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As Filed with the Securities and Exchange Commission on December 27, 1996.
REGISTRATION NO. 333-18771
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SYNETIC, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2975182
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
669 RIVER DRIVE, RIVER DRIVE CENTER II
ELMWOOD PARK, NEW JERSEY 07407
(201) 703-3400
(Address, including Zip Code, and telephone number, including area code, of
Registrant's principal executive offices)
CHARLES A. MELE, ESQ.
VICE PRESIDENT--GENERAL COUNSEL
SYNETIC, INC.
669 RIVER DRIVE, RIVER DRIVE CENTER II
ELMWOOD PARK, NEW JERSEY 07407
(201) 703-3400
(Name, address, including Zip Code, and telephone number, including area code,
of agent for service)
Copy to:
CREIGHTON O'M. CONDON, ESQ.
DAVID J. BEVERIDGE, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount Proposed Proposed Amount of
of Securities to to be Maximum Maximum Registration
be Registered Registered Offering Price Aggregate Fee (2)
(1) per Share Offering Price
Common Stock, par
value $0.01 per share 383,252 (3) (3) $5,982
(1) Of the 383,252 shares being registered, (a) 382,252 shares were registered
in connection with the original filing of this registration statement with
the full registration fee of $5,982 for all 383,252 shares; and (b) 1,000
additional shares are being registered by this filing, for which the
registration fee was included in the $5,982 previously paid.
(2) Registration fee calculated pursuant to Rule 457(c) based on the average
high and low sale prices on the Nasdaq National Market (a) on December 18,
1996 of $51.50 per share, with respect to the 382,252 shares registered in
connection with the original filing statement of the registration
statement, and (b) on December 26, 1996 of $50.8125 per share, with respect
to the additional 1,000 shares being registered by this filing.
(3) Not applicable.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion
Preliminary Prospectus Dated December 27, 1996
PROSPECTUS
383,252 Shares
SYNETIC, INC.
Common Stock
_________________________
All of the 383,252 shares (the "Shares") of Common Stock, par value
$.01, (the "Common Stock") of Synetic, Inc. ("Synetic" or the "Company") offered
hereby are being offered (the "Offering") by certain stockholders of the Company
named herein (collectively, the "Selling Stockholders") who received such shares
that were originally issued in connection with the merger (the "Avicenna
Acquisition") of a wholly owned subsidiary of the Company with and into Avicenna
Systems Corp. ("Avicenna") on December 24, 1996. See "The Company --New Area of
Business and Recent Acquisition" and "Selling Stockholders." The Company will
not receive any proceeds from the sale of the Shares.
The Company has been advised by each Selling Stockholder that the Shares
may be offered or sold by or for the account of such Selling Stockholders from
time to time, at prices and on terms to be determined at the time of sale, to
purchasers directly or through underwriters, brokers, dealers or agents, who may
receive compensation in the form of underwriting discounts, commissions or
concessions. From time to time the Selling Stockholders may engage in short
sales, short sales versus the box, puts and calls and other transactions in
securities of the Company, or derivatives thereof, and may sell and deliver the
Shares in connection therewith. The Selling Stockholders and any brokers,
dealers, agents or underwriters that participate with the Selling Stockholders
in the distribution of Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, in which event any discounts, concessions and
commissions received by such brokers, dealers, agents or underwriters and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The aggregate
net proceeds to the Selling Stockholders from the sale of the Shares offered by
the Selling Stockholders hereby will be the purchase price of such Shares, less
any commissions, if any, and other expenses of issuance and distribution not
borne by the Company. See "Plan of Distribution."
The Common Stock is quoted on the Nasdaq National Market under the
symbol "SNTC." On December 26, 1996, the closing price of the Common Stock was
$50.75 per share.
________________
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
________________
The date of this Prospectus is ___________, 199_.
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THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO EACH PERSON, INCLUDING EACH BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
DOCUMENTS THAT ARE INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS).
REQUESTS SHOULD BE DIRECTED TO VICTOR L. MARRERO, VICE PRESIDENT--FINANCE,
SYNETIC, INC., 669 RIVER DRIVE, RIVER DRIVE CENTER II, ELMWOOD PARK, NEW JERSEY
07407, TELEPHONE (201) 703-3400. IN ORDER TO INSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY NO LATER THAN FIVE BUSINESS DAYS PRIOR
TO THE DATE ON WHICH SUCH PERSON MUST MAKE A FINAL INVESTMENT DECISION.
_________________________________________
IN CONNECTION WITH THIS OFFERING, IF THE OFFERING IS UNDERWRITTEN, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE COMMON STOCK AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, IF THE OFFERING IS UNDERWRITTEN,
CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"PLAN OF DISTRIBUTION."
_________________________________________
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements and other information filed by
the Company can be inspected and copied, at prescribed rates, at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained, at prescribed rates, by writing to the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Company's Common
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3
Stock is quoted on the Nasdaq National Market System. Reports, proxy and
information statements and other information concerning the Company can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and such Common
Stock, reference is made to the Registration Statement. Statements contained in
the Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference to such contract, agreement or other document. The Registration
Statement may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part thereof may be
obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission
(Commission file number 0-17822) pursuant to the Exchange Act and are hereby
incorporated by reference:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 (the "1996 10-K"); and
(ii) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996 (the "First Quarter 10-Q").
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed to
be incorporated by reference in this Prospectus and to be made a part hereof
from their respective dates of filing. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that is
also deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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FORWARD-LOOKING INFORMATION
This Prospectus contains, under the captions "The Company--New Area of
Business and Recent Acquisition" and "Risk Factors--Expansion Risk of New
Business Area", and incorporates by reference certain forward-looking statements
and information relating to the Company that are based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this Prospectus or the
documents incorporated by reference, the words "anticipate", "believe",
"estimate", "expect" and similar expressions, as they relate to the Company or
the Company's management, are intended to identify forward-looking statements.
Such statements reflect the current view of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions. These
risks may include product demand and market acceptance risks, the feasibility of
developing commercially profitable Internet healthcare services, the effect of
economic conditions, user acceptance, the impact of competitive products,
services and pricing and product development, commercialization and
technological difficulties. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected. The Company does not intend to update these forward-
looking statements.
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5
THE COMPANY
The Company is a Delaware corporation and was incorporated in 1989.
Its principal offices are located at 669 River Drive, River Drive Center II,
Elmwood Park, New Jersey 07407, and its telephone number is (201) 703-3400.
Porex Technologies Corp. (together with its subsidiaries, "Porex"), a
wholly owned subsidiary of the Company, designs, manufactures and distributes
porous and solid plastic components and products used in healthcare, industrial
and consumer applications. Porex's principal products, which incorporate porous
plastics, are used to filter, wick, drain, vent or control the flow of fluids or
gases. In November 1996, Synetic established a new wholly-owned subsidiary to
develop and provide inter-enterprise connectivity for healthcare communications,
information and commerce, using the distributive power of the Internet. This
subsidiary will pursue the development of this business through the use of
Synetic's internal resources as well as pursuing the acquisition of
complementary businesses.
NEW AREA OF BUSINESS AND RECENT ACQUISITION
The Company will direct its efforts in a new area of business relating
to the use of Internet-based technology to expand the channels of communication
in the healthcare industry. The creation of these new channels is intended to
benefit providers and payors of healthcare services by improving the quality of
patient care, securing appropriate utilization of healthcare services, reducing
administrative costs and enforcing benefit plan guidelines. The initial focus
will address the unmet needs of physicians by providing physicians with a
portfolio of interactive services designed to help them more efficiently
practice medicine in today's managed care environment. These services will
provide an objective, content-neutral utility for providers and payors to
communicate with each other.
In its first transaction related to this new business, the Company
announced on December 24, 1996 that it was acquiring Avicenna, a privately held,
developmental-stage company located in Cambridge, Massachusetts. Avicenna
markets and builds Intranets for managed healthcare plans, integrated
healthcare delivery systems and hospitals. Avicenna's controlled-access
Intranet systems are designed to allow managed care organizations and provider
groups to exchange transactional, procedural, patient outcome and educational
information. The Company believes that Avicenna's development of Internet
technology-based information systems will provide Synetic with a platform for
building a new generation of inter-enterprise healthcare transaction
applications. These applications are expected to enable managed care
organizations, pharmacy benefit managers, clinical laboratories, physicians and
other providers of healthcare services to share information in a secure and
confidential manner while preserving their investment in existing technologies.
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Pursuant to the Merger Agreement, dated December 23, 1996, among the
Company, Synternet Acquisition Corp., a wholly owned subsidiary of the Company,
Avicenna and the Selling Stockholders, the Company acquired all of Avicenna's
outstanding equity (including employee stock options) and $1,000,000 principal
amount of convertible demand notes for a purchase price of approximately $30.5
million (subject to post-closing adjustments), consisting of 428,642 shares of
Common Stock, based on a market price of $51.725 per share, and options
exercisable for 161,015 shares of Common Stock. As additional consideration,
certain of the Selling Stockholders received nontransferable warrants covering
250,000 shares of Common Stock, which are exercisable in two years at an
exercise price of $54.50 per share. The Selling Stockholders acquired all
383,252 shares of Common Stock offered hereby in the Avicenna Acquisition.
The Company anticipates that a substantial portion of the purchase
price for Avicenna will be attributed to purchased research and development
costs. Under generally accepted accounting principles, Synetic will charge to
expense the portion of the purchase price attributable to purchased research and
development costs. Synetic anticipates that this charge will be recognized
during the quarter ended December 31, 1996. Avicenna has operated at a loss
since its inception two years ago, a substantial portion of which related to
research and development expenses, and as of November 30, 1996 had an unaudited
accumulated deficit of approximately $3,100,000. The current rate of these
expenses approximates $500,000 per month. Synetic expects to continue to incur
significant research and development expenses, which may be materially greater
than such current amounts, and to incur additional operating losses in
connection with this new area of business until Avicenna successfully develops
and markets its products and services. There can be no asurance that such
products and services will be successfully developed or marketed. See "Risk
Factors--Expansion Risk of New Business Area."
ACQUISITION PROGRAM
The Company continues to pursue an acquisition program pursuant to
which it will seek to effect one or more acquisitions of or business
combinations with businesses that the Company believes have significant growth
potential. The Company intends initially to concentrate its acquisition efforts
in the healthcare industry but such emphasis is not intended to limit in any
manner the Company's ability to pursue acquisition opportunities in other
industries. The Company's acquisition program could result in a substantial
change in the business, operations and financial condition of the Company. No
assurance can be given that the Company will succeed in consummating any
acquisitions or that the Company will be able to successfully manage or
integrate any business that it acquires. The future growth of the Company will
depend primarily on its ability to consummate one or more such acquisitions and
to operate such businesses successfully. See "Business--Acquisition Program" in
the 1996 10-K.
CERTAIN CORPORATE HISTORY
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Prior to June 28, 1989, the date of the initial public offering of the
Company, the Company was an indirect wholly owned subsidiary of Medco
Containment Services, Inc. ("Medco"). Thereafter, the Company became a publicly
held, partially owned subsidiary of Medco. Medco provided healthcare cost
containment services, principally managed prescription drug programs, to benefit
plan sponsors. On November 18, 1993, Medco was acquired by Merck & Co., Inc.
("Merck") in a merger transaction, and as a result, the Company became an
indirect, partially owned subsidiary of Merck. Merck is a pharmaceutical
manufacturer. Until December 14, 1994, the Company's operations consisted of
Porex and a group of subsidiaries that provided institutional pharmacy services
(the "Institutional Pharmacies Business").
On December 14, 1994, the Company consummated certain transactions
pursuant to which: (1) the Company sold the Institutional Pharmacies Business
to Pharmacy Corporation of America, an indirect wholly owned subsidiary of
Beverly Enterprises, Inc. (such sale is referred to herein as the
"Divestiture"), for approximately $107,300,000; (2) the Company purchased
5,268,463 shares of its Common Stock, from Merck for an aggregate purchase price
of $37,764,019, pursuant to the Purchase and Sale Agreement, dated as of May 24,
1994, between the Company and Merck; and (3) SN Investors, L.P. ("SN
Investors"), a limited partnership the general partner of which is SYNC, Inc.
(the "General Partner"), whose sole stockholder is Mr. Martin J. Wygod, Chairman
of the Board of the Company, purchased 5,061,857 shares of Common Stock (the
"Wygod Shares") from Merck for an aggregate purchase price of $36,283,079,
pursuant to an assignment by the Company of the right to purchase such shares
from Merck. The purchases of shares of Common Stock from Merck by the Company
and SN Investors are hereinafter referred to as the "Purchase". The shares of
Common Stock purchased by the Company are being held as treasury shares and are
no longer outstanding or entitled to vote.
Immediately prior to the consummation of the Purchase, Merck owned
approximately 58% of the issued and outstanding Common Stock. As a result of
the consummation of the Purchase, Mr. Wygod and SN Investors own an aggregate of
approximately 32% of the outstanding Common Stock as of December 15, 1996 and
Merck no longer owns an equity interest in the Company.
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RISK FACTORS
Prior to making an investment decision with respect to the Common
Stock offered hereby, prospective investors should carefully consider the
specific factors set forth below, together with all of the other information
appearing herein, in light of their particular investment objectives and
financial circumstances.
ACQUISITION PROGRAM
The Company pursues an acquisition program pursuant to which it seeks
to effect acquisitions of or business combinations with businesses that the
Company believes have significant growth potential. The future growth of the
Company will depend primarily on its ability to consummate acquisitions and to
operate such businesses successfully. The Company's acquisition program could
result in a substantial change in the business, operations and financial
condition of the Company. Although management of the Company will endeavor to
evaluate the risks inherent in any particular acquisition candidate, there can
be no assurance that the Company will properly ascertain all such risks. Any
acquisitions will be limited, as required by agreements to which the Company is
a party, to areas of business that would not be competitive with certain
businesses of Merck and its subsidiaries or with the Institutional Pharmacies
Business. See "Certain Relationships and Related Transactions" in the 1996 10-
K. No assurances, however, can be given that the Company will succeed in
consummating any acquisition or that the Company will be able to successfully
manage or integrate any business that it acquires.
The success of the Company's acquisition program will depend on, among
other things, the availability of acquisition candidates, the availability of
funds to finance acquisitions, and the availability of management resources to
oversee the operation of acquired businesses. Financing for acquisitions may
come from several sources, including, without limitation, (a) cash and cash
equivalents on hand and marketable securities and (b) proceeds from the
incurrence of indebtedness or the issuance of additional Common Stock, preferred
stock, convertible debt or other securities, which could result in substantial
dilution of the percentage ownership of the stockholders of the Company at the
time of any such issuance. The proceeds from any financing may be used for
costs associated with identifying and evaluating prospective acquisition
candidates, and for structuring, negotiating, financing and consummating any
such acquisition transactions and for other general corporate purposes. The
Company does not intend to seek stockholder approval for any such acquisition or
security issuance unless required by applicable law or regulation. Although Mr.
Wygod has indicated his intention to assist the Company in its acquisition
program by bringing opportunities for potential acquisitions to the Company and
to assist the Company in negotiating such acquisitions and in seeking financing
in the event any such acquisition were to be financed by the Company, he is not
an officer or an employee of the Company nor is he required pursuant to any
contractual obligation to provide such support or assistance.
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EXPANSION RISK OF NEW BUSINESS AREA
The Company is in the initial development phase of offering services
to provide inter-enterprise connectivity to payors and providers in the
healthcare industry through its new subsidiary. Avicenna, the Company's first
acquisition in this new business area, has operated at a loss since its
inception two years ago, and as of November 30, 1996 had an unaudited
accumulated deficit of approximately $3,100,000. The current rate of these
expenses approximates $500,000 per month. Synetic expects to continue to incur
significant research and development expenses, which may be materially greater
than such current amounts, and to incur additional operating losses in
connection with this new area of business until Avicenna successfully develops
and markets its products and services. There can be no assurance that such
products and services will be successfully developed or marketed. Additionally,
the Company expects to acquire additional businesses to supplement its own
internal efforts and those of Avicenna. There is no specific time frame for the
first commercial introduction of these new services, and the Company anticipates
that it will incur significant development expenses until these services are
successfully developed and marketed. No assurances can be given that the
Company's effort in establishing such services will be successful or that it
will succeed in consummating such acquisitions or that such acquisitions will
ultimately provide Synetic with the ability to offer these services.
REGULATION OF POREX
Porex manufactures and distributes certain medical/surgical devices,
such as plastic and reconstructive surgical implants and tissue expanders, which
are subject to government regulations, including approval procedures instituted
by the Food and Drug Administration. Certain other healthcare products may
also be subject to such regulations and approval processes. Compliance with
such regulations and the process of obtaining approvals can be costly,
complicated and time-consuming, and there can be no assurance that such
approvals will be granted on a timely basis, if ever. See "Business--Porex--
Regulation" in the 1996 10-K.
POTENTIAL LIABILITY RISK AND AVAILABILITY OF INSURANCE
The products sold by the Company expose it to potential risk for
product liability claims particularly with respect to Porex's Life Sciences,
Clinical and Surgical products. The Company believes that Porex carries
adequate insurance coverage against product liability claims and other risks.
There can be no assurance, however, that claims in excess of Porex's
insurance coverage will not arise. In addition, Porex's insurance policies
must be renewed annually. In 1994, Porex was notified that its insurance
carrier would not renew its then-existing insurance coverage after December 31,
1994 with respect to actions and claims arising out of Porex's distribution of
silicone mammary implants. However, Porex has exercised its right to purchase
extended reporting period coverage with respect to such actions and claims.
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10
Such coverage provides insurance, subject to existing policy limits but for an
unlimited time period, with respect to actions and claims made after December
31, 1994 that are based on events that occurred during the policy period. Porex
has renewed its insurance coverage with the same carrier for other liability
claims. Although Porex has been able to obtain adequate insurance coverage at an
acceptable cost in the past and believes that it is adequately indemnified for
products manufactured by others and distributed by it, there can be no assurance
that in the future it will be able to obtain such insurance at an acceptable
cost or be adequately protected by such indemnification. See "Business--Porex--
Health care Products" and "Legal Proceedings--Mammary Implant Litigation" in the
1996 10-K.
CERTAIN LITIGATION
During the year ended June 30, 1988, Porex began distributing silicone
mammary implants ("implants") in the United States pursuant to a distribution
arrangement (the "Distribution Agreement") with a Japanese manufacturer (the
"Manufacturer"). Because of costs associated with increased government
regulation and examination, Porex's supplier determined to withdraw its implants
from the United States market. On July 9, 1991, the FDA mandated a recall of
all implants manufactured by companies that elected not to comply with certain
FDA regulations regarding data collection. Accordingly, Porex notified all of
its customers not to use any implants sold by Porex and to return such implants
to Porex for a full refund. Porex had ceased offering implants for sale prior
to the recall date. Porex believes that after accounting for implants returned
to it, the aggregate number of recipients of implants distributed by Porex under
the Distribution Agreement in the United States totals approximately 2,500.
Since March 1991, Porex has been named as one of many co-defendants in
a number of actions brought by recipients of implants. One of the pending
actions, Donna L. Turner v. Porex Technologies Corporation, et al., is styled as
a class action. Certain of the actions against Porex have been dismissed where
it was determined that the implant in question was not distributed by Porex. In
addition, as of December 20, 1996, 55 claims have been settled on a favorable
basis by the Manufacturer, or by the insurance carriers of Porex, without
material cost to Porex. As of December 20, 1996, 210 actions and 40 out-of-
court claims were pending against Porex. Of the 210 actions, 93 involve
implants identified as distributed by Porex and 84 cases involve implants
identified as not having been distributed by Porex. In the remaining 33
actions, the implants have not been identified. The number of claims made by
individuals during the fiscal year ended June 30, 1996 was significantly lower
than the number of claims made during the fiscal year ended June 30, 1995.
The typical case or claim alleges that the individual's mammary
implants caused one or more of a wide range of ailments. These implant cases
and claims generally raise difficult and complex factual and legal issues and
are subject to many uncertainties and complexities, including, but not limited
to, the facts and circumstances of each particular case
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11
or claim, the jurisdiction in which each suit is brought, and differences in
applicable law. The Company does not have sufficient information to evaluate
each case and claim.
In 1994, Porex was notified that its insurance carrier would not renew
its then-existing insurance coverage after December 31, 1994 with respect to
actions and claims arising out of Porex's distribution of implants. However,
Porex has exercised its right, under such policy, to purchase extended reporting
period coverage with respect to such actions and claims. Such coverage provides
insurance, subject to existing policy limits but for an unlimited time period,
with respect to actions and claims made after December 31, 1994 that are based
on events that occurred during the policy period. In addition, Porex has other
excess insurance where it has similarly purchased extended reporting period
coverage which by its terms would expire December 31, 1997. However, Porex
expects to purchase further extended reporting period coverage from the excess
insurers to the extent such coverage is reasonably available. The Company
believes that its present coverage, together with Porex's insurance policies in
effect on or before December 31, 1994, should provide adequate coverage against
liabilities that could result from actions or claims arising out of Porex's
distribution of implants. To the extent that certain of such actions and claims
seek punitive and compensatory damages arising out of alleged intentional torts,
such damages, if awarded, may or may not be covered, in whole or in part, by
Porex's insurance policies. In addition, Porex's recovery from its insurance
carriers is subject to policy limits and certain other conditions. Porex has
been expensing the retention amount under its policies as incurred.
The Company believes that Porex has a valid claim for indemnification
under the Distribution Agreement with respect to any liabilities that could
result from pending actions or claims by recipients of implants or any similar
actions or claims that may be commenced in the future. However, Porex's right
to indemnification is subject to a disagreement with the Manufacturer. Pending
the resolution of such disagreement, the Manufacturer has been paying a portion
of the costs of the settled claims.
<PAGE>
12
SHARES AVAILABLE FOR FUTURE SALE
The 5,061,857 Wygod Shares are "restricted securities," within the
meaning of Rule 144 promulgated pursuant to the Securities Act ("Rule 144"),
subject to the volume restrictions of Rule 144 but for which the two-year
holding period has expired. In addition, as more fully set forth in "Certain
Relationships and Related Transactions" in the 1996 10-K, the Wygod Shares are
subject to certain restrictions on transfer. Upon expiration of such
restrictions, SN Investors may be able to sell without registration under the
Securities Act the number of such shares permitted under Rule 144. The Company
has granted certain demand registration rights to Mr. Wygod with respect to the
Wygod Shares that are assignable to SN Investors. Any sales by SN Investors
pursuant to Rule 144 or such registration rights could have a material adverse
effect on the prevailing market price for the Common Stock. See "Description
of Capital Stock--Shares Eligible for Future Sale."
As of December 15, 1996, the Company has reserved an aggregate of
5,163,720 shares of Common Stock for issuance pursuant to stock option
agreements and stock option plans. Pursuant to the Avicenna Acquisition, the
Company will reserve an additional 961,015 shares of Common Stock for issuance
pursuant to stock option plans, 80,522 of which may be issued immediately. The
sale of a substantial amount of such additional shares of Common Stock following
their issuance could have a material adverse effect on the market price of the
Common Stock.
<PAGE>
13
USE OF PROCEEDS
The Company will receive no proceeds from the sale of Shares by the
Selling Stockholders.
<PAGE>
14
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below for the five years in the
period ended June 30, 1996 has been derived from the Consolidated Financial
Statements of the Company, which have been audited by Arthur Andersen LLP,
independent accountants. The selected financial data as of and for the three-
month periods ended September 30, 1995 and 1996 are derived from unaudited
consolidated financial statements of the Company which, in the opinion of
management, include all normal and recurring adjustments necessary to present
fairly the financial position and the results of operations of the Company for
those periods. Such information should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
included in the 1996 10-K and First Quarter 10-Q that are incorporated by
reference into this Prospectus. The selected financial data for the five years
in the period ended June 30, 1996 has been restated to reflect the Divestiture.
See "Certain Relationships and Related Transactions" in the 1996 10-K.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.............................. $ 28,486 $ 30,645 $33,093 $39,179 $ 45,128 $ 11,036 $ 11,185
Income from continuing
operations before
provisions for income
taxes................................. 6,031 5,430 1,080 1,078 13,202 3,127 3,527
Provision for income taxes............. 2,151 2,046 411 443 4,617 1,203 1,138
-------- -------- ------- ------- -------- -------- --------
Income from continuing
operations............................ 3,880 3,384 669 635 8,585 1,924 2,389
Income from discontinued
operations............................ 1,376 2,734 1,823 15,459 -- -- --
-------- -------- ------- ------- -------- -------- --------
Net income............................. $ 5,256 $ 6,118 $ 2,492 $16,094 $ 8,585 $ 1,924 $ 2,389
======== ======== ======= ======= ======== ======== ========
Net income per share (1):
Continuing operations................. $ 0.24 $ 0.19 $ 0.04 $ 0.04 $ 0.48 $ 0.11 $ 0.13
Discontinued operations............... 0.09 0.16 0.10 0.89 -- -- --
-------- -------- ------- ------- -------- -------- --------
Net income per share (2)............... $ 0.33 $ 0.35 $ 0.14 $ 0.93 $ 0.48 $ 0.11 $ 0.13
======== ======== ======= ======= ======== ======== ========
<CAPTION>
AT JUNE 30, AS OF SEPTEMBER 30,
------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital........................ $ 44,350 $ 65,673 $ 64,625 $105,279 $166,328 $170,493
Net assets of discontinued
operations............................ 25,352 52,548 55,882 -- -- --
Total assets........................... 163,011 189,494 194,009 188,174 199,592 204,223
Long term debt, less
current portion....................... 81,714 81,058 80,716 -- -- --
Stockholders' equity................... 74,056 102,378 105,130 166,832 181,089 185,376
</TABLE>
___________________
(1) Restated to reflect a two-for-one stock split effected on February 26,
1993.
(2) No cash dividends were declared by the Company during the periods presented
above.
<PAGE>
15
SELLING STOCKHOLDERS
This Prospectus covers the offer and sale by each Selling Stockholder
of Common Stock owned by such Selling Stockholder. Set forth below are the
names of each Selling Stockholder, the nature of any position, office or other
material relationship that the Selling Stockholder has had within the past three
years with the Company or any of its predecessors or affiliates, the number of
shares of Common Stock beneficially owned as of December 24, 1996 by each
Selling Stockholder, the number of Shares that may be offered and sold by or on
behalf of each Selling Stockholder hereunder and the amount of Common Stock to
be owned by each Selling Stockholder upon the completion of the Offering if all
Shares offered by such Selling Stockholder are sold. None of the Selling
Stockholders beneficially owns more than 1% of the outstanding Common Stock.
Any or all of the Shares listed below under the heading "Shares to be Sold" may
be offered for sale by or on behalf of the Selling Stockholders.
Each of the Selling Stockholders listed below acquired the Shares
hereby offered for sale in the Avicenna Acquisition on December 24, 1996, as
described herein. See "Recent Developments" above.
<TABLE>
<CAPTION>
Shares Beneficially
Owned Prior to Shares Beneficially
Offering Owned After Offering
----------------------- Shares --------------------
Selling Stockholders Number Percent Offered Number Percent
- -------------------- ------ ------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Inder-Jeet Gujral/(1)/............. 90,781 * 45,391 45,390 *
Advanced Technology
Ventures IV, L.P./(2)/........... 107,301 * 107,301 0 0
Delphi Venture III,
L.P./(3)/......................... 105,369 * 105,369 0 0
Delphi BioInvestments III,
L.P./(4)/......................... 1,931 * 1,931 0 0
Nazem & Company/(5)/............... 107,300 * 107,300 0 0
CGJR Health Care Services Private
Equities, L.P./(6)/.............. 9,913 * 9,913 0 0
Other Selling Stockholders, each
of whom is selling less than
6,050 shares in the Offering
and beneficially owns less
than 1% of the outstanding
Common Stock..................... 6,047 * 6,047 0 0
</TABLE>
<PAGE>
16
- -------------------
* The percentage of shares of Common Stock beneficially owned does not
exceed one percent of the outstanding shares of Common Stock.
/(1)/ Mr. Gujral, the current President of Avicenna, held the position of
President of Avicenna and owned 379,200 shares of Avicenna common stock
immediately prior to the Avicenna Acquisition.
/(2)/ Advanced Technology Ventures IV, L.P. ("Advanced Technology") owned
333,334 shares of preferred stock, 6,945 shares of common stock and
$333,334 principal amount of convertible demand notes of Avicenna
immediately prior to the Avicenna Acquisition. 107,301 shares held in
the name of Advanced Technology may be distributed to and sold by certain
limited partners of Advanced Technology, each of whom beneficially holds
less than 1% of the outstanding shares of Common Stock.
/(3)/ Delphi Venture III, L.P. ("Delphi Venture") owned 327,438 shares of
preferred stock, 6,821 shares of common stock and $327,438 principal
amount of convertible demand notes of Avicenna immediately prior to the
Avicenna Acquisition. 105,369 shares held in the name of Delphi Venture
may be distributed to and sold by certain limited partners of Delphi
Venture, each of whom beneficially holds less than 1% of the outstanding
shares of Common Stock.
/(4)/ Delphi BioInvestments III, L.P. ("Delphi BioInvestments") owned 5,895
shares of preferred stock, 123 shares of common stock and $5,895
principal amount of convertible demand notes of Avicenna immediately
prior to the Avicenna Acquisition. 1,931 shares held in the name of
Delphi BioInvestments may be distributed to and sold by certain limited
partners of Delphi BioInvestments, each of whom beneficially holds less
than 1% of the outstanding shares of Common Stock.
/(5)/ Nazem & Company IV, L.P. ("Nazem") owned 333,333 shares of preferred
stock, 6,944 shares of common stock and $333,333 principal amount of
convertible demand notes of Avicenna immediately prior to the Avicenna
Acquisition. 107,300 shares held in the name of Nazem may be distributed
to and sold by certain limited partners of Nazem, each of whom
beneficially holds less than 1% of the outstanding shares of Common
Stock.
/(6)/ CGJR Health Care Services Private Equities, L.P. ("CGJR") owned 33,333
shares of preferred stock of Avicenna immediately prior to the Avicenna
Acquisition. 9,913 shares held in the name of CGJR may be distributed to
and sold by certain limited partners of CGJR, each of whom beneficially
holds less than 1% of the outstanding shares of Common Stock.
<PAGE>
17
PLAN OF DISTRIBUTION
The Company has been advised by each Selling Stockholder that such
Selling Stockholder may sell all or a portion of the Shares offered by such
Selling Stockholder hereby from time to time through the Nasdaq National Market.
The Selling Stockholders may also make private sales to purchasers directly or
to or through a broker or brokers. Alternatively, the Selling Stockholders may
from time to time offer the Shares through underwriters, brokers, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Stockholders and/or the purchasers
of the Shares for whom they act as agent. From time to time the Selling
Stockholders may engage in short sales, short sales versus the box, puts and
calls and other transactions in securities of the Company, or derivatives
thereof, and may sell and deliver the Shares in connection therewith. The
distribution of the Shares may be effected from time to time in one or more
transactions that may take place through the Nasdaq National Market or any
national securities exchange on which the Common Stock is approved for listing
in the future, including block trades or ordinary broker's transactions, or
through privately negotiated transactions, or through an underwritten public
offering, or through a combination of any such methods of sale, at the market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. To the extent required, the number of
Shares to be sold, the purchase price, the name of any such agent, broker,
dealer or underwriters and any applicable commissions with respect to a
particular offer will be set forth in an accompanying Prospectus Supplement.
The aggregate net proceeds to the Selling Stockholders from the sale of the
Shares offered by the Selling Stockholders hereby will be the purchase price of
such Shares, less any commissions, if any, and other expenses of issuance and
distribution not borne by the Company.
The Selling Stockholders and any brokers, dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any discounts, concessions and commissions
received by such brokers, dealers, agents or underwriters and any profit on
the resale of the Shares purchased by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has agreed to bear all expenses (other than any
commissions or discounts of underwriters, dealers or agents or brokers' fees and
the fees and expenses of their counsel) in connection with the registration of
the Shares being offered by the Selling Stockholders hereby.
If the Shares are sold in an underwritten offering, the underwriters
and selling group members, if any, may engage in passive market making
transactions in the Company's Common Stock on the Nasdaq National Market
immediately prior to the commencement of the sale of shares in such offering, in
accordance with Rule 10b-6A under the Exchange Act. Passive market making
consists of displaying bids on the Nasdaq National Market limited by the
<PAGE>
18
bid prices of market makers not connected with such offering and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited in amount to 30% of the passive
market maker's average daily trading volume in the Common Stock during the
period of the two full consecutive calendar months prior to the filing with the
Commission of the Registration Statement of which this Prospectus is a part and
must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
No underwriter, broker, dealer or agent has been engaged by the Company
in connection with the distribution of the Shares to which this Prospectus
relates.
Any shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus. There is no assurance that the Selling
Stockholders will sell any or all of the Shares. The Selling Stockholders may
transfer, devise or gift such shares by other means not described herein.
In order to comply with certain states' securities laws, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless the Common Stock has been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
<PAGE>
19
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is
subject to the Delaware General Corporation Law and to provisions contained in
the Company's Certificate of Incorporation and By-Laws, copies of which are
exhibits to the 1996 10-K that is incorporated by reference into this
Prospectus. Reference is made to such exhibits for a detailed description of
the provisions thereof summarized below.
The authorized capital stock of the Company consists of 10,000,000
shares of Preferred Stock, $.01 par value (the "Preferred Stock"), and
50,000,000 shares of Common Stock, $.01 par value. None of the Preferred Stock
is issued and outstanding. At December 15, 1996, there were 16,868,665 shares of
Common Stock outstanding, and the Company issued an additional 428,642 shares in
connection with the Avicenna Acquisition. Holders of capital stock of the
Company have no preemptive or other subscription rights.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series, without stockholder approval. The Board of Directors is authorized to
determine (subject to limitations prescribed by law) the other rights including
voting rights, if any, preferences, terms and limitations to be granted to and
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares of any series of Preferred Stock and the designation of any such
series. The Company has no present plans to issue any shares of Preferred
Stock. Because of its broad discretion with respect to the creation and
issuance of any series of Preferred Stock without stockholder approval, the
Board of Directors could adversely affect the voting power of Common Stock. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company.
COMMON STOCK
Subject to prior rights of any Preferred Stock then outstanding, the
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor declared and paid by the Company. The
Company does not currently anticipate paying cash dividends to holders of its
Common Stock.
Upon liquidation, dissolution or winding up of the Company, the assets
legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock at the time outstanding, subject to the
rights, if any, of the holders of any Preferred Stock then outstanding. Since
the Company's Board of Directors has the authority to fix the rights and
preferences of, and to issue, the Company's authorized but unissued Preferred
Stock without approval of the holders of its Common Stock, the rights of such
holders may be materially limited or qualified by the issuance of the Preferred
Stock.
<PAGE>
20
VOTING RIGHTS
Stockholders are entitled to one vote for each share of Common Stock
held of record, except that for the election of directors, stockholders have
cumulative voting rights. Cumulative voting for directors means that, at each
election of directors, the number of shares eligible to be voted by a
stockholder is multiplied by the number of directors to be elected. A
stockholder may cast all such stockholder's votes for a single candidate, or may
allocate them among two or more candidates in any manner such stockholder
chooses. For example, if three directors are to be elected, holders of one-
third of the shares would be able, by cumulating their votes, to elect one
director, regardless of how the other shares are voted. Currently, the Company
has 11 directors. The maximum number of directors permitted under the Company's
Certificate of Incorporation is 12.
The affirmative vote of the holders of at least two-thirds of the
Company's shares entitled to vote in an election of directors is required to
amend (i) the provisions of the Company's Certificate of Incorporation relating
to cumulative voting, classification of the Company's directors into three
classes, election of only one-third of the Board at each annual meeting of
stockholders and the power to remove directors or fill vacancies, and (ii) the
By-Laws to increase the number of directors above 12. The Company's Certificate
of Incorporation also provides that any or all directors may be removed with or
without cause prior to completion of their term only upon the vote of holders of
two-thirds of the outstanding shares of Common Stock entitled to vote generally
in the election of directors.
The provisions in the Certificate of Incorporation of the Company
relating to a staggered Board of Directors, super-majority requirements and
delegation of rights to issue Preferred Stock may have the effect not only of
discouraging tender offers or other stock acquisitions but also of deterring
existing stockholders from making management changes. A staggered Board, while
promoting stability in Board membership and management, also moderates the pace
of any change in control of the Board of Directors by extending the time
required to elect a majority, effectively requiring action in at least two
annual meetings. Moreover, a staggered Board makes it more difficult for
minority stockholders, even with cumulative voting, to elect a director. For
example, to elect one director of a non-staggered 12-member Board, stockholders
with cumulative voting would need only one-twelfth of the votes cast. To elect
one member of a staggered Board with three classes and 12 members, stockholders
with cumulative voting would need one-fourth of the votes cast. The provisions
with respect to removal of directors, while intended to prevent circumvention of
benefits derived from classification of directors and to prevent a transfer of
control of the Board of Directors through the removal process, also have the
effect of preventing removal of a director for just cause by a majority of
outstanding voting shares. The ability of the Board of Directors to issue
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a
third party to secure a majority of
<PAGE>
21
outstanding voting stock. See "Certain Relationships and Related Transactions"in
the 1996 10-K for a description of voting restrictions on shares held by SN
Investors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Registrar &
Transfer Company.
SHARES ELIGIBLE FOR FUTURE SALE
As of December 15, 1996, the Company has 16,868,665 shares of Common
Stock outstanding and issued 428,442 shares in connection with the Avicenna
Acquisition on December 24, 1996. Of the outstanding shares as of December 15,
1996, the 11,806,808 shares not owned by SN Investors are freely tradable
without restrictions or further registration under the Securities Act; provided,
however, that any shares owned by an "affiliate" of the Company (as that term is
defined in the rules and regulations under the Securities Act) may not be resold
in a public distribution except in compliance with the registration requirements
of the Securities Act or pursuant to Rule 144 thereunder. All of the remaining
5,061,857 shares held by SN Investors are "restricted securities" within the
meaning of Rule 144, subject to the volume restrictions of Rule 144 but for
which the two-year holding period has expired. Of the 428,642 shares issued in
connection with the Avicenna Acquisition, 383,252 may be sold pursuant to this
Prospectus and 45,390 are subject to a two year lock-up. In the Avicenna
Acquisition, certain employees of Avicenna received options to purchase 161,015
shares of Common Stock, 80,522 of which vested on December 24, 1996 and 80,493
of which will vest on December 24, 1998.
In general, Rule 144 under the Securities Act provides that an
affiliate of the Company or any holder of restricted securities, subject to any
applicable holding period, may sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
the Common Stock or the average weekly trading volume in composite trading on
all exchanges during the four calendar weeks preceding such sale. In addition,
sales under Rule 144 may be made only through unsolicited "broker's
transactions" and are subject to various other conditions.
As more fully set forth in "Certain Relationships and Related
Transactions" in the 1996 10-K, the Wygod Shares are subject to certain
contractual restrictions on transfer. Upon expiration of such restrictions, SN
Investors may be able to sell without registration under the Securities Act the
number of such shares permitted under Rule 144, in a transaction complying with
the registration requirements of the Securities Act or in a private transaction
not subject to such requirements. The Investment Agreement between Mr. Wygod and
the Company, dated as of September 13, 1994 (as more fully described in "Certain
Relationships and Related Transactions" in the 1996 10-K), provides certain
demand registration rights to Mr. Wygod at Mr. Wygod's expense, which are
assignable to any permitted transferee of the
<PAGE>
22
Wygod Shares; provided that in no event is the Company required to file in the
aggregate more than two registration statements in connection therewith. Mr.
Wygod has not assigned such registration rights to SN Investors. While Mr. Wygod
currently intends to assign such registration rights to SN Investors in the
event the General Partner determines to sell or otherwise transfer the Wygod
Shares under circumstances in which registration would be required, Mr. Wygod is
under no obligation to do so.
For information concerning shares which may be issued under the
Company's stock option plans, see "Risk Factors--Shares Available for Future
Sale."
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of
the Common Stock offered hereby will be passed upon for the Company by Shearman
& Sterling, New York, New York. Shearman & Sterling is a limited partner in SN
Investors.
The statements of law under the caption "Risk Factors--Regulation of
Porex" in this Prospectus and under the caption "Business--Porex--Regulation" in
the Company's 1996 10-K, incorporated by reference herein, are based upon the
opinion of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A., Columbus, Ohio,
special regulatory counsel to the Company. Robert D. Marotta, Esq., of counsel
to such firm, holds 75,000 options to purchase Common Stock.
EXPERTS
The audited Consolidated Financial Statements and schedules of the
Company that are incorporated by reference into this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
<PAGE>
================================================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALES OR EXCHANGES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
_____________________
TABLE OF CONTENTS
Page
----
Available Information............................... 2
Incorporation of Certain Documents by Reference..... 3
Forward-Looking Information......................... 4
The Company......................................... 5
Risk Factors........................................ 8
Use of Proceeds..................................... 13
Selected Financial Data............................. 14
Selling Stockholders................................ 15
Plan of Distribution................................ 17
Description of Capital Stock........................ 19
Legal Matters....................................... 22
Experts............................................. 22
================================================================================
================================================================================
383,252 Shares
SYNETIC, INC.
Common Stock
______________
PROSPECTUS
______________
__________, 199_
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses, other than the Securities and Exchange Commission
registration fee, are estimated. All expenses of the offering will be paid by
the Company.
SEC Registration Fee...................... $ 5,982
Legal Fees and Expenses................... $ 90,000
Accounting Fees and Expenses.............. $ 25,000
Blue Sky Fees and Expenses................ $ 1,000
Miscellaneous............................. $ 28,018
---------
Total.................................. $ 150,000
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in summary, that directors and officers of Delaware
corporations such as the Registrant are entitled, under certain circumstances,
to be indemnified against all expenses and liabilities (including attorneys'
fees) incurred by them as a result of suits brought against them in their
capacity as a director or officer if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the Registrant,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Any such indemnification may be made by the company only as authorized
in each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Article Eleven of the Registrant's Certificate
of Incorporation and Section 6.5 of the Registrant's By-Laws entitles officers,
directors and controlling persons of the Registrant to indemnification to the
full extent permitted by Section 145 of the DGCL, as the same may be
supplemented or amended from time to time.
<PAGE>
Article Thirteen of the Registrant's Certificate of Incorporation provides
that no director shall have any personal liability to the Registrant or its
stockholders for any monetary damages for breach of fiduciary duty as a
director, provided that such provision does not limit or eliminate the liability
of any director (i) for breach of such director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (involving certain unlawful dividends or stock
repurchase) or (iv) for any transaction from which such director derived an
improper personal benefit. Amendment to such article does not affect the
liability of any director for any act or omission occurring prior to the
effective time of such amendment.
Reference is made to the Form of Indemnification Agreement between the
Registrant and its directors and officers filed as Exhibit 10.1 to this
Registration Statement pursuant to which the registrant has agreed to indemnify
such directors and officers to the fullest extent permitted by Delaware law, as
the same may be amended from time to time.
ITEM 16. EXHIBITS
Exhibits:
4.1 Certificate of Incorporation of the Company, as amended.
Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (No. 33-28654) (the
"Registration Statement").
4.2 By-Laws of the Company, as amended. Incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 (the "1994 10-K").
5.1 Opinion of Shearman & Sterling.
10.1 Form of Indemnification Agreement between the Company and the
directors and officers of the Company. Incorporated by reference
to Exhibit 10.6 to the Registration Statement.
10.2 Merger Agreement, dated December 23, 1996, among the Company,
Synternet Acquisition Corp., a wholly owned subsidiary of the
Company, Avicenna and the Selling Stockholders.
II-2
<PAGE>
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A.
23.3 Consent of Shearman & Sterling (included in Exhibit 5.1).
24.1 Powers of Attorney of the Registrant.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement, to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
herein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
II-3
<PAGE>
persons of the Registrant pursuant to the provisions referred to in Item 20 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered hereby,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective, except where
the transaction in which the securities being offered pursuant to this
registration statement would itself qualify for an exemption from Section 5 of
the Securities Act of 1933, absent the existence of other similar (prior or
subsequent) transactions.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Synetic, Inc., a corporation organized and existing under the laws of the State
of Delaware, certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Borough of Elmwood Park, State of
New Jersey, on the 27th day of December, 1996.
SYNETIC, INC.
By /s/Victor L. Marrero
--------------------
Victor L. Marrero
Vice President--Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* President and Chief Executive December 27, 1996
- ---------------------------- Officer; Director
James V. Manning
* Vice President--Technologies December 27, 1996
- ---------------------------- Group; Director
Ray E. Hannah
* Vice President--Finance and Chief December 27, 1996
- ---------------------------- Financial Officer (Principal
Victor L. Marrero Accounting and Financial Officer)
* Vice President--General Counsel; December 27, 1996
- ---------------------------- Director
Charles A. Mele
* Director December 27, 1996
- ----------------------------
Thomas R. Ferguson
* Director December 27, 1996
- ----------------------------
Mervyn L. Goldstein
* Director December 27, 1996
- ----------------------------
Roger H. Licht
* Director December 27, 1996
- ----------------------------
Per G. H. Lofberg
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director December 27, 1996
- ----------------------------
Herman Sarkowsky
* Director December 27, 1996
- ----------------------------
Paul C. Suthern
* Director December 27, 1996
- ----------------------------
Albert M. Weis
* Director December 27, 1996
- ----------------------------
Martin J. Wygod
*By /s/Victor L. Marrero December 27, 1996
--------------------
Victor L. Marrero
Attorney-in-fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description of Document
- ------- -----------------------
4.1 Certificate of Incorporation of the Company,
as amended. Incorporated by reference to
Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (No. 33-28654) (the
"Registration Statement")
4.2 By-Laws of the Company, as amended.
Incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994
(the "1994 10-K")
5.1* Opinion of Shearman & Sterling
10.1 Form of Indemnification Agreement between
the Company and the directors and officers of
the Company. Incorporated by reference to
Exhibit 10.6 to the Registration Statement
10.2* Merger Agreement, dated December 23, 1996,
among the Company, Synternet Acquisition Corp.,
a wholly owned subsidiary of the Company, Avicenna
and the Selling Stockholders
23.1* Consent of Arthur Andersen LLP
23.2* Consent of Emens, Kegler, Brown,
Hill & Ritter Co., L.P.A.
23.3* Consent of Shearman & Sterling
(included in Exhibit 5.1)
24.1** Powers of Attorney of the Registrant
- ----------
*Filed herewith.
**Filed previously.
<PAGE>
CONFORMED COPY
EXHIBIT 5.1
Shearman & Sterling
599 Lexington Avenue
New York, N.Y. 10022-6069
December 24, 1996
Synetic, Inc.
669 River Drive, River Drive Center II
Elmwood Park, NJ 07407-1361
Ladies and Gentlemen:
We have acted as counsel to Synetic, Inc., a Delaware corporation (the
"Company"), in connection with the preparation of the Registration Statement on
Form S-3 of the Company, filed with the Securities and Exchange Commission on
December 24, 1996, as amended (the "Registration Statement"), relating to the
registration under the Securities Act of 1933, as amended, of 383,252 shares of
the Company's Common Stock, par value $.01 per share (the "Shares"), to be
offered from time to time by certain selling stockholders in the manner
described in the prospectus contained in the Registration Statement (the
"Prospectus").
We have examined the Registration Statement and originals, or copies
certified or otherwise identified to our satisfaction, of such other documents
and corporate records as we have deemed necessary as a basis for the opinion set
forth herein. We have relied as to factual matters on certificates or other
documents furnished by the Company or its officers and by governmental
authorities and upon such other documents and data that we have deemed
appropriate. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
legal capacity of all persons executing such documents, the conformity to
original documents of all documents submitted to us as copies and the truth and
correctness of any representations and warranties contained therein.
The opinion expressed below is limited to the General Corporation Law
of Delaware. We express no opinion herein concerning any other law.
<PAGE>
Based on such examination and review and subject to the foregoing, we
are of the opinion that the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
/s/ Shearman & Sterling
<PAGE>
Exhibit 10.2
S&S DRAFT
12/23/96
AGREEMENT AND PLAN OF MERGER, dated as of December 23, 1996 (this
"Agreement"), among SYNETIC, INC., a Delaware corporation (the "Parent"),
- ---------- ------
SYNTERNET ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of the Parent (the "Purchaser"), AVICENNA SYSTEMS CORP, a
---------
Massachusetts corporation (the "Company"), and the individuals and entities
-------
listed on the signature pages hereof (each, a "Stockholder", and collectively,
-----------
the "Stockholders").
------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of providing health
care interenterprise connectivity by means of computers (the "Business");
--------
WHEREAS, each Stockholder owns (i) such number of shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company, (ii) such
------------
number of shares of Series A Convertible Preferred Stock, par value $0.01 per
share (the "Preferred Stock") of the Company, and (iii) certain convertible
---------------
demand notes convertible into shares of the Common Stock (the "Convertible
-----------
Notes") in such principal amounts, in each case as is set forth opposite such
- -----
Stockholder's name in Schedule A hereto;
WHEREAS, the 400,033 shares of Common Stock currently outstanding (the
"Common Shares") and the 1,033,333 shares of Preferred Stock currently
-------------
outstanding (the "Preferred Shares", and together with the Common Shares, the
----------------
"Shares"), all of which are owned by the Stockholders, will, as of the
------
<PAGE>
2
Closing, represent all of the issued and outstanding capital stock of the
- -------
Company;
WHEREAS, the Company has issued, to the employees and in the amounts
set forth in Schedule A hereto, employee stock options to purchase an aggregate
of 672,572 Common Shares (the "Company Options");
---------------
WHEREAS, the Stockholders desire to sell to the Parent, and the Parent
desires to purchase from the Stockholders, the currently outstanding Shares and
the Convertible Notes in exchange for shares of the common stock, par value
$0.01 per share, of the Parent (the "Parent Shares"), upon the terms and subject
-------------
to the conditions set forth herein;
WHEREAS, as additional consideration payable to the holders of
Preferred Shares in the Merger (as hereinafter defined), the Parent shall issue
250,000 Parent Warrants (as hereinafter defined);
WHEREAS, in furtherance thereof, the Boards of Directors of the
Parent, the Purchaser and the Company, and Mr. Inder-Jeet Gujral and the holders
of the Preferred Stock, have each approved the merger (the "Merger") of the
------
Purchaser with and into the Company in accordance with the General Corporation
Law of the State of Delaware ("Delaware Law") and the Massachusetts Business
------------
Corporation Law ("Massachusetts Law") upon the terms and subject to the
-----------------
conditions set forth herein;
WHEREAS, in connection with the Merger, the parties hereto desire to
provide for the conversion of the Company Options into options exercisable for
Parent Shares;
<PAGE>
3
WHEREAS, the total market value of the Parent Shares (determined based
upon the Signing Date Market Price (as hereinafter defined)) to be issued (i) in
consideration for the Shares, (ii) in consideration for the Convertible Notes,
(iii) for which the Company Options shall become exercisable, and (iv) after the
Merger, in satisfaction of the right held by BlueCross BlueShield of
Massachusetts to acquire 20,333 Preferred Shares, in each case as of the date of
this Agreement, shall be $30,500,000 (the "Purchase Price");
--------------
WHEREAS, based upon the Signing Date Market Price, the total number of
Parent Shares issuable with respect to each Stockholder and each holder of
Company Options in consideration for the Common Shares, the Preferred Shares,
the Convertible Notes, and upon the exercise of the Company Options, is set
forth on Schedule A hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
----------
conditions set forth in this Agreement, at the Effective Time (as defined
below), the Purchaser shall be merged with and into the Company, and the Company
shall be the surviving corporation in the Merger (in such capacity, the
"Surviving Corporation") and shall continue its corporate existence under the
- ----------------------
laws of the Commonwealth of Massachusetts. At the
<PAGE>
4
Effective Time, the separate corporate existence of the Purchaser shall cease.
SECTION 1.02. Effective Time of the Merger. The Merger shall become
----------------------------
effective after properly executed certificates of merger (the "Certificates of
---------------
Merger") are duly filed with the Secretary of State of the State of Delaware, in
- ------
accordance with Delaware Law and the Secretary of State of the Commonwealth of
Massachusetts, in accordance with Massachusetts Law (the "Effective Time").
--------------
SECTION 1.03. Certificate of Incorporation. At the Effective Time,
----------------------------
the Articles of Organization of the Surviving Corporation shall be the Amended
and Restated Articles of Organization set forth in Exhibit 1.03 hereof until
thereafter amended in accordance with applicable law.
SECTION 1.04. By-laws. At the Effective Time, the By-laws of the
-------
Surviving Corporation shall be as set forth in Exhibit 1.03 hereto, until
thereafter amended in accordance with applicable law.
SECTION 1.05. Directors and Officers. The directors of the Purchaser
----------------------
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Organization and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
<PAGE>
5
SECTION 1.06. Effect of the Merger. At and after the Effective Time,
--------------------
the effect of the Merger shall, in all respects, be as provided by Delaware Law
and Massachusetts Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges and
powers of the Purchaser shall vest in the Surviving Corporation and all debts,
liabilities and duties of the Purchaser and the Company shall become debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.07. Closing; Payment of the Purchase Price. (a) Upon the
--------------------------------------
terms and subject to the conditions of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
-------
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, NY at 9:00
am, New York City time, or as promptly as practicable thereafter, on the date of
the satisfaction of the conditions set forth herein (the "Closing Date").
------------
(b) At the Closing, the Stockholders shall deliver or cause to be
delivered to the Parent:
(i) stock certificates evidencing the Shares;
(ii) the Convertible Notes; and
(iii) the opinions, certificates and other documents required to be
delivered pursuant to Section 5.02.
(c) At the Closing, the Parent shall deliver to the Stockholders:
<PAGE>
6
(i) stock certificates evidencing the Parent Shares, as set forth in
Sections 1.08 and 1.09 below;
(ii) the Parent Warrants; and
(iii) the opinions, certificates and other documents required to be
delivered pursuant to Section 5.01.
(d) On the Closing Date, the Certificates of Merger with respect to
the Merger shall be filed with the Secretary of State of the State of Delaware
and the Secretary of State of the Commonwealth of Massachusetts.
SECTION 1.08. Conversion of Securities. At the Effective Time, by
------------------------
virtue of the Merger and without any action on the part of the Parent, the
Purchaser, the Company or the Stockholders, and subject to Section 1.10:
(a) Each Share shall be cancelled and converted automatically into the
right to receive that number of Parent Shares equal to the quotient (the
"Exchange Ratio") obtained by dividing (i) a fraction, the numerator of
---------------
which shall be 26,329,699 and the denominator of which shall be 2,126,271
by (ii) the Signing Date Market Price of one Parent Share. The "Signing
-------
Date Market Price" means the lower of (A) the arithmetic average of the
-----------------
last reported sales price of Parent Shares on the National Association of
Securities Dealers' national market system ("NASDAQ") for each of the ten
------
trading days ending on the trading day immediately preceding the date of
this Agreement or (B) the last reported sales price of Parent Shares on the
NASDAQ on
<PAGE>
7
the trading day immediately preceding the date of this Agreement.
In accordance with the above formulas, the Exchange Ratio has been
calculated to be 0.2394 of a Parent Share, and the Signing Date Market
Price (based on clause (A) of the definition thereof) has been calculated
to be $51.725.
(b) Each Preferred Share shall, upon cancellation pursuant to Section
1.08(a) above and in addition to the Parent Shares referred to in such
Section 1.08(a), be converted into (i) that number of Parent Shares equal
to (A) $3.00 divided by (B) the Signing Date Market Price; and (ii) a
number of warrants, each such warrant exercisable for one Parent Share at
an exercise price equal to $54.50 (the "Parent Warrants"), equal to (x)
---------------
250,000 divided by (y) 1,053,666.
(c) Each Share held in the Company's treasury as of the Effective Time
shall be canceled and retired and all rights in respect thereof shall cease
to exist, without any conversion thereof or payment of any consideration
therefor.
(d) From and after the Effective Time, all Shares to be converted into
Parent Shares pursuant to this Section 1.08 shall cease to be outstanding,
shall be cancelled and retired and shall cease to exist, and the holders of
certificates representing the Shares shall cease to have any rights with
respect to such Shares, except the right to receive the consideration
specified in this Section 1.08.
(e) Each share of capital stock of the Purchaser that is issued and
outstanding
<PAGE>
8
as of the Effective Time shall be converted into one share of capital stock
of the Surviving Corporation.
SECTION 1.09. Convertible Notes; Company Options. (a) In connection
----------------------------------
with the Merger, the Parent shall deliver to the holders of Convertible Notes,
in consideration for each Convertible Note, a number of Parent Shares equal to
(i) the aggregate outstanding principal amount and accrued interest through the
Signing Date on such Convertible Note, divided by (ii) the Signing Date Market
Price.
(b) In connection with the Merger, each outstanding Company Option
shall, in accordance with Section 4.03(a) hereof, be amended and converted into
the right to receive, upon exercise thereof, a number of Parent Shares based on
the Exchange Ratio.
SECTION 1.10. Fractional Shares. The Parent will not issue any
-----------------
fractional Parent Shares pursuant to Section 1.08(a), 1.08(b) or 1.09(a) hereof,
and the Parent will, in lieu of any such fractional shares, round the number of
Parent Shares issuable to each Stockholder to the nearest whole number of Parent
Shares, after aggregating all Parent Shares to which such Stockholder is
entitled pursuant to Sections 1.08(a), 1.08(b) and 1.09(a) hereof. In addition,
the Parent will not issue any fractional warrants pursuant to Section 1.08(b)
hereof and the Parent will, in lieu of any such fractional warrants, round the
number of Parent Warrants issuable to each holder of Preferred Shares to the
nearest whole number of Parent Warrants, after aggregating all Parent Warrants
to which such holder is entitled pursuant to Section 1.08(b). The Parent will
issue a single warrant certificate, substantially in the form attached
<PAGE>
9
hereto as Exhibit 1.10 (each such certificate a "Parent Warrant Certificate"),
--------------------------
to each holder of Preferred Shares, and such Parent Warrant Certificate shall
represent the total number of Parent Warrants to which such holder is entitled
pursuant to the preceding sentence.
SECTION 1.11. Price Protection. (a) If on any Determination Date
----------------
the Determination Date Market Price is less than the Guaranteed Price, then the
Parent will deliver to each Stockholder, as payment with respect to such
Stockholder's Protected Shares, on the next business day following such
Determination Date, an amount, payable in Parent Shares, equal to (i) the number
of Protected Shares held by such Stockholder multiplied by (ii) the number
obtained by subtracting (x) the Determination Date Market Price from (y) the
Guaranteed Price (such amount being the "Deficiency Amount"). In such event,
-----------------
the number of Parent Shares issuable to each Stockholder shall equal the
Deficiency Amount divided by the applicable Determination Date Market Price, and
such shares shall be included in a registration statement filed by the Parent.
(b) "Guaranteed Price" means 90% of the Signing Date Market Price.
----------------
(c) "Protected Shares" means the Parent Shares issued to the
----------------
Stockholders pursuant to Sections 1.08(a), 1.08(b) and 1.09(a) hereof; provided,
--------
however, that in the event that Mr. Inder-Jeet Gujral terminates his employment
- -------
with the Company for any reason other than death or Permanent Disability (as
defined in Exhibit 5.01(c)), the Parent Shares referred to in Section 4.04 shall
cease to be Protected Shares from and after the date of such termination. In no
event
<PAGE>
10
shall either the Parent Warrants or the Parent Shares issuable upon exercise of
the Parent Warrants be entitled to the benefits of this Section 1.11.
(d) "Determination Date" means, (i) with respect to all Protected
------------------
Shares issued on the Closing Date (other than those referred to in clause (ii)
below), the first date on which any of the Protected Shares are first eligible
for sale pursuant to an effective registration statement filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
---
as amended (the "Securities Act"), in accordance with the provisions of Section
--------------
4.03 hereof, and (ii) with respect to Protected Shares referred to in Section
4.04, the second anniversary of the Closing Date.
(e) "Determination Date Market Price" means, on any Determination
-------------------------------
Date, the last reported sale price of Parent Shares on NASDAQ on the trading day
immediately preceding such Determination Date.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to the
Parent that, except as set forth in the disclosure schedule dated as of the date
hereof delivered to the Parent by the Stockholders (the "Disclosure Schedule")
-------------------
(which shall specify any exception to individual representations and warranties
by reference to specific Section numbers):
SECTION 2.01. Organization, Authority and Qualification of the
------------------------------------------------
<PAGE>
11
Stockholders and the Company; Subsidiaries; Certificate and By-laws. (a) Each
- -------------------------------------------------------------------
Stockholder has all necessary power and authority to enter into this Agreement,
to carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each
Stockholder, the performance by each Stockholder of its obligations hereunder
and the consummation by each Stockholder of the transactions contemplated hereby
have been duly authorized by all requisite action on the part of such
Stockholder. This Agreement has been duly executed and delivered by each
Stockholder, and (assuming due authorization, execution and delivery by the
Parent or the Purchaser) this Agreement constitutes a legal, valid and binding
obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms (except in each such case as enforceability may be
limited by bankruptcy, insolvency, reorganization and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally). No
person other than the Stockholders has a right or claim to any portion of the
Purchase Price or any other payments made by the Parent to any Stockholder
hereunder.
(b) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts, and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on the Business as presently conducted. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations and to consummate the transactions
contemplated
<PAGE>
12
hereunder. The execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by the Parent
and the Purchaser) this Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except in each such case as enforceability may be limited by
bankruptcy, insolvency, reorganization and other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally). The Company is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except those jurisdictions, if any, in
which the failure to be so duly qualified or licensed and in good standing would
not, individually or in the aggregate, have a Material Adverse Effect. The
Stockholders have delivered to the Parent true, complete and correct copies of
each of the Certificate of Incorporation, the by-laws and the minutes of each
meeting of the board of directors and shareholders of the Company. For purposes
of this Agreement, "Material Adverse Effect" means any circumstance, change,
-----------------------
event, transaction, loss, failure, effect or other
<PAGE>
13
occurrence that is or will be materially adverse to the business, operations,
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities, results of operations or prospects of the
Company.
(c) There are no corporations, partnerships, joint ventures,
associations or other entities in which the Company owns, of record or
beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same. The Company is not a member of
(nor is any part of the Business conducted through) any partnership. The
Company is not a participant in any joint venture or similar arrangement.
SECTION 2.02. Capitalization; Ownership. (a) The authorized capital
-------------------------
stock of the Company consists of (x) 1,066,667 shares of Preferred Stock, of
which 1,033,333 shares are issued and outstanding and each share of which is
convertible into one share of Common Stock and (y) 2,162,667 shares of Common
Stock, of which (i) 400,033 shares are issued and outstanding, (ii) 672,572
shares are reserved for issuance pursuant to outstanding Company Options issued
pursuant to the Company's 1995 Stock Plan (the "Company Stock Plan"), (iii)
------------------
44,228 shares are reserved for issuance upon the granting of additional options
pursuant to the Company Stock Plan and (iv) no shares are reserved for issuance
pursuant to the Convertible Notes.
(b) Except for the Company Options, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
the Company is a party or obligating the Company to issue or sell any
<PAGE>
14
shares of capital stock of, or other equity interests in, the Company. Except
for the Company Options, no other awards have been made pursuant to the Company
Stock Plan. There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any of the capital stock of the Company
or to provide funds to or make any material investment (in the form of a loan,
capital contribution or otherwise) in any other entity. The Company is not a
party to any agreement granting registration rights to any person with respect
to any securities of the Company. All warrants issued pursuant to the
Convertible Demand Note and Warrant Purchase Agreement dated as of October 10,
1996 among certain of the Stockholders and the Company (the "Company Warrants")
----------------
have been exercised pursuant to the cashless exercise provisions thereof and
20,833 Common Shares have been issued in satisfaction and cancellation of all
such Company Warrants.
(c) The Shares constitute all the issued and outstanding capital stock
of the Company and are owned of record and beneficially solely by the
Stockholders free and clear of all encumbrances. All of the Shares are fully
paid and nonassessable. There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any of the Shares.
(d) The stock register of the Company accurately records: (i) the
name and address of each person owning Shares and (ii) the certificate number of
each certificate evidencing Shares issued by the Company, the number of shares
evidenced by each such certificate, the date of issuance thereof and, in
<PAGE>
15
the case of cancellation, the date of cancellation.
SECTION 2.03. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company and the Stockholders do
not, and the performance of this Agreement by the Company and the Stockholders
will not, (i) conflict with or violate the Certificate of Incorporation or by-
laws of the Company or the organizational documents of any Stockholder, as
applicable, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or the Stockholders or by which
their respective assets or properties are bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or the Stockholders, respectively, pursuant to, or result in a change in
any of the terms of any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, insurance policy or other instrument or obligation to
which the Company or any Stockholder is a party, or by which the Company or any
Stockholder or any of their respective properties are bound or affected, except
in the case of clause (iii) above for such conflicts which would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
delay the consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the Company and
the
<PAGE>
16
Stockholders do not, and the performance of this Agreement by the Company and
the Stockholders will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, on the part of the Company or any Stockholder,
except for the filing of articles of merger with the Secretary of State of the
Commonwealth of Massachusetts and the filing of a certificate of merger with the
Secretary of State of the State of Delaware.
SECTION 2.04. Compliance with Laws. The Company is not in conflict
--------------------
with, or violation of, any law, rule, regulation, order, judgment or decree
applicable to the Company or by which the Company or any of its properties are
bound or affected, except for any such conflicts or violations which would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.05. Financial Information; Books and Records. (a) True
----------------------------------------
and complete copies of (i) the draft of the audited balance sheet of the Company
for the fiscal year ended as of December 31, 1995, and the related audited
statements of income, changes in shareholders' equity and cash flows of the
Company, together with all related notes and schedules thereto (collectively
referred to herein as the "Draft Audited Financial Statements"), and (ii) the
----------------------------------
unaudited balance sheet of the Company for the eleven months ended as of
November 30, 1996, and the related statements of income, changes in
shareholders' equity and cash flows of the Company, together with all related
notes and schedules thereto (collectively referred to herein as the "Interim
-------
Financial Statements")
- --------------------
<PAGE>
17
are attached as Section 2.05 of the Disclosure Schedule. The Draft Audited
Financial Statements and the Interim Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the Company,
(ii) present fairly the consolidated financial condition and results of
operations of the Company as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with the past practices of
the Company and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the financial
condition of the Company and the results of the operations of the Company as of
the dates thereof or for the periods covered thereby; provided, however, that
-------- -------
the Interim Financial Statements may not include all footnotes required by U.S.
generally accepted accounting principles and were or are subject to normal and
recurring year-end adjustments which were not and are not anticipated to be
material in amount.
(b) The books of account and other financial records of the Company:
(i) reflect all items of income and expense and all assets and liabilities
required to be reflected therein in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with the past practices of
the Company, (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies and (iii) have
been maintained in accordance with good business and accounting practices.
(c) Except for (i) liabilities reflected on the balance sheet
contained in the Interim
<PAGE>
18
Financial Statements and (ii) liabilities incurred in the ordinary course of
business of the Company subsequent to November 30, 1996, the Company has no
material liabilities and there is no existing condition or set of circumstances
that could reasonably be expected to result in any such material liability.
SECTION 2.06. Absence of Certain Changes, Events and Conditions.
-------------------------------------------------
Since December 31, 1995, there have not been any changes, occurrences, or
circumstances with respect to the Company which individually or in aggregate had
or have a Material Adverse Effect. Since December 31, 1995, the Company has
operated its business only in the ordinary course, consistent with past
practice, except for the transactions contemplated by this Agreement.
SECTION 2.07. Employee Benefit Plans; Labor Matters; Consultants.
--------------------------------------------------
(a) Section 2.07 of the Disclosure Schedule lists each benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
----------------
plan", as defined in Section 3(3) of the Employee Retirement Income Security Act
- ----
of 1974, as amended ("ERISA")), maintained or contributed to by the Company for
-----
or with respect to any of its current or former employees, officers, directors
or independent contractors, or with respect to which the Company could incur
liability under Section 4069, 4201 or 4212(c) of ERISA (the "Company Benefit
---------------
Plans").
- -----
(b) None of the Company Benefit Plans promises or provides retiree
medical or life insurance benefits to any person. Each Company Benefit Plan
intended to be qualified under Section 401(a) of the Internal Revenue
<PAGE>
19
Code of 1986, as amended, together with the rules and regulations promulgated
thereunder (the "Code") has received a favorable determination letter from the
----
Internal Revenue Service to the effect that it is so qualified and nothing has
occurred since the date of such letter to affect the qualified status of such
plan. None of the Company Benefit Plans in effect on the date hereof would
result, separately or in the aggregate (including, without limitation, as a
result of this Agreement or the transactions contemplated hereby), in the
payment of any "excess parachute payment" within the meaning of Section 280G of
------------------------
the Code. Each Company Benefit Plan has been operated in all material respects
in accordance with its terms and the requirements of applicable law. None of the
Company Benefit Plans is subject to Title IV of ERISA, and the Company has not
incurred, and does not reasonably expect to incur, any direct or indirect
liability under or by operation of Title IV or ERISA.
(c) With respect to the Company Benefit Plans, no event has occurred
and, to the knowledge of the Company, there exists no condition or set of
circumstances, in connection with which the Company could be subject to any
liability under the terms of such Company Benefit Plans, ERISA, the Code or any
other applicable law which would, individually or in the aggregate, have a
Material Adverse Effect.
(d) The Company is not a party to any collective bargaining or other
labor union contracts. There is no pending or, to the knowledge of the Company,
threatened labor dispute, strike or work stoppage against the Company which may
interfere with the business activities of the Company.
<PAGE>
20
Neither the Company nor, to the knowledge of the Company, its representatives or
employees, has committed any unfair labor practices in connection with the
operation of the businesses of the Company, and there is no pending or, to the
knowledge of the Company, threatened charge or complaint against the Company by
the National Labor Relations Board or any comparable state agency. The Company's
relations with its employees are good.
(e) Set forth in Section 2.07(e) of the Disclosure Schedule is a list
of all employment agreements between the Company and any of its employees,
copies of which have been delivered by the Company to the Parent. Except as
otherwise specified in Section 2.07(e) of the Disclosure Schedule, each
employee has signed a Non-Competition Agreement and an Employee Nondisclosure
and Developments Agreement, in the form set forth in Schedule 2.07(e) of the
Disclosure Schedule, and each such agreement is in full force and effect.
(f) Set forth in Section 2.07(f) of the Disclosure Schedule is a list
of all consultants engaged by the Company, and the Company has delivered to the
Parent a copy of each agreement between the Company and any such consultant.
SECTION 2.08. Litigation. There is no pending or, to the knowledge
----------
of Mr. Inder-Jeet Gujral after due inquiry of the employees of the Company,
threatened litigation, arbitration or governmental investigation or legal,
administrative or regulatory proceeding against the Company or to which any of
its properties is or would be subject.
SECTION 2.09. Material Contracts. (a) Section 2.09(a) of the
------------------
Disclosure Schedule
<PAGE>
21
lists each of the following written contracts and agreements of the Company
(such contracts and agreements being "Material Contracts"):
------------------
(i) each contract and agreement for the purchase or lease of personal
property with any supplier or for the furnishing of services to the Company
or otherwise related to the Business;
(ii) each customer contract and agreement and other contract and
agreement for the sale or lease of personal property or for the furnishing
of services by the Company, and any outstanding proposals to customers or
prospective customers of the Company;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Company is a party;
(iv) all leases and subleases of real property;
(v) all contracts and agreements relating to indebtedness other than
trade indebtedness of the Company;
(vi) all contracts and agreements with any governmental authority to
which the Company is a party;
(vii) all contracts and agreements that limit or purport to limit the
ability of the Company to compete in any line of business or with any
person or in any
<PAGE>
22
geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company and
any Stockholder or any affiliate of any Stockholder;
(ix) any other material agreement of the Company which is terminable
upon or prohibits a change of ownership or control of the Company; and
(x) all other contracts and agreements whether or not made in the
ordinary course of business, which are material to the Company or the
conduct of the Business or the absence of which would have a Material
Adverse Effect.
(b) Each Material Contract: (i) is valid and binding on the respective
parties thereto and is in full force and effect and (ii) upon consummation of
the transactions contemplated by this Agreement, shall continue in full force
and effect without penalty or other adverse consequence. The Company is not in
material breach of, or material default under, any Material Contract and, to the
knowledge of the Company, no other party to any Material Contract is in material
breach thereof or material default thereunder.
(c) As of the date of this Agreement the Company has not entered into
any agreement or arrangement limiting or otherwise restricting it from engaging
or competing in any line of business or in any geographic area.
<PAGE>
23
(d) The Company is not a party to any material oral contract or, to
its knowledge, any other oral contract.
SECTION 2.10. Intellectual Property. (a) The Company owns or has
---------------------
the legal right to use all Intellectual Property (as hereinafter defined), as is
used or held for use in the Business, including but not limited to all
Developments (as defined in Section 4.07(d)), free and clear of any encumbrance.
"Intellectual Property" means (i) trademarks, service marks, trade
---------------------
dress, logos, trade names and corporate names (including, without limitation,
the "Avicenna" name and all similar or related names, marks and logos), whether
or not registered, including all common law rights, and registrations and
applications for registration thereof, including, but not limited to, all marks
registered in the United States Patent and Trademark Office, the Trademark
Offices of the States and Territories of the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United States
of America, and the Trademark Offices of other nations throughout the world, and
all rights therein provided by multinational treaties or conventions, (ii)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by multinational treaties
or conventions, (iii) computer software, including, without limitation, source
code, operating systems and specifications, data, data bases, files,
documentation and other materials related thereto, data and documentation, (iv)
trade secrets and confidential, technical or business information (including
ideas, formulas, compositions, inventions and conceptions of
<PAGE>
24
inventions whether patentable or unpatentable and whether or not reduced to
practice), (v) whether or not confidential, technology (including know-how and
show-how), manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (vi) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (vii) issued patents and patent
applications, (viii) all rights to obtain and rights to apply for patents, and
to register trademarks and copyrights, and (ii) all rights to sue and recover
and retain damages and costs and attorneys' fees for present and past
infringement of any of the Intellectual Property rights hereinabove set forth.
(b) Section 2.10(b) of the Disclosure Schedule sets forth a true and
complete list and a brief description of (i) all of the Company's registered and
applied for copyrights, trademarks and patents and all material licenses
pertaining thereto and indicates where and when such Intellectual Property has
been registered or filed with the United States Patent and Trademark Office or
the United States Copyright Office, or the corresponding office of any other
jurisdictions and (ii) all of the Intellectual Property (other than commercially
available shrink-wrap software) licensed or sublicensed to the Company from any
third party. The conduct of the Business does not conflict with or infringe
upon, and, to the best knowledge of the Company or the Stockholders after due
inquiry, no one has
<PAGE>
25
asserted to the Company or the Stockholders that the conduct of the Business
conflicts with or infringes upon, any Intellectual Property owned, possessed,
used or claimed by any third party. The Company has not granted any outstanding
licenses or other rights, or obligated itself to grant licenses or other rights
in or to any of the Intellectual Property owned, used or licensed to it. The
consummation of the transactions contemplated by this Agreement will not result
in the termination or impairment of any of the Intellectual Property.
(c) The Stockholders have, or have caused to be, delivered to the
Parent correct and complete copies of all the licenses and sublicenses for the
Intellectual Property listed in Section 2.10(b) of the Disclosure Schedule and
any and all ancillary documents pertaining thereto (including, but not limited
to, all amendments, consents and evidence of commencement dates and expiration
dates). With respect to each of such licenses and sublicenses:
(i) such license or sublicense, together with all ancillary documents
delivered pursuant to the first sentence of this Section 2.10(c), is valid
and binding and in full force and effect and represents the entire
agreement between the respective licensor and licensee with respect to the
subject matter of such license or sublicense;
(ii) such license or sublicense will not cease to be valid and binding
and in full force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions contemplated by
this Agreement, nor will
<PAGE>
26
the consummation of the transactions contemplated by this Agreement
constitute a breach or default under such license or sublicense or
otherwise give the licensor or sublicensor a right to
terminate such license or sublicense;
(iii) with respect to each such license or sublicense: (A) neither any
Stockholder nor the Company has received any notice of termination or
cancellation under such license or sublicense and no licensor or
sublicensor has any right of termination or cancellation under such license
or sublicense except in connection with the default of the Company
thereunder, (B) neither any Stockholder nor the Company has received any
notice of a breach or default under such license or sublicense, which
breach or default has not been cured, and (C) neither any Stockholder nor
the Company has granted to any other person any rights, adverse or
otherwise, under such license or sublicense;
(iv) neither the Company nor (to the best knowledge of the Company or
the Stockholders after due inquiry) any other party to such license or
sublicense is in breach or default in any material respect, and, to the
best knowledge of the Company or the Stockholders after due inquiry, no
event has occurred that, with notice or lapse of time would constitute such
a breach or default or permit termination, modification or acceleration
under such license or sublicense;
(v) no actions have been brought or asserted or are pending (nor, to
the best knowledge of the Stockholders after due
<PAGE>
27
inquiry, has any such action been threatened) against the Company either
(A) based upon or challenging or seeking to deny or restrict the use by the
Company of any of such Intellectual Property or (B) alleging that any such
Intellectual Property is being licensed, sublicensed or used in violation
of any patents or trademarks, or any other rights of any person; and
(vi) to the best knowledge of the Stockholders after due inquiry, no
person is using any patents, copyrights, trademarks, service marks, trade
names, trade secrets or similar property that are confusingly similar to
such Intellectual Property or that infringe upon such Intellectual Property
or upon the rights of the Company therein.
(d) The Stockholders are not aware of any reason that would prevent
any pending applications to register trademarks, service marks or copyrights or
any pending patent applications from being granted.
(e) The Intellectual Property described in Section 2.10(b) of the
Disclosure Schedule constitutes all the Intellectual Property used or held or
intended to be used by the Company or forming a part of, used, held or intended
to be used in, and all such Intellectual Property necessary in the conduct of,
the Business and there are no other items of Intellectual Property that are
material to the Company or the Business.
SECTION 2.11. Real Property. The Company does not own any real
-------------
property.
<PAGE>
28
SECTION 2.12. Assets. The Company owns, leases or has the legal
------
right to use all the properties and assets, including, without limitation, real
property and personal property, used or intended to be used in the conduct of
the Business or otherwise owned, leased or used by the Company and, with respect
to contract rights, is a party to and enjoys the right to the benefits of all
contracts, agreements and other arrangements used or intended to be used by the
Company in or relating to the conduct of the Business (all such properties,
assets and contract rights being the "Assets"); provided, however, that no
------ -------- -------
representation or warranty is made pursuant to this Section 2.12 with respect to
Intellectual Property. The Company has good and marketable title to, or, in the
case of leased or subleased Assets, valid and subsisting leasehold interests in,
all the Assets, free and clear of all encumbrances.
SECTION 2.13. Taxes. The Company has timely filed all returns and
-----
reports required to be filed with respect to taxes relating to the Business on
or prior to the Closing Date. All taxes required to be collected or paid by the
Company on or prior to the Closing Date have been timely collected and paid.
The Company has not received from any governmental authority any written notice
of proposed adjustment, deficiency or underpayment of any taxes, which notice
has not been satisfied by payment or been withdrawn, and there are no material
claims that have been asserted or threatened relating to such taxes against the
Company. There are no agreements for the extension of time for the assessment
of any taxes of the Company other than routine audit extensions granted in the
ordinary course of business. No consent under Section 341(f) of the Code has
been filed
<PAGE>
29
with respect to the Company. For purposes of this Agreement, "tax" or "taxes"
--- -----
means any and all taxes, fees, levies, duties, tariffs, imposts and other
charges of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any
government or taxing authority, including, without limitation: taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added or gains taxes; license, registration and documentation
fees; and customs' duties, tariffs and similar charges.
SECTION 2.14. Certain Interests. (a) None of the Stockholders or
-----------------
their affiliates or any officer or director of the Company and, to the knowledge
of the Stockholders and the Company, no immediate relative or spouse (or
immediate relative of such spouse) who resides with, or is a dependent of, any
such officer or director:
(i) has any direct or indirect financial interest in any competitor,
supplier or customer of the Company, provided, however, that the ownership
-------- -------
of securities representing no more than five percent of the outstanding
voting power of any competitor, supplier or customer, and which are listed
on any national securities exchange or traded actively in the national
over-the-counter market, shall not be deemed to be a "financial interest"
so long as the person owning such securities has no other connection or
relationship with
<PAGE>
30
such competitor, supplier or customer, provided further that this Section
-------- -------
2.12(a)(i) shall only apply to Mr. Inder-Jeet Gujral;
(ii) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Company
uses or has used in the conduct of the Business or otherwise (except for
any such ownership or interest resulting from the ownership of securities
in a public company); or
(iii) has outstanding any indebtedness to the Company.
(b) Except for the Notes and the Company Options and payment of
employee compensation in the ordinary course of business, the Company has no
liability or any other obligation of any nature whatsoever to any Stockholder or
any affiliate thereof or to any officer or director of the Company or, to the
knowledge of the Stockholders and the Company, to any immediate relative or
spouse (or immediate relative of such spouse) who resides with, or is a
dependent of, any such officer or director.
SECTION 2.15. Investment Intent; Shares Unregistered; Accredited
--------------------------------------------------
Investor. (a) The Stockholders are acquiring the Parent Shares for investment,
- --------
solely for their own account and not with a view to, or for sale in connection
with, the distribution thereof in violation of United States securities laws.
(b) Shares Unregistered. The Stockholders understand and acknowledge
-------------------
that (i) the offer and issuance of the Parent Shares have not been registered
under the
<PAGE>
31
Securities Act, (ii) the Parent Shares must be held indefinitely and the
Stockholders must continue to bear the economic risk of the investment in the
Parent Shares unless the offer and sale of such Parent Shares is subsequently
registered under the Securities Act and all applicable state securities laws or
an exemption from such registration is available and (iii) a restrictive legend
in the form set forth in Section 4.10 hereof shall be placed on the certificates
evidencing the Parent Shares.
(c) Accredited Investor. Each Stockholder is an "Accredited Investor"
-------------------
as that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
SECTION 2.16. Full Disclosure. (a) Neither any of the Stockholders
---------------
nor the Company is aware of any facts pertaining to the Company's operations or
lines of business which could have a Material Adverse Effect and which have not
been disclosed in this Agreement or the Disclosure Schedule.
(b) No representation or warranty of the Stockholders in this
Agreement, nor any statement or certificate furnished or to be furnished to the
Parent pursuant to this Agreement, or in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
SECTION 2.17. Brokers. Except as disclosed in writing to the Parent,
-------
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission
<PAGE>
32
in connection with the transactions contemplated by this Agreement, based upon
arrangements made by or on behalf of the Company or the Stockholders. The
Stockholders shall be solely responsible for any such fees and expenses.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE PURCHASER
The Parent and the Purchaser jointly and severally represent and
warrant to the Stockholders that:
SECTION 3.01. Corporate Organization and Authority. Each of the
------------------------------------
Parent and the Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is presently conducted. Each of the Parent and the
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations and to consummate the transactions
contemplated hereunder. The execution and delivery of this Agreement by each of
the Parent and the Purchaser and the consummation by the Parent and the
Purchaser of the transactions contemplated hereby have been duly authorized by
all necessary corporate action of the Parent and the Purchaser, respectively,
and no other corporate proceedings on the part of the Parent or the Purchaser
are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has
<PAGE>
33
been duly executed and delivered by the Parent and the Purchaser and (assuming
the due authorization, execution and delivery by the Company and the
Stockholders) constitutes the legal, valid and binding obligation of each of the
Parent and the Purchaser enforceable against each of the Parent and the
Purchaser in accordance with its terms (except in each such case as
enforceability may be limited by bankruptcy, insolvency, reorganization and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally).
SECTION 3.02. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by each of the Parent and the Purchaser
do not, and the performance of this Agreement by each of the Parent and the
Purchaser will not, (i) conflict with or violate the articles of incorporation
or by-laws of the Parent or the Purchaser, respectively, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Parent or the Purchaser, respectively, or by which either of them or their
properties are bound or affected, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of the Parent or the Purchaser,
respectively, pursuant to, or result in a change in any of the terms of any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Parent or the Purchaser
is a party or by which the Parent or the Purchaser or any of their respective
properties is bound or affected,
<PAGE>
34
except, in the case of this clause (iii), for any such breaches, defaults or
other occurrences which would not, individually or in the aggregate, have a
material adverse effect on the business, operations, properties (including
intangible properties), condition (financial or otherwise), assets, liabilities,
results of operations or prospects of the Parent or prevent or delay the
consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by each of the Parent
and the Purchaser do not, and the performance of this Agreement by each of the
Parent and the Purchaser (including, without limitation, the consummation of
the transactions hereunder) will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except for the registration of
Parent Shares under the Securities Act, the filing of articles of merger with
the Secretary of State of the Commonwealth of Massachusetts and the filing of a
certificate of merger with the Secretary of State of the State of Delaware.
SECTION 3.03. SEC Filings; Financial Statements. The Parent has
---------------------------------
filed all forms, reports, statements and documents required to be filed with the
SEC since June 30, 1995 (the "Parent SEC Reports"). The Parent SEC Reports (i)
------------------
were each prepared in accordance with, and at the time of filing complied in all
material respects with, the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
------------
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated
<PAGE>
35
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of the
Parent's subsidiaries (including the Purchaser) is required to file any forms,
reports or other documents with the SEC. The financial statements included in
the Parent SEC Reports (i) were prepared in accordance with the books of account
and other financial records of the Parent, (ii) present fairly the consolidated
financial condition and results of operations of the Parent as of the dates
thereof or for the periods covered thereby, (iii) have been prepared in
accordance with U.S. generally accepted accounting principles applied on a basis
consistent with the past practices of the Parent and (iv) include all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the financial condition of the Parent and the results
of the operations of the Parent as of the dates thereof or for the periods
covered thereby.
SECTION 3.04. Common Stock; Options; Warrants. Assuming all
-------------------------------
conditions set forth in Article V are satisfied, all Parent Shares subject to
issuance pursuant to this Agreement, the Company Options, the Parent Options (as
hereinafter defined) and the Parent Warrants, upon such issuance as payment for
the Shares and the Convertible Notes as contemplated by this Agreement or upon
exercise of the Company Options, the Parent Options or the Parent Warrants, as
the case may be, shall (i) be duly authorized, validly issued, fully paid and
nonassessable and (ii) not be subject to any encumbrances created by or on
behalf of the Parent or the Purchaser. The Company Options, the Parent Options
and the Parent Warrants will be
<PAGE>
36
exercisable for Parent Shares in accordance with the terms of the Company Stock
Plan, as amended pursuant to Section 4.03 hereof, the Parent Option Plan (as
hereinafter defined) and the Parent Warrant Certificates, respectively.
SECTION 3.05. Investment Purpose. The Parent is acquiring the Shares
------------------
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof in violation of United States
securities laws.
SECTION 3.06. Full Disclosure. (a) The Parent is not aware of any
---------------
facts pertaining to the Parent's operations or lines of business which could
have a material adverse effect on the Parent and which have not been disclosed
in this Agreement or the Parent SEC Reports.
(b) No representation or warranty of the Parent in this Agreement, nor
any statement or certificate furnished or to be furnished to the Stockholders
pursuant to this Agreement, or in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 3.07. Corporate Structure. The Purchaser is a direct wholly-
-------------------
owned subsidiary of the Parent.
SECTION 3.08. Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions hereunder
<PAGE>
37
based upon arrangements made by or on behalf of the Parent or the Purchaser.
ARTICLE IV. ADDITIONAL AGREEMENTS
SECTION 4.01. Conduct of Business by the Company Pending the Closing.
------------------------------------------------------
Except as contemplated by this Agreement, the Stockholders covenant and agree
that, during the period between the date of this Agreement and through and
including the Closing Date, unless the Parent shall otherwise agree in writing,
the Business shall be conducted only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice. The Stockholders will not take, and will not permit the
Company to take, any action that would cause any representation or warranty made
by the Stockholders in this Agreement to become untrue in any material respect.
SECTION 4.02. Further Action; Public Announcements. Upon the terms
------------------------------------
and subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereunder. The Stockholders will cause the Draft
Audited Financial Statements to be delivered in audited form, accompanied by the
reports thereon of the Company's accountants, by December 27, 1996. None of the
Stockholders shall issue any press release with respect to the transactions
contemplated hereunder. None of the Stockholders shall otherwise make any public
statement (i) prior to the Closing, with respect to the transactions
contemplated hereunder and (ii) after the Closing, relating to the plans,
operations, prospects or business of the
<PAGE>
38
Company, in each case without the prior written consent of the Parent.
SECTION 4.03. Options; Warrants; Reservation of Shares; Registration
------------------------------------------------------
Rights. (a) Prior to the Closing, the Stockholders shall use their best
- ------
efforts (i) to cause the Company to amend the Company Stock Plan and the Company
Options, effective as of the Closing, in the manner set forth in Exhibit 4.03(a)
hereto and (ii) to obtain the consent to such amendment of each holder of
Company Options.
(b) As promptly as practicable following the Closing, the Parent shall
adopt an option plan (the "Parent Option Plan") substantially in the form of
------------------
Exhibit 4.03(b) hereto providing for the issuance to certain of the Company's
officers and other key employees of options (the "Parent Options") to purchase
--------------
up to 800,000 Parent Shares in the aggregate.
(c) As promptly as practicable following the Closing, the Parent will
file, and will use all reasonable efforts to cause to be declared effective, a
registration statement (the "Registration Statement") with the SEC under the
----------------------
Securities Act with respect to the Parent Shares issued pursuant to Sections
1.08(a), 1.08(b) and 1.09(a) hereof (exclusive of the 50% of the Parent Shares
issued to Mr. Inder-Jeet Gujral referenced in Section 4.04) (the "Registered
----------
Shares") and will cause the Registration Statement to remain effective (subject
- ------
to the further provisions of this Section 4.03(c)) until the earliest to occur
of (i) the sale of all Registered Shares (pursuant to the Registration Statement
<PAGE>
39
or otherwise) by the Stockholders, (ii) the Parent Shares being tradeable
pursuant to Rule 144 (taking into account the volume restrictions contained
therein) under the Securities Act (or any similar provision then in force) or
(iii) June 30, 1998. At any time after the Registration Statement has been
maintained effective for at least 30 days, the Parent may from time to time, by
notice to the Stockholders (a "Suspension Notice"), require the Stockholders to
-----------------
suspend all offers and sales of Parent Shares pursuant to the Registration
Statement due to pending or contemplated acquisitions, financings or other
corporate transactions that the Board of Directors of the Parent determine in
good faith make it necessary or advisable to cease offers and sales of Parent
Shares; provided that notwithstanding the foregoing, the Parent will in any
--------
event permit sales during the period between the date of the Closing through
December 30, 1997 for a total of at least 120 days, and during the period from
January 1, 1998 through June 30, 1998 for a total of at least 60 days. The
Stockholders agree that, upon receipt of any Suspension Notice, the Stockholders
will (and will cause any limited partner distributees of any Parent Shares to)
forthwith discontinue the offer and sale of Parent Shares pursuant to the
Registration Statement until receipt of a notice from the Parent that such
offers and sales may recommence.
(d) The Parent will file a registration statement with the SEC on Form
S-8 (or any successor form) or another appropriate form, and will use all
reasonable efforts to cause such registration statement to be declared effective
as promptly as practicable following the Closing Date (provided that the Parent
shall have no obligation to cause such registration statement to be declared
effective prior to the effectiveness of the registration statement referred to
in Section 4.03(c) above), with respect to the Parent Shares subject to the
Company Options. With respect to the Parent Shares subject to the Parent
Options, the Parent will file a registration statement with the SEC on Form S-8,
and will use all reasonable effort to cause such registration statement to be
declared effective,
<PAGE>
at such time as shall be required to register such Parent Shares under the
Securities Act. The Parent shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectuses contained therein) for so long as the Company Options or the
Parent Options, as applicable, remain outstanding.
<PAGE>
41
(e) Effective at the Closing, the holders of Parent Warrants shall
have the registration rights and obligations set forth in Exhibit 4.03(e) hereto
with respect to the Parent Shares issuable upon exercise of such Parent
Warrants.
SECTION 4.04. Disposition of Certain Securities. As a material
---------------------------------
inducement for the Parent and the Purchaser to enter into this Agreement, Mr.
Inder-Jeet Gujral agrees that he will not sell, assign or otherwise transfer in
excess of 50% of the Parent Shares received in consideration for his Common
Shares until after the second anniversary of the Closing Date. In the event
that Mr. Inder-Jeet Gujral desires to sell any of such Parent Shares after the
second anniversary of the Closing Date, he shall sell such Parent Shares (i)
pursuant to Rule 144 promulgated under the Securities Act or any other
applicable exemption from registration under the Securities Act or (ii) at the
request of the Parent, pursuant to a registration statement provided by the
Parent.
<PAGE>
42
SECTION 4.05. Board Representation. The Parent shall take all action
--------------------
necessary to appoint Mr. Inder-Jeet Gujral as a member of the board of directors
of the Parent as promptly as practicable following the Closing.
SECTION 4.06. Non-Competition. (a) For a period of five (5) years
---------------
after the Closing (the "Restricted Period"), Mr. Inder-Jeet Gujral shall not
-----------------
engage, directly or indirectly, in any business anywhere in the United States
that produces or supplies products or services of the kind produced or supplied
by the Business or the Company, or contemplated by the Company's business plan,
as of the Closing Date or, without the prior written consent of the Parent,
directly or indirectly, own an interest in, manage, operate, join, control, lend
money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any person that competes with the Parent, the Business or the Company
in producing or supplying products or services of the kind produced or supplied
by the Business or the Company, or contemplated by the Company's business plan,
as of the Closing Date; provided, however, that, for the purposes of this
-------- -------
Section 4.06, ownership of securities having no more than one percent of the
outstanding voting power of any competitor which are listed on any national
securities exchange or traded actively in the national over-the-counter market
shall not be deemed to be in violation of this Section 4.06 so long as the
person owning such securities has no other connection or relationship with such
competitor.
(b) As a separate and independent covenant, (i) Mr. Inder-Jeet Gujral
agrees that,
<PAGE>
43
for a period of five (5) years following the Closing, he will not in any way,
directly or indirectly, for the purpose of conducting or engaging in any
business that produces or supplies products or services of the kind produced or
supplied by the Business or the Company, or contemplated by the Company's
business plan, as of the Closing Date, call upon, solicit, advise or otherwise
do, or attempt to do, business with any customers of the Business or the Company
with whom the Business, the Company or Mr. Gujral had any dealings during the
period of time in which Mr. Gujral was affiliated with the Company, or take away
or interfere or attempt to interfere with any custom, trade, business or
patronage of the Business or the Company, and (ii) the Stockholders agree that,
for a period of five (5) years following the Closing, neither the Stockholders
nor any of their affiliates will in any way interfere with or attempt to
interfere with any officers, employees, representatives or agents of the
Business or the Company, or induce or attempt to induce any of them to leave the
employ of the Company or violate the terms of their contracts, or any employment
arrangements, with the Company.
(c) The Restricted Period shall be extended by the length of any
period during which the Stockholders are in breach of the terms of this Section
4.06.
(d) The Stockholders hereby acknowledge that any and all Developments
that have at any time been made or suggested by any Stockholder, whether acting
alone or in conjunction with others, during such Stockholder's association with
the Company, are the sole and absolute property of the Company, free of any
reserved or other rights
<PAGE>
44
of any kind on such Stockholder's part. Each Stockholder has fully disclosed all
such Developments to the Company and, if requested by the Company, shall, at the
Company's cost and expense, do all acts and things (including, among others, the
execution and delivery under oath of patent and copyright applications and
instruments of assignment) deemed by the Company to be necessary or desirable at
any time in order to effect the full assignment to the Company of such
Stockholder's right and title, if any, to such Developments. For purposes of
------------
this Agreement, the term "Developments" means all data, discoveries, findings,
reports, designs, inventions, improvements, methods, practices, techniques,
developments, programs, concepts, and ideas, whether or not patentable, relating
to the products or services of the kind produced or supplied by the Business or
the Company, or contemplated by the Company's business plan.
(e) The Stockholders acknowledge that the covenants of the
Stockholders set forth in this Section 4.06 are an essential element of this
Agreement and that, but for the agreement of the Stockholders to comply with
these covenants, the Parent and the Purchaser would not have entered into this
Agreement. The Stockholders acknowledge that this Section 4.06 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement by the Parent or the Purchaser. The
Stockholders have independently consulted with their respective counsel and
after such consultation agree that the covenants set forth in this Section 4.06
are reasonable and proper.
<PAGE>
45
(f) If any provision contained in this Section 4.06 is determined by a
court of competent jurisdiction to be excessively broad as to duration,
activity, geographic application or subject, it shall be construed, by limiting
or reducing it to the extent legally permitted, so as to be enforceable to the
extent compatible with then applicable law.
SECTION 4.07. Confidentiality. The Stockholders agree to, and shall
---------------
cause their respective agents, representatives, affiliates, employees, officers
and directors to: (i) treat and hold as confidential (and not disclose or
provide access to any person to) all information relating to trade secrets,
proprietary processes, patent applications and trademark application information
that has not been publicly disclosed, product development, price, customer and
supplier lists, pricing and marketing plans, policies and strategies, details of
client and consultant contracts, operations methods, product development
techniques, business acquisition plans, new personnel acquisition plans and all
other confidential information with respect to the Business and the Company,
(ii) in the event that any Stockholder or any such agent, representative,
affiliate, employee, officer or director becomes legally compelled to disclose
any such information, provide the Parent with prompt written notice of such
requirement so that the Parent or the Company may seek a protective order or
other remedy or waive compliance with this Section 4.07, (iii) in the event that
such protective order or other remedy is not obtained, or the Parent waives
compliance with this Section 4.07, furnish only that portion of such
confidential information which is legally required to be provided and exercise
its best efforts to obtain assurances that confidential treatment will be
<PAGE>
46
accorded such information, (iv) except for Mr. Inder-Jeet Gujral, who may retain
such information in his possession consistent with his employment by the
Company, promptly furnish (prior to, at, or as soon as practicable following,
the Closing) to the Company or the Parent or destroy any and all copies (in
whatever form or medium) of all such confidential information then in the
possession of the Stockholders or any of their agents, representatives,
affiliates, employees, officers and directors of such information and of any
analyses, compilations, studies or other documents prepared, in whole or in
part, on the basis thereof; provided, however, that this sentence shall not
-------- -------
apply to any information
<PAGE>
47
that, at the time of disclosure, is available publicly and was not disclosed in
breach of this Agreement by any Stockholder, its agents, representatives,
affiliates, employees, officers or directors; provided further that, with
-------- -------
respect to Intellectual Property, specific information shall not be deemed to be
within the foregoing exception merely because it is embraced in general
disclosures in the public domain. In addition, with respect to Intellectual
Property, any combination of features shall not be deemed to be within the
foregoing exception merely because the individual features are in the public
domain unless the combination itself and its principle of operation are in the
public domain. The Stockholders agree and acknowledge that remedies at law for
any breach of its obligations under this Section 4.07 are inadequate and that in
addition thereto the Parent shall be entitled to seek equitable relief,
including injunction and specific performance, in the event of any such breach.
SECTION 4.08. Cancellation of Agreements. The Stockholders and the
--------------------------
<PAGE>
48
Company agree that, effective as of the Closing, all shareholders' agreements
(including, without limitation, the Convertible Demand Note and Warrant Purchase
Agreement dated as of October 10, 1996 among certain of the Stockholders and the
Company, the Stock Restriction Agreement dated December 28, 1995 among certain
of the Stockholders and the Company, the Voting Agreement dated December 28,
1995 among certain of the Stockholders and the Company, the Registration Rights
Agreement dated as of December 28, 1995 among certain of the Stockholders and
the Company, and The Series A Convertible Preferred Stock Purchase Agreement
dated as of December 28, 1995 among certain of the Stockholders and the Company)
to which any of the Stockholders is a party relating to the Company or the
Shares shall terminate, and neither the Parent nor the Company shall have any
liability under any such shareholders' agreement on and after the Closing Date.
No payment or other consideration shall be paid by the Company in connection
with any such termination.
SECTION 4.09. Legends. The Parent shall affix to each certificate
-------
evidencing outstanding Parent Shares that is issued to any Stockholder a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR ANY INTEREST OR
PARTICIPATION
<PAGE>
49
HEREIN MAY BE REOFFERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION."
SECTION 4.10. BlueCross BlueShield Purchase Right. In the event that
-----------------------------------
the Parent has not, within 6 months of the Closing Date, issued to BlueCross
BlueShield of Massachusetts ("BCBS") the Parent Shares and Parent Warrants to
----
which BCBS would have been entitled had it exercised its right to acquire
Preferred Shares prior to the Closing, the Parent will issue to the holders of
Preferred Shares as additional consideration, in accordance with their
respective holdings, the Preferred Shares and Preferred Warrants that would
otherwise have been issued to BCBS. Such Parent Shares and Parent Warrants
shall be deemed to have been outstanding as of the Closing for all purposes of
this Agreement.
ARTICLE V. CONDITIONS TO THE CLOSING
SECTION 5.01. Conditions to Obligations of the Parent and the
-----------------------------------------------
Purchaser. The obligations of the Parent and the Purchaser to effect the
- ---------
Closing shall be subject to the prior fulfillment of each of the following
conditions:
(a) Representations and Warranties; Agreements and Covenants. (i)
--------------------------------------------------------
The representations and warranties of the Stockholders contained in this
Agreement shall be true and correct in all material
<PAGE>
50
respects on and as of the Closing, with the same force and effect as if
made as of the Closing, (ii) all the agreements contained in this Agreement
to be performed or complied with by the Stockholders at or before the
Closing shall have been performed or complied with in all material respects
and (iii) the Parent shall have received a certificate from the
Stockholders as to the fulfillment of the conditions set forth in the
foregoing clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
----------
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency by any federal, state or foreign legislative
body, court, government or governmental, administrative or regulatory
authority or agency which shall have remained in effect and which shall
have had the effect of making illegal the consummation of any of the
transactions hereunder.
(c) Employment Agreements. The Parent shall have received from each
---------------------
individual listed on the employment agreements included as Exhibit 5.01(c)
hereto executed employment agreements in the respective forms of such
exhibit.
(d) Company Options. The Parent shall have received evidence, in form
---------------
and substance satisfactory to the Parent, of the amendment of the Company
Stock Plan and all of the Company Options, each in accordance with Article
IV hereof.
<PAGE>
51
(e) Opinions. The Parent shall have received (i) an opinion from
--------
Lucash, Gesmer & Updergrove substantially in the form attached hereto as
Exhibit 5.01(e)(i), and (ii) an opinion from other counsel to the
Stockholders, reasonably acceptable to the Parent, substantially in the
form of Exhibit 5.01(e)(ii).
(f) Section 280G. The Parent shall have received evidence, in form
------------
and substance satisfactory to the Parent, that any payment or benefit that
would otherwise constitute a "parachute payment" (within the meaning of
Section 280G of the Code) that will be made or provided to any
"disqualified individual" (within the meaning of Section 280G(c) of the
Code) as a result of this Agreement and the transactions contemplated
hereby has been approved by a vote of the stockholders of the Company
satisfying the requirements of Section 280G(b)(5) of the Code, and the
right of any such disqualified individual to receive any such payments or
benefits shall have been made subject to the approval of the Company's
stockholders described in this sentence. The right of Mr. Inder-Jeet
Gujral to receive any amounts pursuant to Section 1.11, or any other
payment or benefit that results from this Agreement and the transactions
contemplated hereby and which would otherwise constitute a "parachute
payment" shall be subject to the approval of the Company's stockholders
described in the preceding sentence.
(g) Good Standing; Qualification to Do Business. The Parent shall
-------------------------------------------
have received a certificate of legal existence for the Company from the
Secretary of State of
<PAGE>
52
the Commonwealth of Massachusetts, dated as of a date reasonably proximate
to the Closing Date, and telephonic confirmation thereof on the Closing
Date.
SECTION 5.02. Conditions to Obligations of the Stockholders. The
---------------------------------------------
obligations of the Stockholders to effect the Closing shall be subject to the
prior fulfillment of each of the following conditions:
(a) Representations and Warranties. (i) The representations and
------------------------------
warranties of the Parent and the Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing, with the same force and effect as if made as of the Closing, (ii)
all the agreements contained in this Agreement and in any certificates or
agreements of the Parent or the Purchaser delivered pursuant hereto to be
performed or complied with by the Parent or the Purchaser, at or before the
Closing, shall have been performed or complied with in all material
respects and (iii) the Stockholders shall have received a certificate of
each of the Parent and the Purchaser, signed by a duly authorized officer
thereof, as to the fulfillment of the conditions set forth in the foregoing
clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
----------
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency by any federal, state or foreign legislative
body, court, government or governmental, administrative or
<PAGE>
53
regulatory authority or agency which shall have remained in effect and
which shall have had the effect of making illegal the consummation of any
of the transactions hereunder.
(c) Parent Shares and Parent Warrant Certificates. The Parent Warrant
---------------------------------------------
Certificates evidencing the right to purchase 250,000 Purchaser Shares and
stock certificates evidencing the Parent Shares issuable pursuant to
Sections 1.08(a), 1.08(b) and 1.09(c) hereof, in each case registered in
the name of the applicable Stockholder and free and clear of all
encumbrances, shall have been duly issued and delivered, or caused to be
delivered, by the Parent to the Stockholders with all required stock
transfer tax stamps affixed;
(d) Employment Agreements. The individuals listed on the employment
---------------------
agreements included as Exhibit 5.01(c) hereto shall have received executed
employment agreements from the Parent in the respective forms of such
exhibit.
(f) Opinion. The Stockholders shall have received an opinion from
-------
Shearman & Sterling substantially in the form attached hereto as Exhibit
5.02(f).
ARTICLE VI. INDEMNIFICATION
SECTION 6.01. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties contained in this Agreement shall survive
the Closing until March 31, 1998; provided, however, that the
-------- -------
representations and warranties contained in
<PAGE>
54
Section 2.02(c) (but only applied severally to each Stockholder with
respect to such Stockholder's Share ownership) and 3.04, shall survive
indefinitely. Neither the period of survival nor the liability of the
Stockholders with respect to the Stockholders' representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Parent or the Purchaser, and neither the period of survival
nor the liability of the Parent with respect to the representations and
warranties of the Parent and the Purchaser shall be reduced by any
investigation made at any time by or on behalf of the Stockholders. If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties, then the relevant
representations and warranties shall survive as to such claim, until such
claim has been finally resolved.
SECTION 6.02. Indemnification by the Stockholders and the
-------------------------------------------
Parent. (a) The Parent and its affiliates (including, after the Closing,
------
the Surviving Corporation), officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by the
Stockholders for any and all liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' fees and expenses) actually suffered or incurred by
them (including, without limitation, in connection with any action brought
or otherwise initiated by any of them) (hereinafter a "Loss"), arising out
----
of or resulting from:
(i) the breach of any representation or warranty made by the
Stockholders in this Agreement; or
<PAGE>
55
(ii) the breach of any covenant or agreement by the Stockholders
contained in this Agreement.
To the extent that the Stockholders' undertakings set forth in this Section
6.02(a) may be unenforceable, the Stockholders shall contribute the maximum
amount that they are permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by the parties entitled to
indemnification hereunder.
(b) The Stockholders and their respective affiliates, officers,
directors, employees, agents, successors and assigns shall be indemnified and
held harmless by the Parent for any and all Losses arising out of or resulting
from:
(i) the breach of any representation or warranty made by the Parent or
the Purchaser in this Agreement;
(ii) the breach of any covenant or agreement by the Purchaser
contained in this Agreement; or
(iii) any claim brought by a third party with respect to liabilities
of the Company existing or created prior to the Closing, but only in the
event that the existence of such liability or the circumstances resulting
in such liability would not have constituted or been deemed to be a breach
of any representation, warranty or covenant of the Stockholders under this
Agreement.
To the extent that the Parent's undertakings set forth in this Section 6.02(b)
may be unenforceable, the Parent shall contribute the maximum amount that it is
permitted to
<PAGE>
56
contribute under applicable law to the payment and satisfaction of all Losses
incurred by the parties entitled to indemnification hereunder.
(c) Any party seeking indemnification under this Article VI (an
"Indemnified Party") shall give each party from whom indemnification is being
- ------------------
sought (each, an "Indemnifying Party") notice of any matter which such
------------------
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement, within 60 days of such determination,
stating the amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this Agreement in respect of which
such right of indemnification is claimed or arises. The obligations and
liabilities of an Indemnifying Party under this Article VI with respect to
Losses arising from claims of any third party which are subject to
the indemnification provided for in this Article VI ("Third Party Claims") shall
------------------
be governed by and contingent upon the following additional terms and
conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indemnifying Party notice of such
Third Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
-------- -------
release the Indemnifying Party from any of its obligations under this Article VI
except to the extent the Indemnifying Party is materially prejudiced by such
failure. If the Indemnifying Party acknowledges in writing its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result
from such Third Party Claim, then the Indemnifying
<PAGE>
57
Party shall be entitled to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives notice of its
intention to do so to the Indemnified Party within ten days of the receipt of
such notice from the Indemnified Party; provided, however, that if there exists
or is reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Indemnified Party for the same counsel to
represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Indemnifying Party. In the event the Indemnifying Party
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party,
at the Indemnifying Party's expense, all witnesses, pertinent records, materials
and information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Indemnifying Party's expense, all
such witnesses, records, materials and information in the Indemnifying Party's
possession or under the Indemnifying Party's control relating thereto as is
reasonably required by the Indemnified Party. No such Third Party Claim may be
settled by the Indemnifying Party without the
<PAGE>
58
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
SECTION 6.03. Limits on Indemnification. No amount shall be payable
-------------------------
by the Stockholders or the Parent pursuant to Section 6.02(a) or 6.02(b),
respectively, unless the aggregate dollar amount of all Losses which would
otherwise be indemnifiable pursuant to Section 6.02(a) or (b), as applicable,
exceeds $50,000, in which case the full amount of such Losses shall be payable
as provided in Section 6.02. With respect to any claim for indemnifiable Losses
made by the Parent pursuant to Section 6.02(a), each Stockholder shall indemnify
the Parent only for such portion of such indemnifiable Losses equal to (i) the
total amount of such Losses multiplied by (ii) a fraction, the numerator of
which shall be the total number of Shares held by such Stockholder immediately
prior to the Closing, as set forth on Schedule A hereto, and the denominator of
which shall be 1,433,366. Notwithstanding anything to the contrary in this
Agreement, the maximum amount of indemnifiable Losses that may be recovered from
any Stockholder pursuant to Section 6.02(a) shall be an amount equal to (x)
$2,100,000 multiplied by (y) a fraction, the numerator of which shall be the
total number of Shares held by such Stockholder immediately prior to the
Closing, as set forth on Schedule A hereto, and the denominator of which shall
be 1,433,366; provided, however, that the maximum amount of indemnifiable Losses
-----------------
that may be recovered from any Stockholder, if such Losses are a result of any
breach by such Stockholder of the representation and warranty contained in
Section 2.02(c) as applied to the Shares owned
<PAGE>
59
by it, shall be an amount equal to the value on the Closing Date of
all Parent Shares and Parent Warrants received by such Stockholder pursuant to
this Agreement; provided, further, that there shall be no limit on the amount of
-------- -------
indemnifiable Losses that may be recovered from any Stockholder in the event
that the breach of the representation, warranty or covenant that gave rise to
such Losses resulted from or arose out of fraud on the part of such Stockholder.
Notwithstanding anything to the contrary in this Agreement, the maximum amount
of indemnifiable Losses that may be recovered from the Parent shall be
$2,100,000; provided, however, that the maximum amount of indemnifiable Losses
-------- -------
that may be recovered from the Parent by any Stockholder if such Losses are a
result of any breach of the representation and warranty contained in Section
3.04 shall be an amount equal to the value on the Closing Date of all Parent
Shares and Parent Warrants received by such Stockholder pursuant to this
Agreement; provided, further, there shall be no limit on the amount of
-------- -------
indemnifiable Losses that may be recovered from the Parent in the event that the
breach of the representation, warranty or covenant that gave rise to such Losses
resulted from or arose out of fraud on the part of the Parent or the Purchaser.
SECTION 6.04. Indemnification as Exclusive Remedy. The
-----------------------------------
indemnification provided by this Article VI, subject to the limitations set
forth herein, shall be the exclusive post-Closing remedy available to the
parties hereto for any breach of any representation or warranty contained in
this Agreement, and the parties hereto acknowledge that no party hereto has made
any representation or warranty to any other
<PAGE>
60
party hereto other than as set forth in this Agreement. In no event shall any
party hereto be entitled to rescission of this Agreement as a result of any
breach of any representation, warranty, covenant or agreement contained herein.
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER; MISCELLANEOUS
SECTION 7.01. Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date (i) by mutual written consent of the Stockholders and the Parent or
(ii) by either the Stockholders or the Parent if there has been a material
breach of any representation, warranty, covenant or agreement on the part of the
other parties which would cause the conditions to Closing to fail to be
satisfied and which is incapable of being cured prior to January 15, 1997; or
(iii) by the Stockholders or the Parent, if the Closing shall not have occurred
by January 15, 1997; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 6.01(a)(iii) shall not be available to any party
whose wilful failure to fulfill any material obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
SECTION 7.02. Effect of Termination; Expenses. In the event of the
-------------------------------
termination of this Agreement pursuant to Section 6.01, this Agreement shall
forthwith become void and have no effect and there shall be no liability on the
part of any party hereto or its affiliates, directors, officers or shareholders;
provided,
- --------
<PAGE>
61
however, that nothing herein shall relieve any party from liability for any
- -------
willful breach hereof prior to such termination. All costs and expenses,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the Company or the Stockholders in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Stockholders (except for the legal fees and expenses listed on
Schedule 2.06 of the Disclosure Schedule (up to a maximum of $25,000), which
shall be paid by the Company) and all costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by the Parent in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Parent, whether or not the
Closing shall have occurred.
SECTION 7.03. Miscellaneous. This Agreement may be amended at any
-------------
time by an instrument signed by the Parent and the Stockholders. Either the
Stockholders or the Parent may (a) extend the time for the performance of any of
the obligations or other acts of the Company or any Stockholder, or the Parent
and the Purchaser, respectively, (b) waive any inaccuracies in the
representations and warranties of the Company or any Stockholder, or the Parent
and the Purchaser, respectively, contained herein or in any document delivered
pursuant hereto by the Company or any Stockholder, or the Parent and the
Purchaser, respectively and (c) waive compliance with any of the agreements of
the Company or any Stockholder, or the Parent and the Purchaser, respectively,
or any conditions contained herein. Any such extension or waiver shall be valid
if set forth
<PAGE>
62
in an instrument in writing signed by the party to be bound thereby. The failure
of any party to assert any of its rights hereunder shall not constitute a waiver
of any such rights. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. This Agreement and the exhibits hereto constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement may
not be assigned by operation of law or otherwise without the express written
consent of the Parent and the Stockholders; provided, however, that the Parent
-------- -------
may assign this Agreement to an affiliate of the Parent without the consent of
the Stockholders, but no such assignment shall relieve the Parent of its
obligations hereunder if such assignee does not perform such obligations. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to
<PAGE>
63
or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were not
to be performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity. Any notices under this Agreement shall be
addressed, if to the Parent, to its principal executive office, attention: Chief
Executive Officer; if to Advanced Technology Venture IV, L.P., to its General
Partner at Somerset Court, 281 Winter Street, Suite 350, Waltham, MA 02154; if
to Nazem & Company IV, L.P., to its General Partner at 645 Madison Avenue, New
York, NY 10022, if to CGJR Capital Management, to its General Partner at 104
Woodmont Blvd., Suite 410, Nashville, TN 37205; if to Delphi Venture III, L.P.,
to its General Partner at 3000 Sand Hill Road, Building One, Suite 135, Menlo
Park 94025; if to Delphi BioInvestments III, L.P., to its General Partner at
3000 Sand Hill Road, Building One, Suite 135, Menlo Park 94025; and if to Inder-
Jeet Gujral, at 1030 Massachusetts Avenue, Cambridge, MA 02138.
<PAGE>
64
IN WITNESS WHEREOF, the Parent, the Purchaser, the Company and the
Stockholders have each caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
SYNETIC, INC.
By:____________________________
Name:
Title:
_________________________
Name: Inder-Jeet Gujral
Address:
Social Security #:
ADVANCED TECHNOLOGY VENTURES IV,
L.P., by ATV Associates IV, L.P., its General
Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
DELPHI VENTURES III, L.P.,
by Delphi Management Partners III, L.L.C., its
General Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
DELPHI INVESTMENTS III, L.P.,
by Delphi Management Partners III, L.L.C., its
General Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
NAZEM & COMPANY IV, L.P., by
Nazem & Associates IV, L.P., its General
Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
<PAGE>
65
CGJR Health Care Services Private Equities,
L.P., by CGJR Capital Management, Inc., its
General Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
BLUECROSS BLUESHIELD OF
MASSACHUSETTS (also making the
representations and warranties contained in
Schedule B to this Agreement)
By:_____________________________
Name:
Title:
AVICENNA SYSTEMS CORP.
By:_____________________________
Name:
Title: President
Taxpayer ID #:
By:_____________________________
Name:
Title: Treasurer
<PAGE>
CONFORMED COPY
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to the Registration Statement on Form S-3
(File No. 333-18771) of our report dated September 27, 1996 included in Synetic,
Inc.'s Form 10-K for the year ended June 30, 1996 and to all references to our
Firm included in this Amendment No. 1 to the Registration Statement.
/s/ ARTHUR ANDERSEN LLP
New York, New York
December 20, 1996
<PAGE>
CONFORMED COPY
EXHIBIT 23.2
CONSENT OF EMENS, KEGLER, BROWN, HILL & RITTER CO., L.P.A.
Dear Ladies and Gentlemen:
We hereby consent to the incorporation by reference into this
Amendment No. 1 to the Synetic, Inc. Registration Statement on Form S-3 (File
No. 333-18771) filed with the Securities and Exchange Commission, of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. We
also consent to all references to our firm included in this Amendment No. 1 to
Registration Statement.
Columbus, Ohio
December 27, 1996
Very truly yours,
EMENS, KEGLER, BROWN,
HILL & RITTER CO., L.P.A.
By: /s/ Jack A. Bjerke
-----------------------------
Jack A. Bjerke, Vice President
