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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 23, 1996
TARGET THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19801 95-3962471
(Commission File Number) (IRS Employer Identification No.)
47201 Lakeview Blvd., Fremont, CA 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 440-7700
--------------------------
N/A
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On April 29, 1996, Target Therapeutics, Inc., a Delaware corporation
(the "Registrant"), entered into an Agreement and Plan of Reorganization (the
"Agreement") with Interventional Therapeutics Corporation, a California
corporation ("ITC") and TTI Acquisition Corporation, a California corporation
and a wholly-owned subsidiary of Registrant ("Sub"), pursuant to which
Registrant agreed to acquire ITC via the merger of Sub with and into ITC. At the
effective time of the merger, May 23, 1996, Registrant acquired from the
shareholders and optionholders of ITC all of the issued and outstanding stock
and options of ITC in exchange for Common Stock and options to purchase Common
Stock of Registrant and ITC became a wholly-owned subsidiary of Registrant.
Registrant has issued or reserved for issuance up to an aggregate of 331,133
shares of Registrant's Common Stock (including shares issuable upon exercise of
options to purchase Registrant's Common Stock) in exchange for all of the
outstanding stock and options of ITC, to be decreased in proportion to cash
issued in lieu of fractional shares. The amount of consideration to be paid by
Registrant in connection with this acquisition was determined based on
arms-length negotiations between Registrant, ITC and their respective
representatives.
ITC designs, manufactures and markets products to address vascular
diseases and disorders of the brain.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Acquired Business.
As it is impracticable to provide the required financial statements
with respect to the business acquired at the time that this report is filed,
such financial statements will be filed as soon as they become available and in
any event not later than August 6, 1996.
(b) Pro Forma Financial Information.
As it is impracticable to provide the required financial information
with respect to the business acquired at the time that this report is filed,
such financial information will be filed as soon as it becomes available and in
any event not later than August 6, 1996.
(c) Exhibits.
2.1 Agreement and Plan of Reorganization dated April 29, 1996 between
the Registrant, Interventional Therapeutics Corporation and TTI Acquisition
Corporation (a wholly-owned subsidiary of Registrant).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TARGET THERAPEUTICS, INC.
(Registrant)
Dated: June 6, 1996 By: /s/ Robert E. McNamara
------------------------------------------------
Robert E. McNamara
Vice President, Finance and Administration,
Chief Financial Officer (Principal Financial and
Accounting Officer) and Assistant Secretary
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INDEX TO EXHIBITS
(c) Exhibits.
2.1 Agreement and Plan of Reorganization dated April 29, 1996 between
the Registrant, Interventional Therapeutics Corporation and TTI
Acquisition Corporation (a wholly-owned subsidiary of
Registrant).
<PAGE> 1
EXHIBIT 2.1
______________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
TARGET THERAPEUTICS, INC.
TTI ACQUISITION CORPORATION
AND
INTERVENTIONAL THERAPEUTICS CORPORATION
DATED AS OF APRIL 29, 1996
______________________________________________________________________________
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TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
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ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Actions to be Taken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Common Stock of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Conversion or Cancellation of ITC Capital Stock . . . . . . . . . . . . . . . . . 2
Section 1.4 No Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.5 ITC Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 Issuance and Delivery of Merger Securities . . . . . . . . . . . . . . . . . . . . 4
Section 1.7 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.8 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.9 Filing of Merger Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF ITC AND INDIVIDUALS . . . . . . . . . . . . . . . . . . 6
Section 2.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 No Other Agreements to Sell Assets, Merge, Etc. . . . . . . . . . . . . . . . . . 8
Section 2.4 Authorization; Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.5 Governmental Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.6 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.7 Financial Statements; Absence of Undisclosed Liabilities . . . . . . . . . . . . . 9
Section 2.8 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.9 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.10 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.11 ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.15 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.16 Interests of Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.17 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.18 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment . 22
Section 2.19 Regulatory Matters; Governmental Licenses; Compliance with Laws . . . . . . . . . 22
Section 2.20 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.21 Questionable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.23 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.25 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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Section 2.26 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TARGET AND SUB . . . . . . . . . . . . . . . . . . . . 25
Section 3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.3 Authorization, Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.4 Governmental Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.5 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.6 Reports; Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IV - COVENANTS OF ITC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.1 Regular Course of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.2 Restricted Activities and Transactions . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.3 Dividends and Distributions; Repurchases . . . . . . . . . . . . . . . . . . . . . 31
Section 4.4 No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.5 Taxes; Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.6 Advice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.7 Negotiation With Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.8 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.9 Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.10 Access to Records and Properties . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.11 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.12 Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.13 Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.14 Protection and Declaration of Inventions . . . . . . . . . . . . . . . . . . . . 33
Section 4.15 Inventory Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE V - COVENANTS OF TARGET AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.1 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.2 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.3 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.4 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.5 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.6 Maintenance of ITC Indemnification Obligations . . . . . . . . . . . . . . . . . . 34
Section 5.7 Mitigation and Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI - MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.4 Agreements to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.5 State Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.6 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 6.7 Transfer of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII - PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.1 Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.2 Representations, Warranties and Covenants of ITC . . . . . . . . . . . . . . . . . 39
Section 7.3 Representations, Warranties and Covenants of Target . . . . . . . . . . . . . . . 39
Section 7.4 Mailing to Shareholders; Recommendation of ITC Board; ITC Special Meeting . . . . 39
ARTICLE VIII - CONDITIONS TO THE OBLIGATIONS OF TARGET AND SUB . . . . . . . . . . . . . . . . . . . . . 40
Section 8.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.3 No Governmental or Other Proceeding or Litigation . . . . . . . . . . . . . . . . 40
Section 8.4 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.6 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.7 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.9 Resignation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.10 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.11 ITC Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.12 Inventory Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.13 Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.14 Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.15 ITC Employee Declarations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.16 Exchange and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.17 Termination of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.18 ITC Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX - CONDITIONS TO ITC'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.3 No Governmental or Other Proceeding or Litigation . . . . . . . . . . . . . . . . 42
Section 9.4 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.6 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.7 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.8 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.9 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE X - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XI - INDEMNITY AND ESCROW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.2 Escrow of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.4 Term of Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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(a) Escrow Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Extension of Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) Protection of Escrow Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) Distributions; Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 11.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.6 ITC Shareholders' Representatives . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.7 Mechanics of Making Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.8 Escrow Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.9 ITC Shareholder Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12.1 Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIII - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 13.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 13.2 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 13.3 No Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . 50
Section 13.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 13.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.7 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.9 Headings and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.12 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 13.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 13.14 Absence of Third Party Beneficiary Rights . . . . . . . . . . . . . . . . . . . 53
Section 13.15 Mutual Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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EXHIBITS
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Exhibit A Agreement of Merger
Exhibit B Non-Competition Agreement
Exhibit C Shareholder Agreement
Exhibit D Protection and Declaration of Inventions
Exhibit E Declaration of Registration Rights
Exhibit F Opinion of ITC Legal Counsel
Exhibit G Exchange and Escrow Agreement
Exhibit H Opinion of Target Legal Counsel
Exhibit I-1 & I-2 Employment Agreements
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "AGREEMENT") is
entered into as of April 29, 1996, among Target Therapeutics, Inc., a Delaware
corporation ("TARGET"), TTI Acquisition Corporation, a California corporation
and a wholly-owned subsidiary of Target ("SUB"), and Interventional
Therapeutics Corporation, a California corporation ("ITC").
RECITALS
A. The Boards of Directors of Target, Sub and ITC have deemed it
advisable that Target and ITC combine their operations by a merger of Sub into
ITC, under the terms and conditions hereinafter set forth (the "MERGER").
B. The Boards of Directors of Target, Sub and ITC, have approved
and adopted this Agreement and the Merger Agreement (as defined below) and
intend that the Merger qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE").
In consideration of the mutual representations, warranties, covenants
and agreements herein contained and subject to the conditions and other terms
herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Actions to be Taken. Upon performance (or waiver) of
all covenants and obligations of the parties contained herein and upon
fulfillment (or waiver) of all conditions to the obligations of the parties
contained herein, at the Effective Time (as defined below) and pursuant to the
General Corporation Law of the State of California (the "CGCL") the following
will occur:
(a) Sub will be merged with and into ITC in accordance
with Section 368(a) of the Code. ITC will be the surviving corporation (the
"SURVIVING CORPORATION"), and the separate existence and corporate organization
of Sub will cease, and thereupon ITC and Sub will be a single corporation;
(b) ITC, as the Surviving Corporation, will succeed,
insofar as permitted by law, to all rights, assets, liabilities and obligations
of Sub in accordance with the CGCL;
(c) the Articles of Incorporation and Bylaws of Sub will
be the Articles of Incorporation and Bylaws of the Surviving Corporation until
amended as provided by law;
(d) The officers and directors of Sub will be the initial
officers and directors of the Surviving Corporation at and after the Effective
Time, each to hold office in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation.
<PAGE> 8
As soon as practicable after each condition to the obligations of
Target and Sub and ITC hereunder has been satisfied or waived, an Agreement of
Merger, in the form attached hereto as Exhibit A and properly completed and
executed in accordance with the CGCL (the "MERGER AGREEMENT") will be filed
with the Secretary of State of the State of California, together with the
required officers' certificates. The Merger will become effective at the time
and on the date the Merger Agreement is so filed. The date and time when the
Merger becomes effective is referred to herein as the "EFFECTIVE TIME."
Section 1.2 Common Stock of Surviving Corporation. Following the
Effective Time, all issued and outstanding shares of Common Stock of Sub will
continue to be fully paid and nonassessable shares of Common Stock of the
Surviving Corporation. Each certificate of Sub evidencing ownership of any
such shares will continue to evidence ownership of the same number of shares of
Common Stock of the Surviving Corporation.
Section 1.3 Conversion or Cancellation of ITC Capital Stock.
(a) The maximum number of shares of Common Stock of
Target, $0.0025 par value per share ("TARGET COMMON STOCK") to be issued by
Target (including Target Common Stock to be issued upon the exercise of ITC
Options, as defined in Section 2.2 below, assumed by Target) in connection with
the Merger (rounded to the nearest whole share, the "TARGET MERGER SHARES")
shall be determined by dividing (i) the Aggregate Dollar Amount (as defined
below) by (ii) the average closing price of the Target Common Stock on the
Nasdaq National Market over the ten consecutive trading days ending the second
trading day prior to the date of the Closing (the "AVERAGE CLOSING PRICE");
provided, however, that if the Average Closing Price shall be less than $48.319
per share, then the Average Closing Price for purposes of this Agreement shall
be deemed to be $48.319 per share, and if the Average Closing Price shall be
more than $59.056 per share, then the Average Closing Price for purposes of
this Agreement shall be deemed to be $59.056 per share. The "AGGREGATE DOLLAR
AMOUNT" for purposes of this Agreement shall mean that amount equal to (i)
$16,000,000 less (ii) the dollar amount of fees and expenses ITC's legal,
accounting and financial advisors in connection with this transaction that
exceeds an aggregate of $500,000, as evidenced by the sum of the Final Invoices
delivered by such advisors at the Closing pursuant to Section 8.19 below.
(b) At the Effective Time, by virtue of the Merger and
without any action on the part of any holder thereof, each share of the capital
stock of ITC ("ITC CAPITAL STOCK"), issued and outstanding immediately prior to
the Effective Time (other than any shares cancelled or retired pursuant to
Section 1.3(c) and other than Dissenting Shares (as defined below)) will cease
to be outstanding and will be converted into the right to receive the number of
shares of Target Common Stock, subject to the provisions of Article XI hereof,
as is determined by a ratio (the "EXCHANGE RATIO"), the numerator of which is
the number of Target Merger Shares and the denominator of which is equal to the
sum of (i) the number of shares of ITC Common Stock outstanding (assuming
conversion of all outstanding shares of ITC Preferred Stock) plus (ii) the
number of shares of ITC Capital Stock subject to outstanding options to
purchase such stock from ITC as of the Effective Time. The shares of Target
Common Stock issuable pursuant to this Section 1.3(b) are hereinafter referred
to as the "MERGER SECURITIES." The Exchange Ratio will be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any
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dividend or distribution of securities convertible into Target Common Stock or
ITC Capital Stock), reorganization, recapitalization or other like change with
respect to the capital stock of Target or ITC which occurs, or with respect to
which the record date occurs, after the date hereof and prior to the Effective
Time. Each share of Target Common Stock issued in connection with the Merger
shall be issued with one associated preferred share purchase right (a "TARGET
RIGHT") pursuant to the Preferred Shares Rights Agreement dated as of September
21, 1994, as amended, by and between Target and The First National Bank of
Boston, as the exchange agent (the "TARGET STOCKHOLDER RIGHTS PLAN").
(c) Each share of ITC Capital Stock which, immediately
prior to the Effective Time, was issued and held in the treasury of ITC or was
issued and outstanding and held by ITC or any subsidiary of ITC will be
cancelled or retired and no issuance of Merger Securities or other payment will
be made with respect thereto.
(d) Notwithstanding anything in this Agreement to the
contrary, shares of ITC Capital Stock which are dissenting shares (as defined
in Section 1300(b) of the CGCL) or which remain eligible at the Effective Time
to become dissenting shares (collectively, "DISSENTING SHARES") will not
(except as provided below) be converted into or represent a right to receive
any shares of Target Common Stock, but the holders thereof will be entitled
only to such rights as are granted by the CGCL. Each holder of Dissenting
Shares who becomes entitled to payment therefor pursuant to the CGCL will
receive payment from the Surviving Corporation in accordance with the CGCL;
provided, however, that (i) if any such holder of Dissenting Shares shall have
failed to establish his entitlement to dissenter's rights as provided in the
CGCL, (ii) if any such holder of Dissenting Shares shall have effectively
withdrawn his demand for purchase thereof or lost his right to purchase and
payment therefor under the CGCL, or (iii) if neither any holder of Dissenting
Shares nor the Surviving Corporation shall have filed a petition demanding a
determination of the value of all Dissenting Shares within the time provided in
the CGCL, such holder or holders (as the case may be) shall forfeit the right
to demand repurchase with respect to such shares of ITC Capital Stock and such
shares of ITC Capital Stock shall thereupon be deemed to have been converted,
as of the Effective Time, into and represent shares of Target Common Stock,
without interest thereon, as provided in Section 1.3(b). ITC will give Target
prompt notice of any written demands for purchase and any other instruments
served pursuant to Chapter 13 of the CGCL and received by ITC and will
cooperate with Target in any negotiations or proceedings with respect to
demands for purchase under the CGCL. ITC will not, without the written consent
of Target, voluntarily make any payment with respect to any demands for
purchase or offer to settle or settle any such demands.
Section 1.4 No Fractional Interests. Neither certificates nor
scrip for fractional interests in the Merger Securities issued pursuant to
Sections 1.3(b), 1.6(c) or 1.6(d) hereof will be issued, but in lieu thereof
each holder of shares of ITC Capital Stock who would otherwise have been
entitled to a fraction of a share of Target Common Stock will be paid an amount
in cash equal to such fraction multiplied by the Average Closing Price of the
Target Common Stock, as defined in Section 1.3(a) above.
Section 1.5 ITC Stock Options. At the Effective Time, all ITC
Options (as defined in Section 2.2 below) outstanding at the Effective Time
will, by virtue of the Merger and without
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any further action on the part of ITC or the holder of any such option, be
assumed by Target and each such option assumed by Target will be exercisable
upon the same terms and conditions as under the existing agreements covering
such option, except that (a) each such option will be exercisable for that
whole number of shares of Target Common Stock (rounded down to the nearest
whole share) into which the number of shares of ITC Capital Stock subject to
such option immediately prior to the Effective Time would be converted under
Section 1.3(b), without giving effect to any holdback of shares contemplated by
Article XI, which holdback shall not apply to shares of Target Common Stock
issued upon exercise of the ITC Options after the Effective Time, and (b) the
exercise price per share of Target Common Stock will be an amount equal to the
exercise price per share of ITC Capital Stock subject to such option in effect
immediately prior to the Effective Time divided by the Exchange Ratio (the
exercise price per share, as so determined, being rounded upward to the nearest
full cent). From and after the Effective Time, all references to ITC in any
agreements covering such options will be deemed to refer to Target. Upon or
prior to any exercise of an assumed ITC Option by a holder thereof after the
Effective Time, Target shall pay in cash to such holder an amount equal the
product of (x) the deemed Average Closing Price less the exercise price of the
ITC Option (as adjusted by the Exchange Ratio), multiplied by (y) the fraction
of a share of Target Common Stock that such ITC Option would have entitled the
holder to purchase but for the rounding down of such option upon assumption
pursuant to the terms of this paragraph. The assumption of ITC Options under
this Section 1.5 is intended to constitute an assumption of stock options in a
transaction to which Section 424(a) of the Code applies, and this Section 1.5
shall be interpreted and applied in a manner consistent with such intent.
Section 1.6 Issuance and Delivery of Merger Securities.
(a) Target and ITC hereby authorize The First National
Bank of Boston to act as Exchange Agent (the "EXCHANGE AGENT") hereunder. As
soon as practicable following the Effective Time, Target will issue and deliver
to the Exchange Agent certificates ("NEW CERTIFICATES") representing a
sufficient number of shares of Target Common Stock for issuance pursuant to
Sections 1.3(b), 1.6(c) and 1.6(d) hereof.
(b) As soon as practicable after the Effective Time, the
Exchange Agent will send written notice to each record holder of certificates
representing shares of ITC Capital Stock converted pursuant to Section 1.3(b)
hereof ("OLD CERTIFICATES") of the manner and basis for exchanging Old
Certificates for New Certificates.
(c) At the Effective Time, in accordance with Article XI
hereof, Target will cause ten percent (10%) of the aggregate number of Target
Merger Shares (rounded down to the nearest whole share), to be deposited in the
Escrow Fund, and three percent (3%) of the aggregate number of Target Merger
Shares (rounded down to the nearest whole share) to be deposited in an
additional escrow fund for the payment of expenses incurred by the
Representatives. Such shares shall be issued in the name of the applicable
escrow agent or its nominee for the benefit of the holders of ITC Capital
Stock.
(d) Upon surrender for cancellation to the Exchange Agent
of one or more Old Certificates, accompanied by a duly executed letter of
transmittal in proper form, the Exchange
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Agent will, as promptly as practicable, deliver to each holder of such
surrendered Old Certificates, New Certificates representing the number of
shares of Target Common Stock to which the holder of ITC Capital Stock is
entitled pursuant to Section 1.3(b) hereof, less the number of shares
corresponding to the holder's Proportionate Interest in the Target Merger
Shares deposited in the escrows in accordance with 1.6(b) above (as calculated
pursuant to Section 11.5 below), together with checks for payment of cash in
lieu of fractional interests to be issued in respect of the Old Certificates.
Target will deliver to the Exchange Agent, when required, cash sufficient to
settle the payment for fractional interests.
(e) Until Old Certificates have been surrendered and
exchanged as herein provided for New Certificates, each outstanding Old
Certificate will be deemed for all corporate purposes of Target, other than the
payment of dividends or any distributions, to evidence ownership of the number
of shares of Target Common Stock into which the number of shares of ITC Capital
Stock shown thereon have been converted pursuant to Section 1.3(b) hereof. No
dividends or other distributions declared on Target Common Stock will be paid
to persons otherwise entitled to receive the same until the Old Certificates
have been surrendered in exchange for New Certificates in the manner herein
provided, but upon such surrender, such dividends or other distributions will
be paid to such persons in accordance with the terms of such securities. In no
event will the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. From and after the Effective Time, Target will, however, be
entitled to treat Old Certificates which have not yet been surrendered for
exchange as evidencing the ownership of the number of shares of Target Common
Stock into which the shares of ITC Capital Stock represented by such Old
Certificates will have been converted, notwithstanding any failure to surrender
such Old Certificates.
(f) No transfer taxes will be payable by any shareholder
of ITC in connection with the exchange of Old Certificates for New
Certificates, except that if any New Certificate is to be issued in a name
other than that in which the Old Certificate surrendered in exchange therefor
is registered, it will be a condition of such exchange that the person
requesting such exchange will pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of the New Certificate in a name other
than the registered holder of the Old Certificate, or will establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(g) In the event that the appointment of the Exchange
Agent is terminated, following such termination, Old Certificates will be
surrendered to, and New Certificates delivered by, Target or its agent. If
outstanding Old Certificates are not surrendered prior to two years after the
Effective Time (or, in any particular case, prior to such earlier date on which
dividends or other distributions, if any, would otherwise escheat to or become
the property of any governmental unit or agency), the amount of dividends and
other distributions, if any, which have become payable and which thereafter
become payable on Merger Securities evidenced by such Old Certificates as
provided herein will, to the extent permitted by applicable law, become the
property of the Surviving Corporation (and, to the extent not in its
possession, will be paid over to it by Target), free and clear of all claims or
interest of any person previously entitled thereto.
Section 1.7 Stock Transfer Books. At the Effective Time, the
stock transfer books of ITC will be closed and no transfer of ITC Capital Stock
will thereafter be made.
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Section 1.8 Shareholders' Meeting.
(a) As soon as practicable after the execution of this
Agreement, the Board of Directors of ITC will duly call, and cause to be held,
a special meeting of the shareholders of ITC (the "ITC SPECIAL MEETING") for
the purpose of approving this Agreement and the Merger and will recommend the
approval of this Agreement and the Merger to the ITC shareholders, which
recommendation shall not be withheld, withdrawn or modified unless, in the good
faith judgment of the ITC Board of Directors based on the advice of its legal
counsel set forth in a written opinion or memorandum, such action is required
to comply with the fiduciary duty of the Board under applicable law.
(b) Target and ITC will coordinate and cooperate with
respect to the timing of the ITC Special Meeting.
(c) ITC will, subject to Section 4.7, use its best
efforts to solicit from its shareholders proxies in favor of the matters set
forth in Section 1.8(a) and take all other action necessary or advisable to
secure the vote or consent of its shareholders required by the CGCL.
Section 1.9 Filing of Merger Documents. As soon as practicable
after the requisite approval of the shareholders of ITC has been obtained as
provided in Section 1.8, and each other condition to the obligations of Target
and Sub and ITC hereunder has been satisfied or waived, ITC and Sub will
deliver the Merger Agreement for filing with the Secretary of State of the
State of California and Target and Sub and ITC will take such other and further
actions as may be required by the CGCL in connection with such filing and the
consummation of the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF ITC AND INDIVIDUALS
As of the date hereof, except as disclosed in a document referring
specifically to the relevant subsections of this Article II which is delivered
by ITC to Target prior to execution of this Agreement (collectively with the
attachments and schedules to such document, the "ITC DISCLOSURE SCHEDULE"),
each of ITC and, with respect only to the statements set forth in Sections 2.7,
2.13 and 2.24 below, Ray H. Dormandy, Jr. and Julie D. Bell, hereby severally
but not jointly represents and warrants to Target and Sub as set forth in this
Article II. Any information disclosed in the ITC Disclosure Schedule under a
particular section or subsection will constitute a disclosure for purposes of
each other section or subsection of the ITC Disclosure Schedule for which the
applicability of such disclosure is obvious and the information provided is
sufficient for purposes of the other section or subsection.
Section 2.1 Corporate Organization. Each of ITC and its
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation and
has all requisite corporate power and authority and all necessary governmental
authorizations to own, lease and operate its properties and to conduct its
business as it is now being conducted. A true and complete list of such
Subsidiaries is set out in the ITC Disclosure Schedule, together with the
jurisdiction of incorporation of each Subsidiary. Each of
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ITC and its Subsidiaries is duly qualified or licensed to do business and is in
good standing as a foreign corporation in each state or other jurisdiction in
which the nature of its business or operations or ownership of its property
requires such qualification or licensing, except where the failure to be so
qualified or licensed would not, individually or in the aggregate, materially
and adversely affect the condition (financial or other), business, properties,
prospects (as currently contemplated), net worth or results of operations of
ITC and its Subsidiaries taken as a whole (collectively, "ITC'S BUSINESS").
The minute books of ITC and its Subsidiaries, as made available to Target,
contain complete and accurate records of all corporate action taken by ITC and
its Subsidiaries since their respective dates of incorporation. ITC has no
direct or indirect interest in or loans to any partnership, corporation, joint
venture, business association or other entity other than ITC's Subsidiaries
which in the aggregate do not exceed $25,000, all of which are listed in the
ITC Disclosure Schedule. ITC has delivered to Target complete and correct
copies of the Articles of Incorporation and Bylaws (or other organizational or
charter documents) of ITC and each of its Subsidiaries, in each case as amended
to the date hereof. As used in this Agreement, the term "SUBSIDIARY" means a
"subsidiary" as defined in Rule 1.01 in Regulation S-X promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
Section 2.2 Capital Structure. The authorized capital stock of
ITC consists of 10,000,000 shares of Common Stock, no par value ("ITC COMMON
STOCK"), 500,000 shares of Preferred Stock, no par value, all of which are
designated Series A Preferred Stock. Upon execution of this Agreement on the
date hereof by ITC, there were outstanding 1,035,751 shares of ITC Common Stock
and 300,374 shares of Series A Preferred Stock, and 202,917 shares of ITC
Common Stock were reserved for issuance upon the exercise of outstanding
employee stock options ("ITC OPTIONS"), pursuant to the 1990 Stock Option Plan
("ITC OPTION PLAN"). All outstanding shares of ITC Capital Stock are, and any
shares of ITC Common Stock issued upon exercise of any ITC Option will be,
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, ITC's Articles of Incorporation or Bylaws or any
agreement to which ITC or any of its Subsidiaries is a party or by which ITC or
any of its Subsidiaries may be bound. The ITC Options and all outstanding
shares of ITC Capital Stock have been, and any shares of ITC Capital Stock
issued upon exercise of any ITC Option will be, issued in compliance with all
applicable federal, state and foreign securities laws. ITC has provided Target
and its legal counsel with a complete and accurate list of (a) all issuances of
Capital Stock by ITC, (b) the names and addresses of all holders of ITC Capital
Stock, together with the number and type of shares held by each holder and (c)
lists for each ITC Option, including the name and address of the optionee, the
number of shares subject to such option, the exercise price of such option, the
number of shares as to which such option will have vested at April 30, 1996
and, if the exercisability of such options will be accelerated in any way by
the transactions contemplated by this Agreement or for any other reason, an
indication of the extent of such acceleration. The ITC Disclosure Schedule
also describes any repricing of options which has taken place. Except for the
shares issuable upon conversion of the ITC Preferred Stock, shares listed above
issuable pursuant to ITC Options, and a warrant for the purchase of up to 5,766
shares of Series A Preferred Stock issued to Silicon Valley Bank on July 3,
1995, there are no options, warrants, calls, conversion rights, commitments or
agreements of any character to which ITC or any Subsidiary of ITC is a party or
by which any of them may be bound that do or may obligate ITC or
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any Subsidiary of ITC to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of ITC Capital Stock or of the capital
stock of any Subsidiary of ITC or that do or may obligate ITC or any Subsidiary
of ITC to grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement. ITC is the owner of all outstanding
shares of capital stock of each of its Subsidiaries and all such shares are
duly authorized, validly issued, fully paid and nonassessable. Other than
pursuant to that certain Amended and Restated Investors Rights Agreement dated
as of July 31, 1995, which agreement will be terminated at or prior to the
Effective Time, ITC is not under any obligation to register under the
Securities Act any of its presently outstanding securities or any securities
that may subsequently be issued. There are no agreements or understandings to
which ITC is a party or, to the knowledge of ITC, any other agreements or
understandings, with respect to the transfer or voting of shares of ITC Capital
Stock.
Section 2.3 No Other Agreements to Sell Assets, Merge, Etc.
Except as provided hereby, ITC has no legal obligation, absolute or contingent,
to any person or firm to sell assets other than in the ordinary course of
business or to effect any merger, consolidation or reorganization of ITC or to
enter into any agreement with respect thereto.
Section 2.4 Authorization; Execution and Delivery. ITC has all
requisite corporate power and authority (a) to execute and deliver this
Agreement, the Merger Agreement and the agreements attached as exhibits hereto
to which ITC is a party (the "ITC ANCILLARY AGREEMENTS"), (b) subject to the
approval of this Agreement and the Merger Agreement by the holders of a
majority of the outstanding shares of ITC Common Stock and ITC Preferred Stock,
voting as separate classes, to perform its obligations under this Agreement,
the Merger Agreement and the ITC Ancillary Agreements, and (c) to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the Merger Agreement and the ITC Ancillary
Agreements by ITC and the consummation by ITC of the transactions contemplated
hereby and thereby have been duly approved and authorized by all requisite
corporate action of ITC, subject to obtaining any necessary approval of its
shareholders. This Agreement has been duly executed and delivered by ITC and,
subject to obtaining any necessary approval of holders of a majority of the
outstanding shares of ITC Common Stock and ITC Preferred Stock, voting as
separate classes, and assuming its due authorization, execution and delivery by
Target and Sub, constitutes the legal, valid and binding obligation of ITC,
enforceable in accordance with its terms. The Board of Directors of ITC has
unanimously determined that it is advisable and in the best interest of ITC's
shareholders for ITC to enter into a strategic business combination with Target
upon the terms and subject to the conditions of this Agreement.
Section 2.5 Governmental Approvals and Filings. No approval,
authorization, consent, license, clearance or order of, declaration or
notification to, or filing, registration or compliance with, any governmental
or regulatory authority ("GOVERNMENTAL ENTITY") is required on the part of ITC
in order (a) to permit ITC to perform its obligations under this Agreement or
(b) to prevent the termination of any right, privilege, license or agreement of
ITC or any Subsidiary of ITC, or to prevent any loss to ITC's Business, by
reason of the transactions contemplated by this Agreement, except for the
filing of the Merger Agreement and a Certificate of Satisfaction from the
Franchise Tax Board of the State of California, as required by the CGCL.
Section 2.6 No Conflict. Except for the receipt of any required
approval of the shareholders of ITC as contemplated by Section 1.8(a) hereof,
and compliance with the
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governmental and regulatory requirements described in Section 2.5 hereof,
neither the execution, delivery and performance of this Agreement, the Merger
Agreement and the ITC Ancillary Agreements by ITC nor the consummation by ITC
of the transactions contemplated hereby and thereby will (a) conflict with, or
result in a breach of, any of the terms, conditions or provisions of ITC's or
any of ITC's Subsidiaries' Articles of Incorporation or Bylaws (or other
organizational or charter documents), (b) conflict with, result in a breach or
violation of, give rise to a termination right or a default under, result in
the acceleration of performance under (whether or not after the giving of
notice or lapse of time or both), any mortgage, lien, lease, agreement, note,
bond, indenture, guarantee or instrument or any license or franchise granted by
or to a third party, in each case, that is material to ITC's Business or that
is referenced in the ITC Disclosure Schedule, (c) conflict with, or result in a
violation of, any statute, regulation, law, ordinance, writ, injunction, order,
judgment or decree to which ITC or any ITC Subsidiary or any of their assets
may be subject, (d) give rise to a declaration or imposition of any lien,
charge, security interest or encumbrance of any nature whatsoever upon any of
the assets of ITC or any ITC Subsidiary, (e) adversely affect any franchise,
license, permit or other governmental approval which is material to ITC's
Business or is necessary to enable ITC or any ITC Subsidiary to carry on its
business as presently conducted or is required of any employee or agent of ITC
or any ITC Subsidiary to enable each of them to carry out such person's duties
on behalf of ITC or any ITC Subsidiary or (f) require the consent of any third
party.
Section 2.7 Financial Statements; Absence of Undisclosed
Liabilities.
(a) ITC has furnished Target with the consolidated
balance sheets of ITC and its Subsidiaries as of June 30, 1991, 1992, 1993,
1994 and 1995 and the related consolidated statements of operations, cash flows
and changes in shareholders' equity for each of the years in the five-year
period ended June 30, 1995, together with the notes thereto and the related
reports of Frank, Rimmerman + Co., independent public accountants, and the
unaudited balance sheet at March 31, 1996 and related consolidated statements
of operations, cash flows and changes in shareholders' equity for the
nine-month period ended March 31, 1996 (collectively, the "ITC FINANCIAL
STATEMENTS"). The ITC Financial Statements, including the notes thereto, (i)
are in accordance with the respective books of ITC and the ITC Subsidiaries;
(ii) have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved; (iii)
present fairly the consolidated financial position of ITC and the ITC
Subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of ITC for the respective periods indicated therein;
and (iv) do not reflect any material items of nonrecurring income except as
stated therein; except that, with reference to items (ii) and (iii), the
unaudited interim financial statements (A) are subject to normal year-end
accruals which are not expected to be material in the aggregate and (B) do not
include footnotes. During the three-year period ended June 30, 1995 and the
nine-month period ended March 31, 1996, there has been no change in ITC's
accounting principles, methods or policies, except as described in the notes to
the ITC Financial Statements.
(b) ITC and its Subsidiaries have no liabilities of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, which were not disclosed or provided for in the ITC Financial
Statements or the notes thereto other than obligations not
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required to be disclosed or provided for under GAAP and liabilities incurred
since March 31, 1996, which are not individually or in the aggregate, material
to ITC's Business.
(c) ITC makes and keeps accurate books and records
reflecting in all material respects its assets and maintains internal
accounting controls which provide reasonable assurance that (i) transactions
are executed in accordance with management's authorization, (ii) transactions
are recorded to permit preparation of ITC's financial statements and to
maintain accountability in all material respects for the assets of ITC and the
ITC Subsidiaries, (iii) access to the assets of ITC and the ITC Subsidiaries
are permitted only in accordance with management's authorization, and (iv) the
recorded accountability of the assets of ITC and the ITC Subsidiaries is
compared with existing assets at reasonable intervals.
Section 2.8 Absence of Changes. Since March 31, 1996 (a) there
has been no material adverse change in ITC's Business or any development known
to ITC that is reasonably expected to cause a material adverse change in ITC's
Business; (b) there has been no damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any assets material to
ITC's Business; (c) there has been no change by ITC or its Subsidiaries in
accounting principles or methods except insofar as may be required by a change
in generally accepted accounting principles; (d) there has been no revaluation
by ITC or any of its Subsidiaries of any of their assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivable; (e) ITC has conducted its business only in the ordinary
course consistent with past practice; and (f) no event described in Section 4.2
or Section 4.3 hereof has occurred.
Section 2.9 Contracts and Commitments.
(a) Neither ITC nor any of its Subsidiaries is a party or
subject to:
(i) Any union contract or collective bargaining
agreement or any employment contract or arrangement, written or oral, providing
for future compensation with any officer, consultant, director or employee
which is not terminable by it or its Subsidiary on 30 days' notice or less
without penalty or obligation to make payments related to such termination,
other than (A) (in the case of employees other than executive officers) such
severance agreements as are not different from standard arrangements offered to
employees generally in the ordinary course of business consistent with ITC's
past practices, a description of which is set forth in the ITC Disclosure
Schedule and (B) such agreements as may be imposed or implied by law;
(ii) Any plans, contracts or arrangements, written
or oral, which collectively require aggregate payments by ITC in excess of
$25,000 for bonuses, pensions, deferred compensation, severance pay or
benefits, retirement payments, profit-sharing, or the like;
(iii) Any joint marketing, joint development or
joint venture contract or arrangement or any other agreement which has involved
or is expected to involve a sharing of profits with other persons;
(iv) Any existing OEM agreement, distribution
agreement, volume purchase agreement, or other similar agreement in which the
annual amount involved in 1995 exceeded, or is expected to exceed in 1996 or
any subsequent year, $25,000 or pursuant to which
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ITC has granted or received most favored customer provisions or exclusive
marketing rights related to any product, group of products or territory;
(v) Any lease for real or personal property
pursuant to which the amount of payments which ITC is required to make on an
annual basis exceeds $25,000;
(vi) Any agreement, contract, mortgage, indenture,
lease, instrument, license, franchise, permit, concession, arrangement,
commitment or authorization which may be, by its terms, terminated or breached
by reason of the execution of this Agreement, the Merger Agreement or any ITC
Ancillary Agreement, the closing of the Merger, or the consummation of the
transactions contemplated hereby or thereby;
(vii) Except for trade indebtedness incurred in the
ordinary course of business, any instrument evidencing or related in any way to
indebtedness in excess of $25,000 incurred in the acquisition of companies or
other entities or indebtedness in excess of $25,000 for borrowed money by way
of direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, indemnification or otherwise;
(viii) Any license agreement, either as licensor or
licensee;
(ix) Any contract containing covenants purporting
to limit ITC's freedom or that of any of its Subsidiaries to compete in any
line of business or in any geographic area or with any third party;
(x) Any agreement, contract or commitment
relating to capital expenditures and involving future obligations in excess of
$25,000;
(xi) Any unwritten agreement, contract or
commitment that is not terminable without penalty upon ninety days or less
prior written notice; provided that for purposes of this paragraph, "penalty"
shall not be deemed to include expenses incurred in connection with any such
termination and relating to the repurchase of saleable inventory from the
terminated party or the transfer and/or refiling of local regulatory approvals
held by the terminated parties to Target, ITC or their affiliates); or
(xii) Any other agreement, contract or commitment
which is material to ITC's Business.
(b) Each agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license and
commitment listed in the ITC Disclosure Schedule is valid and binding on ITC or
its Subsidiaries, as applicable, and is in full force and effect, and neither
ITC nor any of its Subsidiaries, nor to the knowledge of ITC, any other party
thereto, has breached any material provision of, or is in default under the
terms of, any such agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license or commitment.
(c) None of the 20 largest customers of ITC or its
Subsidiaries during the twelve months ended March 31, 1996 (determined on the
basis of both revenues and bookings
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during such period) has reduced or terminated, or has notified ITC in writing
that it intends to reduce or terminate, the amount of its business with ITC or
any of its Subsidiaries.
(d) There is no agreement, judgment, injunction, order or
decree binding upon ITC or its Subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any material
current business practice of ITC or its Subsidiaries, any acquisition of
material property by ITC or its Subsidiaries or the conduct of business by ITC
or its Subsidiaries as currently conducted or as proposed to be conducted by
ITC or its Subsidiaries.
Section 2.10 Legal Proceedings. Each of ITC and its Subsidiaries
is not in violation of, and has not received any notice of any violation of (a)
any applicable statute, law, regulation, ordinance, writ, injunction, order,
judgment or decree, the effect of which violation could, individually or in the
aggregate, be materially adverse to ITC's Business, or (b) any provision of the
Articles of Incorporation or Bylaws (or other organizational or charter
document) of ITC or any ITC Subsidiary. There is no order, writ, injunction,
judgment or decree outstanding, and no legal, administrative, arbitration or
other proceeding, action, suit or governmental investigation or inquiry against
or relating to ITC or any of ITC's Subsidiaries or their assets or business
("ITC LEGAL PROCEEDINGS") pending or, to the knowledge of ITC, threatened and,
to the knowledge of ITC, there are no claims (including unasserted claims as to
which there has been a manifestation by a potential claimant of an awareness of
such claim or it is considered probable that a claim will be asserted and there
is a reasonable possibility that the outcome will be unfavorable, all as such
terms are used in Statement of Financial Accounting Standards No. 5), against
or relating to ITC or any of ITC's Subsidiaries or their assets or business,
which pending or threatened ITC Legal Proceedings or claims would reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on ITC's Business. There is no ITC Legal Proceeding which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated hereby. The ITC Disclosure Schedule sets forth all existing
indemnification arrangements between ITC or its Subsidiaries and their
respective officers and/or directors. There is no pending or, to the knowledge
of ITC, threatened claim or litigation the results, prosecution or defense of
which would invoke such indemnification arrangements. The ITC Disclosure
Schedule sets forth with respect to each ITC Legal Proceeding, to the extent
that the aggregate remedies or damages claimed for each such complaint are
unspecified, involve specific performance or injunctive relief or exceed
$25,000, the forum, the parties thereto, a brief description of the subject
matter thereof and the amount of damages claimed.
Section 2.11 ERISA Matters.
(a) The ITC Disclosure Schedule lists, with respect to
ITC, any ITC Subsidiary and any trade or business (whether or not incorporated)
which is treated as a single employer with ITC (an "ERISA AFFILIATE") within
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a
non-officer employee in excess of $5,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code section 125) or
dependent care (Code Section 129), life insurance or accident insurance plans,
programs or
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arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior
management of ITC and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of ITC of greater
than $5,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of ITC (together, the "ITC EMPLOYEE PLANS").
(b) ITC has furnished to Target a copy of each of the ITC
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each ITC
Employee Plan which is subject to ERISA reporting requirements, provided copies
of the Form 5500 reports filed for the last three plan years. Any ITC Employee
Plan intended to be qualified under Section 401(a) of the Code has either
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
applied to the Internal Revenue Service for such a determination letter prior
to the expiration of the requisite period under applicable Treasury Regulations
or Internal Revenue Service pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a favorable
determination. ITC has also furnished Target with the most recent Internal
Revenue Service determination letter issued with respect to each such ITC
Employee Plan, and nothing has occurred since the issuance of each such letter
which could reasonably be expected to cause the loss of the tax-qualified
status of any ITC Employee Plan subject to Code Section 401(a).
(c) (i) None of the ITC Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any ITC Employee
Plan, which could reasonably be expected to have, in the aggregate, a material
adverse effect on ITC's Business; (iii) each ITC Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
material adverse effect on ITC's Business, and ITC and each subsidiary or ERISA
Affiliate have performed all obligations required to be performed by them
under, are not in any material respect in default under or in violation of, and
have no knowledge of any material default or violation by any other party with
respect to, any of the ITC Employee Plans; (iv) neither ITC nor any subsidiary
or ERISA Affiliate is subject to any liability or penalty under Sections 4976
through 4980 of the Code or Title I of ERISA with respect to any of the ITC
Employee Plans; (v) all material contributions required to be made by ITC or
any subsidiary or ERISA Affiliate to any ITC Employee Plan have been made on or
before their due dates and a reasonable amount, where required under generally
accepted accounting principles, has been accrued for contributions to each ITC
Employee Plan for the current plan years; (vi) with respect to each ITC
Employee Plan, no "reportable event" within the meaning of Section 4043 of
ERISA (excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 or ERISA has occurred; and
(vii) no ITC Employee Plan is covered by, and neither ITC nor any subsidiary or
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ERISA Affiliate has incurred or expects to incur any liability under Title IV
of ERISA or Section 412 of the Code. With respect to each ITC Employee Plan
subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, ITC has prepared in good faith and timely filed all
requisite governmental reports (which were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all notices
and reports to employees required to be filed, distributed or posted with
respect to each such ITC Employee Plan. No suit, administrative proceeding,
action or other litigation has been brought, or to the best knowledge of ITC is
threatened, against or with respect to any such ITC Employee Plan, including
any audit or inquiry by the IRS or United States Department of Labor. Neither
ITC nor any ITC subsidiary or other ERISA Affiliate is a party to, or has made
any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each ITC Employee Plan, ITC and each
of its United States subsidiaries have complied with (i) the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations thereunder
and (ii) the applicable requirements of the Family Leave Act of 1993 and the
regulations thereunder, except to the extent that such failure to comply would
not, in the aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of ITC, any ITC subsidiary or any other ERISA Affiliate to
severance benefits or any other payment (including, without limitation,
unemployment compensation, golden parachute or bonus), except as expressly
provided in this Agreement, or (ii) accelerate the time of payment or vesting
of any such benefits, or increase the amount of compensation due any such
employee or service provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by ITC, any ITC
subsidiary or other ERISA Affiliate relating to, or change in participation or
coverage under, any ITC Employee Plan which would materially increase the
expense of maintaining such Plan above the level of expense incurred with
respect to that Plan for the most recent fiscal year included in ITC's
financial statements.
Section 2.12 Taxes.
(a) For purposes of this Section 2.12 and other
provisions of this Agreement relating to Taxes, the following definitions shall
apply:
(i) The term "TAXES" shall mean all taxes,
however denominated, including any interest, penalties or other additions to
tax that may become payable in respect thereof, (A) imposed by any federal,
territorial, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes (including but not
limited to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers' compensation,
Pension Benefit
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Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in (A) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (C) any liability for
amounts referred to in (A) or (B) as a result of any obligation to indemnify
another person.
(ii) The term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(iii) The term "CODE" shall mean the Internal
Revenue Code of 1986, as amended.
(b) All Returns required to be filed by or on behalf of
the ITC and each of its Subsidiaries have been duly filed on a timely basis and
such Returns are true, complete and correct. All Taxes shown to be payable on
such Returns or on subsequent assessments with respect thereto, and all
payments of estimated Taxes required to be made by or on behalf of ITC and each
of its Subsidiaries under Section 6655 of the Code or comparable provisions of
state, local or foreign law, have been paid in full on a timely basis or have
been accrued on the Financial Statements, and no other Taxes are payable by ITC
or any of its Subsidiaries with respect to items or periods covered by such
Returns (whether or not shown on or reportable on such Returns) or with respect
to any period prior to the date of this Agreement. ITC and each of its
Subsidiaries has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of ITC or any of its Subsidiaries with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that ITC or
such subsidiary is contesting in good faith through appropriate proceedings and
for which appropriate reserves have been established. Neither ITC or any of
its Subsidiaries has at any time been a member of any partnership or joint
venture for a period for which the statue of limitations for any Tax
potentially applicable as a result of such membership has not expired. The
amount of ITC's and its Subsidiaries' liability for unpaid Taxes (whether
actual or contingent) for all periods through the date of the Financial
Statements does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes reflected on the Financial Statements, and the
Financial Statements properly accrue in accordance with GAAP all liabilities
for Taxes payable after the date of the Financial Statements attributable to
transactions and events occurring prior to such date. No liability for Taxes
of ITC or any of its Subsidiaries has been incurred (or prior to Closing will
be incurred) since the date of the Financial Statements other than in the
ordinary course of business.
(c) ITC has made available to Purchaser true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of ITC or
any of its Subsidiaries relating to Taxes, and (ii) all federal and state
income or franchise tax Returns and state sales and use tax Returns for or
including ITC or any of its Subsidiaries for all periods ending on and after
December 31, 1992.
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The ITC Disclosure Schedule sets forth a list of all of the Returns referred to
in clause (ii). Neither ITC nor any of its Subsidiaries does business in or
derives income from any state other than states for which Returns have been
duly filed and made available to Purchaser.
(d) The Returns of or including ITC and its Subsidiaries
have never been audited by a government or taxing authority, nor is any such
audit in process, threatened or, to ITC's knowledge, pending (either in writing
or verbally, formally or informally). No deficiencies exist or have been
asserted (either in writing or verbally, formally or informally) or are
expected to be asserted with respect to Taxes of ITC or any of its
Subsidiaries, and neither ITC nor any such subsidiary has received notice
(either in writing or verbally, formally or informally) nor expects to receive
notice that it has not filed a Return or paid Taxes required to be filed or
paid. Neither ITC nor any of its Subsidiaries is a party to any action or
proceeding for assessment or collection of Taxes, nor has such event been
asserted or threatened (either in writing or verbally, formally or informally)
against ITC, any of its Subsidiaries, or any of their assets. No waiver or
extension of any statute of limitations is in effect with respect to Taxes or
Returns of ITC of its Subsidiaries. ITC and each Subsidiary have disclosed on
their federal and state income and franchise tax returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Code Section 6662 or comparable provisions of applicable state tax
laws.
(e) Neither ITC nor any Subsidiary is (or has ever been)
a party to any tax sharing agreement.
(f) ITC is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, and Target is not required to withhold tax by reason of Section 1445 of
the Code. Neither ITC nor any of its Subsidiaries is a "consenting
corporation" under Section 341(f) of the Code. Neither ITC nor any Subsidiary
has entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a nondeductible expense to
ITC or such subsidiary pursuant to Section 280G of the Code or an excise tax to
the recipient of such payment pursuant to Section 4999 of the Code. Neither
ITC nor any Subsidiary has agreed to, nor is it required to make, any
adjustment under Code Section 481(a) by reason of, a change in accounting
method, and ITC and its Subsidiaries will not otherwise have any income
reportable for a period ending after the Closing Date attributable to a
transaction or other event (e.g., an installment sale) occurring prior to the
Closing Date. Neither ITC nor any Subsidiary is, nor has it been, a "reporting
corporation" subject to the information reporting and record maintenance
requirements of Section 6038A and the regulations thereunder. ITC and each
Subsidiary is in compliance with the terms and conditions of any applicable tax
exemptions, agreements or orders of any foreign government to which it may be
subject or which it may have claimed, and the transactions contemplated by this
Agreement will not have any adverse effect on such compliance.
(g) ITC and its Subsidiaries have no net operating
losses and credit carryovers or other tax attributes that are currently subject
to limitation under Sections 382, 383 or 384 of the Code (or comparable
provisions of state tax law).
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Section 2.13 Intellectual Property.
(a) Each of ITC and the ITC Subsidiaries owns or has the
exclusive right to use, make, sell, license, or sublicense and bring actions
for infringement of all ITC Products (as defined below) and Intellectual
Property Rights (as defined below) developed by or for ITC or any ITC
Subsidiary or that are used or currently proposed to be used in the business of
ITC or any ITC Subsidiary as currently conducted or proposed to be conducted
(the "ITC INTELLECTUAL PROPERTY RIGHTS"). All of the ITC Products and ITC
Intellectual Property Rights are owned by ITC and its Subsidiaries free and
clear of any rights or claims of any former employees, consultants, officers
and directors of ITC or any ITC Subsidiary and former employers of all current
and former employees, consultants, officers and directors of ITC or any ITC
Subsidiary. The methods of manufacture for ITC's embolization particulates (as
distinguished from embolization coils) and silicone balloons constitute trade
secrets of ITC that are presently valid and protectable, and are not part of
the public knowledge or literature. All taxes and fees, including, without
limitation, patent and trademark registration and prosecution fees and all
professional fees in connection therewith pertaining to the ITC Intellectual
Property Rights, due and payable on or before the date hereof, have been paid
by ITC. ITC's Intellectual Property Rights can be practiced in compliance with
the terms of certain Technology Practice Standards which have been agreed upon
by the parties pursuant to a document dated the date of this Agreement.
(b) ITC's current products and products under development
are listed on the ITC Disclosure Schedule (collectively, "ITC'S PRODUCTS"). No
person has a license to make, use or distribute or the right to acquire such a
license with respect to any current or future version of any ITC Product or any
ITC Product that is under development, and no agreement to which ITC or any ITC
Subsidiary is a party will restrict the Surviving Corporation or Target from
charging customers for any such new version. No agreement for the support or
maintenance of ITC Products obligates ITC or any ITC Subsidiary, or would
obligate the Surviving Corporation or Target after the Effective Time to
provide any improvement, enhancement, change in functionality or other
alteration in the performance of the ITC Products.
(c) No person has a right to receive a royalty or other
payment in respect of any ITC Product or ITC Intellectual Property Rights
whether or not pursuant to any contractual arrangements entered into by ITC or
any ITC Subsidiary. Each of ITC and the ITC Subsidiaries has no licenses
granted, sold or otherwise transferred by or to it nor other agreements to
which it is a party, relating in whole or in part to any ITC Product or ITC
Intellectual Property Rights.
(d) The execution, delivery and performance of this
Agreement, the Merger Agreement and the ITC Ancillary Agreements, the
consummation of the Merger and the consummation of the other transactions
contemplated hereby and thereby (including without limitation the continued
conduct by Target after the Merger of ITC's Business as presently conducted and
the incorporation of any ITC Product or ITC Intellectual Property Right in any
product of Target or the Surviving Corporation) will not breach, violate or
conflict with any instrument or agreement governing any such ITC Product or ITC
Intellectual Property Right necessary or required for, or used in, the conduct
of the business of ITC or any ITC Subsidiary as presently conducted or as
proposed to be conducted and will not cause the forfeiture or
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termination or give rise to a right of forfeiture or termination of any such
ITC Product or ITC Intellectual Property Right or in any way impair the right
of Target or the Surviving Corporation or any of its subsidiaries to use, sell,
license or dispose of, either as part or all of an ITC Product or subsequent to
the Closing (as defined in Article X) as part or all of a product of Target or
the Surviving Corporation, or to bring any action for the infringement of, any
such ITC Product or ITC Intellectual Property Right or portion thereof.
(e) The (i) manufacture, marketing, license, sale or use
of any currently marketed ITC Product or, to ITC's knowledge, any ITC Product
currently under development, and (ii) the practice or use of any patent or
trademark within the ITC Intellectual Property Rights, or to ITC's knowledge,
any other ITC Intellectual Property Right, do not and will not infringe any
Intellectual Property Right of any other party. The development, manufacture,
marketing, license, sale or use of any ITC Product or the practice or use of
any ITC Intellectual Property Right do not and will not violate any license or
agreement to which ITC or any ITC Subsidiary is a party. There is no pending
or, to the knowledge of ITC, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any
Intellectual Property Right necessary or required for, or used in, the conduct
of the business of ITC or any ITC Subsidiary as presently conducted nor, to the
knowledge of ITC, is there any basis for any such claim, nor has ITC or any ITC
Subsidiary received any notice asserting that any such Intellectual Property
Right or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party, nor, to the knowledge of ITC,
is there any basis for any such assertion. To ITC's knowledge, there is no
infringement on the part of any third party of ITC's Intellectual Property
Rights.
(f) Each of ITC and each ITC Subsidiary has taken
reasonable and practicable steps (including, without limitation, entering into
confidentiality and non-disclosure agreements with all officers and employees
of and consultants to ITC and each ITC Subsidiary with access to or knowledge
of ITC's Intellectual Property Rights) to maintain the secrecy and
confidentiality of, and its proprietary rights in, all Intellectual Property
Rights necessary or required for, or used in, the conduct of ITC's Business.
All employees, consultants, officers, directors and shareholders of ITC or any
ITC Subsidiary that have had access to any material portion of the ITC
Intellectual Property Rights are parties to a written agreement ("PROPRIETARY
INFORMATION AND INVENTIONS AGREEMENT"), under which each such person or entity
(i) is obligated to disclose and transfer to ITC or any ITC Subsidiary, without
the receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of employment with or performance of
services for ITC or any ITC Subsidiary, he makes or conceives of either solely
or jointly with others, that relate to any subject matter with which his work
for ITC or any ITC Subsidiary may be concerned, or relate to or are connected
with the business, products or projects of ITC or any ITC Subsidiary, or
involve the use of the time, material or facilities of ITC or any ITC
Subsidiary, and (ii) is obligated to maintain the confidentiality of
proprietary information of ITC and the ITC Subsidiaries. To ITC's knowledge,
none of ITC's or any ITC Subsidiary's employees, consultants, officers or
directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their obligation to use their best efforts to promote the interests of ITC in
the ITC Business or that would conflict with the ITC
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Business. It is currently not necessary nor will it be necessary for ITC to
utilize in the ITC Business nor will ITC utilize in the ITC Business any
inventions of any of such persons or entities (or people it currently intends
to hire) made or owned prior to their employment by or affiliation with ITC or
any ITC Subsidiary, nor is it or will it be necessary to utilize any other
assets or rights of any such persons or entities (or people it currently
intends to hire) made or owned prior to their employment with or engagement by
ITC or any ITC Subsidiary, in violation of any registered patents, trade names,
trademarks or copyrights or any other limitations or restrictions to which any
such person or entity is a party or to which any of such assets or rights may
be subject, except to the extent that such utilization would not have a
material adverse effect on the ITC Business. None of ITC's or any ITC
Subsidiary's employees, consultants, officers, directors or shareholders that
has had knowledge or access to information relating to ITC's Business has
taken, removed or made use of any proprietary documentation, manuals, products,
materials, or any other tangible item from his previous employer relating to
the business as conducted of such previous employer which has resulted in ITC's
or any ITC Subsidiary's access to or use of such proprietary items in ITC's
Business, and ITC and each ITC Subsidiary will not gain access to or make use
of any such proprietary items in ITC's Business, except to the extent that any
such activities would not have a material adverse effect on ITC's Business.
(g) The ITC Disclosure Schedule also sets forth a
complete list of all licenses, sublicenses and other agreements as to which ITC
or any ITC Subsidiary is a party and pursuant to which ITC or any ITC
Subsidiary or any other person is authorized to use, license, sublicense, sell
or distribute any Intellectual Property Right and includes the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof. Neither ITC nor any ITC Subsidiary is
in violation of any license, sublicense or agreement described on such list
except such violations as do not materially impair ITC's or any ITC
Subsidiary's rights under such license, sublicense or agreement. The ITC
Disclosure Schedule separately identifies each exclusive arrangement between
ITC or any ITC Subsidiary and any third party to use, license, sublicense, sell
or distribute any ITC Intellectual Property Right or any ITC Product.
(h) The ITC Disclosure Schedule contains a complete and
accurate list of all applications, filings and other formal actions made or
taken (including any results thereof) pursuant to federal, state, local and
foreign laws by ITC or any ITC Subsidiary to perfect or protect its interest in
ITC Intellectual Property Rights, including, without limitation, all patents,
patent applications, trademarks, trademark applications, service marks and
copyright registrations. As used herein, the term "INTELLECTUAL PROPERTY
RIGHTS" means all intellectual property rights, including, without limitation,
domestic and foreign patents, patent applications, patent rights, trademarks,
trademark registrations, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright applications, licenses,
know-how, trade secrets, trade rights, proprietary processes and formulae,
inventions, development tools, designs, plans, specifications, technical
information and other proprietary rights, whether or not registered, and all
documentation and media relating to the above.
Section 2.14 Environmental Matters.
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(a) The operations of ITC and the ITC Subsidiaries comply
in all material respects with all federal, state and local environmental,
health and safety laws, statutes and regulations.
(b) To ITC's best knowledge, the operations of ITC and
the ITC Subsidiaries are not the subject of any judicial or administrative
proceeding alleging the violation of any federal, state or local environment,
health or safety law, statute or regulation by ITC or any ITC Subsidiaries.
(c) Neither ITC nor any ITC Subsidiary has been directed
by any governmental agency to investigate or remediate a release of any
Hazardous Material into the environment.
(d) Neither ITC nor any ITC Subsidiary has filed any
notice under federal, state or local law indicating past or present treatment,
storage or disposal requiring a Part B permit or designation of "interim
status" as defined under 40 C.F.R. Parts 260-270 or any state equivalent of a
hazardous or toxic waste as defined therein nor does ITC or any ITC Subsidiary
possess any hazardous waste permit or any authorization under the California
Hazardous Waste Control Law. Neither ITC nor any ITC Subsidiary has reported a
spill or release of a Hazardous Material into the environment except in
accordance with applicable law.
(e) Neither ITC nor any ITC Subsidiary has "released", as
defined in the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.), any hazardous substance as defined
therein into the environment.
(f) None of the operations of ITC or any ITC Subsidiary
involve the generation, transportation, treatment or disposal as defined under
40 C.F.R. Parts 260-270 or any state equivalent of hazardous waste as defined
therein requiring a Part B permit or designation of "interim status" or permit
tier or authorization under the California Hazardous Waste Control Law.
(g) Neither ITC nor any ITC Subsidiary has owned or
operated any underground storage tanks.
(h) No lien in favor of any governmental authority for
(i) any liability under federal or state environmental laws or regulations, or
(ii) damages arising from or costs incurred by such governmental authority in
response to a release of a hazardous or toxic waste, substance or constituent
or other substance, into the environment has been filed or attached to the
premises currently owned by ITC or any ITC Subsidiary.
(i) All material permits necessary for the continued
conduct of the business of ITC and the ITC Subsidiaries as currently conducted
relating to the transportation, transfer, recycling, storage, use, treatment,
discharge, manufacture, investigation or removal of any Hazardous Materials
have been obtained by ITC or any ITC Subsidiary. All such permits are valid
and in full force and effect and will survive the Closing without modification
provided that the operations of ITC and the ITC Subsidiaries as currently
conducted are not modified. Each of ITC and the ITC Subsidiaries has complied
in all material respects with all covenants and conditions of any permits and
to ITC's best knowledge no circumstances currently exist which
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could cause any permit to be revoked, modified or rendered non-renewable upon
the payment of the permit fee or which could impose upon Target or the
Surviving Corporation the obligation to obtain any additional permits.
(j) Neither ITC nor any ITC Subsidiary has exposed in
violation of any applicable environmental law any persons, nor received notice
of any claim of injury due to exposure of any person to, Hazardous Materials
manufactured, stored, used, distributed, disposed of, released or controlled by
ITC or any ITC Subsidiary.
(k) To ITC's best knowledge, no property of ITC or any
ITC Subsidiary currently occupied by ITC or any ITC Subsidiary has been listed
as a "border zone" property pursuant to the California Health & Safety Code.
(m) No claim, complaint, or administrative proceeding has
been brought or is currently pending against ITC or any ITC Subsidiary relating
to any liability of ITC or any ITC Subsidiary with respect to Hazardous
Materials or as to the investigation or remediation of Hazardous Materials.
As used herein "FEDERAL, STATE AND LOCAL ENVIRONMENTAL, HEALTH AND
SAFETY LAWS, STATUTES OR REGULATIONS" means any and all laws, rules,
regulations, orders, treaties, statutes and codes promulgated by any local,
state, federal or international governmental authority or agency which has
jurisdiction over any portion of the current operations of ITC and the ITC
Subsidiaries, and which prohibits, regulates or controls any hazardous material
or the transportation, storage, transfer, recycling, use, treatment,
manufacture, investigation, removal, remediation, release, exposure of others
to, sale or distribution of hazardous materials including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.), the Hazardous Material Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), as these laws have been amended or supplemented to date and any
analogous state or local statutes and the regulations promulgated to date
pursuant thereto.
As used herein, "HAZARDOUS MATERIALS" means those substances which are
regulated by or governed by, without limitation, any federal, state or local
environmental, health and safety laws, statutes or regulations because they are
radioactive, toxic, hazardous or otherwise a danger to health, reproduction or
the environment, including, without limitation: (a) asbestos, (b) oil and
petroleum products, (c) explosives, (d) radioactive substances, pollutants or
wastes, (e) urea formaldehyde-containing building materials, (f)
polychlorinated biphenyls, (g) radon gas, and (h) ultra-hazardous or toxic
substances, pollutants or wastes.
Section 2.15 Certain Agreements. Neither the execution and
delivery of this Agreement, the Merger Agreement and the ITC Ancillary
Agreements, nor the consummation of the transactions contemplated hereby or
thereby will (a) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or employee of ITC or its Subsidiaries, under any
Plan or otherwise,
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(b) increase any benefits otherwise payable under any Plan, or (c) result in
the acceleration of the time of payment or vesting of any such benefits.
Section 2.16 Interests of Officers and Directors. No officer or
director of ITC or any "affiliate" or "associate" (as those terms are defined
in Rule 405 promulgated under the Securities Act) of any such person has had,
either directly or indirectly, a material interest in: (a) any person or
entity which purchases from or sells, licenses or furnishes to ITC or any of
its Subsidiaries any goods, property, technology or intellectual or other
property rights or services; (b) any contract or agreement to which ITC or any
of its Subsidiaries is a party or by which it may be bound or affected; or (c)
any property, real or personal, tangible or intangible, used in or pertaining
to ITC's Business or the business of its Subsidiaries, including any interest
in the ITC Intellectual Property Rights.
Section 2.17 Restrictions on Business Activities. There is no
material agreement, judgment, injunction, order or decree binding upon ITC or
any of its Subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of ITC or
any of its Subsidiaries, any acquisition of property by ITC or any of its
Subsidiaries or the conduct of business by ITC or any of its Subsidiaries as
currently conducted or as currently proposed to be conducted by ITC or any of
its Subsidiaries.
Section 2.18 Title to Properties; Absence of Liens and
Encumbrances; Condition of Equipment.
(a) The ITC Disclosure Schedule lists all facilities
occupied by ITC or any ITC Subsidiary since ITC's incorporation, and indicates
the nature of ITC's or its Subsidiary's interest in such facilities. ITC and
its Subsidiaries have good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of their tangible
properties and assets, real, personal and mixed, used in their business, free
and clear of any liens, charges, pledges, security interests or other
encumbrances, except as reflected in the ITC Financial Statements or except for
such imperfections of title and encumbrances, if any, which are not substantial
in character, amount or extent, and which do not materially detract from the
value, or interfere with the present use, of the property subject thereto or
affected thereby.
(b) The equipment owned or leased by ITC or its
Subsidiaries is, taken as a whole, (i) adequate for the conduct of the business
of ITC and its Subsidiaries consistent with their past practice, (ii) suitable
for the uses to which it is currently employed, (iii) in good operating
condition, (iv) regularly and properly maintained, (v) not obsolete, dangerous
or in need of renewal or replacement, except for renewal or replacement in the
ordinary course of business, and (vi) free from any defects, except, with
respect to clauses (ii) through (vi) above, as would not have been a material
adverse effect on ITC's Business.
Section 2.19 Regulatory Matters; Governmental Licenses; Compliance
with Laws.
(a) The ITC Disclosure Schedule sets forth a complete and
accurate list and description of (i) all United States Food and Drug
Administration (the "FDA") and any other Governmental Entity inspector lists of
observations or similar documents made at inspections with respect to ITC,
including without limitation Form(s) FDA-483, (ii) Regulatory or Warning
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Letters, Notices of Adverse Findings or Section 305 notices issued by the FDA
or any similar letters or notices issued by any other Governmental Entity to
ITC; (iii) all United States Pharmacopoeia Product Problem Reporting Program
complaints or reports and MedWatch FDA forms 3500, device experience network
complaints received by ITC and Medical Device Reports ("MDRS") filed by ITC;
(iv) all product recalls and safety alerts conducted by or issued to ITC; (v)
any civil penalty actions begun by the FDA or any other Governmental Entity
against ITC of which ITC is aware; and (vi) all 510(k) substantial equivalence
letters or premarket approval letters ("PMAS") received by ITC, all
applications filed by ITC for 510(k)s or PMAs and all assurances from the
FDA, written or oral, that any modifications to devices subject to issued
510(k)s or PMAs remain covered by FDA and any other Governmental Entity
approvals.
(b) ITC has obtained all consents, approvals,
registrations, certifications, authorizations, permits and licenses of, and
has made all filings with, or notifications to, all Governmental Entities
pursuant to applicable requirements of all federal, state or local and, to
ITC's knowledge, foreign, laws, ordinances, governmental rules or regulations
applicable to ITC and its business, including but not limited to, all such
laws, ordinances, governmental rules or regulations relating to registration of
ITC's products (including proposed products) and certification of its
facilities. ITC is in compliance with all federal, state or local and, to ITC's
knowledge, foreign, laws, ordinances, governmental rules or regulations
relating to medical device manufacturers and distributors or otherwise
applicable to its business and has no reason to believe that any of its
consents, approvals, authorizations, registrations, certifications, permits,
filings or notifications that it has received or made to operate its business
are invalid or have been or are being suspended, cancelled, revoked or
questioned. There is no investigation or inquiry to which ITC is a party or,
to ITC's knowledge, pending or threatened relating to the operation of ITC's
business and its compliance with applicable federal, state, local or foreign
laws, ordinances, governmental rules or regulations.
(c) ITC is not in default with respect to any order of
any court, governmental authority or arbitration board or tribunal to which ITC
is a party or is subject.
Section 2.20 Labor Matters.
(a) ITC and its Subsidiaries are in compliance in all
material respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment
and wages and hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice. ITC and each of
its Subsidiaries has complied in all material aspects with all applicable
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and has no material obligations with respect to any former employees
or qualifying beneficiaries thereunder. Neither ITC nor any of its
Subsidiaries has received any notice from any Governmental Entity, and there
has not been asserted before any Governmental Entity, any claim, action or
proceeding to which ITC or any of its Subsidiaries is a party or involving ITC
or any of its Subsidiaries, and there is neither pending nor, to ITC's
knowledge, threatened any investigation or hearing concerning ITC or any of its
Subsidiaries arising out of or based upon any such laws, regulations or
practices. Except as is not material to ITC's Business, neither ITC nor any
ITC Subsidiary has given to or received from, or anticipates giving to or
receiving from, any employee of ITC or any ITC Subsidiary notice of
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termination of employment. The ITC Disclosure Schedule sets forth the terms
pursuant to which all amounts may be payable (whether currently or in the
future) to current or former officers, directors, or employees of ITC or any
ITC Subsidiary as a result of or in connection with the Merger.
(b) Neither ITC nor any ITC Subsidiary is a party to any
labor agreement with respect to its employees with any labor organization,
union, group or association and there are no employee unions (nor any other
similar labor or employee organizations) under local statutes, custom or
practice. Neither ITC nor any ITC Subsidiary has experienced any attempt by
organized labor or its representatives to make ITC conform to demands of
organized labor relating to its employees or to enter into a binding agreement
with organized labor that would cover the employees of ITC or any ITC
Subsidiary. To ITC's knowledge, there is no labor strike or labor disturbance
pending or threatened against ITC nor is any grievance currently being
asserted. Neither ITC nor any ITC Subsidiary has experienced a work stoppage
or other labor difficulty.
Section 2.21 Questionable Payments. Neither ITC nor any of its
Subsidiaries, nor to its knowledge any director, officer, agent or other
employee of ITC or any of its Subsidiaries, has: (a) made any payments or
provided services or other favors in the United States of America or in any
foreign country in order to obtain preferential treatment or consideration by
any Governmental Entity with respect to any aspect of the business of ITC or
any of its Subsidiaries; or (b) made any political contributions which would be
lawful under the laws of the United States or the foreign country in which such
payments were made. Neither ITC nor any of its Subsidiaries, nor to its
knowledge any director, officer, agent or other employee of ITC or any of its
Subsidiaries, has been the subject of any inquiry or investigation by any
Governmental Entity in connection with payments or benefits or other favors to
or for the benefit of any governmental or armed services official, agent,
representative or employee with respect to any aspect of the business of ITC or
its Subsidiaries or with respect to any political contribution.
Section 2.22 Insurance. The ITC Disclosure Schedule contains a
complete and accurate list of all policies or binders of fire, liability,
title, worker's compensation, product liability and other forms of insurance
maintained by ITC and the ITC Subsidiaries. Neither ITC nor any ITC Subsidiary
is in default under any of such policies or binders, and neither ITC nor any
ITC Subsidiary has failed to give any notice or to present any claim under any
such policy or binder in a due and timely fashion. There are no facts known to
ITC upon which an insurer might be justified in reducing coverage or increasing
premiums on existing policies or binders. There are no outstanding unpaid
claims under any such policies or binders. All policies and binders provide
sufficient coverage for the risks insured against, are in full force and effect
on the date hereof and shall be kept in full force and effect through the
Effective Time.
Section 2.23 Brokers. No broker, finder or investment banker
(other than Robertson, Stephens & Company LLC) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement. In the event that the preceding sentence is in
any way inaccurate, ITC agrees to indemnify and hold harmless Target from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and
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expenses of defending against such liability or asserted liability) for which
Target or any of its directors, officers, partners, employees or
representatives is responsible.
Section 2.24 Disclosure. No representation or warranty made by
ITC in this Agreement, nor any document, written information, statement,
financial statement, certificate, schedule or exhibit prepared and furnished or
to be prepared and furnished by ITC or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, 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 or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. To the knowledge of ITC after reasonable inquiry, there is no
event, fact or condition that has resulted in, or could reasonably be expected
to result in, a material adverse effect on ITC's Business that has not been set
forth in this Agreement or in the ITC Disclosure Schedule. ITC has provided
copies to Target of all documents and information requested by Target pursuant
to Target's diligence requests.
Section 2.25 Vote Required. The affirmative votes of the holders
of a majority of the outstanding shares of ITC Common Stock and ITC Preferred
Stock, voting as separate classes, are the only votes of the holders of any
class or series of ITC Capital Stock necessary to approve this Agreement and
the Merger.
Section 2.26 Fairness Opinion. ITC has received a written opinion
from Robertson, Stephens & Company LLC to the effect that, as of the date of
such opinion, the Exchange Ratio is fair to the ITC shareholders from a
financial point of view and has delivered to Target a copy of such opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
TARGET AND SUB
As of the date hereof, except as disclosed in a document referring
specifically to the relevant subsections of this Article III which is delivered
by Target to ITC prior to execution of this Agreement (the "TARGET DISCLOSURE
SCHEDULE"), Target and Sub hereby represent and warrant to ITC as follows:
Section 3.1 Corporate Organization. Target and Sub are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and the State of California, respectively, and
each has all requisite corporate power and authority and all necessary
governmental authorizations to own, lease and operate its properties and to
conduct its business as it is now being conducted. Target and Sub are duly
qualified or licensed to do business and are in good standing as foreign
corporations in each state or other jurisdiction in which the nature of their
respective businesses or operations or ownership of their property requires
such qualification or licensing, except where the failure to be so qualified or
licensed would not, individually or in the aggregate, materially and adversely
affect the condition (financial or other), business, properties, prospects (as
currently contemplated), net worth or results of operations of Target and Sub
taken as a whole (collectively, "TARGET'S BUSINESS"). Target has delivered to
ITC complete
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and correct copies of Target's Certificate of Incorporation and Bylaws and
Sub's Articles of Incorporation and Bylaws, in each case as amended to the date
hereof.
Section 3.2 Capital Structure. As of the date hereof the
authorized capital stock of Target consists of 25,000,000 shares of Target
Common Stock, and 2,000,000 shares of Preferred Stock, $0.001 par value
("TARGET PREFERRED STOCK"). At the close of business on March 29, 1996,
14,714,661 shares of Target Common Stock were outstanding and 1,583,560 shares
of Target Common Stock were reserved for issuance upon the exercise of
outstanding stock options ("TARGET OPTIONS"), and no shares of Target Preferred
Stock were outstanding. All outstanding shares of Target Common Stock are
validly issued, fully paid, nonassessable and free of preemptive rights except
pursuant to Target Rights issued under Target's Stockholder Rights Plan. The
shares of Target Common Stock issuable in connection with the Merger are duly
authorized and reserved for issuance and, when issued in accordance with the
terms of this Agreement and the Merger Agreement, will be validly issued, fully
paid, nonassessable and free of preemptive rights. As of the date hereof, the
authorized capital stock of Sub consists of 1,000 shares of Common Stock, no
par value, all of which are validly issued, fully paid and nonassessable and
owned by Target. Except for the shares listed above issuable pursuant to
Target Options and the Target Rights issued or issuable pursuant to Target's
Stockholder Rights Plan, there are not any options, warrants, calls, conversion
rights, commitments or agreements of any character to which Target or any
Subsidiary of Target is a party or by which any of them may be bound obligating
Target or any Subsidiary of Target to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of Target or
of any Subsidiary of Target or obligating Target or any Subsidiary of Target to
grant, extend or enter into any such option, warrant, call, conversion right,
commitment or agreement.
Section 3.3 Authorization, Execution and Delivery. Target and
Sub each has all requisite corporate power and authority (a) to execute and
deliver this Agreement, the Merger Agreement and the agreements attached as
exhibits hereto to which Target or Sub is a party (the "TARGET ANCILLARY
AGREEMENTS"), (b) to perform its respective obligations under this Agreement,
the Merger Agreement and the Target Ancillary Agreements, and (c) to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the Merger Agreement and the Target Ancillary
Agreements by Target and Sub and the consummation by Target and Sub of the
transactions contemplated hereby and thereby have been duly approved and
authorized by all requisite corporate action of Target and Sub. This Agreement
has been duly executed and delivered by Target and Sub and, assuming its due
authorization, execution and delivery by ITC, constitutes the legal, valid and
binding obligation of each of them, enforceable in accordance with its terms.
The Board of Directors of Target has determined that it is advisable and in the
best interest of Target's stockholders for Target to enter into a strategic
business combination with ITC upon the terms and subject to the conditions of
this Agreement.
Section 3.4 Governmental Approvals and Filings. No approval,
authorization, consent, license, clearance or order of, declaration or
notification to, or filing, registration or compliance with, any Governmental
Entity is required on the part of Target or Sub in order (a) to permit Target
and Sub to perform their respective obligations under this Agreement or (b) to
prevent the termination of any right, privilege, license or agreement of
Target, or to prevent any loss to
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Target's Business, by reason of the transactions contemplated by this
Agreement, except for (i) the filing of the Merger Agreement and the
Certificate of Satisfaction from the Franchise Tax Board of the State of
California, as required by the CGCL, (ii) the registration requirements of the
Securities Act and of state securities or "Blue Sky" laws and (iii) the rules
of the Nasdaq National Market applicable to the Target Common Stock.
Section 3.5 No Conflict. Except for compliance with the
governmental and regulatory requirements described in Section 3.4 hereof,
neither the execution, delivery and performance of this Agreement, the Merger
Agreement and the Target Ancillary Agreements by Target and Sub nor the
consummation by Target and Sub of the transactions contemplated hereby and
thereby, including the Subsequent Merger, will (a) conflict with, or result in
a breach of, any of the terms, conditions or provisions of Target's Certificate
of Incorporation, Sub's Articles of Incorporation, Target's Bylaws or Sub's
Bylaws, (b) conflict with, result in a breach or violation of, give rise to a
termination right or a default under, or result in the acceleration of
performance under (whether or not after the giving of notice or lapse of time
or both), any mortgage, lien, lease, agreement, note, bond, indenture,
guarantee or instrument or any license or franchise granted by or to third
party that is material to Target's Business, (c) conflict with, or result in a
violation of, any statute, regulation, law, ordinance, writ, injunction, order,
judgment or decree to which Target or Sub or any of their respective assets may
be subject, which conflict, breach, default or violation would materially and
adversely affect Target's Business, (d) give rise to a declaration or
imposition of any lien, charge, security interest or encumbrance of any nature
whatsoever upon any of the assets of Target or Sub, (e) materially and
adversely affect any franchise, license, permit or other governmental approval
which is material to Target's Business or is necessary to enable Target or Sub
to carry on their respective businesses as presently conducted or is required
of any employee or agent thereof to enable each of them to carry out such
person's duties on behalf of Target or Sub, as the case may be, or (f) require
the consent of any third party.
Section 3.6 Reports; Accuracy of Information. Target has
previously delivered to ITC true and complete copies of (a) Target's annual
report on Form 10-K for the year ended March 31, 1995, as filed with the
Commission, (b) all other periodic reports filed by Target with the Commission
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), since March 31, 1995, and (c) all proxy
statements and annual and quarterly reports furnished to Target's stockholders
since March 31, 1995. As of their respective dates (or, if any such report or
proxy statement shall have been amended, as of the date of such amendment),
such reports and proxy statements (i) complied with all applicable provisions,
rules and regulations of federal securities laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances in which such statements were made, not misleading.
Since March 31, 1995, Target has timely filed all reports and registration
statements required to be filed by Target with the Commission under the rules
and regulations of the Commission.
Section 3.7 Litigation. There is no action, suit, proceeding,
investigation or claim pending or, to the knowledge of Target, threatened
against Target or any its Subsidiaries which could, individually or in the
aggregate, have a material adverse effect on Target's Business or
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which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay any of the transactions contemplated hereby.
Section 3.8 No Material Adverse Change. Since the date of the
balance sheet included in Target's most recently filed report on Form 10-Q,
Target has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in Target's Business, it being
understood that fluctuations in Target's Common Stock price as reported on the
Nasdaq National Market shall not constitute a material adverse change in
Target's Business for purposes of this paragraph or elsewhere in this Agreement
where such phrase is invoked; (b) any amendment or change in the Articles of
Incorporation or Bylaws of Target; (c) any damage to, destruction of or loss of
any assets of the Target (whether or not covered by insurance) that materially
and adversely affects the financial condition or business of Target; or (d) any
sale of a material amount of property of Target, except in the ordinary course
of business.
Section 3.9 Brokers. No broker, finder or investment banker
(other than Alex Brown & Sons Incorporated) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement. In the event that the preceding sentence is in
any way inaccurate, Target agrees to indemnify and hold harmless ITC from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Target or any of its directors, officers, partners,
employees or representatives is responsible.
ARTICLE IV
COVENANTS OF ITC
Section 4.1 Regular Course of Business. Except as otherwise
consented to in writing by Target, prior to the Effective Time ITC and its
Subsidiaries shall conduct their respective businesses in the ordinary and
usual course consistent with past practice and shall use reasonable efforts to
maintain and preserve intact their business organizations, keep available the
services of their officers and employees and maintain positive relations with
licensors, licensees, suppliers, contractors, distributors, customers and
others having business relationships with them. ITC shall promptly notify
Target of any event or occurrence not in the ordinary course of business and
will not enter into or amend any agreement or take any action which reasonably
could be expected to have a material adverse effect on ITC's Business.
Section 4.2 Restricted Activities and Transactions. Except as
provided herein or as otherwise consented to in writing by Target, prior to the
Effective Time, ITC will not:
(a) propose, adopt or permit an amendment of ITC's
Articles of Incorporation or ITC's Bylaws;
(b) issue, sell, encumber or deliver, or agree to issue,
sell, encumber or deliver, any shares of any class of capital stock of ITC or
any securities convertible into any such shares or convertible into securities
in turn so convertible, or any options, warrants, or other rights calling for
the issuance, sale or delivery of any such shares or convertible securities
(except pursuant to the exercise of ITC Options or other securities convertible
into or exercisable for ITC Capital
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Stock and outstanding as of the date hereof) or authorize or propose any change
in its equity capitalization;
(c) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or repurchase, redeem or otherwise acquire any shares of its
capital stock,
(d) mortgage or pledge any of its assets, tangible or
intangible;
(e) (i) borrow, or agree to borrow, any funds or
voluntarily incur, assume or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability (absolute or contingent),
(ii) cancel or agree to cancel any debts or claims, (iii) lease, sell or
transfer, agree to lease, sell or transfer, or grant or agree to grant any
preferential rights to lease or acquire, any of its assets, property or rights
(except for (A) dispositions of obsolete or worthless assets, (B) sales of
immaterial assets not in excess of $25,000 in the aggregate and (C) leases of
equipment in the ordinary course of business pursuant to commitments as set
forth in the ITC Disclosure Schedule), or (iv) make or permit any material
amendments or termination of any material contract, agreement, license or other
right to which it is a party;
(f) grant any increase in compensation to any employee or
director (except for annual increases in salary or wages of, and bonus grants
made to, employees in the ordinary course of business consistent with past
practice, which increases or grants have been consented to in writing by Target
and have been listed in the ITC Disclosure Schedule), or amend in any respect
the terms of any Plan or adopt any new Plan or similar arrangements or
agreements (except in each case as specifically provided in this Agreement or
as required by law), amend any employment, or enter into or amend any severance
or similar arrangement;
(g) accelerate, amend or change the period of
exercisability of any rights to purchase securities of ITC or change the
vesting period of any restricted stock of ITC or authorize cash payments in
exchange for any outstanding ITC Options;
(h) hire any management personnel or terminate any
employee of ITC or any ITC Subsidiary, except in the ordinary course of
business involving a person with an annual salary of less than $25,000 and only
(in the case of a new hire) pursuant to an at-will arrangement without any
severance benefits;
(i) acquire control or ownership of any other
corporation, association, joint venture, partnership, business trust or other
business entity, or acquire control or ownership of all or a substantial
portion of the assets of any of the foregoing, or incorporate or form, or cause
to be incorporated or formed, any corporation, association, joint venture,
partnership, business trust or other business entity, or merge, consolidate or
otherwise combine with any other corporation (except as provided for in this
Agreement), or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the ITC Business;
(j) transfer the stock of any ITC Subsidiary to any other
ITC Subsidiary or any assets or liabilities to any new or existing ITC
Subsidiary;
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(k) pay, discharge or satisfy any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise), other than
the payment, discharge or satisfaction of in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against in
the ITC Financial Statements;
(l) except in the ordinary course of business, enter into
or agree to enter into any transaction material to ITC's Business;
(m) transfer or license to any person or entity, or
otherwise extend, amend or modify, any rights to the ITC Intellectual Property
Rights;
(n) enter into or amend any agreements pursuant to which
any other party is granted most favored customer status or exclusive marketing,
distribution or other similar rights with respect to any products of ITC or any
ITC Subsidiary;
(o) violate, amend or otherwise modify the material terms
of any of the contracts set forth on the ITC Disclosure Schedule;
(p) commence a lawsuit other than for the routine
collection of bills or to enforce ITC's rights under this Agreement, or settle
a lawsuit;
(q) change the accounting methods or practices followed
by ITC or any ITC Subsidiary, including any change in any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve, except as may be required by changes in generally accepted accounting
principles, make or change any material Tax election, adopt or change any Tax
accounting method, file any material Return or any amendment to a material
Return (other than as required and in accordance with Section 4.5), enter into
any material closing agreement, settle any material Tax claim or assessment, or
consent to any extension or waiver of the limitation period applicable to any
material Tax claim or assessment, without the prior consent of Target, which
consent will not be unreasonably withheld (for purposes of this covenant a
"material" Tax Return, closing agreement, Tax claim or assessment shall mean a
Tax liability with respect to each such item in excess of $25,000);
(r) take any action that would result in any of the
representations and warranties of ITC set forth in this Agreement becoming
untrue;
(s) make any changes in its investment portfolio other
than the reinvestment of the proceeds of maturing, redeemed or prepaid
securities, obligations or other investments into United States Treasury
securities maturing 90 days or less from the date of investment;
(t) allow or permit to be done any act by which any of
its insurance policies may be suspended, impaired or canceled;
(u) fail to comply in any material respect with all laws
applicable to it; or
(v) authorize or propose any of the foregoing, or enter
into any contract, agreement, commitment or arrangement to do any of the
foregoing.
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Section 4.3 Dividends and Distributions; Repurchases. Except as
otherwise consented to in writing by Target prior to the Effective Time, ITC
will not declare or pay any dividend on its capital stock in cash, stock or
property, and will not redeem, repurchase or otherwise acquire any shares, or
rights to acquire shares, of its capital stock.
Section 4.4 No Default or Violation. Except as otherwise
consented to in writing by Target, prior to the Effective Time, ITC will use
its best efforts not to (a) violate, or commit a breach of or a default under,
any contract, agreement, lease, license, mortgage or commitment to which it is
a party or to which any of its assets may be subject or (b) violate any
statute, regulation, ordinance, writ, injunction, order, judgment or decree, or
any other requirement of any governmental body or court, applicable to its
assets or business, the effect of which in any such case in clauses (a) or (b)
would be materially adverse to ITC's Business.
Section 4.5 Taxes; Consent. ITC shall prepare and timely file
all Returns and amendments thereto required to be filed by it and its
Subsidiaries on or before the Closing Date. Between the date of this Agreement
and the Closing Date, ITC shall give Target and its authorized representatives
full access to all properties, books, records and Returns of or relating to
ITC, whether in possession of ITC, any ITC Subsidiary or third-party
professional advisors or representatives in order that Target may have full
opportunity to make such investigations as it shall desire to make of the
affairs of ITC. ITC shall ensure that all third-party advisors and
representatives of ITC, including without limitation accountants and attorneys,
fully cooperate and be available to Target in connection with such
investigation. ITC shall, as of the Closing Date, terminate all tax allocation
agreements or tax sharing agreements with respect to ITC and/or any ITC
Subsidiary and shall ensure that any such agreements are of no further force or
effect as to ITC or any ITC Subsidiary on and after the Closing Date.
Section 4.6 Advice of Changes. ITC will promptly advise Target
in writing of (a) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of ITC contained in this
Agreement, if made on or as of the date of such event or the date of the
Closing, untrue or inaccurate or (b) any material adverse change in ITC's
Business.
Section 4.7 Negotiation With Others. From and after the date of
this Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, ITC shall not, directly or
indirectly, (a) solicit, initiate discussions or engage in negotiations with
any person (whether such negotiations are initiated by ITC or otherwise) or
take any other action intended or designed to facilitate the efforts of any
person, other than Target, relating to the possible acquisition of ITC or any
of its Subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or their
capital stock or assets (with any such efforts by any such person, including
without limitation a firm proposal to make such an acquisition, to be referred
to as an "ACQUISITION PROPOSAL"), (b) provide information with respect to ITC
or any of its Subsidiaries to any person, other than Target, relating to a
possible Acquisition Proposal by any person, other than Target, (c) enter into
an agreement with any person, other than Target, providing for a possible
Acquisition Proposal, or (d) make or authorize any statement, recommendation or
solicitation in support of any possible Acquisition Proposal by any person
other than by Target. In addition, ITC agrees to immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
prior
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to the date hereof with respect to the foregoing. Notwithstanding the
foregoing, nothing contained in this Agreement shall prevent the Board of
Directors of ITC (or its agents pursuant to its instruction) from taking any of
the following actions: if ITC shall receive from a third party an unsolicited
written proposal from a third party to acquire 100% of ITC and its entire
business through a merger, consolidation, stock purchase, purchase of all or
substantially all of its assets, or otherwise, and (ii) if the Board of
Directors has made a good faith determination, based upon the advice of its
legal counsel set forth in a written opinion or memorandum from such counsel
that it would be a violation of its fiduciary duties to the shareholders of ITC
to do otherwise, ITC may, without breaching this Section 4.7, furnish
information to and enter into negotiations with such third party. Further, if
in the reasonable good faith judgment of the ITC Board of Directors any such
written proposal is reasonably likely to be consummated and is more favorable
to the shareholders of ITC from a financial perspective than the terms of the
Merger (a "SUPERIOR PROPOSAL"), nothing contained in this Agreement shall
prevent the ITC Board of Directors from approving, accepting and recommending
to the shareholders of ITC a Superior Proposal, if the ITC Board of Directors
has made a good faith determination, based upon the advice of its legal counsel
set forth in the written opinion or memorandum from such counsel, that it would
be a violation of its fiduciary duties to the shareholders of ITC to do
otherwise; provided that in each such event ITC notifies Target of such
determination by the ITC Board of Directors and provides Target with a true and
complete copy of the Superior Proposal received from such third party and of
all documents containing or referring to information of ITC that is supplied to
such third party. Except to the extent expressly referenced in this Section
4.7, nothing in this Section 4.7 shall relieve ITC from complying with the
other terms of this Agreement, including, without limitation, the provisions of
Sections 6.2 and 12.1(g) below.
Section 4.8 Acquisition Proposals. ITC will provide Target with
immediate notice of any inquiry or offer ITC receives from or on behalf of any
third party of the type referred to in Section 4.7 hereof, including in such
notice the identity of the third party and a complete description of any such
inquiry or offer, and will provide Target with immediate notice if ITC provides
or furnishes any information to any third party relating to a possible
Acquisition Proposal.
Section 4.9 Consents, Approvals and Filings. ITC will use its
best efforts to comply as promptly as practicable with the governmental
requirements specified in Section 2.5 hereof and to obtain on or before the
Closing all necessary approvals, authorizations, consents, licenses, clearances
or orders of Governmental Entities referred to in such section or of other
persons referred to in Section 2.6 or the ITC Disclosure Schedule.
Section 4.10 Access to Records and Properties. Target may, prior
to the Effective Time, through its employees, agents and representatives,
continue to conduct or cause to be conducted a detailed review of the business,
financial condition, properties, assets, books and records of ITC. ITC agrees
to assist Target in conducting such review and investigation and will provide,
and will cause its independent public accountants to provide (subject to
Target's agreement to any hold-harmless or indemnity reasonably required by
such independent public accountants), Target and its employees, agents and
representatives full access to, and complete information concerning all aspects
of the business of ITC, including its books, records (including Returns filed
or in preparation), personnel and premises, the audit work papers and other
records
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relating to ITC of its independent public accountants. Neither any
investigation by Target nor the receipt by Target of any data or information
from ITC, its independent public accountants and other representatives or
advisors will affect the right of Target or Sub to rely on the representations,
warranties or covenants of ITC or the right of Target to terminate this
Agreement as provided in Section 12.1 hereof.
Section 4.11 Reorganization. From and after the date hereof and
until the Effective Time, ITC will not, and ITC will use its reasonable best
efforts to cause the ITC Affiliates not to, knowingly take any action, or
knowingly fail to take any action which is reasonable and not materially
burdensome to ITC or its shareholders, that would jeopardize qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
Section 4.12 Non-Competition Agreements. Prior to the Closing,
ITC will use its reasonable efforts to cause Ray H. Dormandy, Jr. and Julie D.
Bell to execute and deliver to Target Non-Competition Agreements substantially
in the form of Exhibit B attached hereto (the "NON- COMPETITION AGREEMENTS").
Section 4.13 Shareholder Agreement. Prior to the Closing, ITC
will use its reasonable efforts to obtain from the holders of ITC Capital Stock
executed copies of the Shareholder Agreement substantially in the form of
Exhibit C attached hereto (the "SHAREHOLDER AGREEMENT").
Section 4.14 Protection and Declaration of Inventions. Prior to
the Closing, ITC will use its best efforts to cause all persons who are
employees of or consultants to ITC on or after the date of this Agreement to
execute and deliver a Protection and Declaration of Inventions substantially in
the form attached hereto as Exhibit D (an "ITC EMPLOYEE DECLARATION").
Section 4.15 Inventory Audit. Prior to the Closing, ITC will
conduct a book-to-physical audit of ITC's inventory. Target will have the
right to have a company representative and a representative of Target's
independent auditors present during the conduct of such audit.
ARTICLE V
COVENANTS OF TARGET AND SUB
Section 5.1 Listing Application. Target will prepare and submit
to the Nasdaq National Market an additional listing application covering the
Merger Securities issuable in connection with the Merger and will use its best
efforts to obtain approval for the listing of such securities upon official
notice of issuance.
Section 5.2 Reorganization. From and after the date hereof,
Target will not, and Target will use its reasonable best efforts to cause its
affiliates not to, knowingly take any action, or knowingly fail to take any
action, that would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 5.3 Registration Rights. Target hereby grants, effective
as of the Effective Time, the registration rights set forth in the Declaration
of Registration Rights attached as
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Exhibit E hereto to all holders of Target Common Stock issued as a result of
the merger; provided that in the event that there is then in effect a
registration statement on Form S-8 pursuant to Section 5.4 below, the shares of
Target Common Stock covered by such registration statement shall not be
entitled to the registration rights granted under this paragraph.
Section 5.4 Form S-8. At or as soon as practicable after the
Effective Time, Target shall file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to the shares of Target
Common Stock subject to ITC Options and shall use its reasonable efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such ITC Options remain outstanding. The parties specifically contemplate
that such Form S-8 may be either a new Form S-8 or an amendment to an existing
Form S-8, at Target's sole discretion.
Section 5.5 Employee Benefits. Promptly following the Effective
Time, Target will take all steps necessary to make available to those employees
of ITC that will become employees of Target or the Surviving Corporation all
employee benefits then offered to Target employees of like circumstance.
Section 5.6 Maintenance of ITC Indemnification Obligations.
(a) Subject to and following the Effective Time, the
Surviving Corporation shall, and Target shall cause the Surviving Corporation
to, indemnify and hold harmless the Indemnified ITC Parties (as defined below)
to the extent provided in the Bylaws of ITC as in effect on the date of this
Agreement. The Surviving Corporation shall, and Target shall cause the
Surviving Corporation to, keep in effect such provisions, which shall not be
amended except as required by applicable law or to make changes permitted by
the CGCL that would enlarge the rights to indemnification available to the
Indemnified ITC Parties and changes to provide for exculpation of director and
officer liability to the fullest extent permitted by the CGCL. If the
Surviving Corporation fails to perform its indemnification obligations to any
Indemnified ITC Party, Target shall provide the indemnification directly. The
indemnification obligations to officer and directors of ITC shall also be
extended to all employees, and agents of ITC. For purposes of this Section
5.6, "INDEMNIFIED ITC PARTIES" shall mean the officers, directors, employees
and agents of ITC.
(b) Subject to and following the Effective Time, Target
and the Surviving Corporation shall be jointly and severally obligated to pay
the reasonable expenses, including reasonable attorney's fees, that may be
incurred by any Indemnified ITC Party in enforcing the rights provided in this
Section 5.6 and shall make any advances of such expenses to the Indemnified ITC
Party that would be available under the ITC Bylaws with regard to the
advancement of indemnifiable expenses, subject to the undertaking of such party
to repay such advances in the event that it is ultimately determined that such
party is not entitled to indemnification.
(c) The provisions of this Section 5.6 shall be in
addition to any other rights available to the Indemnified ITC Parties, shall
survive the Effective Time of the Merger, and are expressly intended for the
benefit of the Indemnified Parties.
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Section 5.7 Mitigation and Involvement. Following the Effective
Time, in connection with the termination of unwritten arrangements between ITC
and certain third parties, Target will use its reasonable efforts (a) to avoid
paying termination penalties or "break-up fees" that may constitute recoverable
Losses pursuant to Article XI below based upon ITC's representation in Section
2.9(a)(xi) above and (b) to involve Ray H. Dormandy, Jr., President of ITC
prior to the effective time, in the discussions with any such party to be
terminated, particularly where a penalty or "break-up fee" is likely to be
incurred.
ARTICLE VI
MUTUAL COVENANTS
Section 6.1 Confidentiality.
(a) In connection with the negotiation of this Agreement,
the preparation for the consummation of the transaction contemplated hereby,
and the performance of obligations hereunder, each party hereto acknowledges
that it has had, and will have, access to confidential information relating to
the other party, including, but not limited to, technical, manufacturing or
marketing information, ideas, methods, developments, inventions, improvements,
business plans, trade secrets, scientific or statistical data, diagrams,
drawings, specifications or other proprietary information relating thereto,
together with all analyses, compilations, studies or other documents, records
or data prepared by the parties or their respective representatives which
contain or otherwise reflect or are generated from such information. All such
information is herein referred to as "CONFIDENTIAL INFORMATION"; provided,
however, that the term "Confidential Information" does not include information
received by a party in connection with the transaction contemplated hereby
which (i) is or becomes generally available to the public other than as a
result of a disclosure by such party or its representatives, (ii) was within
such party's possession (as evidenced by duly authenticated writings) prior to
its being furnished to such party by or on behalf of the other party in
connection with the transaction contemplated hereby, provided that the source
of such information was not known by such party to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other person with
respect to such information or (iii) becomes available to such party on a
non-confidential basis from a source other than the other party or any of its
representatives, provided that such source is not bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the other party or any other person with respect to such
information.
(b) Nothing in this Section 6.1 is intended to grant any
rights under any patent or copyright of either party, nor shall this Section
6.1 grant any right in or to the other party's Confidential Information. Each
party shall use the other party's Confidential Information solely for the
purpose of consummating the transaction contemplated by this Agreement and
shall use reasonable efforts to treat all Confidential Information as
confidential, preserve the confidentiality thereof and not disclose any
Confidential Information, except to its representatives and affiliates who need
to know such Confidential Information in connection with the transaction
contemplated hereby. Each party shall cause its representatives to comply with
the covenants in the preceding sentence.
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(c) All Confidential Information shall remain the
property of the party who originally possessed such information. In the event
of the termination of this Agreement for any reason whatsoever, Target shall,
and shall cause its representatives to, promptly return to ITC, and ITC shall,
and shall cause its representatives to, promptly return to Target, all
Confidential Information (including all copies, summaries and extracts thereof
and return or destroy all analyses, compilations, studies or other documents,
records or data which contain, reflect or are generated from such Confidential
Information) furnished to Target or ITC, as the case may be, by the other party
in connection with the transactions contemplated hereby.
(d) If a party or any of its representatives or
affiliates is requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) or is otherwise required by
operation of law to disclose any Confidential Information, such party shall
provide the other party with prompt written notice of such request or
requirement, which notice shall, if practicable, be at least 48 hours prior to
making such disclosure, so that the other party may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or the
receipt of such a waiver, such party or any of its representatives are
nonetheless, in the opinion of counsel, legally compelled to disclose
Confidential Information, then such party may disclose that portion or the
Confidential Information which such counsel advises is legally required to be
disclosed, provided that such party uses its reasonable efforts to preserve the
confidentiality of the Confidential Information, whereupon such disclosure
shall not constitute a breach of this Agreement.
(e) Each party agrees that its obligations provided
herein are necessary and reasonable in order to protect the other party and its
business, and each party expressly agrees that monetary damages would be
inadequate to compensate a party for any breach by the other party of its
covenants and agreements set forth herein. Accordingly, each party agrees and
acknowledges that any such breach or threatened breach will cause irreparable
injury to the other party and that, in addition to any other remedies that may
be available, in law, in equity or otherwise, such party shall be entitled to
obtain injunctive relief against the threatened breach of this Agreement or the
continuation of any such breach, without the necessity of proving actual
damages.
Section 6.2 Expenses.
(a) Except as otherwise provided in this Section 6.2, in
the event the Merger is not consummated, Target and ITC will each separately
bear its own expenses incurred in connection with this Agreement or any
transaction contemplated hereby, except that in the event that the Closing
occurs, any fees and expenses of ITC's legal, accounting and financial advisors
in excess of an aggregate of $500,000 will be deducted from the Aggregate
Dollar Amount, as set forth in Section 1.3(a) above, and result in a decrease
in the number of Target Merger Shares issuable by Target in connection with
this transaction.
(b) If this Agreement is terminated pursuant to Sections
12.1(f) or 12.1(g), then ITC shall pay to Target within three business days of
such termination an amount equal to $1,000,000 by check or wire transfer
(subject, in each case, to the proviso regarding terminations resulting from a
material adverse change in Target's Business subsequent to the date of this
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Agreement and prior to the Effective Time). Notwithstanding the foregoing,
nothing contained herein shall relieve any party from liability for any breach
of this Agreement.
Section 6.3 Public Announcements. Except as provided for herein,
Target and ITC shall not from and after the date hereof and prior to the
Effective Time make, issue or release any public announcement, press release,
public statement or acknowledgment of the existence of, or reveal publicly the
terms, conditions and status of, the transactions provided for herein
(including any generally disseminated communication to employees, customers or
the trade) without the prior consent of the other party as to the content and
time of release of and the media in which such statement or announcement is to
be made; provided, however, that in the case of announcements, statements,
acknowledgments or disclosures which any party is required by law to make,
issue or release, the making, issuing or releasing of any such announcement,
statement, acknowledgment or disclosure by the party so required to do so by
law shall not constitute a breach of this Agreement if such party shall have
given, to the extent reasonably possible, not less than one calendar day prior
notice to the other party, and shall have attempted, to the extent reasonably
possible, to clear such announcement, statement, acknowledgment or disclosure
with the other party. Each party hereto agrees that it will not unreasonably
withhold any such consent or clearance. If, based upon the advice of its
outside legal counsel, Target believes it to be necessary to meet its public
disclosure obligations or otherwise desirable, the parties will issue a
mutually agreed upon joint press release announcing the execution and delivery
of this Agreement.
Section 6.4 Agreements to Cooperate.
(a) ITC shall take, and shall cause its Subsidiaries to
take, all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on ITC or its Subsidiaries with respect to
the Merger and shall take all reasonable actions necessary to cooperate
promptly with and furnish information to Target in connection with any such
requirements imposed upon Target or Sub or any Subsidiary of Target or Sub in
connection with the Merger. ITC shall take, and shall cause its Subsidiaries
to take, all reasonable actions necessary (i) to obtain (and will take all
reasonable actions necessary to promptly cooperate with Target or Sub and their
Subsidiaries in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity, or other third party, required to be
obtained or made by ITC or any of its Subsidiaries (or by Target or Sub or any
of their Subsidiaries) in connection with the Merger or the taking of any
action contemplated by this Agreement; (ii) to lift, rescind or mitigate the
effect of any injunction or restraining order or other order adversely
affecting the ability of ITC to consummate the transactions contemplated
hereby; (iii) to fulfill all conditions applicable to ITC pursuant to this
Agreement; and (iv) to prevent, with respect to a threatened or pending
temporary, preliminary or permanent injunction or other order, decree or
ruling, the entry, or promulgation thereof, as the case may be; provided,
however, that ITC shall not be obligated to, nor shall ITC be obligated to
cause its Subsidiaries to, dispose of or hold separate all or a material
portion of the business or assets of ITC and its Subsidiaries, taken as a
whole.
(b) Target and Sub shall take, and shall cause their
Subsidiaries to take, all reasonable actions necessary to comply promptly with
all legal requirements which may be
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imposed on them or their Subsidiaries with respect to the Merger and shall take
all reasonable actions necessary to cooperate promptly with and furnish
information to ITC in connection with any such requirements imposed upon ITC or
any Subsidiary of ITC in connection with the Merger. Target and Sub shall
take, and shall cause their Subsidiaries to take, all reasonable actions
necessary (i) to obtain (and will take all reasonable actions necessary to
promptly cooperate with ITC and its Subsidiaries in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity, or other third party, required to be obtained or made by Target or Sub
or any of their Subsidiaries (or by ITC or any of its Subsidiaries) in
connection with the Merger or the taking of any action contemplated by this
Agreement; (ii) to lift, rescind or mitigate the effect of any injunction or
restraining order or other order adversely affecting the ability of Target or
Sub to consummate the transactions contemplated hereby; (iii) to fulfill all
conditions applicable to Target or Sub pursuant to this Agreement; and (iv) to
prevent, with respect to a threatened or pending temporary, preliminary or
permanent injunction or other order, decree or ruling or statute, rule,
regulation or executive order, the entry, enactment or promulgation thereof, as
the case may be; provided, however, that Target shall not be obligated to, nor
shall Target be obligated to cause its Subsidiaries to, dispose of or hold
separate or otherwise relinquish all or a portion of the business or assets of
Target and its Subsidiaries, taken as a whole, or to change its or ITC's
business in any way.
(c) The parties hereto will consult and cooperate with
one another, and consider in good faith the views of one another, in connection
with any analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to any federal or state antitrust
or fair trade law.
Section 6.5 State Statutes. If any state takeover law shall
become applicable to the transactions contemplated by this Agreement, Target
and its Board of Directors or ITC and its Board of Directors, as the case may
be, shall use their reasonable efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effects of such
state takeover law on the transactions contemplated by this Agreement.
Section 6.6 Additional Agreements. In case at any time after the
Effective Time of the Merger any further action is reasonably necessary to
carry out the purposes of this Agreement or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of ITC and Sub, the proper officers and directors of each
corporation party to this Agreement shall take all such necessary action.
Section 6.7 Transfer of Sub. Each of Target and ITC agrees that,
notwithstanding the other provisions of this Agreement, Target shall have the
right prior to or after the Effective Time to transfer the outstanding shares
of Sub or the Surviving Corporation to another wholly-owned subsidiary of
Target.
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ARTICLE VII
PROXY STATEMENT
Section 7.1 Preparation. Target and ITC will cooperate in the
prompt preparation by ITC of a proxy statement for submission to the
shareholders of ITC in connection with the ITC Special Meeting (the "PROXY
STATEMENT").
Section 7.2 Representations, Warranties and Covenants of ITC.
ITC represents and warrants to Target that the Proxy Statement will not, at the
time of its issuance, at the time of the ITC Special Meeting and at the
Effective Time contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading except that no
representation or warranty is made with respect to information set forth in the
Proxy Statement concerning Target or any Subsidiary thereof furnished by Target
or any such Subsidiary in writing expressly for use in the Proxy Statement.
ITC will promptly advise Target in writing if at any time prior to the
Effective Time it obtains knowledge of any facts that might make it necessary
or appropriate to amend or supplement the Proxy Statement in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law.
Section 7.3 Representations, Warranties and Covenants of Target.
Target represents and warrants to ITC that the information set forth in the
Proxy Statement concerning Target or any Subsidiary thereof furnished by Target
or any such Subsidiary to ITC in writing expressly for use in the Proxy
Statement will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading. Target
will promptly advise ITC in writing if at any time prior to the Effective Time
it obtains knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Proxy Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law.
Section 7.4 Mailing to Shareholders; Recommendation of ITC Board;
ITC Special Meeting. ITC will cause the Proxy Statement to be mailed to ITC's
shareholders as soon as practicable after the date hereof in accordance with
applicable state law. ITC will call the ITC Special Meeting to be held as
promptly as practicable for the purpose of obtaining the shareholder approval
of this Agreement and the Merger and shall use all reasonable efforts to obtain
such approval. ITC shall coordinate and cooperate with Target with respect to
the timing of the ITC Special Meeting. ITC shall not change the date of the
ITC Special Meeting without the prior written consent of Target, nor shall ITC
adjourn the ITC Special Meeting without the prior written consent of Target,
unless such adjournment is due to the lack of a quorum, in which case the
Chairman of the ITC Special Meeting shall announce at such meeting the time and
place of the adjourned meeting.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
TARGET AND SUB
The obligations of Target and Sub under this Agreement to consummate
the Merger will be subject to the satisfaction, or to the waiver by them in the
manner contemplated by Section 13.2, on or before the Closing, of the following
conditions:
Section 8.1 Representations and Warranties. The representations
and warranties of ITC contained in this Agreement will be true and correct on
and as of the Effective Time, except for changes contemplated by this Agreement
and except for statements which address items only as of a particular date,
with the same force and effect as if made on and as of the Effective Time,
except, in all such cases, for such breaches, inaccuracies or omissions which
in the aggregate do not have a material adverse effect on Target's Business.
Section 8.2 Performance of Covenants. ITC shall have performed
and complied in all material respects with each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by it
prior to or on the Closing.
Section 8.3 No Governmental or Other Proceeding or Litigation.
No order of any court or administrative agency will be in effect which
restrains or prohibits any transaction contemplated hereby or which would limit
or otherwise affect in a material respect Target's ownership of ITC; no suit,
action, or proceeding by any Governmental Entity or other person or entity, or
investigation or inquiry by any Governmental Entity, will be pending or, in the
case of a Governmental Entity, threatened against Target, Sub or ITC, which
challenges the validity or legality, or seeks to restrain the consummation, of
any transaction contemplated hereby, including the Subsequent Merger, or which
seeks to limit or otherwise affect Target's ownership of ITC, and no written
advice shall have been received by Target, Sub, ITC or their respective counsel
from any Governmental Entity, and remain in effect, stating that an action or
proceeding will, if the Merger is consummated or sought to be consummated, be
filed seeking to invalidate or restrain the Merger or limit or otherwise affect
Target's ownership of ITC and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which would (a) make the consummation of the Merger
illegal, (b) render Target, Sub or ITC unable to consummate the Merger or (c)
prohibit Target's, Sub's or ITC's ownership or operation of all or any material
portion of the business or assets of ITC and its Subsidiaries, taken as a
whole, as a result of the Merger, or compel Target, Sub or ITC to dispose of or
hold separate all or any material portion of the business or assets of ITC and
its Subsidiaries, taken as a whole.
Section 8.4 Approvals and Consents. The approval of the
shareholders of ITC referred to in Section 1.8 hereof, and all approvals and
authorizations of the governmental entities and other third parties referred
to in Sections 2.5, 2.6, 3.4 and 3.5 hereof and in the ITC Disclosure Schedule
shall have been obtained.
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Section 8.5 Opinion of Counsel. Target shall have received from
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation counsel to ITC, an
opinion dated the date of the Closing and addressed to Target, substantially in
the form attached hereto as Exhibit F.
Section 8.6 Certificate. Target shall have received a
certificate signed by the Chief Executive Officer of ITC to the effect that the
conditions set forth in Section 8.1 and 8.2 have been met.
Section 8.7 Dissenting Shares. The aggregate number of
Dissenting Shares shall not exceed four percent (4%) of the outstanding shares
of ITC Capital Stock immediately prior to the Effective Time.
Section 8.8 No Material Adverse Change. There shall have been no
material adverse change in ITC's Business from the date hereof through the
Closing Date.
Section 8.9 Resignation of Directors. The directors of ITC in
office immediately prior to the Effective Time shall have resigned as directors
of the Surviving Corporation effective as of the Effective Time.
Section 8.10 FIRPTA. At the Closing, ITC shall deliver to Target
a properly executed statement conforming to the requirements of Treasury
Regulation Sections 1.897-2(h)(l)(i) and 1.445-2(c)(3) and ITC further agrees
to provide the notification to the Internal Revenue Service required pursuant
to Treasury Regulation Section 1.897-2(h)(2).
Section 8.11 ITC Warrants. Except for the ITC Options, all
warrants, options or other rights to purchase shares of ITC Capital Stock shall
have terminated by full exercise or cancellation thereof.
Section 8.12 Inventory Audit. Target shall have received in
writing at or prior to the Closing the results of the book-to-physical audit
of ITC's inventory conducted by ITC between the date of execution of this
Agreement and the Closing.
Section 8.13 Non-Competition Agreements. Target shall have
received at or prior to the Closing from each of Ray H. Dormandy, Jr. and
Julie D. Bell a Non-Competition Agreement executed by such person.
Section 8.14 Shareholder Agreement. Target shall have received at
or prior to the Closing from holders of not less than ninety-six (96%) of ITC's
Capital Stock a duly executed Shareholder Agreement.
Section 8.15 ITC Employee Declarations. ITC shall have obtained
from each ITC employee and consultant at the Effective Time, and delivered to
Target, an executed ITC Employee Declaration.
Section 8.16 Exchange and Escrow Agreement. Target, the
Representatives, The First National Bank of Boston and State Street Bank &
Trust Co. shall have entered into an Exchange and Escrow Agreement
substantially in the form attached hereto as Exhibit G.
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Section 8.17 Termination of Agreements. ITC shall have obtained
from the parties in interest thereto, and delivered to Target, an agreement to
terminate ITC's Amended and Restated Investors Rights Agreement dated as of
July 31, 1995.
Section 8.18 ITC Advisors. ITC shall have obtained from its
legal, accounting and financial advisors, and delivered to Target, final
invoices for services rendered by such parties in connection with the Merger
(the "Final Invoices") which shall include the written representation of such
advisors that such invoices set forth all fees and expenses incurred by or owed
to such advisors by ITC in connection with the Merger.
ARTICLE IX
CONDITIONS TO ITC'S OBLIGATIONS
The obligations of ITC under this Agreement to consummate the Merger
will be subject to the satisfaction, or to the waiver by ITC in the manner
contemplated by Section 13.2, on or before the Closing, of the following
conditions:
Section 9.1 Representations and Warranties. The representations
and warranties of Target and Sub contained in this Agreement will be true and
correct on and as of the Effective Time, with the same force and effect as if
made on and as of the Effective Time.
Section 9.2 Performance of Covenants. Target and Sub shall have
performed and complied in all material respects with each and every covenant,
agreement and condition required by this Agreement to be performed or complied
with by each prior to or at the Closing.
Section 9.3 No Governmental or Other Proceeding or Litigation.
No order of any court or administrative agency will be in effect which
restrains or prohibits any transaction contemplated hereby or which would limit
or otherwise affect in a material respect Target's ownership of ITC; no suit,
action or proceeding by any Governmental Entity or other person or entity or
investigation by any Governmental Entity, will be pending or, in the case of a
Governmental Entity, threatened against Target, Sub or ITC, which challenges
the validity or legality, or seeks to restrain the consummation, of any
transaction contemplated hereby, including the Subsequent Merger, or which
seeks to limit or otherwise affect Target's ownership of ITC; and no written
advice shall have been received by Target, Sub, ITC or their respective counsel
from any Governmental Entity, and remain in effect, stating that an action or
proceeding will, if the Merger is consummated or sought to be consummated, be
filed seeking to invalidate or restrain the Merger or limit or otherwise affect
Target's ownership of ITC and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which would (a) make the consummation of the Merger
illegal or (b) render Target, Sub or ITC unable to consummate the Merger.
Section 9.4 Approvals and Consents. The approval of the
shareholders of ITC referred to in Section 1.8 hereof, and all approvals and
authorizations of the Governmental Entities and other third parties referred to
in Sections 2.5, 2.6, 3.4 and 3.5 hereof shall have been obtained.
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Section 9.5 Opinion of Counsel. ITC shall have received from
Venture Law Group, A Professional Corporation, counsel to Target and Sub, an
opinion dated the date of the Closing and addressed to ITC, substantially in
the form attached hereto as Exhibit H.
Section 9.6 Tax Opinion. ITC shall have received an opinion,
dated the Closing Date, of Wilson, Sonsini, Goodrich & Rosati, legal counsel to
ITC, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, counsel shall be entitled to rely on reasonable
representations of Target, Sub, ITC and certain ITC shareholders.
Section 9.7 Certificates. ITC shall have received certificates
signed by the Chief Financial Officer of each of Target and Sub to the effect
that the conditions set forth in Sections 9.1 and 9.2 have been met.
Section 9.8 Employment Agreements. Target shall have delivered at
or prior to the Closing duly executed Employment Agreements in substantially
the forms attached hereto as Exhibits I-1 and I-2 with Ray H. Dormandy and
Julie D. Bell, respectively.
Section 9.9 No Material Adverse Change. There shall have been no
material adverse change in Target's Business from the date hereof through the
Closing Date.
ARTICLE X
CLOSING
Unless this Agreement shall have been terminated and the Merger shall
have been abandoned pursuant to a provision of Article XII hereof, a closing
(the "CLOSING") will be held, as soon as practicable after the satisfaction or
waiver of the conditions set forth in Articles VIII and IX, at the offices of
Venture Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo Park,
California 94025. At the date of the Closing (the "CLOSING DATE"), the
documents referred to in Articles VIII and IX will be exchanged by the parties
and, immediately thereafter, the Merger Agreement will be filed by ITC and Sub
with the Secretary of State of the State of California.
ARTICLE XI
INDEMNITY AND ESCROW
Section 11.1 Indemnification.
(a) From and after the Effective Time, ITC's shareholders
shall indemnify and hold harmless Target, Target's Subsidiaries (including the
Subsidiaries of ITC) and the Surviving Corporation and their respective
affiliates, officers, directors, employees, representatives and agents
(collectively, the "INDEMNIFIED PARTIES") from and against any claims, losses,
liabilities, damages, arbitration or any legal actions (including, without
limitation, interest, penalties and reasonably incurred costs, expenses and
legal fees and expenses) (collectively, "LOSSES") arising from or in connection
with any breach of a representation, warranty, covenant or agreement of
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ITC contained in this Agreement, including any Exhibits or Schedules attached
hereto, and the Merger Agreement, which breach becomes known to Target, and is
asserted in accordance with Section 11.7 below, within eighteen (18) months
following the Effective Date. Losses in each case shall be net of the amount
of any insurance proceeds, indemnity and contribution actually recovered by
Target or the Surviving Corporation.
(b) The ITC shareholders shall be not obligated to
indemnify the Indemnified Parties pursuant to this Article XI except and to the
extent that aggregate Losses by Indemnified Parties exceed one hundred thousand
dollars ($100,000) (the "BASKET AMOUNT"), whereupon the ITC shareholders shall
be obligated to indemnify the Indemnified Parties for all Losses in excess of
such amount.
Section 11.2 Escrow of Shares. At the Effective Time ten percent
(10%) of the Target Merger Shares (rounded down to the nearest whole share)
will be deposited with State Street Bank & Trust Co. (or other institution
acceptable to Target and the Representatives (as defined in Section 11.6)), as
the escrow agent (the "ESCROW AGENT"), for the indemnification of Losses
pursuant to Section 11.1(a) (the "ESCROW FUND"). The Escrow Fund will be
governed by the terms set forth herein and maintained at Target's sole cost and
expense. The shares of Target Common Stock deposited in the Escrow Fund shall
be referred to as "ESCROW SHARES." Each ITC shareholder at the Effective Time
is referred to as a "FORMER ITC SHAREHOLDER." The obligation of Target to
deliver the Escrow Shares otherwise issuable to the Former ITC Shareholders
upon the Merger shall be subject to reduction to satisfy the Former ITC
Shareholders' obligations under this Article XI. Claims for Losses made by
Target or any other Indemnified Party that (a) are accepted as valid by the
Representatives (as defined in Section 11.6), or (b) are determined to be valid
through arbitration proceedings or which otherwise are allowed as described in
this Article XI, shall reduce the number of Escrow Shares issuable to the
Former ITC Shareholders by the number of Escrow Shares (rounded to the closest
whole number) equal to the amount of such Losses divided by the deemed Average
Closing Price for purposes of Section 1.3(a) above. As to each Former ITC
Shareholder, any such reduction shall be made on a pro rata basis based upon
the Proportionate Interest (as defined below) of each Former ITC Shareholder.
The interest of each Former ITC Shareholder in the Escrow Shares shall not be
assignable or transferable in any manner except by operation of law, by will or
by the laws of descent until such Escrow Shares are issued to the Former ITC
Shareholders.
Section 11.3 Remedies.
(a) The Escrow Fund provided for herein is intended by
the parties to this Agreement to apply to breaches of any representation,
warranty, covenant or agreement of ITC contained in this Agreement, including
any Exhibits or Schedules attached hereto, and the Merger Agreement, and,
except as otherwise provided herein, resort to the Escrow Fund shall be the
exclusive remedy of the Indemnified Parties for such breaches. Notwithstanding
the foregoing, the restrictions set forth herein do not limit any other
potential remedies of Target for any fraud or willful deceit by ITC, its
officers, directors or affiliates.
(b) With respect to Losses resulting from a breach by
either Ray H. Dormandy or Julie D. Bell of the representations made by them in
their individual capacities, Target agrees
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that it will initially pursue indemnification of such Losses out of the Escrow
Fund (to the extent that the Escrow Fund has not already been fully utilized
to compensate Losses) pursuant to the claim provisions set forth in this
Article XI, and, to the extent that such Losses exceed the amount available in
the Escrow Fund, Mr. Dormandy or Ms. Bell will only be personally responsible
for such excess Losses to the extent that such Losses relate to fraud or
willful deceit by Mr. Dormandy or Ms. Bell.
Section 11.4 Term of Escrow.
(a) Escrow Shares. The Escrow Agent shall deliver the Escrow
Shares, after giving effect to the reductions in or holdbacks of the number of
Escrow Shares as described in Section 11.2 above or Section 11.4(b) below to
the Former ITC Shareholders on the date eighteen (18) months following the
Closing Date, or earlier if determined by Target in its sole discretion (the
"ESCROW EXPIRATION DATE"). The period commencing upon the Closing Date and
ending upon the Escrow Expiration Date shall be referred to as the "ESCROW
HOLDBACK PERIOD."
(b) Extension of Escrow. Notwithstanding Section 11.4(a), to the
extent Target has made a claim which is being disputed by the Representatives
in accordance with Section 11.7 below on the Escrow Expiration Date, the Escrow
Agent shall withhold the delivery of and maintain in the Escrow Fund such
number of Escrow Shares as is reasonably necessary in the opinion of the Escrow
Agent to satisfy such claim and upon resolution of such claim such withheld
Escrow Shares, after giving effect to any appropriate further reduction under
Section 11.2, shall be transferred by the Escrow Agent into the respective
names of the Former ITC Shareholders. The period during which any escrow of
Escrow Shares existed under this Agreement is referred to herein as the "ESCROW
PERIOD." Upon expiration of the Escrow Period, the Escrow Fund shall terminate
and the Escrow Agent shall deliver to each Former ITC Shareholder his, her or
its Proportionate Interest in the Escrow Shares remaining in the Escrow Fund.
(c) Protection of Escrow Funds. The Escrow Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Target and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(d) Distributions; Voting.
(i) Any shares of Target Common Stock or other
equity securities issued or distributed by Target (including shares issued upon
a stock split) ("NEW SHARES") in respect of shares of Target Common Stock in
the Escrow Fund which have not been released from the Escrow Fund shall be
added to the Escrow Fund and become a part thereof. New Shares issued in
respect of shares of Target Common Stock which have been released from the
Escrow Fund shall not be added to the Escrow Fund, but shall be distributed to
the holders thereof. When and if cash dividends on shares of Target Common
Stock in the Escrow Fund shall be declared and paid, they shall not be added to
the Escrow Fund but shall be paid to the Former ITC Shareholders according to
their Proportionate Interest in the Escrow Fund.
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(ii) Each Former ITC Shareholder shall have voting
rights with respect to the shares of Target Common Stock contributed to the
Escrow Fund on behalf of such shareholder (and on any voting securities added
to the Escrow Fund in respect of such shares of Target Common Stock) so long as
such shares of Target Common Stock or other voting securities are held in the
Escrow Fund.
Section 11.5 "Proportionate Interest" Defined. Each Former ITC
Shareholder's "PROPORTIONATE INTEREST" shall be a fraction calculated by
dividing (a) the number of shares of ITC capital stock held by such Former ITC
Shareholder at the Effective Time by (b) the result of (i) the aggregate number
of shares of ITC Capital Stock outstanding at the Effective Time less (ii) the
aggregate number of shares of ITC Capital Stock entitled to dissenter's rights
under Chapter 13 of CGCL (which number shall be reduced to the extent that such
rights are not perfected).
Section 11.6 ITC Shareholders' Representatives. During the Escrow
Period, the Former ITC Shareholders shall be represented hereunder by S. Allan
Johnson and Julie D. Bell or their designees (the "REPRESENTATIVES"). The
terms under which the Representatives will act will be as set forth in the
Shareholder Agreement and are hereby incorporated herein by reference and made
a part hereof, which will be binding on all Former ITC Shareholders,
irrespective of whether it is executed by such Former ITC Shareholders.
Section 11.7 Mechanics of Making Claims.
(a) In the event that any written claim or demand for
which Target or any other Indemnified party is entitled to indemnification is
sought against Target or sought to be collected from Target or any other
Indemnified Party by a third party, promptly after the assertion
of any such claim or demand, or otherwise promptly upon discovery of any other
Loss for which Target or any other Indemnified Party seeks indemnification,
Target or such other Indemnified Party shall notify the Escrow Agent and the
Representatives of such claim, demand or Loss; provided, however, that the
failure promptly to give such notice shall not affect Target's rights hereunder
except to the extent that such failure shall adversely affect the Former ITC
Shareholders or their rights hereunder. Target shall advise the
Representatives of all material facts relating to such assertion within the
knowledge of Target, and shall afford the Representatives, in the event that
they do not assume such defense pursuant to Section 11.7(d) below, the
opportunity to participate, at their own expense, in the defense against such
claims for liability, provided that Target shall control such defense.
(b) On the date 20 business days following the receipt by
the Escrow Agent and the Representatives of written notice from Target or any
other Indemnified Party of a claim of indemnification pursuant to this Article
XI, including the material facts upon which such claim is based and the amount
of the Losses with respect to such claim, the Escrow Agent shall, subject to
the provisions of Section 11.7(c), deliver to Target or such other Indemnified
Party out of the Escrow Fund, as promptly as possible, that number of Escrow
Shares (rounded to the closest whole number) equal to the amount of such losses
divided by the deemed Average Closing Price for purposes of Section 1.3(a)
above.
(c) If the Representatives shall notify Target and the
Escrow Agent in writing within such 20 business day period of their objection
to a claim of indemnification, the Escrow
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Shares shall not be delivered to Target until the rights of the Former ITC
Shareholders and Target or such other Indemnified Party with respect thereto
have been agreed upon between the Representatives and Target or such other
Indemnified Party or until such rights are finally determined through binding
arbitration, which may be demanded by either the Representatives or an
Indemnified Party unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by binding
arbitration conducted by one arbitrator to be mutually agreed upon by the
Representatives and the Indemnified Party(ies), or, if the parties cannot agree
upon one arbitrator, by a panel of three arbitrators, one of whom will be
selected by each of the Representatives on the one hand and the Indemnified
Party(ies) on the other, which two selected arbitrators shall then mutually
agree upon a third panel member. Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Any such
arbitration shall be held in Santa Clara County, California under the
Commercial Arbitration Rules of the American Arbitration Association then in
effect. The Escrow Agent shall be entitled to act in accordance with such
determination and to make or withhold payments out of the Escrow Fund in
accordance therewith. The costs and expenses (including reasonable counsel
fees) of any such arbitration proceeding shall be borne as the arbitrator(s)
determine to be fair under the circumstances.
(d) Target shall have the right (i) to defend, settle or
compromise any claim or liability subject to indemnification under this Article
XI, and (ii) to be indemnified from and against all Losses resulting therefrom
(but the Representatives shall not be prevented from contesting such Loss
pursuant to the terms of Section 11.7(c)), unless the Representatives, within
20 calendar days after receiving such notice of the claim or liability in
accordance with Section 11.7(a) notify Target in writing that they intend to
assume the defense against such claim or liability and in fact promptly do so.
(e) Except as otherwise provided in Section 11.7(d), the
Former ITC Shareholders shall not be liable under this Article XI for any
settlement effected without the prior consent of the Representatives (which
consent may not be unreasonably withheld) of any claim, liability or proceeding
for which indemnity may be sought hereunder. In the event that the
Representatives assume the defense of any claim, liability or proceeding
pursuant to Section 11.7(d), the Representatives may not settle any such claim
liability or proceeding without the prior consent of Target (which consent may
not be unreasonably withheld).
Section 11.8 Escrow Agent's Duties.
(a) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Target and by each of the Representatives, and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall not be liable for any act done or omitted hereunder as
Escrow Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith.
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(b) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect
on account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(e) The Escrow Agent may resign at any time upon giving
at least 30 days written notice to Target and the Representatives pursuant to
the provisions of this Agreement; provided, however, that no such resignation
shall become effective until the appointment of a successor escrow agent which
shall be accomplished as follows: Target and the Representatives shall use
their best efforts to mutually agree upon a successor agent within 30 days
after receiving such notice. If the parties fail to agree upon a successor
transfer agent within such time, Target shall have the right to appoint a
successor escrow agent authorized to do business in California. The successor
escrow agent selected in the preceding manner shall execute and deliver an
instrument accepting such appointment and it shall thereupon be deemed the
Escrow Agent hereunder and it shall without further acts be vested with all the
estates, properties, rights, powers, and duties of the predecessor Escrow Agent
as if originally named as Escrow Agent. Thereafter, the predecessor Escrow
Agent shall be discharged for any further duties and liabilities under this
Agreement.
Section 11.9 ITC Shareholder Escrow. At the Effective Time, three
percent (3%) of the Target Merger Shares otherwise issuable in connection with
the Merger shall be issued into a separate escrow (the "ITC SHAREHOLDER
ESCROW") in order to provide for the payment of out-of-pocket expenses
incurred by the Representatives in connection with their services in such
capacity; provided, that such escrow arrangement is approved by the holders of
a majority of the shares of ITC Capital Stock (voting as a single class) prior
to the Effective Time. Target acknowledges that the Target Merger Shares issued
into the ITC Shareholder Escrow are entitled to the registration rights granted
pursuant to Section 5.3 and Target agrees to provide reasonable assistance to
the Representatives and their appointed escrow agent in liquidating such
securities through the exercise of registration procedures established pursuant
to such section.
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ARTICLE XII
TERMINATION
Section 12.1 Termination and Abandonment. This Agreement
may be terminated and the Merger may be abandoned before the Effective Time,
notwithstanding any approval and adoption of this Agreement by the shareholders
of ITC or by Target in its capacity as sole stockholder of Sub:
(a) by the mutual written consent of the Boards of
Directors of Target and ITC;
(b) by Target or by ITC at any time after June 30, 1996
(or such later date as shall have been agreed to in writing by them, acting
through their respective Boards of Directors) if the Merger for any reason has
not by such date become effective; provided, however, that this provision shall
not be available to any party whose willful failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by either Target or ITC if a permanent injunction or
other order by any federal or state court would make illegal or otherwise
restrain or prohibit the consummation of the Merger shall have been issued and
shall have become final and nonappealable; or
(d) by Target if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of ITC and such breach has not been cured within five business days
after written notice from Target to ITC (provided, that Target is not in
material breach of the terms of this Agreement; and provided further, that no
cure period shall be required for a breach which by its nature cannot be
cured);
(e) by ITC if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Target or Sub and such breach has not been cured within five
business days after written notice from ITC to Target or Sub (provided, that
ITC is not in material breach of the terms of this Agreement; and provided
further, that no cure period shall be required for a breach which by its nature
cannot be cured);
(f) by Target or ITC, if the required approval of the
shareholders of ITC contemplated by this Agreement shall not have been obtained
by reason of the failure to obtain the required vote upon a vote taken at the
ITC Special Meeting or at any adjournment thereof to the extent determined to
be necessary subsequent to the date hereof; provided, that termination by ITC
pursuant to this paragraph shall result in the payment of certain fees
described under Section 6.2 above unless such failure results from the
occurrence of a material adverse change in Target's Business after the date of
this Agreement and prior to the Effective Time; or
(g) by ITC or Target, if the ITC Board of Directors,
pursuant to the exercise of its fiduciary obligations to the ITC shareholders
under the CGCL, shall have (i) accepted or approved, or recommended to the
shareholders of ITC a Superior Proposal, or (ii) amended, withheld or withdrawn
its recommendation of the Merger; provided, that termination pursuant to
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this paragraph shall result in the payment of certain fees described under
Section 6.2 unless such action results from the occurrence of a material
adverse change in Target's Business after the date of this Agreement and prior
to the Effective Time.
The power of termination provided for by this Section 12 may be
exercised for Target or ITC only by their respective Boards of Directors and
will be effective only after written notice thereof, signed on behalf of the
party for which it is given by its Chief Executive Officer or other duly
authorized officer, shall have been given to the other and all fees and
expenses required to be paid under Section 6.2, if any, shall have been paid.
If this Agreement is terminated in accordance with this Section 12.1, the
Merger will be abandoned without further action by Target, Sub or ITC.
Section 12.2 Effect of Termination. In the event of termination
and abandonment of the Merger pursuant to Section 12.1, none of Target, Sub, or
ITC shall have any liability or further obligation to any of the others except
as provided in Sections 6.1 and 6.2 and except for any breach of this
Agreement; and neither Ray H. Dormandy, Jr. nor Julie D. Bell shall have any
personal liability.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment and Modification. To the fullest extent
provided by applicable law, this Agreement may be amended, modified and
supplemented with respect to any of the terms contained herein by mutual
consent of the respective Boards of Directors of Target, Sub and ITC or by
their respective officers duly authorized by such Boards of Directors by an
appropriate written instrument executed at any time prior to the Effective
Time.
Section 13.2 Waiver of Compliance. To the fullest extent
permitted by law, each of Target, Sub and ITC may, pursuant to action by its
respective Board of Directors, or its respective officers duly authorized by
its Board of Directors, by an instrument in writing extend the time for or
waive the performance of any of the obligations of the others or waive
compliance by the others with any of the covenants, or waive any of the
conditions to its obligations, contained herein; provided, however, that the
obtaining of the approval of the shareholders of ITC referred to in Section 1.8
hereof will not be waivable. No such extension of time or waiver will operate
as a waiver of, or estoppel with respect to, any subsequent or other failure.
Section 13.3 No Survival of Representations and Warranties. The
respective representations and warranties of each party hereto contained herein
will not be deemed to be waived or otherwise affected by any investigation made
by the other party hereto. Such representations and warranties will be
extinguished by and will not survive the Effective Time, except with respect to
the remedies set forth in Article XI and except for remedies that may be
available for fraud.
Section 13.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder will be in writing and will be
deemed to have been duly given
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when delivered by hand or when mailed by registered or certified mail, postage
prepaid, or when given by facsimile transmission (promptly confirmed in
writing), as follows:
(a) If to Target or Sub:
Target Therapeutics, Inc.
47201 Lakeview Boulevard
Fremont, CA 94538
Telephone No.: (510) 440-7700
Telecopy No.: (510) 440-7780
Attention: Gary R. Bang, President and Chief
Executive Officer
with a copy to:
Venture Law Group,
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Telephone No.: (415) 854-4488
Telecopy No.: (415) 854-1121
Attention: Michael W. Hall, Esq.
or to such other person as Target or Sub designates in writing delivered to ITC
in the manner provided in this Section 13.4;
(b) If to ITC:
Interventional Therapeutics Corporation
48668 Milmont Drive
Fremont, CA 94538
Telephone No.: (510) 249-9866
Telecopy No.: (510) 252-8654
Attention: Ray H. Dormandy, Jr., President and Chief
Executive Officer
with copies to:
Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
Attention: Robert B. Jack, Esq.
or to such other person as ITC designates in writing, delivered to Target in
the manner provided in this Section 13.4.
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Section 13.5 Assignment. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto (and
in the case of Sections 4.13 hereof, the persons intended to be benefited
thereby) and their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties.
Section 13.6 Governing Law. This Agreement and the legal relations
between the parties hereto will be governed by and construed in accordance with
the laws of the State of California, without giving effect to the choice of law
principles thereof; provided, however, that the law governing the fiduciary
duties of each party hereto and their respective boards of directors and the
law governing any other matters of internal corporate goverance of any of
Target, Sub or ITC shall be the law of their respective jurisdictions of
incorporation.
Section 13.7 Parties in Interest. Nothing expressed or implied in
this Agreement is intended or will be construed to confer upon or give to any
person, firm or corporation other than the parties hereto any rights or remedies
under or by reason of this Agreement or any transaction contemplated hereby,
except as specifically provided in this Agreement.
Section 13.8 Counterparts. This Agreement may be executed in two
or more counterparts and by the different parties hereto on separate
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
Section 13.9 Headings and References. The headings of the sections
and articles of this Agreement are inserted for convenience of reference only
and will not by themselves determine the interpretation of this Agreement. All
references herein to sections and articles are to sections and articles of this
Agreement, unless otherwise indicated.
Section 13.10 Entire Agreement. This Agreement, including the ITC
Disclosure Schedule and the Target Disclosure Schedule, the schedules and
exhibits and other documents referred to herein which form a part hereof,
contains the entire understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter contained herein, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 13.11 Severability. If any provision of this Agreement,
or the application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such invalid or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of the invalid and unenforceable
provision.
Section 13.12 Other Remedies. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not
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exclusive of any other remedy conferred hereby or by law or equity on such
party, and the exercise of any one remedy will not preclude the exercise of any
other.
Section 13.13 Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.
Section 13.14 Absence of Third Party Beneficiary Rights. No
provision of this Agreement is intended, nor will be interpreted, to provide to
create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, employee, partner or any party
hereto or any other person or entity unless specifically provided otherwise
herein, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement.
Section 13.15 Mutual Drafting. This Agreement is the joint product
of Target and ITC, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Target and ITC, and shall not be
construed for or against any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Reorganization to be duly executed as of the date and year first
written above.
TARGET THERAPEUTICS, INC.
By:________________________________________
Title:_____________________________________
TTI ACQUISITION CORPORATION
By:________________________________________
Title:_____________________________________
INTERVENTIONAL THERAPEUTICS CORPORATION
By:________________________________________
Title:_____________________________________
_______________________________________
Ray H. Dormandy, Jr.
_______________________________________
Julie D. Bell
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STATEMENT PURSUANT TO ITEM 601(b)(2) OF REGULATION S-K
The following exhibits originally attached have been deleted from this
copy of the Agreement and Plan of Reorganization pursuant to Item 601(b)(2) as
they do not contain information which is material to an investment decision and
which is not otherwise disclosed in the Agreement and Plan of Reorganization or
the disclosure document utilized in connection therewith:
<TABLE>
<S> <C>
Exhibit A Agreement of Merger -- Summary of the principle terms of the Merger for filing
with the California Secretary of State.
Exhibit B Non-Competition Agreement -- Agreement by which Ray H. Dormandy, Jr. and Julie D.
Bell have agreed not to compete with the business of ITC for a specified period of
time following the Merger.
Exhibit C Shareholder Agreement -- Agreement pursuant to which the ITC Shareholders appoint
their representative for purposes of administering the escrows and make certain
investment representations to Target.
Exhibit D Protection and Declaration of Inventions -- Declaration pursuant to which
ITC's employees agree that the inventions made by them during the course of
their employment with ITC belong to ITC.
Exhibit E Declaration of Registration Rights -- Declaration granting certain registration
rights to the former ITC shareholders in connection with the Target Common Stock
acquired pursuant to the Merger.
Exhibit F Opinion of ITC Legal Counsel -- Terms of the legal opinion to be delivered at
the Closing by legal counsel to ITC.
Exhibit G Exchange and Escrow Agreement -- Agreement setting forth the additional
administrative terms with respect to the exchange of shares and the
administration of the escrow account.
Exhibit H Opinion of Target Legal Counsel -- Terms of the legal opinion to be delivered
at the Closing by legal counsel to Target.
Exhibit I-1 & I-2 Employment Agreements -- Agreements between Target and Ray H. Dormandy, Jr.
and Julie D. Bell setting forth certain terms of employment for a specified
period of time following the Merger.
</TABLE>
Target hereby undertakes to furnish supplementally a copy of any
omitted exhibit to the Securities and Exchange Commission upon request.
