or her incapacity due to physical or mental illness); (ii)
engaging in misconduct or a fiduciary breach which is or potentially is
materially injurious to the Company or its shareholders; (iii) commission of a
felony; (iv) the commission of a crime against the Company which is or
potentially is materially injurious to the Company; or (v) as otherwise provided
in the Stock Option Agreement or Stock Purchase Agreement. For purposes of this
Plan, the existence of Cause shall be determined by the Administrator in its
sole discretion.
"CHANGE IN CONTROL" shall mean:
(1) The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than 50% of
the combined voting power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation or other reorganization
is owned, directly or indirectly, by persons who were not shareholders of the
Company immediately prior to such merger, consolidation or other reorganization;
or
(2) The sale, transfer or other disposition of all or substantially all of
the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means a committee of the Board designated by the Board to
administer the Plan.
"COMPANY" means Biopool International, Inc., a corporation organized under
the laws of the State of Delaware (or any successor corporation).
"DATE OF GRANT" means the date on which the Administrator adopts a
resolution expressly granting a Right to a Participant or, if a different date
is set forth in such resolution as the Date of Grant, then such date as is set
forth in such resolution.
"DIRECTOR" means a member of the Board.
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"DISABILITY" means that the Optionee is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment. For purposes of determining the term of an ISO pursuant to Section
6.6 hereof, the Disability must be expected to result in death or to have lasted
or be expected to last for a continuous period of not less than 12 months. The
determination of whether an individual has a Disability shall be determined
under procedures established by the Plan Administrator.
"ELIGIBLE PERSON" means an employee, officer, consultant or Director of the
Company, any Parent or any Subsidiary.
"EXERCISE PRICE" shall have the meaning set forth in Section 6.3 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the fair market value of a Share, determined
as follows:
(1) If the Stock is listed on any established stock exchange or a national
market system, including without limitation the NASDAQ National Market, the Fair
Market Value of a share of Stock shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in the Stock) on
the last market trading day prior to the day of determination, as reported in
the WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(2) If the Stock is quoted on the NASDAQ System (but not on the NASDAQ
National Market) or is regularly quoted by a recognized securities dealer but
closing sale prices are not reported, the Fair Market Value of a share of Stock
shall be the mean between the bid and asked prices for the Stock on the last
market trading day prior to the day of determination, as reported in the WALL
STREET JOURNAL or such other source as the Administrator deems reliable;
(3) In the absence of an established market for the Stock, the Fair Market
Value shall be determined in good faith by the Administrator. Such determination
shall be conclusive and binding on all persons.
"FIRST REFUSAL RIGHT" shall have the meaning set forth in Section 8.7
hereof.
"ISO" means a Stock Option intended to qualify as an "incentive stock
option" as that term is defined in Section 422(b) of the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an Employee
of the Company, a Parent or Subsidiary, who satisfies the requirements of such
term as defined in Rule 16b-3(b)(3)(i) promulgated by the Securities and
Exchange Commission.
"NON-QUALIFIED STOCK OPTION" means a Stock Option not described in Section
422(b) of the Code.
"OFFEREE" means a Participant who is granted a Purchase Right pursuant to
the Plan.
"OPTIONEE" means a Participant who is granted a Stock Option pursuant to
the Plan.
"OUTSIDE DIRECTOR" means a member of the Board who is not an Employee of
the Company, a Parent or Subsidiary, who satisfies the requirements of such term
as defined in Treas. Regs. Section 1.162-27(e)(3).
"PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.
"PARTICIPANT" means any Eligible Person selected by the Administrator,
pursuant to the Administrator's authority in Section 3, to receive grants of
Rights.
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"PLAN" means this Biopool International, Inc. 2000 Stock Incentive Plan, as
the same may be amended or supplemented from time to time.
"PURCHASE PRICE" shall have the meaning set forth in Section 7.3.
"PURCHASE RIGHT" means the right to purchase Stock granted pursuant to
Section 7.
"RIGHTS" means Stock Options and Purchase Rights.
"REPURCHASE RIGHT" shall have the meaning set forth in Section 8.8 of the
Plan.
"SERVICE" shall mean service as an Employee, Director or Consultant.
"STOCK" means Common Stock ($.001 par value) of the Company.
"STOCK OPTION" means an option to purchase shares of Stock granted pursuant
to Section 6.
"STOCK OPTION AGREEMENT" shall have the meaning set forth in Section 6.1.
"STOCK PURCHASE AGREEMENT" shall have the meaning set forth in Section 7.1.
"SUBSIDIARY" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company, if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.
"TEN PERCENT SHAREHOLDER" means a person who on the Date of Grant owns,
either directly or through attribution as provided in Section 424 of the Code,
Stock constituting more than 10% of the total combined voting power of all
classes of stock of his or her employer corporation or of any Parent or
Subsidiary.
SECTION 3: ADMINISTRATION
3.1 ADMINISTRATOR. The Plan shall be administered by either (i) the Board
or (ii) the Committee (the group that administers the Plan is referred to as the
"Administrator").
3.2 POWERS IN GENERAL. The Administrator shall have the power and authority
to grant to Eligible Persons, pursuant to the terms of the Plan, (i) Stock
Options, (ii) Purchase Rights or (iii) any combination of the foregoing.
3.3 SPECIFIC POWERS. In particular, the Administrator shall have the
authority: (i) to construe and interpret the Plan and apply its provisions; (ii)
to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to determine whether
each Stock Option is to be an ISO or a Non-Qualified Stock Option; (viii) to
prescribe the terms and conditions of each Stock Option and Purchase Right,
including, without limitation, the Purchase Price and medium of payment, vesting
provisions and repurchase provisions, and to specify the provisions of the Stock
Option Agreement or Stock Purchase Agreement relating to such grant or sale;
(ix) to amend any outstanding Rights for the purpose of modifying the time or
manner of vesting, the Purchase Price or Exercise Price, as the case may be,
subject to applicable legal restrictions and to the consent of the other party
to such agreement; (x) to determine the duration and purpose of leaves of
absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan; (xi) to make decisions with
respect to outstanding Stock Options that may become necessary upon a change in
corporate control or an event
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that triggers anti-dilution adjustments; and (xii) to make any and all other
determinations which it determines to be necessary or advisable for
administration of the Plan.
3.4 DECISIONS FINAL. All decisions made by the Administrator pursuant to
the provisions of the Plan shall be final and binding on the Company and the
Participants.
3.5 THE COMMITTEE. The Board may, in its sole and absolute discretion, from
time to time, and at any period of time during which the Company's Stock is
registered pursuant to Section 12 of the Exchange Act shall, delegate any or all
of its duties and authority with respect to the Plan to the Committee whose
members are to be appointed by and to serve at the pleasure of the Board. From
time to time, the Board may increase or decrease the size of the Committee, add
additional members to, remove members (with or without cause) from, appoint new
members in substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the majority of its
members or, in the case of a committee comprised of only two members, the
unanimous consent of its members, whether present or not, or by the written
consent of the majority of its members or, in the case of a Committee comprised
of only two members, the unanimous written consent of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the limitations prescribed by the Plan and the Board, the
Committee may establish and follow such rules and regulations for the conduct of
its business as it may determine to be advisable. During any period of time
during which the Company's Stock is registered pursuant to Section 12 of the
Exchange Act, all members of the Committee shall be Non-Employee Directors and
Outside Directors.
3.6 INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as Directors or members of the Committee, and to the extent
allowed by applicable law, the Administrator shall be indemnified by the Company
against the reasonable expenses, including attorney's fees, actually incurred in
connection with any action, suit or proceeding or in connection with any appeal
therein, to which the Administrator may be party by reason of any action taken
or failure to act under or in connection with the Plan or any option granted
under the Plan, and against all amounts paid by the Administrator in settlement
thereof (provided that the settlement has been approved by the Company, which
approval shall not be unreasonably withheld) or paid by the Administrator in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Administrator did not act in good faith and in a manner
which such person reasonably believed to be in the best interests of the
Company, and in the case of a criminal proceeding, had no reason to believe that
the conduct complained of was unlawful; PROVIDED, HOWEVER, that within 60 days
after institution of any such action, suit or proceeding, such Administrator
shall, in writing, offer the Company the opportunity at its own expense to
handle and defend such action, suit or proceeding.
SECTION 4: STOCK SUBJECT TO THE PLAN
4.1 STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in Section
9, 3,000,000 shares of Common Stock ($.001 par value) shall be reserved and
available for issuance under the Plan. Stock reserved hereunder may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
4.2 BASIC LIMITATION. The maximum number of shares with respect to which
Options, awards or sales of Stock may be granted under the Plan to any
Participant in any one calendar year shall be 1,500,000 shares. The number of
shares that are subject to Rights under the Plan shall not exceed the number of
shares that then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available a
sufficient number of shares to satisfy the requirements of the Plan.
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4.3 ADDITIONAL SHARES. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purposes of the Plan. In the event that shares issued under
the Plan are reacquired by the Company pursuant to the terms of any forfeiture
provision, right of repurchase or right of first refusal, such shares shall
again be available for the purposes of the Plan.
SECTION 5: ELIGIBILITY
Eligible Persons who are selected by the Administrator shall be eligible to
be granted Rights hereunder subject to limitations set forth in this Plan;
PROVIDED, HOWEVER, that only employees shall be eligible to be granted ISOs
hereunder.
SECTION 6: TERMS AND CONDITIONS OF OPTIONS.
6.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company. Such
Option shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which are not inconsistent with
the Plan and which the Administrator deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.
6.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the number
of shares of Stock that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9, hereof. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Non-Qualified
Stock Option.
6.3 EXERCISE PRICE.
6.3.1 IN GENERAL. Each Stock Option Agreement shall state the price at
which shares subject to the Stock Option may be purchased (the "EXERCISE
PRICE"), which shall, with respect to Incentive Stock Options, be not less than
100% of the Fair Market Value of the Stock on the Date of Grant. In the case of
Non-Qualified Stock Options, the Exercise Price shall be determined in the sole
discretion of the Administrator; PROVIDED, HOWEVER, that the Exercise Price
shall be no less than 85% of the Fair Market Value of the shares of Stock on the
Date of Grant of the Non-Qualified Stock Option.
6.3.2 TEN PERCENT SHAREHOLDER. A Ten Percent Shareholder shall not be
eligible for designation as an Optionee or Purchaser, unless (i) the Exercise
Price of a Non-Qualified Stock Option is at least 110% of the Fair Market Value
of a Share on the Date of Grant, or (ii) in the case of an ISO, the Exercise
Price is at least 110% of the Fair Market Value of a Share on the Date of Grant
and such ISO by its terms is not exercisable after the expiration of five years
from the Date of Grant.
6.3.3 NON-APPLICABILITY. The Exercise Price restriction applicable to
Non-Qualified Stock Options required by Sections 6.3.1 and 6.3.2(i) shall be
inoperative if (i) the shares to be issued upon payment of the Exercise Price
have been registered under a then currently effective registration statement
under applicable federal or state securities laws, or (ii) a determination is
made by counsel for the Company that such Exercise Price restrictions are not
required in the circumstances under applicable federal or state securities laws.
The Exercise Price shall be payable in a form described in Section 8,
hereof.
6.4 WITHHOLDING TAXES. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Board may require for the
satisfaction of any federal, state, local or
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foreign withholding tax obligations that may arise in connection with such
exercise or with the disposition of shares acquired by exercising an Option.
6.5 EXERCISABILITY. Each Stock Option Agreement shall specify the date when
all or any installment of the Option becomes exercisable. In the case of an
Optionee who is not an officer of the Company, a Director or a Consultant, an
Option shall become exercisable at least as rapidly as 20% per year over the
five-year period commencing on the Date of Grant until such time as when the
Company's securities become publicly traded. Subject to the preceding sentence,
the exercise provisions of any Stock Option Agreement shall be determined by the
Board, in its sole discretion.
6.6 TERM. The Stock Option Agreement shall specify, the term of the Option.
No Option shall be exercised after the expiration of ten years after the date
the Option is granted. In addition, no option may be exercised (i) three months
after the date the Optionee's Service with the Company, its Parent or its
Subsidiaries terminates if such termination is for any reason other than death,
Disability or Cause, (ii) one year after the date the Optionee's Service with
the Company and its subsidiaries terminates if such termination is a result of
death or Disability, and (iii) if the Optionee's Service with the Company and
its Subsidiaries terminates for Cause, all outstanding Options granted to such
Optionee shall expire as of the commencement of business on the date of such
termination; PROVIDED, HOWEVER, that the Stock Option Agreement for any Option
may provide for longer or shorter periods, and the Administrator may, in its
sole discretion, waive the accelerated expiration provided for in (i) or (ii).
Outstanding Options that are not exercisable at the time of termination of
employment for any reason shall expire at the close of business on the date of
such termination. In the case of an ISO granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Parent or Subsidiary corporations, the term
set forth in (i), above, shall not be more than five years after the date the
Option is granted.
6.7 LEAVES OF ABSENCE. For purposes of Section 6.6 above, Service shall be
deemed to continue while the Optionee is on a bona fide leave of absence, if
such leave was approved by the Company in writing and if continued crediting of
Service for this purpose is expressly required by the terms of such leave or by
applicable law (as determined by the Administrator).
6.8 MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Administrator may modify, extend or assume
outstanding Options or may accept the cancellation of outstanding Options
(whether granted by the Company or another issuer) in return for the grant of
new Options for the same or a different number of shares and at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair the Optionee's rights
or increase the Optionee's obligations under such Option. However, a termination
of the Option in which the Optionee receives a cash payment equal to the
difference between the Fair Market Value and the Exercise Price for all shares
subject to exercise under any outstanding Option shall not be deemed to impair
any rights of the Optionee or increase the Optionee's obligations under such
Option.
SECTION 7: TERMS AND CONDITIONS OF AWARDS OR SALES
7.1 STOCK PURCHASE AGREEMENT. Each award or sale of shares under the Plan
(other than upon exercise of an Option) shall be evidenced by a Stock Purchase
Agreement between the Purchaser and the Company. Such award or sale shall be
subject to all applicable terms and conditions of the Plan and may be subject to
any other terms and conditions which are not inconsistent with the Plan and
which the Board deems appropriate for inclusion in a Stock Purchase Agreement.
The provisions of the various Stock Purchase Agreements entered into under the
Plan need not be identical.
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7.2 DURATION OF OFFERS. Any right to acquire shares under the Plan (other
than an Option) shall automatically expire if not exercised by the Purchaser
within 30 days after the grant of such right was communicated to the Purchaser
by the Company.
7.3 PURCHASE PRICE.
7.3.1 IN GENERAL. Each Stock Purchase Agreement shall state the price
at which the Stock subject to such Stock Purchase Agreement may be purchased
(the "PURCHASE PRICE"), which, with respect to Stock Purchase Rights, shall be
determined in the sole discretion of the Administrator; PROVIDED, HOWEVER, that
the Purchase Price shall be no less than 85% of the Fair Market Value of the
shares of Stock on either the Date of Grant or the date of purchase of the
Purchase Right.
7.3.2 TEN PERCENT SHAREHOLDERS. A Ten Percent Shareholder shall not be
eligible for designation as a Purchaser unless the Purchase Price (if any) is at
least 100% of the Fair Market Value of a Share.
7.3.3 NON APPLICABILITY. The Purchase Price restrictions required by
Sections 7.3.1 and 7.3.2 shall be inoperative if (i) the shares to be issued
upon payment of the Purchase Price have been registered under a then currently
effective registration statement under applicable federal or state securities
laws, or (ii) a determination is made by counsel for the Company that such
Purchase Price restrictions are not required in the circumstances under
applicable federal or state securities laws.
The Purchase Price shall be payable in a form described in Section 8.
7.4 WITHHOLDING TAXES. As a condition to the purchase of shares, the
Purchaser shall make such arrangements as the Board may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such purchase.
SECTION 8: PAYMENT; RESTRICTIONS
8.1 GENERAL RULE. The entire Purchase Price or Exercise Price of shares
issued under the Plan shall be payable in full by, as applicable, cash or check
for an amount equal to the aggregate Purchase Price or Exercise Price for the
number of shares being purchased, or in the discretion of the Administrator,
upon such terms as the Administrator shall approve, (i) in the case of an
Option, by a copy of instructions to a broker directing such broker to sell the
Stock for which such Option is exercised, and to remit to the Company the
aggregate Exercise Price of such Options (a "CASHLESS EXERCISE"), (ii) in the
case of an Option or a sale of Stock, by paying all or a portion of the Exercise
Price or Purchase Price for the number of shares being purchased by tendering
Stock owned by the Optionee, duly endorsed for transfer to the Company, with a
Fair Market Value on the date of delivery equal to the aggregate Purchase Price
of the Stock with respect to which such Option or portion thereof is thereby
exercised or Stock acquired (a "sTOCK-FOR-STOCK EXERCISE") or (iii) by a
stock-for-stock exercise by means of attestation whereby the Optionee identifies
for delivery specific shares of Stock already owned by Optionee and receives a
number of shares of Stock equal to the difference between the Option shares
thereby exercised and the identified attestation shares of Stock (an
"ATTESTATION EXERCISE").
8.2 WITHHOLDING PAYMENT. The Purchase Price or Exercise Price shall include
payment of the amount of all federal, state, local or other income, excise or
employment taxes subject to withholding (if any) by the Company or any parent or
subsidiary corporation as a result of the exercise of a Stock Option. The
Optionee may pay all or a portion of the tax withholding by cash or check
payable to the Company, or, at the discretion of the Administrator, upon such
terms as the Administrator shall approve, by (i) cashless exercise or
attestation exercise; (ii) Stock-for-Stock exercise; (iii) in the case of an
Option, by paying all or a portion of the tax withholding for the number of
shares being purchased by withholding shares from any transfer or payment to the
Optionee ("STOCK WITHHOLDING"); or (iv) a combination of one
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or more of the foregoing payment methods. Any shares issued pursuant to the
exercise of an Option and transferred by the Optionee to the Company for the
purpose of satisfying any withholding obligation shall not again be available
for purposes of the Plan. The Fair Market Value of the number of shares subject
to Stock withholding shall not exceed an amount equal to the applicable minimum
required tax withholding rates.
8.3 SERVICES RENDERED. At the discretion of the Administrator, shares may
be awarded under the Plan in consideration of services rendered to the Company,
a Parent or a Subsidiary prior to the award. At the discretion of the
Administrator, shares may also be awarded under the Plan in consideration of
services to be rendered to the Company, a Parent or a Subsidiary after the
award, except that the par value of such shares, if newly issued, shall be paid
in cash or cash equivalents.
8.4 PROMISSORY NOTE. To the extent that a Stock Option Agreement or Stock
Purchase Agreement so provides, in the discretion of the Administrator, upon
such terms as the Administrator shall approve, all or a portion of the Exercise
Price or Purchase Price (as the case may be) of shares issued under the Plan may
be paid with a full-recourse promissory note. However, the par value of the
shares, if newly issued, shall be paid in cash or cash equivalents. The shares
shall be pledged as security for payment of the principal amount of the
promissory note and interest thereon. The interest rate payable under the terms
of the promissory note shall not be less than the minimum rate (if any) required
to avoid the imputation of additional interest under the Code. Subject to the
foregoing, the Administrator (at its sole discretion) shall specify the term,
interest rate, amortization requirements (if any) and other provisions of such
note. Unless the Administrator determines otherwise, shares of Stock having a
Fair Market Value at least equal to the principal amount of the loan shall be
pledged by the holder to the Company as security for payment of the unpaid
balance of the loan and such pledge shall be evidenced by a pledge agreement,
the terms of which shall be determined by the Administrator, in its discretion;
PROVIDED, HOWEVER, that each loan shall comply with all applicable laws,
regulations and rules of the Board of Governors of the Federal Reserve System
and any other governmental agency having jurisdiction.
8.5 EXERCISE/PLEDGE. To the extent that a Stock Option Agreement or Stock
Purchase Agreement so allows and if Stock is publicly traded, in the discretion
of the Administrator, upon such terms as the Administrator shall approve,
payment may be made all or in part by the delivery (on a form prescribed by the
Administrator) of an irrevocable direction to pledge shares to a securities
broker or lender approved by the Company, as security for a loan, and to deliver
all or part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
8.6 WRITTEN NOTICE. The purchaser shall deliver a written notice to the
Administrator requesting that the Company direct the transfer agent to issue to
the purchaser (or to his designee) a certificate for the number of shares of
Common Stock being exercised or purchased or, in the case of a cashless exercise
or share withholding exercise, for any shares that were not sold in the cashless
exercise or withheld.
8.7 FIRST REFUSAL RIGHT. Each Stock Option Agreement and Stock Purchase
Agreement may provide that the Company shall have the right of first refusal
(the "First Refusal Right"), exercisable in connection with any proposed sale,
hypothecation or other disposition of the Stock purchased by the Optionee or
Offeree pursuant to a Stock Option Agreement or Stock Purchase Agreement; and in
the event the holder of such Stock desires to accept a bona fide third-party
offer for any or all of such Stock, the Stock shall first be offered to the
Company upon the same terms and conditions as are set forth in the bona fide
offer.
8.8 REPURCHASE RIGHTS. Following a termination of the Participant's Service
the Company may repurchase the Participant's Rights as provided in this Section
8.8.
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8.8.1 REPURCHASE PRICE. Following a termination of the Participant's
Service the Repurchase Right shall be exercisable at a price equal to (i) the
Fair Market Value of vested Stock or, in the case of exercisable options, the
Fair Market Value of the Stock underlying such unexercised options less the
Exercise Price or (ii) the Purchase Price or Exercise Price, as the case may be,
of unvested Stock. The right to repurchase unvested stock as described in
Section 8.8.1(ii) shall lapse at a rate of at least 20% per year over five years
from the date the Right is granted.
8.8.2 EXERCISE OF REPURCHASE RIGHT. A Repurchase Right may be exercised
only within 90 days after the termination of the Participant's Service for cash
or for cancellation of indebtedness incurred in purchasing the shares.
8.9 TERMINATION OF REPURCHASE AND FIRST REFUSAL RIGHTS. Each Stock Option
Agreement and Stock Purchase Agreement shall provide that the Repurchase Rights
and First Refusal Rights shall have no effect over, or shall lapse and cease to
have effect over, shares that have been registered under a then currently
effective registration statement under applicable federal or state securities
laws, or when a determination is made by counsel for the Company that such
Repurchase Rights and First Refusal Rights are not required in the circumstances
under applicable federal or state securities laws.
8.10 NO TRANSFERABILITY. Except as provided herein, a Participant may not
assign, sell or transfer Rights, in whole or in part, other than by will or by
operation of the laws of descent and distribution.
8.10.1 PERMITTED TRANSFER OF NON-QUALIFIED OPTION. The Administrator,
in its sole discretion may permit the transfer of a Non-Qualified Option (but
not an ISO or Stock Purchase Right) as follows: (i) by gift to a member of the
Participant's immediate family or (ii) by transfer by instrument to a trust
providing that the Option is to be passed to beneficiaries upon death of the
trustor (either or both (i) or (ii) referred to as a "PERMITTED TRANSFEREE").
For purposes of this Section 8.10.1, "immediate family" shall mean the
Optionee's spouse (including a former spouse subject to terms of a domestic
relations order); child, stepchild, grandchild, child-in-law; parent,
stepparent, grandparent, parent-in-law; sibling and sibling-in-law, and shall
include adoptive relationships.
8.10.2 CONDITIONS OF PERMITTED TRANSFER. A transfer permitted under
this Section 8.9 hereof may be made only upon written notice to and approval
thereof by Administrator. A Permitted Transferee may not further assign, sell or
transfer the transferred Option, in whole or in part, other than by will or by
operation of the laws of descent and distribution. A Permitted Transferee shall
agree in writing to be bound by the provisions of this Plan.
SECTION 9: ADJUSTMENTS; MARKET STAND-OFF
9.1 EFFECT OF CERTAIN CHANGES.
9.1.1 STOCK DIVIDENDS, SPLITS, ETC. If there is any change in the
number of outstanding shares of Stock by reason of a stock split, reverse stock
split, stock dividend, recapitalization, combination or reclassification, then
(i) the number of shares of Stock available for Rights, (ii) the number of
shares of Stock covered by outstanding Rights and (iii) the Exercise Price or
Purchase Price of any Stock Option or Purchase Right, in effect prior to such
change, shall be proportionately adjusted by the Administrator to reflect any
increase or decrease in the number of issued shares of Stock; PROVIDED, HOWEVER,
that any fractional shares resulting from the adjustment shall be eliminated.
9.1.2 LIQUIDATION, DISSOLUTION, MERGER OR CONSOLIDATION. In the event
of: a dissolution or liquidation of the Company, or any corporate separation or
division, including, but not limited to, a split-up, a split-off or a spin-off,
or a sale of substantially all of the assets of the Company; a merger or
consolidation in which the Company is not the surviving corporation; or a
reverse merger in which the
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Company is the surviving corporation, but the shares of Company stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then, the Company, to the extent permitted by applicable law, but
otherwise in its sole discretion may provide for: (i) the continuation of
outstanding Rights by the Company (if the Company is the surviving corporation);
(ii) the assumption of the Plan and such outstanding Rights by the surviving
corporation or its parent; (iii) the substitution by the surviving corporation
or its parent of Rights with substantially the same terms for such outstanding
Rights; or (iv) the cancellation of such outstanding Rights without payment of
any consideration, provided that if such Rights would be canceled in accordance
with the foregoing, the Participant shall have the right, exercisable during the
later of the ten-day period ending on the fifth day prior to such merger or
consolidation or ten days after the Administrator provides the Rights holder a
notice of cancellation, to exercise such Right in whole or in part without
regard to any installment exercise provisions in the Right agreement.
9.1.3 ACCELERATED VESTING AND EXERCISABILITY. Unless the applicable
Stock Purchase Agreement or Stock Option Agreement provides otherwise, any right
to repurchase a Purchaser's shares at the original Purchase Price (if any) upon
termination of the Purchaser's Service shall lapse and all of such Stock shall
become vested and all of such Options shall become exercisable in full if (i) a
Change in Control occurs before the Purchaser's Service terminates and (ii) the
options are not assumed by, or Repurchase Right is not assigned to, the entity
that employs the Participant immediately after the Change in Control or to its
parent or subsidiary.
9.1.4 PAR VALUE CHANGES. In the event of a change in the Stock of the
Company as presently constituted which is limited to a change of all of its
authorized shares with par value, into the same number of shares without par
value, or a change in the par value, the shares resulting from any such change
shall be "Stock" within the meaning of the Plan.
9.2 DECISION OF ADMINISTRATOR FINAL. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive; PROVIDED, HOWEVER, that each ISO granted pursuant
to the Plan shall not be adjusted in a manner that causes such Stock Option to
fail to continue to qualify as an ISO without the prior consent of the Optionee
thereof.
9.3 NO OTHER RIGHTS. Except as hereinbefore expressly provided in this
Section 9, no Participant shall have any rights by reason of any subdivision or
consolidation of shares of Company stock or the payment of any dividend or any
other increase or decrease in the number of shares of Company stock of any class
or by reason of any of the events described in Section 9.1, above, or any other
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class; and, except as provided in this Section 9,
none of the foregoing events shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Stock subject to
Rights. The grant of a Right pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or part of its
business or assets.
9.4 MARKET STAND-OFF. Each Stock Option Agreement and Stock Purchase
Agreement shall provide that, in connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Participant shall agree not
to sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the repurchase of, or otherwise dispose or transfer for value or otherwise agree
to engage in any of the foregoing transactions with respect to any Stock without
the prior written consent of the Company or its underwriters, for such period of
time from and after the effective date of such registration statement as may be
requested by the Company or such underwriters (the "MARKET STAND-OFF").
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SECTION 10: AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the Plan at any time and for any
reason. At the time of such amendment, the Board shall determine, upon advice
from counsel, whether such amendment will be contingent on shareholder approval.
SECTION 11: GENERAL PROVISIONS
11.1 GENERAL RESTRICTIONS.
11.1.1 NO VIEW TO DISTRIBUTE. The Administrator may require each person
acquiring shares of Stock pursuant to the Plan to represent to and agree with
the Company in writing that such person is acquiring the shares without a view
towards distribution thereof. The certificates for such shares may include any
legend that the Administrator deems appropriate to reflect any restrictions on
transfer.
11.1.2 LEGENDS. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state securities
laws, and the Administrator may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
11.1.3 NO RIGHTS AS SHAREHOLDER. Except as specifically provided in
this Plan, a Participant or a transferee of a Right shall have no rights as a
shareholder with respect to any shares covered by the Rights until the date of
the issuance of a Stock certificate to him or her for such shares, and no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions of other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 9.1, hereof.
11.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements,
subject to shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in specific
cases.
11.3 DISQUALIFYING DISPOSITIONS. Any Participant who shall make a
"DISPOSITION" (as defined in Section 424 of the Code) of all or any portion of
an ISO within two years from the date of grant of such ISO or within one year
after the issuance of the shares of Stock acquired upon exercise of such ISO
shall be required to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such shares of
Stock.
11.4 REGULATORY MATTERS. Each Stock Option Agreement and Stock Purchase
Agreement shall provide that no shares shall be purchased or sold thereunder
unless and until (i) any then applicable requirements of state or federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel and (ii) if required to do so by the Company, the
Optionee or Offeree shall have executed and delivered to the Company a letter of
investment intent in such form and containing such provisions as the Board or
Committee may require.
11.5 RECAPITALIZATIONS. Each Stock Option Agreement and Stock Purchase
Agreement shall contain provisions required to reflect the provisions of Section
9.
11.6 DELIVERY. Upon exercise of a Right granted under this Plan, the
Company shall issue Stock or pay any amounts due within a reasonable period of
time thereafter. Subject to any statutory
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obligations the Company may otherwise have, for purposes of this Plan, thirty
days shall be considered a reasonable period of time.
11.7 OTHER PROVISIONS. The Stock Option Agreements and Stock Purchase
Agreements authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation, restrictions upon
the exercise of the Rights, as the Administrator may deem advisable.
SECTION 12: INFORMATION TO PARTICIPANTS
The Company will cause a report to be sent to each Participant not later
than 120 days after the end of each fiscal year. Such report shall consist of
the financial statements of the Company for such fiscal year and shall include
such other information as is provided by the Company to its shareholders.
SECTION 13: EFFECTIVE DATE OF PLAN
The effective date of this Plan is _____________, 2000. The adoption of the
Plan is subject to approval by the Company's shareholders, which approval must
be obtained within 12 months from the date the Plan is adopted by the Board. In
the event that the shareholders fail to approve the Plan within 12 months after
its adoption by the Board, any grants of Options or sales or awards of shares
that have already occurred shall be rescinded, and no additional grants, sales
or awards shall be made thereafter under the Plan.
SECTION 14: TERM OF PLAN
The Plan shall terminate no later then prior to the 10th anniversary of the
effective date. No Right shall be granted pursuant to the Plan after such date,
but Rights theretofore granted may extend beyond that date. The Plan may be
terminated on any earlier date pursuant to Section 10 hereof.
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APPENDIX G
BIOPOOL INTERNATIONAL, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned, a stockholder of BIOPOOL INTERNATIONAL, INC., a Delaware
corporation, (the "Company") hereby appoints Michael Bick, Ph.D. and Robert
Foote, and each of them, the proxy of the undersigned, with full power of
substitution, to attend, vote and act for the undersigned at the Company's
Annual Meeting of Stockholders (the "Annual Meeting"), to be held on August 10,
2000, and at any of its postponements or adjournments, to vote and represent all
of the shares of the Company which the undersigned would be entitled to vote, as
follows:
The Board of Directors recommends a FOR vote on all proposals listed below.
1. To elect the Board of Directors' four nominees as directors.
Michael D. Bick, Ph.D. Douglas L. Ayer
N. Price Paschall James H. Chamberlain
_____ FOR NOMINEES LISTED _____ WITHHELD
(except as marked to the contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below:)
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The undersigned hereby confer(s) upon the proxies and each of them
discretionary authority with respect to the election of directors in the
event that any of the above nominees is unable or unwilling to serve.
2. To ratify the appointment of Ernst & Young LLP as the independent
public accountants of the Company.
____ FOR ____ AGAINST ____ ABSTAIN
3. To approve the proposed merger Xtrana, Inc. with the Company pursuant
to the terms of the Merger Agreement between the Company and Xtrana,
Inc.
____ FOR ____ AGAINST ____ ABSTAIN
4. To ratify the adoption of the Biopool International, Inc. 2000 Stock
Incentive Plan.
____ FOR ____ AGAINST ____ ABSTAIN
The undersigned hereby revokes any other proxy to vote at the Annual
Meeting, and hereby ratifies and confirms all that the proxy holder may lawfully
do by virtue hereof. As to any other business that may properly come before the
Annual Meeting and any of its postponements or adjournments, the proxy holder is
authorized to vote in accordance with its best judgment.
This Proxy will be voted in accordance with the instructions set forth
above. This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE FOR the
approval of the merger with
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Xtrana and issuance of shares of common stock
pursuant to the Merger Agreement with Xtrana, Inc., unless otherwise directed.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated June 26, 2000 relating to the
Annual Meeting.
Date: ______________________________, ____
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Signature(s) of Stockholder(s)
(See Instructions Below)
The signature(s) hereon should correspond exactly with the name(s) of the
stockholder(s) appearing on the Stock Certificate. If stock is jointly held, all
joint owners should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer is a corporation,
please sign the full corporation name, and give title of signing officer.
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF
BIOPOOL INTERNATIONAL, INC.
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