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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AFFYMETRIX, INC., NAUTILUS ACQUISITION CORP.
AND
NEOMORPHIC, INC.
SEPTEMBER 29, 2000
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TABLE OF CONTENTS
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ARTICLE 1 - THE MERGER...........................................................................................3
1.1 The Merger..............................................................................................3
1.2 The Closing.............................................................................................3
1.3 Actions at the Closing..................................................................................3
1.4 Additional Action.......................................................................................4
1.5 Conversion of Shares....................................................................................4
1.6 Dissenting Shares.......................................................................................6
1.7 Exchange of Shares......................................................................................6
1.8 Fractional Shares.......................................................................................8
1.9 Options and Warrants....................................................................................8
1.10 Escrow..................................................................................................9
1.11 Articles of Incorporation and By-laws...................................................................9
1.12 No Further Rights.......................................................................................9
1.13 Closing of Transfer Books...............................................................................9
1.14 Tax-Free Reorganization.................................................................................9
1.15 Ancillary Agreements...................................................................................10
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................10
2.1 Organization, Qualification and Corporate Power........................................................10
2.2 Capitalization.........................................................................................10
2.3 Authorization of Transaction...........................................................................11
2.4 Noncontravention.......................................................................................11
2.5 Subsidiaries...........................................................................................12
2.6 Financial Statements...................................................................................12
2.7 Absence of Certain Changes.............................................................................12
2.8 Undisclosed Liabilities................................................................................12
2.9 Tax Matters............................................................................................12
2.10 Assets.................................................................................................14
2.11 Owned Real Property....................................................................................14
2.12 Real Property Leases...................................................................................14
2.13 Intellectual Property..................................................................................14
2.14 Inventory..............................................................................................17
2.15 Contracts..............................................................................................17
2.16 Accounts Receivable....................................................................................18
2.17 Powers of Attorney.....................................................................................18
2.18 Insurance..............................................................................................18
2.19 Litigation.............................................................................................19
2.20 Warranties.............................................................................................19
2.21 Employees..............................................................................................19
2.22 Employee Benefits......................................................................................19
2.23 Environmental Matters..................................................................................21
2.24 Legal Compliance.......................................................................................22
2.25 Customers and Suppliers................................................................................22
2.26 Permits................................................................................................22
2.27 Certain Business Relationships With Affiliates.........................................................23
2.28 Brokers' Fees..........................................................................................23
2.29 Books and Records......................................................................................23
2.30 Certain Business Practices.............................................................................23
2.31 Vote Required; Consents................................................................................23
2.32 Principal Stockholders.................................................................................23
2.33 Disclosure.............................................................................................24
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY...........................25
3.1 Organization, Qualification and Corporate Power........................................................25
3.2 Capitalization.........................................................................................25
3.3 Authorization of Transaction...........................................................................25
3.4 Noncontravention.......................................................................................25
3.5 Reports and Financial Statements.......................................................................26
3.6 Absence of Material Adverse Change.....................................................................26
3.7 Litigation.............................................................................................26
3.8 Interim Operations of the Transitory Subsidiary........................................................26
3.9 Brokers' Fees..........................................................................................26
3.10 Disclosure.............................................................................................26
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ARTICLE 4 - COVENANTS...........................................................................................26
4.1 Closing Efforts........................................................................................26
4.2 Governmental and Third-Party Notices and Consents......................................................27
4.3 Meeting of Company Stockholders........................................................................27
4.4 Operation of Business..................................................................................27
4.5 Access to Information..................................................................................29
4.6 Notice of Breaches.....................................................................................29
4.7 Exclusivity............................................................................................30
4.8 Expenses...............................................................................................30
4.9 Restricted Securities..................................................................................30
4.10 Listing of Merger Shares...............................................................................31
4.11 Registration Rights....................................................................................31
4.12 Rule 144 Information...................................................................................33
ARTICLE 5 - CONDITIONS TO CONSUMMATION OF MERGER................................................................33
5.1 Conditions to Each Party's Obligations.................................................................33
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary...................................33
5.3 Conditions to Obligations of the Company...............................................................35
ARTICLE 6 - INDEMNIFICATION.....................................................................................36
6.1 Indemnification by the Stockholders....................................................................36
6.2 Indemnification of Buyer...............................................................................36
6.3 Indemnification Claims.................................................................................36
6.4 Survival of Representations and Warranties.............................................................39
6.5 Limitations............................................................................................39
ARTICLE 7 - TERMINATION.........................................................................................40
7.1 Termination of Agreement...............................................................................40
7.2 Effect of Termination..................................................................................41
ARTICLE 8 - DEFINITIONS.........................................................................................41
ARTICLE 9 - MISCELLANEOUS.......................................................................................44
9.1 Press Releases and Announcements.......................................................................44
9.2 No Third Party Beneficiaries...........................................................................44
9.3 Entire Agreement.......................................................................................44
9.4 Succession and Assignment..............................................................................44
9.5 Counterparts Facsimile Signature.......................................................................44
9.6 Headings...............................................................................................45
9.7 Notices................................................................................................45
9.8 Governing Law; Submission to Jurisdiction..............................................................45
9.9 Amendments and Waivers.................................................................................46
9.10 Severability...........................................................................................46
9.11 Construction...........................................................................................46
9.12 Attorneys' Fees........................................................................................46
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EXHIBIT A - FORM OF ESCROW AGREEMENT
EXHIBIT B - FORMS OF OPTION LETTER AND RESTRICTED STOCK LETTER
EXHIBIT C - FORM OF SOPHISTICATED INVESTOR REPRESENTATION LETTER
EXHIBIT D - FORM OF ACCREDITED INVESTOR REPRESENTATION LETTER
EXHIBIT E - FORM OF STEINHART & FALCONER, LLP LEGAL OPINION
EXHIBIT F - FORM OF LEGAL OPINION OF GENERAL COUNSEL TO AFFYMETRIX
EXHIBIT G - FORM OF DECLARATION OF NON-PATENTABLE TECHNOLOGY
EXHIBIT H - FORM OF JOINT ESCROW INSTRUCTIONS LETTER
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER entered into as of September 29, 2000
(the "Agreement"), by and among Affymetrix, Inc., a Delaware corporation (the
"Buyer"), Nautilus Acquisition Corp., a California corporation and a
wholly-owned subsidiary of the Buyer (the "Transitory Subsidiary"), Neomorphic,
Inc., a California corporation (the "Company"), and the stockholders of the
Company signatory hereto (the "Principal Stockholders"). The Buyer, the
Transitory Subsidiary, the Company and the Principal Stockholders are referred
to collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary with
and into the Company. In such merger, the stockholders of the Company will
receive common stock of and, under certain circumstances, cash from, the Buyer
in exchange for their capital stock of the Company.
Now, therefore, in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows.
ARTICLE 1 - THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions of
this Agreement, the Transitory Subsidiary shall merge with and into the Company
(with such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which a copy of a
merger agreement complying with Section 1101 of the California Corporation Code
(collectively, the "CERTIFICATE OF MERGER"), is accepted for filing by the
Secretary of State of California in accordance with the California Corporation
Code (the "CCC"). The Merger shall have the effects set forth in Section 1107 of
the CCC.
1.2 THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of the Buyer in
Santa Clara, California, commencing at 9:00 a.m. local time on October 13, 2000,
or, if all of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby have not been satisfied or waived by such date,
on such mutually agreeable later date as soon as practicable (and in any event
not later than three business days) after the satisfaction or waiver of all
conditions (excluding the delivery of any documents to be delivered at the
Closing by any of the Parties) set forth in Article V hereof (the "Closing
Date").
1.3 ACTIONS AT THE CLOSING. At the Closing:
(a) the Company shall deliver to the Buyer and the
Transitory Subsidiary the various certificates, instruments and documents
referred to in Section 5.2;
(b) the Buyer and the Transitory Subsidiary shall
deliver to the Company the various certificates, instruments and documents
referred to in Section 5.3;
(c) the Surviving Corporation shall file with the
Secretary of State of the State of California the Certificate of Merger;
(d) the Buyer shall deliver a certificate for
1,098,592 shares of Buyer Common Stock (the "Initial Shares") to a bank trust
company or other entity reasonably satisfactory to the Company appointed by the
Buyer to act as the exchange agent (the "Exchange Agent") in accordance with
Section 1.7; and
(e) the Buyer, Cyrus Harmon (the "Indemnification
Representative") and the State Street Bank and Trust Company or other nationally
recognized financial institution (the "Escrow Agent") shall execute and deliver
the Escrow Agreement attached hereto as EXHIBIT A (the "Escrow Agreement") and
the Buyer shall deliver to
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the Escrow Agent a certificate for 122,066 shares of Buyer Common Stock (the
"Initial Escrow Shares") that are being placed in escrow on the Closing Date
pursuant to Section 1.10.
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any
time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or the
Transitory Subsidiary, in order to consummate the transactions contemplated by
this Agreement.
1.5 CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of any Party or the holder of any
of the following securities:
(a) Each share of common stock, no par value per
share, of the Company (the "Common Shares") issued and outstanding immediately
prior to the Effective Time (other than Common Shares owned beneficially by the
Buyer or the Transitory Subsidiary, Dissenting Shares (as defined below) and
Common Shares held in the Company's treasury) shall be converted into and
represent the right to receive (subject to the provisions of Section 1.10) such
number of shares of common stock, $.01 par value per share, of the Buyer (the
"Buyer Common Stock") as is equal to the Common Conversion Ratio (as defined
below).
(b) Each share of Preferred Stock, no par value per
share, of the Company (the "Preferred Shares" and, together with the Common
Shares, the "Company Shares") issued and outstanding immediately prior to the
Effective Time (other than Preferred Shares owned beneficially by the Buyer or
the Transitory Subsidiary, Dissenting Shares and Preferred Shares held in the
Company's treasury) shall be converted into and represent the right to receive
(subject to the provisions of Section 1.10) (i) such number of shares of Buyer
Common Stock as is equal to the Preferred Conversion Ratio (as defined below),
and (ii) an amount of cash equal to $2,400,000 divided by the number of
outstanding Preferred Shares immediately prior to the Effective Time (the
"Preferred Cash Consideration").
(c) (i) The "Common Conversion Ratio" shall be the
result obtained by dividing (a) 1,408,451 (the
"Closing Date Number") by (b) the Outstanding
Closing Shares; provided, however, that the Common
Conversion Ratio shall be subject to adjustment as
provided in Section 1.5(d). "Outstanding Closing
Shares" shall mean the number of outstanding
Common Shares immediately prior to the Effective
Time (after giving effect to the conversion into
Common Shares of all outstanding Preferred Shares
(assuming that upon the conversion of one
Preferred Share the holder thereof would be
entitled to receive one Common Share, subject to
equitable adjustment in the event of any stock
split, stock dividend, reverse stock split or
similar event affecting the Common Shares or the
Preferred Shares)) plus the number of outstanding
Common Shares subject to Options (as defined
herein). The "Preferred Conversion Ratio" shall be
equal to the Common Conversion Ratio as the same
may be adjusted. Each of the Common Conversion
Ratio and the Preferred Conversion Ratio shall be
subject to equitable adjustment in the event of
any stock split, stock dividend, reverse stock
split or similar event affecting the Buyer Common
Stock. The aggregate number of shares of Buyer
Common Stock into which Company Shares are
converted pursuant to this Section 1.5 (prior to
any adjustment to the Common Conversion Ratio
pursuant to Section 1.5(d)) is referred to herein
as the "Merger Shares," the aggregate number of
shares of Buyer Common Stock into which Company
Shares are converted pursuant to this Section 1.5
(including after taking into account any
adjustment to the Common Conversion Ratio pursuant
to Section 1.5(d)) is referred to herein as the
"Adjusted Merger Shares," and the number of
Adjusted Merger Shares minus the number of Escrow
Shares (as defined herein) is referred to as the
"Adjusted Initial Shares."
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(ii) Stockholders of record of the Company
immediately prior to the Effective Time
(the "Company Stockholders") shall be
entitled to receive, in the aggregate,
such number of shares of Buyer Common
Stock as is equal to the total number of
Adjusted Merger Shares into which their
Company Shares are converted pursuant to
this Section 1.5; provided that,
notwithstanding any exercise by the
Buyer of the Cash Option (as defined
below), such number of shares of Buyer
Common Stock as is equal to 10% of the
total number of Adjusted Merger Shares,
rounded to the nearest whole number (the
"Escrow Shares"), shall be set aside,
pro rata, from the Adjusted Merger
Shares otherwise distributable to each
of the Company Stockholders and
deposited in the escrow described in
Section 1.10 for the purpose of securing
the indemnification obligations of the
Company Stockholders set forth in this
Agreement.
(d) In the event that the Average Closing Price (as hereinafter
defined) is:
(i) less than $35.50 per share, the Common Conversion
Ratio shall be adjusted such that the Common
Conversion Ratio shall be equal to the quotient of
(X) the sum of (a) the Closing Date Number plus
(b) $20,000,000 divided by the Average Closing
Price, divided by (Y) the Outstanding Closing
Shares.
(ii) less than $49.70 per share but greater than or
equal to $35.50 per share, then the Common
Conversion Ratio shall be adjusted such that the
Common Conversion Ratio shall be equal to the
quotient of (X) $70,000,000 divided by the Average
Closing Price, divided by (Y) the Outstanding
Closing Shares.
(iii) greater than or equal to $49.70 but less than or
equal to $92.30, there shall be no adjustment to
the Common Conversion Ratio.
(iv) greater than $92.30 per share but less than or
equal to $106.50 per share, then the Common
Conversion Ratio shall be adjusted such that the
Common Conversion Ratio shall be equal to the
quotient of (X) $130,000,000 divided by the
Average Closing Price, divided by (Y) the
Outstanding Closing Shares.
(v) greater than $106.50 per share, the Common
Conversion Ratio shall be adjusted such that the
Common Conversion Ratio shall be equal to the
quotient of (X) the difference between (a) the
Closing Date Number minus (b) $20,000,000 divided
by the Average Closing Price, divided by (Y) the
Outstanding Closing Shares.
Notwithstanding anything to the contrary provided in this Agreement,
in the event that the Common Conversion Ratio is adjusted as of the Registration
Effectiveness Date (as defined below) pursuant to Section 1.5(d)(i) or
1.5(d)(ii), the Buyer shall have the option (the "Cash Option"), in its sole
discretion and in lieu of any such adjustment, of paying to the Company
Stockholders (the "Cash Consideration") (A) in the case of an adjustment to the
Common Conversion Ratio that would otherwise occur by virtue of Section
1.5(d)(ii), cash in an aggregate per share amount equal to the quotient of (a)
the product of (I) the Adjusted Closing Date Number (as defined below) minus the
Closing Date Number, multiplied by (II) the Average Closing Price, divided by
(b) the Outstanding Closing Shares, or (B) in the case of an adjustment to the
Common Conversion Ratio that would otherwise occur by virtue of Section
1.5(d)(i), cash in an aggregate per share amount equal to the quotient of (a)
$20,000,000, divided by (b) the Outstanding Closing Shares; provided, however,
that the Buyer shall not be permitted to pay cash pursuant to this Section
1.5(d) in an amount that would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code; provided
further, however, that the Buyer may pay such cash pursuant to this Section
1.5(d) up to but not exceeding an amount that would otherwise cause the Merger
to fail to qualify as
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a reorganization under Section 368(a) of the Code. The "Average Closing Price"
shall mean the average trading price of the Buyer Common Stock for the ten (10)
consecutive trading days ending with the second trading day prior to the date on
which the Registration Statement (as hereinafter defined) is declared effective
by the SEC (the "Registration Effectiveness Date"). The "Adjusted Closing Date
Number" shall equal the amount set forth in clause (X) of the foregoing clauses
(i), (ii), (iv) and (v), as applicable, based on the Average Closing Price, and
if there is no adjustment to the Common Conversion Ratio pursuant to Section
1.5(d)(iii), then the Adjusted Closing Date Number shall equal the Closing Date
Number. Except for purposes of determining the number of Adjusted Escrow Shares
pursuant to Section 1.5(c)(ii) and except for purposes of adjustments to the
assumed Options pursuant to Section 1.9(e), if the Buyer exercises the Cash
Option, there shall be deemed to be no adjustment to the Common Conversion Ratio
pursuant to this Section 1.5(d) and (I) the Adjusted Closing Date Number shall
equal the Closing Date Number, and (II) the Adjusted Merger Shares shall equal
the Merger Shares.
(e) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and
retired without payment of any consideration therefor.
(f) Each share of common stock, $.01 par value per
share, of the Transitory Subsidiary issued and outstanding immediately prior to
the Effective Time shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving Corporation.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting
Shares" means Company Shares held as of the Effective Time by a Company
Stockholder who has not voted such Company Shares in favor of the adoption of
this Agreement and the Merger and with respect to which appraisal shall have
been duly demanded and perfected in accordance with Section 1300 of the CCC and
not effectively withdrawn or forfeited prior to the Effective Time. Dissenting
Shares shall not be converted into or represent the right to receive Merger
Shares, Adjusted Merger Shares, Cash Consideration or Preferred Cash
Consideration, unless such Company Stockholder shall have forfeited his, her or
its right to appraisal under the CCC or properly withdrawn, his, her or its
demand for appraisal. If such Company Stockholder has so forfeited or withdrawn
his, her or its right to appraisal of Dissenting Shares, then (i) as of the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Shares, Adjusted Merger Shares, Cash Consideration and Preferred Cash
Consideration issuable or payable in respect of such Company Shares pursuant to
Section 1.5, and (ii) promptly following the occurrence of such event but
subject to Section 1.7, the Buyer shall deliver to the Exchange Agent a
certificate representing the Adjusted Merger Shares, Cash Consideration, if any,
and Preferred Cash Consideration to which such holder is entitled pursuant to
Section 1.5.
(b) The Company shall give the Buyer (i) prompt notice
of any written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the CCC. The Company shall not, except
with the prior written consent of the Buyer, make any payment with respect to
any demands for appraisal of Company Shares or offer to settle or settle any
such demands.
1.7 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, the Buyer shall
appoint the Exchange Agent to effect the exchange for the Adjusted Merger
Shares, Cash Consideration, if any, and Preferred Cash Consideration of
certificates that, immediately prior to the Effective Time, represented Company
Shares converted into Adjusted Merger Shares, Cash Consideration, if any, and
Preferred Cash Consideration pursuant to Section 1.5 (including any Company
Shares referred to in the last sentence of Section 1.6(a)) (the "Certificates").
On the Closing Date, the Buyer
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shall deliver to the Exchange Agent, in trust for the benefit of holders of
Certificates, a stock certificate (issued in the name of the Exchange Agent or
its nominee) representing the Initial Shares and an amount of cash equal to the
aggregate Preferred Cash Consideration payable to holders of Preferred Shares
pursuant to Section 1.5, and on the Registration Effectiveness Date the Buyer
shall deliver to the Exchange Agent, in trust for the benefit of holders of
Certificates, a stock certificate (issued in the name of the Exchange Agent or
its nominee) representing the difference, if any, between the Adjusted Initial
Shares and the Initial Shares (the "Additional Initial Shares"), and Cash
Consideration, if any. As soon as practicable after the Effective Time, the
Buyer shall cause the Exchange Agent to send a notice and a transmittal form to
each holder of a Certificate advising such holder of the effectiveness of the
Merger and the procedure for surrendering to the Exchange Agent such Certificate
in exchange for Initial Shares, Additional Initial Shares, Cash Consideration,
if any, and Preferred Cash Consideration issuable or payable pursuant to Section
1.5, plus cash in lieu of any fractional shares, as provided in Section 1.8
below. Each holder of a Certificate, upon proper surrender thereof to the
Exchange Agent in accordance with the instructions in such notice, shall be
entitled to receive in exchange therefor (subject to any taxes required to be
withheld) Initial Shares, Additional Initial Shares, Cash Consideration, if any,
and Preferred Cash Consideration issuable or payable to such holder pursuant to
Section 1.5 (but in no event shall such holder be entitled to receive a
certificate representing such holder's Additional Initial Shares or Cash
Consideration until after the Registration Effectiveness Date). Until properly
surrendered, each such Certificate shall be deemed for all purposes to evidence
only the right to receive a certificate or certificates or payment, as
applicable, for the Initial Shares, the Additional Initial Shares, the Cash
Consideration, if any, and the Preferred Cash Consideration issuable or payable
to such holder pursuant to Section 1.5. Holders of Certificates shall not be
entitled to receive certificates or certificates for Initial Shares or
Additional Initial Shares, or payment of any Cash Consideration or Preferred
Cash Consideration, to which they would otherwise be entitled until such
Certificates are properly surrendered.
(b) If any Initial Shares, Additional Initial Shares, Cash
Consideration or Preferred Cash Consideration are to be issued in the name of or
paid to a person other than the person in whose name the Certificate surrendered
in exchange therefor is registered, it shall be a condition to the issuance and
payment of such Initial Shares, Additional Initial Shares, Cash Consideration
and Preferred Cash Consideration that (i) the Certificate so surrendered shall
be transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay to the Exchange Agent any transfer
or other taxes payable by reason of the foregoing or establish to the
satisfaction of the Exchange Agent that such taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither the Exchange Agent
nor any Party shall be liable to a holder of Company Shares for any Initial
Shares, Additional Initial Shares, Cash Consideration or Preferred Cash
Consideration issuable or payable to such holder pursuant to Section 1.5 that
are delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Buyer shall issue in
exchange for such lost, stolen or destroyed Certificate the Initial Shares
issuable in exchange therefor pursuant to Section 1.5. The Board of Directors of
the Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to give
the Buyer a bond in such sum as it may direct as indemnity against any claim
that may be made against the Buyer with respect to the Certificate alleged to
have been lost, stolen or destroyed.
(d) No dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Initial Shares, Additional Initial Shares, Cash Consideration
or Preferred Cash Consideration until such holders surrender their Certificates
for certificates representing the Adjusted Merger Shares. Upon such surrender,
the Buyer shall pay
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or deliver to the persons in whose name the certificates representing such
Initial Shares, Additional Initial Shares, Cash Consideration Preferred Cash
Consideration are issued any dividends or other distributions that are payable
to the holders of record of Buyer Common Stock as of a date on or after the
Closing Date and which were paid or delivered between the Effective Time and the
time of such surrender; provided that no such person shall be entitled to
receive any interest on such dividends or other distributions.
1.8 FRACTIONAL SHARES. No certificates or scrip representing
fractional Initial Shares or Additional Initial Shares shall be issued to former
Company Stockholders upon the surrender for exchange of Certificates, and such
former Company Stockholders shall not be entitled to any voting rights, rights
to receive any dividends or distributions or other rights as a stockholder of
the Buyer with respect to any fractional Initial Shares or Additional Initial
Shares that would have otherwise been issued to such former Company
Stockholders. In lieu of any fractional Initial Shares or Additional Initial
Shares that would have otherwise been issued, each former Company Stockholder
that would have been entitled to receive a fractional Initial Share or
Additional Initial Share shall, upon proper surrender of such person's
Certificates, receive a cash payment equal to the closing price per share of the
Buyer Common Stock on the Nasdaq National Market, as reported by Nasdaq, on the
business day immediately preceding the Closing Date, multiplied by the fraction
of a share that such Company Stockholder would otherwise be entitled to receive.
Such cash payment for fractional Initial Shares shall be made promptly following
the Closing Date and such cash payment for fractional Additional Initial Shares
shall be made promptly following the Registration Effectiveness Date.
1.9 OPTIONS.
(a) As of the Effective Time, all options to purchase
Common Shares issued by the Company pursuant to its stock option plans or
otherwise ("Options"), whether vested or unvested, shall be assumed by the
Buyer. Immediately after the Effective Time, each Option outstanding immediately
prior to the Effective Time shall be deemed to constitute an option to acquire,
on the same terms and conditions as were applicable under such Option at the
Effective Time, such number of shares of Buyer Common Stock as is equal to the
number of Common Shares subject to the unexercised portion of such Option,
multiplied by the Common Conversion Ratio (with any fraction resulting from such
multiplication to be rounded down to the nearest whole number). The exercise
price per share of each such assumed Option shall be equal to the aggregate
exercise price of such Option immediately prior to the Effective Time, divided
by the aggregate number of shares of Buyers Common Stock purchasable pursuant to
such Option after the Effective Time. The vesting schedule and other terms of
each Option may be changed to the extent so agreed upon by the Buyer, the
Company and the holder thereof pursuant to the Option Letters (as defined
below).
(b) As soon as practicable after the Effective Time,
the Buyer or the Surviving Corporation shall deliver to the holders of Options
appropriate notices setting forth such holders' rights pursuant to such Options,
as amended by this Section 1.9, and the agreements evidencing such Options shall
continue in effect on the same terms and conditions (subject to the amendments
provided for in this Section 1.9 and such notice).
(c) The Buyer shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Buyer Common
Stock for delivery upon exercise of the Options assumed in accordance with this
Section 1.9. Within 60 days after the Effective Time, the Buyer shall file a
Registration Statement on Form S-8 (or any successor form) under the Securities
Act of 1933 (as amended, the "Securities Act") with respect to all shares of
Buyer Common Stock subject to such Options that are eligible to be registered on
a Form S-8, and shall use its Reasonable Best Efforts to maintain the
effectiveness of such Registration Statement for so long as such Options remain
outstanding.
(d) The Company shall obtain, prior to the Closing,
the consent from each holder of an Option to the amendment of such Option
pursuant to this Section 1.9 (the "Option Letters").
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(e) Notwithstanding anything to the contrary provided
in this Section 1.9, (i) the number of shares of Buyer Common Stock subject to
each assumed Option and the exercise price thereof shall be adjusted as of the
Registration Effectiveness Date to reflect any adjustment in the Common
Conversion Ratio, and (ii) the Buyer shall take such actions as it deems
appropriate in its reasonable judgment to effectuate any adjustments to the
assumed Options required by this Section 1.9(e). For purposes of this Section
1.9(e), the Common Conversion Ratio shall be deemed to have been adjusted
pursuant to Section 1.5(d) notwithstanding any exercise by the Buyer of the Cash
Option.
1.10 ESCROW.
(a) On the Closing Date, the Buyer shall deliver to
the Escrow Agent a certificate (issued in the name of the Escrow Agent or its
nominee) representing the Initial Escrow Shares. Promptly following the
Registration Effectiveness Date, the buyer shall deliver to the Escrow Agent a
certificate (issued in the name of the Escrow Agent or its nominee) representing
the difference, if any, between the Escrow Shares and the Initial Escrow Shares
(the "Additional Escrow Shares"). The Escrow Shares shall be held by the Escrow
Agent for the purposes of securing the indemnification obligations of the
Company Stockholders set forth in this Agreement. The Escrow Shares shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof and this Agreement. The Escrow Shares shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party, and shall be held and disbursed
solely for the purposes and in accordance with the terms of this Agreement and
the Escrow Agreement.
(b) The adoption of this Agreement and the approval of
the Merger by the Company Stockholders shall constitute approval of the Escrow
Agreement and of all of the arrangements relating thereto, including without
limitation the placement of the Escrow Shares in escrow and the appointment of
the Indemnification Representative.
1.11 ARTICLES OF INCORPORATION AND BYLAWS.
(a) The Articles of Incorporation of the Surviving
Corporation immediately following the Effective Time shall be the same as the
Articles of Incorporation of the Transitory Subsidiary immediately prior to the
Effective Time, except that (i) the name of the corporation set forth therein
shall be changed to the name of the Company and (ii) the identity of the
incorporator shall be deleted;
(b) The Bylaws of the Surviving Corporation
immediately following the Effective Time shall be the same as the Bylaws of the
Transitory Subsidiary immediately prior to the Effective Time, except that the
name of the corporation set forth therein shall be changed to the name of the
Company.
1.12 NO FURTHER RIGHTS. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.13 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Shares
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Buyer, the Surviving Corporation or the Exchange Agent, they
shall be cancelled and exchanged for Adjusted Merger Shares, Cash Consideration,
if any, and Preferred Cash Consideration in accordance with Section 1.5, subject
to Section 1.10 and to applicable law in the case of Dissenting Shares.
1.14 TAX-FREE REORGANIZATION. The parties intend to adopt and
hereby do adopt this Agreement as a plan of reorganization within the meaning of
the Regulations issued pursuant to Section 368 of the Internal Revenue Code of
1986, as amended (the "Code") and intend to consummate the Merger in accordance
with the provisions of Section 368(a) of the Code. Each party covenants and
agrees that it will not take or assert any position on any tax return, report or
otherwise which is inconsistent with the qualification of the Merger as a
reorganization within the
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meaning of Section 368(a) of the Code and will take no action, either prior or
subsequent to the Merger, which would cause the Merger to fail to qualify as a
reorganization.
1.15 ANCILLARY AGREEMENTS. Contemporaneously with the execution
of this Agreement, certain Company Stockholders have entered into Voting
Agreements and Stock Restriction Agreements with the Buyer. In addition, the
Company Stockholders have provided to the Buyer Sophisticated Investor
Representation Letters, as applicable, the form of which is attached hereto as
EXHIBIT C, and Accredited Investor Representation Letters, as applicable, the
form of which is attached hereto as EXHIBIT D.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and each of the Principal Stockholders, jointly and
severally, represent and warrant to the Buyer that the statements contained in
this Article II are true and correct, except as set forth in the disclosure
schedule provided by the Company to the Buyer on the date hereof and accepted in
writing by the Buyer (the "Disclosure Schedule"). The Disclosure Schedule shall
be arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article II, and the disclosures in any paragraph of the
Disclosure Schedule shall qualify only the corresponding paragraph in this
Article II. For purposes of this Article II the phrase "to the knowledge of the
Company" or any phrase of similar import shall be deemed to refer to the actual
knowledge of the executive officers of the Company, as well as any other
knowledge which such executive officers would have possessed had they made
reasonable inquiry of appropriate employees and agents of the Company with
respect to the matter in question.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of California. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of the State of California and each other jurisdiction in which the
nature of its businesses or the ownership or leasing of its properties requires
such qualification, except where the failure to be so qualified or in good
standing, individually or in the aggregate, has not had and would not reasonably
be expected to have a Company Material Adverse Effect (as defined below). The
Company has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties and assets
owned and used by it. The Company has furnished to the Buyer complete and
accurate copies of its Articles of Incorporation and Bylaws each as amended to
date. The Company is not in default under or in violation of any provision of
its Articles of Incorporation or Bylaws, and such Articles and Bylaws are in
full force and effect. For purposes of this Agreement, "Company Material Adverse
Effect" means a material adverse effect on the assets, business, condition
(financial or otherwise), results of operations or future prospects of the
Company and the Subsidiaries (as defined below), taken as a whole.
2.2 CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 20,000,000 Common Shares, of which, as of the date of this
Agreement, 7,659,650 shares are issued and outstanding, no shares are held in
the treasury of the Company, and 2,215,350 shares are reserved for issuance
under the 1998 Stock Option Plan and (b) 10,000,000 Preferred Shares, of which
(i) 700,000 shares have been designated as Series A Preferred Stock, of which,
as of the date of this Agreement, 625,553 shares were issued and outstanding.
Section 2.2(i) of the Disclosure Schedule sets forth a complete and accurate
list of (i) all stockholders of the Company, indicating the number and class or
series of Company Shares held by each stockholder and (for Company Shares other
than Common Shares) the number of Common Shares (if any) into which such Company
Shares are convertible, (ii) all outstanding Options, indicating (A) the holder
thereof, (B) the number and class or series of Company Shares subject to each
Option and (for Company Shares other than Common Shares) the number of Common
Shares (if any) into which such Company Shares are convertible, (C) the exercise
price, date of grant, vesting schedule and expiration date for each Option, and
(D) any terms regarding the acceleration of vesting, and (iii) all stock option
plans and other stock or equity-related plans of the Company. All of the issued
and outstanding Company Shares are, and all Company Shares that may be issued
upon exercise of Options will be (upon issuance in
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accordance with their terms), duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. Other than the Options listed
in Section 2.2(ii) of the Disclosure Schedule, there are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Company is a party or which are binding upon the Company providing for the
issuance or redemption of any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company. Other than the agreements listed and described in Section 2.2(iii)
of the Disclosure Schedule, there are no agreements to which the Company is a
party or by which it is bound with respect to the voting (including without
limitation voting trusts or proxies), registration under the Securities Act, or
sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company. To the knowledge of the Company, there
are no agreements among other parties, to which the Company is not a party and
by which it is not bound, with respect to the voting (including without
limitation voting trusts or proxies) or sale or transfer (including without
limitation agreements relating to rights of first refusal, co-sale rights or
"drag-along" rights) of any securities of the Company. All of the issued and
outstanding Company Shares were issued in compliance with applicable federal and
state securities laws.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by the Company of this
Agreement and, subject to the adoption of this Agreement and the approval of the
Merger by the Company Stockholders, the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. Without limiting the
generality of the foregoing, the Board of Directors of the Company, at a meeting
duly called and held, by the unanimous vote of all directors (i) determined that
the Merger is fair and in the best interests of the Company and its
stockholders, (ii) adopted this Agreement in accordance with the provisions of
the CCC, and (iii) directed that this Agreement and the Merger be submitted to
the stockholders of the Company for their adoption and approval and resolved to
recommend that the stockholders of Company vote in favor of the adoption of this
Agreement and the approval of the Merger. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
2.4 NONCONTRAVENTION. Subject to the filing of the Certificate
of Merger as required by the CCC, neither the execution and delivery by the
Company of this Agreement, nor the consummation by the Company of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Articles of Incorporation or Bylaws of the Company or the
charter, Bylaws or other organizational document of any Subsidiary (as defined
below), (b) require on the part of the Company or any Subsidiary any filing
with, or any permit, authorization, consent or approval of, any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"), (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of their assets is subject, (d) result in
the imposition of any Security Interest (as defined below) upon any assets of
the Company or any Subsidiary or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any Subsidiary or
any of their properties or assets. For purposes of this Agreement: "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary course
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of the Company's business, consistent with past custom and practice (including
with respect to frequency and amount).
2.5 SUBSIDIARIES. The Company does not control directly or
indirectly or have any direct or indirect equity participation or similar
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business association.
2.6 FINANCIAL STATEMENTS. The Company has provided to the Buyer
(a) the unaudited consolidated balance sheets and statements of income, changes
in stockholders' equity and cash flows of the Company as of and for each of the
last three fiscal years; and (b) the unaudited consolidated balance sheet and
statements of income, changes in stockholders' equity and cash flows as of and
for the eight months ended as of August 31, 2000 (the "Most Recent Balance Sheet
Date"). Except as listed in Section 2.6 of the Disclosure Schedule such
financial statements (collectively, the "Financial Statements") have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods covered
thereby (except that the Financial Statements do not contain all of the notes
required under GAAP), fairly present the financial condition, results of
operations and cash flows of the Company and the Subsidiaries as of the
respective dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company and the Subsidiaries.
Nothing has come to the attention of the Company since the date of the Most
Recent Balance Sheet (as defined below) which would indicate that such financial
statements were not true and representative of the Company's financial position
in all material respects as of the Most Recent Balance Sheet Date.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent Balance
Sheet Date, (a) there has occurred no event or development which has had, or
would reasonably be expected to have, a Company Material Adverse Effect, and (b)
neither the Company nor any Subsidiary has taken any of the actions set forth in
paragraphs (a) through (o) of Section 4.4.
2.8 UNDISCLOSED LIABILITIES. Except as listed in Section 2.8 of
the Disclosure Schedule none of the Company and its Subsidiaries has any
liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities shown on the balance sheet referred to in clause (b) of Section 2.6
(the "Most Recent Balance Sheet"), (b) liabilities which have arisen since the
Most Recent Balance Sheet Date in the Ordinary Course of Business and which are
similar in nature and amount to the liabilities which arose during the
comparable period of time in the immediately preceding fiscal period and (c)
contractual and other liabilities incurred in the Ordinary Course of Business
which are not required by GAAP to be reflected on a balance sheet.
2.9 TAX MATTERS.
(a) For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Taxes" means all taxes, charges, fees,
levies or other similar assessments or liabilities, including without limitation
income, gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government and any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any tax or any contest or dispute thereof.
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(ii) "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in connection with Taxes.
(b) Each of the Company and the Subsidiaries has filed
on a timely basis (taking into account any extension of time within which to
file) all Tax Returns that it was required to file, and all such Tax Returns
were complete and accurate in all material respects. Neither the Company nor any
Subsidiary is or has ever been a member of a group of corporations with which it
has filed (or been required to file) consolidated, combined or unitary Tax
Returns, other than a group of which only the Company and the Subsidiaries are
or were members. Each of the Company and the Subsidiaries has paid on a timely
basis all Taxes that were due and payable, except in each case with respect to
matters contested in good faith, which matters are set forth on Section 2.9(b)
of the Company Disclosure Schedule. The unpaid Taxes of the Company and the
Subsidiaries for tax periods through the Most Recent Balance Sheet Date do not
exceed the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Most Recent Balance Sheet. Neither the Company nor any
Subsidiary has any actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
other entities that included the Company or any Subsidiary during a prior
period) other than the Company and the Subsidiaries. All Taxes that the Company
or any Subsidiary is or was required by law to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to the
proper Governmental Entity.
(c) The Company has delivered to the Buyer complete
and accurate copies of all federal income Tax Returns, examination reports
and statements of deficiencies conform assessed against or agreed to by the
Company or any Subsidiary since December 6, 1996. The federal income Tax
Returns of the Company and each Subsidiary have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for
all taxable years through the taxable year specified in Section 2.9(c) of the
Disclosure Schedule. The Company has delivered or made available to the Buyer
complete and accurate copies of all other Tax Returns of the Company and the
Subsidiaries together with all related examination reports and statements of
deficiency for all periods from and after December 6, 1996. No examination or
audit of any Tax Return of the Company or any Subsidiary by any Governmental
Entity is currently in progress or, to the knowledge of the Company,
threatened or contemplated. Neither the Company nor any Subsidiary has been
informed by any jurisdiction that the jurisdiction believes that the Company
or Subsidiary was required to file any Tax Return that was not filed. Neither
the Company nor any Subsidiary has waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
(d) Neither the Company nor any Subsidiary: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or the Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has 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; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code; (iv) has any actual
or potential liability for any Taxes of any person (other than the Company and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise; or (v) is or has been required to make a
basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury
Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company or any
Subsidiary: (i) is property that is required to be treated as being owned by any
other person pursuant to the provisions of former Section 168(f)(8) of the Code;
(ii) is "tax-exempt use property" within the meaning of Section 168(h) of the
Code; or (iii) directly or indirectly secures any debt the interest on which is
tax exempt under Section 103(a) of the Code.
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(f) Neither the Company nor any Subsidiary has
undergone a change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code.
(g) No state or federal "net operating loss" of the
Company determined as of the Closing Date is subject to limitation on its use
pursuant to Section 382 of the Code or comparable provisions of state law as a
result of any "ownership change" within the meaning of Section 382(g) of the
Code or comparable provisions of any state law occurring prior to the Closing
Date.
2.10 ASSETS. Each of the Company and the Subsidiaries owns or
leases all tangible assets necessary for the conduct of its businesses as
presently conducted and as presently proposed to be conducted. Each such
tangible asset is free from material defects, has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear) and is suitable for the purposes for which it
presently is used. Except as listed in Section 2.10 of the Disclosure Schedule
no asset of the Company or any Subsidiary (tangible or intangible) is subject to
any Security Interest.
2.11 OWNED REAL PROPERTY. Neither the Company nor any Subsidiary
owns any real property.
2.12 REAL PROPERTY LEASES. Section 2.12 of the Disclosure
Schedule lists all real property leased or subleased to or by the Company or any
Subsidiary and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Company has delivered to the Buyer
complete and accurate copies of the leases and subleases (as amended to date)
listed in Section 2.12 of the Disclosure Schedule. With respect to each lease
and sublease listed in Section 2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal,
valid, binding, enforceable and in full force and effect immediately following
the Closing in accordance with the terms thereof as in effect immediately prior
to the Closing;
(c) neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any other party, is in breach or violation of, or
default under, any such lease or sublease, and no event has occurred, is pending
or, to the knowledge of the Company, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a breach or default
by the Company or any Subsidiary or, to the knowledge of the Company, any other
party under such lease or sublease;
(d) neither the Company nor any Subsidiary has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold or subleasehold; and
(e) the Company is not aware of any Security Interest,
easement, covenant or other restriction applicable to the real property subject
to such lease, except for recorded easements, covenants and other restrictions
which do not materially impair the current uses or the occupancy by the Company
or a Subsidiary of the property subject thereto.
2.13 INTELLECTUAL PROPERTY.
(a) Set forth in Section 2.13(a) of the Disclosure
Schedule is a complete list of each of the following items (A) all patents and
applications therefor, registrations of trademarks (including service marks) and
applications therefor, and registrations of copyrights and applications therefor
that are owned by the Company or licensed to the Company (collectively, "Company
Intellectual Property Rights"), (B) all licenses, sublicenses, agreements and
contracts relating to the Company Intellectual Property pursuant to which the
Company is entitled to
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use any Company Intellectual Property owned by any third party ("Third Party
Intellectual Property Licenses"), excluding freely or commercially available
computer software licenses where the total license fees for such software do not
exceed $10,000 per license per calendar year, used in the normal course of
business ("Commercial Software Licenses") and (C) all agreements under which the
Company has granted any third party the right to use any Company Intellectual
Property.
(b) To the knowledge of the Company, the Company is
the owner or licensee of all intellectual property, including, without
limitation, all Company Intellectual Property Rights, patents and patent
applications, supplementary protection certificates and patent extensions,
trademarks and trademark applications, service mark and service mark
registrations, logos, commercial symbols, business name registrations, trade
names, copyrights and copyright registrations, computer software, mask works and
mask work registration applications, industrial designs and applications for
registration of such industrial designs, including, without limitation, any and
all applications for renewal, extensions, reexaminations and reissues of any of
the foregoing intellectual property rights where applicable, inventions,
biological materials, trade secrets, formulae, know-how, technical information,
research data, research raw data, laboratory notebooks, procedures, designs,
proprietary technology and information held or used in the business of the
Company (the "Company Intellectual Property").
(c) To the knowledge of the Company, the Company is
the sole legal and beneficial owner of all the Company Intellectual Property
(except for Company Intellectual Property that is the subject of any Third Party
Intellectual Property Licenses or the Commercial Software Licenses).
(d) Except as set forth in Section 2.13(d) of the
Disclosure Schedule, the Company has not entered into any agreements, licenses
or created any encumbrances, leases, equities, options, restrictions, rights of
first refusal, title retention agreements or other exceptions to title which
grant or could grant to third parties ownership or other rights to use any of
the Company Intellectual Property or restrict the use by the Company of the
Company Intellectual Property in any way.
(c) All Third Party Intellectual Property Licenses and
Commercial Software Licenses or other agreements relating to Company
Intellectual Property are valid and are in full force and effect and constitute
legal, valid and binding obligations of the Company and, to the knowledge of the
Company, of the other parties, and are enforceable in accordance with their
respective terms. The Company has no knowledge of any notice or threat to
terminate any such licenses or other agreements. Neither the Company nor, to the
knowledge of the Company, any other party, is in default in complying with any
provisions of any such licenses or other agreements, and no condition or event
or fact exists which, with notice, lapse of time or both, would constitute a
default thereunder on the part of the Company, except for any such default,
condition, event or fact that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(f) The Company is not, and will not be as a result of
the execution, delivery or performance of this Agreement or the consummation of
the Merger or the other transactions contemplated hereby, in breach, violation
or default of any Third Party Intellectual Property Licenses. The rights of the
Company to the Company Intellectual Property will not be affected by the
execution, delivery or performance of this Agreement or the consummation of the
Merger or the other transactions contemplated hereby.
(g) The Company has the right to license to third
parties the use of Company Intellectual Property Rights.
(h) To the knowledge of the Company, all Company
Intellectual Property is valid and subsisting; all registrations and filings
relating to Company Intellectual Property Rights are in good standing; and all
maintenance and renewal fees necessary to preserve the rights of the Company in
respect of Company Intellectual Property Rights have been made. The
registrations and filings relating
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to Company Intellectual Property Rights are proceeding and there are no facts of
which the Company has knowledge which could materially undermine those
registrations or filings or reduce to a material extent the scope of protection
of any patents arising from such applications.
(i) The manufacturing, marketing, distribution or sale
of any product currently manufactured, marketed, distributed or sold by, or
identified for development by, the Company, licensees or sublicensees in the
countries where the Company has conducted or proposes to conduct (as set forth
in the Company's business plan or otherwise disclosed to the Buyer by the
Company) such activities, to the knowledge of the Company, does not and would
not infringe, induce infringement or contributorily infringe the patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, and proprietary trade names,
publication rights, computer programs (including source code and object code),
inventions, know-how, trade secrets, technology, processes, confidential
information and all other intellectual property rights throughout the world
(collectively, "Intellectual Property Rights") of any third party.
(j) To the knowledge of the Company, there are no
allegations, claims or proceedings instituted or pending which challenge the
rights possessed by the Company to use the Company Intellectual Property or the
validity or effectiveness of the Company Intellectual Property, including
without limitation any interference, oppositions, cancellations or other
contested proceedings.
(k) To the knowledge of the Company, there are no
outstanding claims or proceedings instituted or pending by any third party
challenging the ownership, priority, scope or validity or effectiveness of any
Company Intellectual Property.
(l) To the knowledge of the Company, there are no
Intellectual Property Rights of any third party that would be infringed by the
continued practice of any technologies previously used or presently in use by
the Company.
(m) To the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of the Company Intellectual
Property by any third party, including any employee or former employee of the
Company.
(n) Except as set forth in Section 2.13(n) of the
Disclosure Schedule, the Company has not granted any licenses, immunities,
options or other rights to the Company Intellectual Property which could provide
a third party with a defense to patent infringement proceedings, whether
domestic or foreign.
(o) The Company has taken commercially reasonable
measures to maintain the confidentiality of the inventions, trade secrets,
formulae, know-how, technical information, research data, research raw data,
laboratory notebooks, procedures, designs, proprietary technology and
information of the Company, and all other information the value of which to the
Company is contingent upon maintenance of the confidentiality thereof. Without
limiting the generality of the foregoing, (A) each employee of the Company and
each consultant to the Company who has had access to proprietary information
with respect to the Company has entered into an agreement suitable to vest
ownership rights to any inventions, creations, developments, and works in the
Company and has entered into an agreement for maintaining the confidential
information of the Company and (B) each officer and director of the Company has
entered into an agreement to maintain the confidential information of the
Company, except for those individuals listed in Schedule 2.13(o) whose
involvement in the business of the Company is described with specificity
therein.
(p) The components manufactured or developed by the
Company and used in the Company's products are free of any disabling codes or
instructions (a "Disabling Code"), and any virus or other intentionally created,
contaminant (a "Contaminant") that may, or may be used to, access, modify,
delete, damage or disable the Systems (as defined below) or that may result in
damage thereto. The components obtained from third party suppliers are, to the
knowledge of the Company,
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free of any Disabling Codes or Contaminants that may, or may be used to, access,
modify, delete, damage or disable any of the Systems or that might result in
damage thereto. The Company has taken reasonable steps and implemented
reasonable procedures to ensure that its internal computer systems (consisting
of hardware, software, databases or embedded control systems, or "Systems") are
free from Disabling Codes and Contaminants. The Company has in place appropriate
disaster recovery plans, procedures and facilities and has taken reasonable
steps to safeguard its Systems and restrict unauthorized access thereto.
(q) To the Company's knowledge, all products that the
Company has distributed (whether pursuant to a pre-commercial evaluation or
otherwise) to third parties or that have been designed by the Company for
commercial distribution (whether or not the Company has released pre-commercial
versions to third parties, either for evaluation and testing or otherwise)
perform in all material respects with each of the functions described in any
published specifications or end-user documentation or other information provided
to customers of the Company on which such customers relied when licensing or
otherwise acquiring such products. Such products are in compliance with all
applicable industry standards and laws and regulations, except for such
noncompliance which, individually or in the aggregate, would not have a Company
Material Adverse Effect.
2.14 INVENTORY. The Company does not maintain inventory.
2.15 CONTRACTS.
(a) Section 2.15 of the Disclosure Schedule lists the
following agreements (written or oral) to which the Company or any Subsidiary is
a party as of the date of this Agreement:
(i) any agreement (or group of related
agreements) for the lease of personal property from or to third parties;
(ii) any agreement (or group of related
agreements) for the purchase or sale of products or for the furnishing or
receipt of services or in which the Company or any Subsidiary has granted
manufacturing rights, "most favored nation" pricing provisions or marketing or
distribution rights relating to any products or territory or has agreed to
purchase a minimum quantity of goods or services or has agreed to purchase goods
or services exclusively from a certain party;
(iii) any agreement establishing a partnership
or joint venture;
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness (including capitalized lease
obligations) or under which it has imposed (or may impose) a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality
or noncompetition or in any way restricting the Company's or a successor's
ability to hire employees or retain contracts;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer,
director or stockholder of the Company or any affiliate (an "Affiliate"), as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), thereof;
(viii) any agreement under which the
consequences of a default or termination would reasonably be expected to have a
Company Material Adverse Effect;
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(ix) any agreement which contains any
provisions requiring the Company or any Subsidiary to indemnify any other party
thereto (excluding indemnities contained in agreements for the purchase, sale or
license of products entered into in the Ordinary Course of Business);
(x) any agreement which contains a "change
in control" or similar provision. A "change of control" provision shall mean a
provision that purports to alter the parties' rights under such agreement in the
event of (i) a merger, consolidation or other transaction in which securities
possessing a certain percentage of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or (ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets.
(xi) any other material agreement (or group
of related agreements) or any other agreement not entered into in the Ordinary
Course of Business.
(b) The Company has delivered to the Buyer a complete
and accurate copy of each agreement listed in Section 2.13 or Section 2.15 of
the Disclosure Schedule. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding and enforceable and
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect immediately prior to the Closing; and (iii)
neither the Company nor any Subsidiary nor, to the knowledge of the Company, any
other party, is in breach or violation of, or default under, any such agreement,
and no event has occurred, is pending or, to the knowledge of the Company, is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by the Company or any Subsidiary or, to the
knowledge of the Company, any other party under such contract.
2.16 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
and the Subsidiaries reflected on the Most Recent Balance Sheet are valid
receivables subject to no setoffs or counterclaims and are current and
collectible (within 60 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. All accounts receivable reflected in the financial or accounting records
of the Company that have arisen since the Most Recent Balance Sheet Date are
valid receivables subject to no setoffs or counterclaims and are collectible
(within 60 days after the date on which it first became due and payable), net of
a reserve for bad debts in an amount proportionate to the reserve shown on the
Most Recent Balance Sheet.
2.17 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company or any Subsidiary.
2.18 INSURANCE. Section 2.18 of the Disclosure Schedule lists
each insurance policy (including fire, theft, casualty, general liability,
workers compensation, business interruption, environmental, product liability
and automobile insurance policies and bond and surety arrangements) to which the
Company or any Subsidiary is a party. Such insurance policies are with
respectable insurance carriers, provide full and adequate coverage for all
normal risks incident to the business of the Company and its properties and
assets. There is no material claim pending under any such policy as to which
coverage has been questioned, denied or disputed by the underwriter of such
policy. All premiums due and payable under all such policies have been paid,
neither the Company nor any Subsidiary may be liable for retroactive premiums or
similar payments, and the Company and the Subsidiaries are otherwise in
compliance in all material respects with the terms of such policies. The Company
has no knowledge of any threatened termination of, or material premium increase
with respect to, any such policy. Each such policy will continue to be
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing.
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2.19 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator (a "Legal Proceeding") which is pending or has been threatened
against the Company or any Subsidiary.
2.20 WARRANTIES. No product or service manufactured, sold,
leased, licensed or delivered by the Company or any Subsidiary is subject to any
guaranty, warranty, right of return, right of credit or other indemnity other
than (i) the applicable standard terms and conditions of sale or lease of the
Company or the appropriate Subsidiary, which are set forth in Section 2.20(i) of
the Disclosure Schedule and (ii) manufacturers' warranties for which neither the
Company nor any Subsidiary has any liability. Section 2.20(ii) of the Disclosure
Schedule sets forth the aggregate expenses incurred by the Company and the
Subsidiaries in fulfilling their obligations under their guaranty, warranty,
right of return and indemnity provisions during each of the fiscal years and the
interim period covered by the Financial Statements; and the Company does not
know of any reason why such expenses should significantly increase as a
percentage of sales in the future.
2.21 EMPLOYEES.
(a) Section 2.21(i) of the Disclosure Schedule
contains a list of all employees of the Company and each Subsidiary, along with
the position and the annual rate of compensation of each such person. Each such
employee has entered into an Employment, Confidential Information and
Intellectual Property agreement with the Company or a Subsidiary, copies of
which have previously been delivered to the Buyer. No employee of the Company or
any Subsidiary is a party to any non-competition agreement with the Company or
any Subsidiary. To the knowledge of the Company, no key employee or group of
employees has any plans to terminate employment with the Company or any
Subsidiary.
(b) Neither the Company nor any Subsidiary is a party
to or bound by any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor has any of them
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Company has no knowledge of any
organizational effort made or threatened, either currently or within the past
two years, by or on behalf of any labor union with respect to employees of the
Company or any Subsidiary.
2.22 EMPLOYEE BENEFITS.
(a) For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Employee Benefit Plan" means any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), any
"employee welfare benefit plan" (as defined in Section 3(l) of ERISA), and any
other written or oral plan, agreement or arrangement involving direct or
indirect compensation, including without limitation insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation.
(ii) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
(iii) "ERISA Affiliate" means any entity which
is, or at any applicable time was, a member of (1) a controlled group of
corporations (as defined in Section 414(b) of the Code), (2) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code),
or (3) an affiliated service group (as defined under Section 414(m) of the Code
or the regulations under Section 414(o) of the Code), any of which includes or
included the Company or a Subsidiary.
(b) Section 2.22(b) of the Disclosure Schedule
contains a complete and accurate list of all Employee Benefit Plans maintained,
or contributed to, by
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the Company, any Subsidiary or any ERISA Affiliate. Complete and accurate copies
of (i) all Employee Benefit Plans which have been reduced to writing, (ii)
written summaries of all unwritten Employee Benefit Plans, (iii) all related
trust agreements, insurance contracts and summary plan descriptions, and (iv)
all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded
plans) all plan financial statements for the last five plan years for each
Employee Benefit Plan, have been delivered to the Buyer. Each Employee Benefit
Plan has been administered in all material respects in accordance with its terms
and each of the Company, the Subsidiaries and the ERISA Affiliates has in all
material respects met its obligations with respect to such Employee Benefit Plan
and has made all required contributions thereto. The Company, each Subsidiary,
each ERISA Affiliate and each Employee Benefit Plan are in compliance in all
material respects with the currently applicable provisions of ERISA and the Code
and the regulations thereunder (including without limitation Section 4980B of
the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and
Section 701 et seq. of ERISA). All filings and reports as to each Employee
Benefit Plan required to have been submitted to the Internal Revenue Service or
to the United States Department of Labor have been duly submitted.
(c) There are no Legal Proceedings (except claims for
benefits payable in the normal operation of the Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders) against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and revocation has
not been threatened, and no such Employee Benefit Plan has been amended or
operated since the date of its most recent determination letter or application
therefor in any respect, and no act or omission has occurred, that would
adversely affect its qualification or materially increase its cost. Each
Employee Benefit Plan which is required to satisfy Section 401(k)(3) or Section
401(m)(2) of the Code has been tested for compliance with, and satisfies the
requirements of, Section 401(k)(3) and Section 401(m)(2) of the Code for each
plan year ending prior to the Closing Date.
(e) Neither the Company, any Subsidiary, nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(f) At no time has the Company, any Subsidiary or any
ERISA Affiliate been obligated to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any
Employee Benefit Plan providing benefits after termination of employment to any
employee of the Company or any Subsidiary (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code or other applicable law and insurance
conversion privileges under state law. The assets of each Employee Benefit Plan
which is funded are reported at their fair market value on the books and records
of such Employee Benefit Plan.
(h) No act or omission has occurred and no condition
exists with respect to any Employee Benefit Plan maintained by the Company, any
Subsidiary or any ERISA Affiliate that would subject the Company, any Subsidiary
or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of
any kind imposed under ERISA or the Code or (ii) any contractual indemnification
or contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Employee Benefit Plan.
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(i) No Employee Benefit Plan is funded by, associated
with or related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan is amendable and
terminable unilaterally by the Company at any time without liability to the
Company as a result thereof and no Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits the Company from amending or
terminating any such Employee Benefit Plan.
(k) Section 2.22(k) of the Disclosure Schedule
discloses each: (i) agreement with any stockholder, director, executive officer
or other key employee of the Company or any Subsidiary (A) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any Subsidiary of the
nature of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such director,
executive officer or key employee; (ii) agreement, plan or arrangement under
which any person may receive payments from the Company or any Subsidiary that
may be subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding the Company or any Subsidiary,
including without limitation any stock option plan, stock appreciation right
plan, restricted stock plan, stock purchase plan, severance benefit plan or
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(l) Section 2.22(l) of the Disclosure Schedule sets
forth the policy of the Company and any Subsidiary with respect to accrued
vacation, accrued sick time and earned time-off and the amount of such
liabilities as of the Most Recent Balance Sheet Date and the date hereof.
2.23 ENVIRONMENTAL MATTERS.
(a) Each of the Company and the Subsidiaries has
complied with all applicable Environmental Laws (as defined below). There is no
pending or, to the knowledge of the Company, threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law involving the Company or any Subsidiary. For
purposes of this Agreement, "Environmental Law" means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including without limitation any
statute, regulation, administrative decision or order pertaining to (i)
treatment, storage, disposal, generation and transportation of industrial, toxic
or hazardous materials or substances or solid or hazardous waste; (ii) air,
water and noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous materials or substances, or solid or hazardous waste, including
without limitation emissions, discharges, injections, spills, escapes or dumping
of pollutants, contaminants or chemicals; (v) the protection of wild life,
marine life and wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels, containers, abandoned or
discarded barrels, and other closed receptacles; (vii) health and safety of
employees and other persons; and (viii) manufacturing, processing, using,
distributing, treating, storing, disposing, transporting or handling of
materials regulated under any law as pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
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(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, leased, operated or
controlled by the Company or a Subsidiary. With respect to any such releases of
Materials of Environmental Concern, the Company or such Subsidiary has given all
required notices to Governmental Entities (copies of which have been provided to
the Buyer). The Company is not aware of any releases of Materials of
Environmental Concern at parcels of real property or facilities other than those
owned, leased, operated or controlled by the Company or a Subsidiary that would
reasonably be expected to have an impact on the real property or facilities
owned, leased, operated or controlled by the Company or a Subsidiary. For
purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the Resource Conservation and Recovery Act), toxic materials, oil
or petroleum and petroleum products or any other material subject to regulation
under any Environmental Law.
(c) Set forth in Section 2.23(c) of the Disclosure
Schedule is a list of all documents (whether in hard copy or electronic form)
that contain any environmental reports, investigations and audits relating to
premises currently or previously owned, leased or operated by the Company or a
Subsidiary (whether conducted by or on behalf of the Company or a Subsidiary or
a third party, and whether done at the initiative of the Company or a Subsidiary
or directed by a Governmental Entity or other third party) which the Company has
possession of or access to. A complete and accurate copy of each such document
has been provided to the Buyer.
(d) The Company is not aware of any material
environmental liability of any solid or hazardous waste transporter or
treatment, storage or disposal facility that has been used by the Company or any
Subsidiary.
2.24 LEGAL COMPLIANCE. Each of the Company and the Subsidiaries,
and the conduct and operations of their respective businesses, are in compliance
with each applicable law (including rules and regulations thereunder) of any
federal, state, local or foreign government, or any Governmental Entity, except
for any violations or defaults that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Company Material Adverse
Effect.
2.25 CUSTOMERS AND SUPPLIERS. Section 2.25 of the Disclosure
Schedule sets forth a list of (a) each customer that accounted for more than 1%
of the consolidated revenues of the Company during the last full fiscal year or
the interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product to the Company or
a Subsidiary. No such customer or supplier has indicated within the past year
that it will stop, or decrease the rate of, buying products or supplying
products, as applicable, to the Company or any Subsidiary. No unfilled customer
order or commitment obligating the Company or any Subsidiary to process,
manufacture or deliver products or perform services will result in a loss to the
Company or any Subsidiary upon completion of performance. No purchase order or
commitment of the Company or any Subsidiary is in excess of normal requirements,
nor are prices provided therein in excess of current market prices for the
products or services to be provided thereunder.
2.26 PERMITS. Section 2.26 of the Disclosure Schedule sets forth
a list of all permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity (including without limitation those
issued or required under Environmental Laws and those relating to the occupancy
or use of owned or leased real property) ("Permits") issued to or held by the
Company or any Subsidiary. Such listed Permits are the only Permits that are
required for the Company and the Subsidiaries to conduct their respective
businesses as presently conducted or as proposed to be conducted, except for
those the absence of which, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect. Each
such Permit is in full force and effect and, to the knowledge of the Company, no
suspension or cancellation of such Permit is threatened and there is no basis
for believing that such Permit will not be renewable upon
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expiration. Each such Permit will continue in full force and effect immediately
following the Closing.
2.27 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No Affiliate
of the Company or of any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Company or any Subsidiary, (b)
has any claim or cause of action against the Company or any Subsidiary, or (c)
owes any money to, or is owed any money by, the Company or any Subsidiary.
Section 2.27 of the Disclosure Schedule describes any transactions or
relationships between the Company or a Subsidiary and any Affiliate thereof
which have occurred or existed since December 6, 1996.
2.28 BROKERS' FEES. Neither the Company nor any Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement, except
that the Company has employed Banc of America Securities LLC as its financial
advisor, the arrangements with which have been disclosed and completely and
accurately described to the Buyer prior to the date hereof.
2.29 BOOKS AND RECORDS. The minute books and other similar
records of the Company and each Subsidiary contain complete and accurate records
of all actions taken at any meetings of the Company's or such Subsidiary's
stockholders, Board of Directors or any committee thereof and of all written
consents executed in lieu of the holding of any such meeting. The books and
records of the Company and each Subsidiary accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company or such Subsidiary and have been maintained in
accordance with good business and bookkeeping practices.
2.30 CERTAIN BUSINESS PRACTICES. Neither the Company, nor, to the
Company's knowledge, any Affiliates, directors, officers, agents or employees of
the Company or other people acting on behalf of any of them (in their capacities
as such) has (i) used any funds of the Company for contributions, gifts,
entertainment or other expenses relating to political activity in violation of
any applicable Law, (ii) made any payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns,
in each case in violation of any applicable Law, or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended, (iii) consummated any
transaction, made any payment, entered into any agreement or arrangement or
taken any other action in violation of Section 1128B(b) of the Social Security
Act, as amended, or (iv) accepted or received any contributions, payments, gifts
or expenditures in violation of any applicable Law.
2.31 VOTE REQUIRED; CONSENTS. The affirmative vote of the holders
of at least a majority of (x) the Common Shares, and the Series A Preferred
Stock, voting together as a single class, and (y) the Series A Preferred Stock,
voting as a separate class, are the only votes of the holders of any of the
shares of capital stock of the Company necessary to approve this Agreement and
the Merger and the transactions contemplated hereby at a meeting of the
Company's stockholders held for such purpose. Approval of this Agreement and the
Merger by the stockholders of the Company without a meeting thereof requires
action by the written consent of such stockholders having the requisite number
of votes necessary to approve such action at a meeting of stockholders as
described in the preceding sentence.
2.32 PRINCIPAL STOCKHOLDERS. Each of the Principal Stockholders,
jointly and severally, represents and warrants to the Buyer that:
(a) Each Principal Stockholder is the sole record and
beneficial owner of good and marketable title to the shares of Company Capital
Stock listed next to its name on Section 2.32 of the Company Disclosure
Schedule. Each Principal Stockholder owns such Common Shares free and clear of
any security interest, pledge, mortgage, lien (including, without limitation,
environmental and tax liens), charge, encumbrance, adverse claim, preferential
arrangement or restriction of any kind including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership ("Encumbrances").
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(b) Each Principal Stockholder has the full power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each Principal Stockholder and the
consummation by each Principal Stockholder of the transactions contemplated
hereby have been duly and validly authorized by all necessary action on the part
of each Principal Stockholder, and, except as otherwise set forth in this
Agreement, no other proceedings on the part of any of the Principal Stockholders
is necessary to authorize this Agreement or to consummate such transactions
except the filing and recordation of the Certificate of Merger as required by
the CCC. Assuming the due authorization, execution and delivery by the other
parties hereto, this Agreement constitutes the legal, valid and binding
obligation of each of the Principal Stockholders, enforceable against each of
the Principal Stockholders in accordance with its terms (except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws, both state and federal, affecting the enforcement of creditors'
rights or remedies in general as from time to time in effect and the exercise by
courts of equity powers).
(c) Each Principal Stockholder understands that the
Adjusted Merger Shares have not been registered under the Securities Act, or any
other applicable securities laws. Each Principal Stockholder is acquiring the
Adjusted Merger Shares for such Principal Stockholder's own account or for
investment only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any participation
therein. Each Principal Stockholder is aware of the risks associated with the
Adjusted Merger Shares. The undersigned acknowledges that transfers of the
Adjusted Merger Shares are restricted under applicable securities laws.
(d) Each Principal Stockholder is an "accredited
investor," as defined in Rule 501(a) under the Securities Act.
(e) Each Principal Stockholder is able to bear the
economic risks of this investment, including the total loss of the investment,
and has adequate means of providing for current needs and possible
contingencies. Each Principal Stockholder's overall commitment to investments
which are not readily marketable is not disproportionate to the net worth of
such Principal Stockholder, and such Principal Stockholder's investment in the
Adjusted Merger Shares will not cause such overall commitment to become
excessive. Each Principal Stockholder has had the opportunity to ask questions
and receive answers concerning the Buyer, as well as the opportunity to obtain
any additional information necessary to verify the accuracy of information
furnished in connection therewith which the Buyer possesses or can acquire
without unreasonable effort or expense. Each Principal Stockholder has such
knowledge and experience in financial and business matters that such Principal
Stockholder is capable of evaluating the merits and risks of this investment and
of making an informed investment decision, and has relied solely upon the advice
of his or her own counsel, accountant and other advisors, with regard to the
legal, investment, tax and other considerations regarding this investment.
(f) Each Principal Stockholder first learned of this
investment in the jurisdiction of his or her residential address set forth on
Section 2.32(f) of the Disclosure Schedule, and intends that the securities laws
of only that jurisdiction, as preempted by the federal securities laws, shall
govern this transaction.
2.33 DISCLOSURE. No representation or warranty by the Company or
the Principal Stockholders contained in this Agreement, and no statement
contained in the Disclosure Schedule or any other document, certificate or other
instrument delivered or to be delivered by or on behalf of the Company pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. The Company has disclosed to the
Buyer all material information relating to the business of the Company or any
Subsidiary or the transactions contemplated by this Agreement.
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF
THE BUYER AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and
warrants to the Company as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of the
Buyer and the Transitory Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
The Buyer is duly qualified to conduct business and is in corporate good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing
would not have a Buyer Material Adverse Effect (as defined below). The Buyer has
all requisite corporate power and authority to carry on the businesses in which
it is engaged and to own and use the properties owned and used by it. The Buyer
has furnished or made available to the Company complete and accurate copies of
its Restated Certificate of Incorporation and Bylaws. For purposes of this
Agreement, "Buyer Material Adverse Effect" means a material adverse effect on
the assets, business, condition (financial or otherwise), results of operations
of the Buyer and its subsidiaries, taken as a whole.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer
consists of (a) 200,000,000 shares of Buyer Common Stock, of which 55,250,732
shares were issued and outstanding as of August 21, 2000, and (b) 5,000,000
shares of Preferred Stock, $.01 par value per share, of which no shares are
issued or outstanding. All of the issued and outstanding shares of Buyer Common
Stock are duly authorized, validly issued, fully paid, nonassessable and free of
all preemptive rights. All of the Merger Shares will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights.
3.3 AUTHORIZATION OF TRANSACTION. Each of the Buyer and the
Transitory Subsidiary has all requisite power and authority to execute and
deliver this Agreement and (in the case of the Buyer) the Escrow Agreement and
to perform its obligations hereunder and thereunder. The execution and delivery
by the Buyer and the Transitory Subsidiary of this Agreement and (in the case of
the Buyer) the Escrow Agreement and the consummation by the Buyer and the
Transitory Subsidiary of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of the Buyer and Transitory Subsidiary, respectively. This Agreement has been
duly and validly executed and delivered by the Buyer and the Transitory
Subsidiary and constitutes a valid and binding obligation of the Buyer and the
Transitory Subsidiary, enforceable against them in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the CCC,
neither the execution and delivery by the Buyer or the Transitory Subsidiary of
this Agreement or (in the case of the Buyer) the Escrow Agreement, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the Restated Certificate of Incorporation or Bylaws of the Buyer or the
Articles of Incorporation of the Transitory Subsidiary, (b) require on the part
of the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the Buyer
or the Transitory Subsidiary is a party or by which either is bound or to which
any of their assets are subject, except for (i) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not
adversely affect the consummation of the transactions contemplated hereby or
(ii) any notice, consent or waiver the absence of which would not adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or the Transitory Subsidiary or any of their properties or assets.
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3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously
furnished or made available to the Company complete and accurate copies, as
amended or supplemented, of all reports filed by the Buyer under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC (such
reports are collectively referred to herein as the "Buyer Reports"). The Buyer
Reports constitute all of the documents required to be filed by the Buyer under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC through the date of this Agreement. The Buyer Reports complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder when filed. As of their respective dates, the Buyer
Reports 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 therein, in light of the circumstances under which they were made,
not misleading. The unaudited interim financial statements of the Buyer included
in the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Buyer as of the respective dates thereof and
for the periods referred to therein, and (iv) are consistent with the books and
records of the Buyer.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since June 30, 2000,
there has occurred no event or development which has had, or would reasonably be
expected to a have Buyer Material Adverse Effect.
3.7 LITIGATION. Except as disclosed in the Buyer Reports, as of
the date of this Agreement, there is no Legal Proceeding which is pending or, to
the Buyer's knowledge, threatened in writing against the Buyer or any subsidiary
of the Buyer, which, if determined adversely to the Buyer, would have a Buyer
Material Adverse Effect.
3.8 INTERIM OPERATIONS OF THE TRANSITORY SUBSIDIARY. The
Transitory Subsidiary was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has engaged in no business
activities other than as contemplated by this Agreement.
3.9 BROKERS' FEES. Neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
3.10 PATENTS, TRADEMARKS, TRADE NAMES AND COPYRIGHTS. To the
knowledge of the Buyer, the conduct of the Buyer's business as currently
conducted does not infringe any patent, trademark, trade name, copyright or
trade secret of any other person, except where such infringement, individually
or in the aggregate, has not had and would not have a Buyer Material Adverse
Effect.
3.11 DISCLOSURE. No representation or warranty by the Buyer
contained in this Agreement, and no statement contained in any document,
certificate or other instrument delivered or to be delivered by or on behalf of
the Buyer pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omit or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading.
ARTICLE 4 - COVENANTS
4.1 CLOSING EFFORTS. Each of the Parties shall use its best
efforts, to the extent commercially reasonable ("Reasonable Best Efforts"), to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, including without
limitation using its Reasonable Best Efforts to ensure that (i) its
representations and warranties remain true and
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correct in all material respects through the Closing Date and (ii) the
conditions to the obligations of the other Parties to consummate the Merger are
satisfied.
4.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS.
(a) Each Party shall use its Reasonable Best Efforts
to obtain, at its expense, all waivers, permits, consents, approvals or other
authorizations from Governmental Entities, and to effect all registrations,
filings and notices with or to Governmental Entities, as may be required for
such Party to consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement.
(b) The Company shall use its Reasonable Best Efforts
to obtain, at its expense, all such waivers, consents or approvals from third
parties, and to give all such notices to third parties, as are required to be
listed in Section 2.4 of the Disclosure Schedule.
4.3 MEETING OF COMPANY STOCKHOLDERS. The Company shall cause a
meeting of its stockholders (the "Stockholder Meeting") to be duly called and
held as soon as reasonably practicable, with written notice thereof to be given
and a summary of this Agreement and any other relevant disclosure information to
be provided in accordance with applicable law, for the purpose of voting on (i)
the approval and adoption of this Agreement and the Merger and (ii) the approval
of an amendment to the Company's Articles of Incorporation that provides that
the merger and the transactions contemplated by this Agreement shall not be
considered a liquidation under Section 3 of the Amended and Restated Certificate
of Determination of Preferences of Preferred Shares of the Company, filed with
the Secretary of State of California on July 13, 2000 (collectively, the
"Stockholder Proposals"). Notwithstanding the foregoing, the Company may take
such actions as are required by applicable law to obtain the written consent (in
lieu of the Stockholder Meeting) of the stockholders of the Company to the
approval of the Stockholder Proposals. The directors of the Company shall
recommend approval of the Stockholder Proposals by the stockholders of the
Company. In connection with the Stockholder Meeting or the solicitation of
written consents in lieu thereof, the Company will use its best efforts to
obtain the Stockholder Proposals and will otherwise comply with all legal
requirements applicable to the Stockholder Meeting or the solicitation of
written consents in lieu thereof. The Buyer shall have the right to review and
approve such disclosure information, which approval shall not be unreasonably
withheld or delayed.
4.4 OPERATION OF BUSINESS. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Time, the Company shall (and shall cause each Subsidiary to) conduct its
operations in the Ordinary Course of Business and in compliance with all
applicable laws and regulations and, to the extent consistent therewith, use its
Reasonable Best Efforts to preserve intact its current business organization,
keep its physical assets in good working condition, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, prior to the Effective Time,
the Company shall not (and shall cause each Subsidiary not to), without the
written consent of the Buyer:
(a) issue or sell, or redeem or repurchase, any stock
or other securities of the Company or any rights, warrants or options to acquire
any such stock or other securities, or amend any of the terms of (including
without limitation the vesting of) any such convertible securities or Options,
except in each case as expressly contemplated by this Agreement and except for
the grant of options to purchase Common Shares pursuant to the Company's 1998
Stock Option Plan in connection with the hiring of any employee (provided that
no such individual grant shall exceed 40,000 Common Shares);
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(b) split, combine or reclassify any shares of its
capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(c) create, incur or assume any indebtedness
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(d) enter into, adopt or amend any Employee Benefit
Plan or any employment or severance agreement or arrangement of the type
described in Section 2.22(k) or (except for normal increases in the Ordinary
Course of Business for employees who are not Affiliates) increase in any manner
the compensation or fringe benefits of, or materially modify the employment
terms of, its directors, officers or employees, generally or individually, or
pay any bonus or other benefit to its directors, officers or employees (except
for existing payment obligations listed in Section 2.21(i) of the Disclosure
Schedule);
(e) acquire, sell, lease, license or dispose of any
assets or property (including without limitation any shares or other equity
interests in or securities of any Subsidiary or any corporation, partnership,
association or other business organization or division thereof, other than
purchases and sales of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets
or subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay
any obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, Bylaws or other organizational
documents;
(i) change in any material respect its accounting
methods, principles or practices, except insofar as may be required by a
generally applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take
any action that would constitute a violation of or default under any material
contract or agreement;
(k) make or commit to make any capital expenditure in
excess of $25,000 per item or $100,000 in the aggregate;
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action
permitted by this Agreement with the knowledge that such action or failure to
take action would result in (i) any of the representations and warranties of the
Company or the Principal Stockholders set forth in this Agreement becoming
untrue or (ii) any of the conditions to the Merger set forth in Article V not
being satisfied;
(n) transfer to any person or entity any rights to
Company Intellectual Property other than transfers necessary to conduct
development or perform services in the ordinary course of business consistent
with past practice;
(o) make any changes in the customary methods of
operations of the Company, including, without limitation, practices and policies
relating to purchasing, marketing, selling and pricing other than in the
ordinary course of business consistent with past practice;
(p) merge with, enter into a consolidation with or
acquire an interest of 5% or more in any person or entity or acquire a
substantial portion of
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the assets or business of any person or entity or any division or line of
business thereof, or otherwise acquire any assets other than in the Ordinary
Course of Business;
(q) enter into any agreement, written or oral, with
any of its directors, officers, employees or stockholders except in the Ordinary
Course of Business consistent with past practice of the Company (or, to the
knowledge of the Company or any Principal Stockholder, with any relative,
beneficiary, spouse or Affiliate of such person);
(r) write down or write up (or fail to write down or
write up in accordance with consistent past practice) the value of any
receivables or revalue any assets of the Company other than in the Ordinary
Course of Business and in accordance with GAAP;
(s) amend, terminate, cancel or compromise any claims
of the Company or waive any other rights of substantial value to the Company to
any material contract;
(t) allow any Permit, including any Permit related to
environmental matters, that was issued or related to the Company to lapse or
terminate or fail to renew any such Permit or any insurance policy that is
scheduled to terminate or expire within 30 calendar days of the date of this
Agreement;
(u) permit there to occur any events that,
individually or in the aggregate, would reasonably be expected to have a Company
Material Adverse Effect; or
(v) agree in writing or otherwise to take any of the
foregoing actions.
4.5 ACCESS TO INFORMATION.
(a) The Company shall (and shall cause each Subsidiary
to) permit representatives of the Buyer to have full access (at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company and the Subsidiaries) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company and each Subsidiary.
(b) Within 15 days after the end of each month ending
prior to the Closing, beginning with September 30, 2000, the Company shall
furnish to the Buyer an unaudited income statement for such month and a balance
sheet as of the end of such month, prepared on a basis consistent with the
Financial Statements. Such financial statements shall present fairly the
financial condition and results of operations of the Company and the
Subsidiaries on a consolidated basis as of the dates thereof and for the periods
covered thereby, and shall be consistent with the books and records of the
Company and the Subsidiaries.
4.6 SUPPLEMENTAL INFORMATION.
(a) From the date of this Agreement until the
Effective Time, the Company shall promptly deliver to the Buyer supplemental
information in writing concerning events or circumstances occurring subsequent
to the date hereof which would render any representation, warranty or statement
in this Agreement made by the Company or the Principal Stockholders or contained
in the Disclosure Schedule inaccurate or incomplete in any material respect at
any time after the date of this Agreement until the Closing Date. No such
supplemental information shall be deemed to cure any misrepresentation or breach
of warranty or constitute an amendment of any representation, warranty or
statement in this Agreement or the Disclosure Schedule; provided that nothing in
this subsection shall extend or alter the date at which any representation or
warranty is made pursuant to this Agreement.
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(b) From the date of this Agreement until the
Effective Time, the Buyer shall promptly deliver to the Company supplemental
information in writing concerning events or circumstances occurring subsequent
to the date hereof which would render any representation or warranty in this
Agreement made by Buyer inaccurate or incomplete in any material respect at any
time after the date of this Agreement until the Closing Date. No such
supplemental information shall be deemed to cure any misrepresentation or breach
of warranty or constitute an amendment of any representation or warranty in this
Agreement; provided that nothing in this subsection shall extend or alter the
date at which any representation or warranty is made pursuant to this Agreement.
4.7 EXCLUSIVITY.
(a) The Company agrees that neither it nor any of its
officers or directors shall, and that it shall direct and use its best efforts
to cause its employees, agents and representatives (including any investment
banker, attorney or accountant retained by it) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase of 10%
or more of the assets or any equity securities of, the Company (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
The Company further agrees that neither it nor any of its officers or directors
shall, and that it shall direct and use its best efforts to cause its employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it) not to, directly or indirectly, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal.
(b) The Company shall immediately notify any party
with which discussions or negotiations of the nature described in paragraph (a)
above were pending that the Company is terminating such discussions or
negotiations. If the Company receives any inquiry, proposal or offer of the
nature described in paragraph (a) above, the Company shall, within one business
day after such receipt, notify the Buyer of such inquiry, proposal or offer,
including the identity of the other party and the terms of such inquiry,
proposal or offer.
4.8 EXPENSES. Except as set forth in Article VI and the Escrow
Agreement, each of the Parties shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
4.9 RESTRICTED SECURITIES.
(a) The Adjusted Merger Shares and any shares of
capital stock or other securities received with respect thereto (collectively,
the "Restricted Securities") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 4.9, which conditions are intended to
insure compliance with the provisions of the Securities Act of 1933 (the
"Securities Act"). The Company and each Company Stockholder shall observe and
comply with the Securities Act and the rules and regulations promulgated by the
Securities and Exchange Commission (the "SEC") thereunder as now in effect or
hereafter enacted or promulgated, and as from time to time amended, in
connection with any Transfer of Restricted Securities beneficially owned by
them.
(b) Each certificate representing Restricted
Securities issued to a holder of such certificate and each certificate for such
securities issued to subsequent transferees of any such certificate shall
(unless otherwise permitted by the provisions of Sections 4.9 (c) and (d)
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
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REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN SECTION 4.9 OF THE AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 29, 2000 AMONG AFFYMETRIX, INC.,
NAUTILUS ACQUISITION CORP. AND NEOMORPHIC, INC. AND THE
STOCKHOLDERS OF NEOMORPHIC, INC. SIGNATORY THERETO."
(c) Prior to any Transfer of Restricted Securities,
the holder thereof shall give written notice to the Buyer of such holder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 4.9. Each such notice shall describe the manner and
circumstances of the proposed Transfer and shall be accompanied by the written
opinion, addressed to the Buyer, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion shall be
reasonably satisfactory to Buyer) such proposed transfer does not involve a
transaction requiring registration or qualification of such Restricted
Securities under the Securities Act or the securities or "blue sky" laws of any
relevant state of the United States. The holder thereof shall thereupon, with
the written consent of the Buyer, be entitled to Transfer such Restricted
Securities in accordance with the terms of the notice delivered by it to the
Buyer. Each certificate or other instrument evidencing the securities issued
upon the Transfer of any such Restricted Securities (and each certificate or
other instrument evidencing any untransferred balance of such Restricted
Securities) shall bear the legend set forth in Section 4.9(b) unless (x) in the
opinion of counsel of Buyer registration of any future Transfer is not required
by the applicable provisions of the Securities Act or (y) the Buyer shall have
waived the requirement of such legends. No holder shall Transfer any Restricted
Securities until such opinion of counsel has been given (unless waived by the
Buyer).
(d) Notwithstanding the foregoing provisions of this
Section 4.9, the restrictions imposed by this Section 4.9 upon the
transferability of Restricted Securities shall not apply during any period when
(i) any such shares are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as otherwise contemplated by
Section 4.9(c) and, pursuant to Section 4.9(c), the securities so transferred
are not required to bear the legend set forth in Section 4.9(c) or (ii) the
holder of such Restricted Securities has met the requirements for Transfer of
such Restricted Securities pursuant to subparagraph (k) of Rule 144 of the
Securities Act. Whenever the restrictions imposed by this Section 4.9 shall
terminate, as herein provided, the holder of Restricted Securities as to which
such restrictions have terminated shall be entitled to receive from Buyer,
without expense, a new certificate not bearing the restrictive legend set forth
in Section 4.9(b) and not containing any other reference to the restrictions
imposed by this Section 4.9.
(e) The Buyer, at its discretion, may cause stop
transfer orders to be placed with its transfer agent with respect to
certificates for Restricted Securities owned by a holder but not as to
certificates for such shares of Buyer Common Stock as to which the legend set
forth in paragraph (b) of this Section 4.9 is no longer required because one or
more of the conditions set forth in Section 4.9(d) shall have been satisfied.
4.10 LISTING OF MERGER SHARES. The Buyer shall comply with the
requirements of Nasdaq for listing the Merger Shares on the Nasdaq National
Market within thirty (30) days following the Closing Date.
4.11 REGISTRATION RIGHTS.
(a) After the Closing Date, the Buyer shall use its
Reasonable Best Efforts to qualify and remain qualified to register for resale
the Merger Shares on behalf of the holders thereof (the "Selling Shareholders")
on a registration
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statement on Form S-3 (or any successor form) under the Securities Act (the
"Registration Statement"). The Buyer shall use its Reasonable Best Efforts to
cause the Registration Statement to be filed with the SEC not later than 60 days
following the Closing Date and to cause the Registration Statement to be
declared effective not later than 120 days following the Closing Date; provided,
however, that such time periods shall automatically be extended in order to
permit the Buyer to complete preparation of the financial information required
to be included in the Registration Statement by applicable securities laws and
the Buyer has acted and is continuing to act in good faith to comply with such
laws. Upon receipt of any notice (a "Suspension Notice") from the Buyer of the
happening of any event which makes any statement made in the Registration
Statement or related prospectus untrue or which requires the making of any
changes in such Registration Statement or prospectus so that they will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
in the light of the circumstances under which they were made not misleading,
each holder of Merger Shares registered under such Registration Statement shall
forthwith discontinue disposition of Merger Shares pursuant to such Registration
Statement until such holder's receipt of the copies of the supplemented or
amended prospectus or until it is advised in writing (the "Advice") by the Buyer
that the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
prospectus; PROVIDED, HOWEVER, that the Buyer shall not give a Suspension Notice
until after the Registration Statement has been declared effective. In the event
that the Company shall give any Suspension Notice, the Buyer shall use its
Reasonable Best Efforts and take such actions as are reasonably necessary to
render the Advice and end the suspension period as promptly as practicable.
Notwithstanding anything to the contrary provided in this Section 4.11, the
Buyer shall not have any obligation to maintain the Registration Statement or
keep it effective to permit the resale of any Merger Shares on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act from and after such
time as the Merger Shares may be sold by the holders thereof pursuant to Rule
144 of the Securities Act.
(b) The Buyer agrees to indemnify and hold harmless
each Selling Shareholder, from and against any losses, claims, damages or
liabilities to which such Selling Shareholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any failure by
the Buyer to fulfill any undertaking included in the Registration Statement
(each, a "Violation"), and the Buyer will reimburse such Selling Shareholder for
any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any action, proceeding or claim relating to
such Violation; PROVIDED, HOWEVER, that the indemnity contained in this Section
4.11(c) shall not apply to any amounts paid by, or on behalf of, a Selling
Shareholder in settlement of any such loss, claim, damage or liability if such
settlement is effected without the consent of the Buyer (which consent shall not
be unreasonably withheld), nor shall the Buyer be liable to a Selling
Shareholder in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, any Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such Registration Statement by such Selling Shareholder.
The Buyer will reimburse such Selling Shareholder, as the case may be, for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim.
(c) Each Selling Shareholder agrees to indemnify and
hold harmless the Buyer (and each person, if any, who controls Buyer within the
meaning of the Securities Act, each officer of the Buyer who signs the
Registration Statement and each director of the Buyer) and any underwriter, any
other stockholder selling shares of Buyer Common Stock in such Registration
Statement and any controlling person of any such underwriter or other
stockholder, from and against any losses, claims, damages or liabilities (joint
or several) to which any of the foregoing persons may become subject (under the
Securities Act or otherwise), insofar as such
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losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any Violation, in each case to the
extent that such Violation occurs in reliance upon and conformity with written
information furnished by such Selling Shareholder expressly for use in
connection with such Registration Statement, and each Selling Shareholder will
pay, as incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 4.11(d) in connection with
investigating or defending any such loss, claim, damage or liability; provided,
however, that the indemnity contained in this Section 4.11(d) shall not apply to
any amounts paid in settlement of any such loss, claim, damage or liability if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld); and provided further that, in no event
shall any indemnity under this Subsection 4.11(d) exceed the net proceeds from
the offering received by such Selling Shareholder, except in the case of willful
fraud by such Selling Shareholder.
(d) If the indemnification provided for in Section
4.11(b) or (c) from the indemnifying person is held by a court of competent
jurisdiction to be unavailable to an indemnified person hereunder in respect of
any losses, claims, damages, liabilities or expenses referred to herein, then
the indemnifying person, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying person and
indemnified persons in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying person and
indemnified persons shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by,
such indemnifying person or indemnified persons, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Buyer and the Selling
Shareholders under this Section 4.11 shall survive the completion of any
offering of Merger Shares in a Registration Statement under this Section 4.11,
and otherwise.
4.12 RULE 144 INFORMATION. The Buyer shall make and keep public
information available as those terms are understood and defined in Rule 144
under the Securities Act, for a period of three (3) years after the Closing
Date.
ARTICLE 5 - CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each Party to consummate the Merger are subject to the
satisfaction of the condition that the Stockholder Proposals shall have received
the requisite stockholder approval under applicable law.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE TRANSITORY
SUBSIDIARY. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of
the following additional conditions:
(a) Holders of more than three percent (3%) of the
outstanding shares of each of the Company Common Stock and the Series A
Preferred Stock, respectively, shall not have exercised, nor shall they have any
continuing right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger or any other
matter submitted to the Company Stockholders in connection with the transactions
contemplated by this Agreement;
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(b) the Company and the Subsidiaries shall have
obtained (and shall have provided copies thereof to the Buyer) all of the
waivers, permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, referred to in Section 4.2 which are
required on the part of the Company or the Subsidiaries;
(c) the representations and warranties of the Company
set forth in the first sentence of Section 2.1 and in Section 2.2 and 2.3 and
any representations and warranties of the Company set forth in this Agreement
that are qualified as to materiality, "Company Material Adverse Effect" or words
of similar effect shall be true and correct in all respects, and all other
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of
this Agreement and as of the Closing Date as though made as of the Closing Date,
except to the extent such representations and warranties are specifically made
as of a particular date (in which case such representations and warranties shall
be true and correct as of such date);
(d) the Company shall have performed or complied in
all material respects with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding shall be pending or threatened
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (iii) have a Company Material Adverse
Effect, or (iv) require the Company or the Buyer, upon consummation of any of
the transactions contemplated by this Agreement, to hold separate or dispose of
any of the stock or assets of the Company or the Buyer or impose limitations on
the ability of the Surviving Corporation to control in any respect the business,
assets or operations of either the Company or the Buyer, and no such judgment,
order, decree, stipulation or injunction shall be in effect;
(f) the Company shall have delivered to the Buyer and
the Transitory Subsidiary a certificate (the "Company Certificate") to the
effect that the condition specified in Section 5.1 and clauses (a) through (e)
(insofar as clause (e) relates to Legal Proceedings involving the Company or a
Subsidiary) of this Section 5.2 is satisfied in all respects;
(g) the Buyer shall have received from counsel to the
Company an opinion in the form as set forth in EXHIBIT E attached hereto,
addressed to the Buyer and dated as of the Closing Date;
(h) the Buyer shall have received copies of the
resignations, effective as of the Effective Time, of each director and officer
of the Company and the Subsidiaries (other than any such resignations which the
Buyer designates, by written notice to the Company, as unnecessary);
(i) the Buyer shall have received a certificate from
the Secretary of the Company, dated as of the Closing Date, certifying as to the
Company's Articles of Organization, Bylaws, the incumbency of officers and
directors of the Company, and the resolutions adopted by the Board of Directors
and Stockholders of the Company approving the Merger Agreement and the Merger;
(j) there shall not have been, and no events shall
have occurred since the date of this Merger Agreement, that, individually or in
the aggregate, have had or which would be reasonably expected to result in, a
Company Material Adverse Effect;
(k) each of the agreements listed on Section 2.2(iii)
of the Disclosure Schedule shall have been terminated and the parties thereto
shall have no further rights or obligations thereunder;
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(l) the Buyer, the Company, the Indemnification
Representative and the Escrow Agent each shall have executed and delivered the
Escrow Agreement;
(m) all of the holders of (I) Options and (II)
restricted Common Shares (except Cyrus Harmon, Harmon Family Investors, LLC,
Gregg Helt, David Kulp, Kulp Family Trust, Moses Cesario and the holders of
restricted Common Shares who acquired such shares upon the exercise of Options)
shall have properly completed and executed an Option Letter or Restricted Stock
Letter, as applicable, in the forms attached hereto as EXHIBIT B;
(n) the Company shall have received a payoff letter
from Bank of the West in an amount not to exceed $100,000 (plus accrued but
unpaid interest thereon) related to that certain Commercial Security Agreement,
dated as of February 28, 2000, by and between the Company and Bank of the West
and evidence of the release by Bank of the West of all security interests in the
assets of the Company;
(o) the Company shall not have incurred more than an
aggregate of $200,000 in legal and accounting fees and expenses in connection
with the Merger;
(p) holders of Options shall not have exercised
Options such that the offer of the Adjusted Merger Shares by the Buyer fails to
qualify as an offer of securities under Rule 506 of the Securities Act;
(q) David Kulp, David Haussler, Martin Reese and Frank
Eeckman shall have executed the Declaration of Non-Patentable Technology
attached hereto as EXHIBIT G; and
(r) the Buyer, the Escrow Agent and each of Company
Stockholders who is a party to a Restricted Stock Agreement shall have entered
into a Joint Escrow Instructions Letter in the form attached hereto as EXHIBIT
H.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to consummate the Merger is subject to the satisfaction of the
following additional conditions:
(a) the Buyer shall have effected all of the
registrations, filings and notices referred to in Section 4.2 which are required
on the part of the Buyer, except for any which if not obtained or effected would
not have a Buyer Material Adverse Effect or a material adverse effect on the
ability of the Parties to consummate the transactions contemplated by this
Agreement;
(b) the representations and warranties of the Buyer
and the Transitory Subsidiary set forth in the first sentence of Section 3.1 and
Section 3.3 and any representations and warranties of the Buyer and the
Transitory Subsidiary set forth in this Agreement that are qualified as to
materiality, "Buyer Material Adverse Effect" or words of similar effect, shall
be true and correct, and the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in this Agreement that are not so qualified
(other than those set forth in Section 3.1 and Section 3.3) shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made as of the Closing Date, except to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date);
(c) each of the Buyer and the Transitory Subsidiary
shall have performed or complied with in all material respects its agreements
and covenants required to be performed or complied with under this Agreement as
of or prior to the Effective Time;
(d) the Buyer shall have delivered to the Company a
certificate (the "Buyer Certificate") to the effect that each of the conditions
specified in clauses (a) through (c) of this Section 5.3 is satisfied in all
respects;
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(e) the Company shall have received from counsel to
the Buyer and the Transitory Subsidiary an opinion in the form as set forth in
EXHIBIT F attached hereto, addressed to the Company and dated as of the Closing;
and
(f) the Company shall have received a certificate from
the Secretary of Buyer, dated as of the Closing Date, certifying as to its
respective certificate of incorporation, bylaws, the incumbency of its
respective officers and directors, and the resolutions adopted by its respective
board of directors and stockholders, if applicable, approving this Agreement and
the Merger.
ARTICLE 6 - INDEMNIFICATION
6.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Company
Stockholders shall indemnify the Buyer, the Surviving Corporation and each of
their officers, directors, agents, and each person, if any, who controls or may
control the Buyer within the meaning of the Securities Act (each a "Buyer
Indemnified Party" and collectively, the "Buyer Indemnified Parties") in respect
of, and hold them harmless against, any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) ("Damages") incurred or suffered by any of the foregoing parties
resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Company or any Principal
Stockholder contained in this Agreement or the Company Certificate;
(b) any failure of any Company Stockholder to have
good, valid and marketable title to the issued and outstanding Company Shares
issued in the name of such Company Stockholder, free and clear of all Security
Interests; or
(c) any claim by a stockholder or former stockholder
of the Company, or any other person or entity, seeking to assert, or based upon:
(i) ownership or rights to ownership of any shares of stock of the Company; (ii)
any rights of a stockholder (other than the right to receive Adjusted Merger
Shares pursuant to this Agreement or appraisal rights under the applicable
provisions of the CCC), including any option, preemptive rights or rights to
notice or to vote; (iii) any rights under the Articles of Incorporation or
Bylaws of the Company; or (iv) any claim that his, her or its shares were
wrongfully repurchased by the Company.
6.2 INDEMNIFICATION OF BUYER. The Buyer shall indemnify the
Company Stockholders in respect of, and hold them harmless against, any and all
Damages incurred or suffered by them resulting from, relating to or constituting
any misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Buyer or the Transitory Subsidiary contained in this Agreement
or the Buyer Certificate.
6.3 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to
indemnification under this Article VI (an "Indemnified Party") shall give
written notification (a "Notification of Suit") to the party from whom
indemnification is sought (an "Indemnifying Party") of the commencement of any
suit or proceeding relating to a third party claim for which indemnification
pursuant to this Article VI may be sought. Such Notification of Suit shall be
given within 30 business days after receipt by the Indemnified Party of notice
of such suit or proceeding, and shall describe in reasonable detail (to the
extent known by the Indemnified Party) the facts constituting the basis for such
suit or proceeding and the amount of the claimed damages; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party of any liability or obligation
hereunder except to the extent of any damage or
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liability caused by or arising out of such failure. Within 30 days after
delivery of such Notification of Suit, the Indemnifying Party may, upon written
notice thereof to the Indemnified Party, assume control of the defense of such
suit or proceeding if, but only if, the Indemnifying Parties acknowledge in
writing their obligation to indemnify the Indemnified Parties hereunder against
any Damages that such Indemnified Parties incur or have incurred in connection
with such third party claim; provided that the Indemnifying Party may not assume
control of the defense of a suit or proceeding involving criminal liability or
in which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not so assume control of such defense, the Indemnified
Party shall control such defense. The party not controlling such defense (the
"Non-controlling Party") may participate therein at its own expense. The party
controlling such defense (the "Controlling Party") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed. The Indemnified Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this
Article VI, an Indemnified Party shall give written notification (a "Claim
Notice") to the Indemnifying Party which contains (i) a description and the
amount (the "Claimed Amount") of any Damages incurred or reasonably expected to
be incurred by the Indemnified Party, (ii) a statement that the Indemnified
Party is entitled to indemnification under this Article VI for such Damages and
a reasonable explanation of the basis therefor, and (iii) a demand for payment
(in the manner provided in paragraph (c) below) in the amount of such Damages.
If the Indemnified Party is seeking to enforce such claim pursuant to the Escrow
Agreement, the Indemnifying Party shall deliver a copy of the Claim Notice to
the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice,
the Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount; (ii) agree
that the Indemnified Party is entitled to receive part, but not all, of the
Claimed Amount (the "Agreed Amount"); or (iii) dispute that the Indemnified
Party is entitled to receive any of the Claimed Amount. If the Indemnifying
Party agrees that the Indemnified Party is entitled to receive all of the
Claimed Amount, the Indemnifying Party shall deliver to the Indemnified Party
with the Response either a payment for the Claimed Amount, by check or by wire
transfer, or, if the Indemnifying Parties are the Company Stockholders, deliver
to the Escrow Agent, within three days following the delivery of the Response, a
written notice instructing the Escrow Agent to distribute to the Buyer such
number of Escrow Shares as have an aggregate Value (as defined below) equal to
the Claimed Amount. If the Indemnifying Party agrees that the Indemnified Party
is entitled to receive part, but not all, of the Claimed Amount, the
Indemnifying Party shall deliver to the Indemnified Party with the Response
either a payment for the Agreed Amount, by check or by wire transfer, or, if the
Indemnifying Parties are the Company Stockholders, deliver to the Escrow Agent,
within three days following the delivery of the Response, a written notice
instructing the Escrow Agent to distribute to the Buyer such number of Escrow
Shares as have an aggregate Value equal to the Agreed Amount. If the
Indemnifying Party in the Response disputes its liability for all or part of the
Claimed Amount, the Indemnifying Party and the Indemnified Party shall follow
the procedures set forth in Section 6.3(d) for the resolution of such dispute (a
"Dispute"). For purposes of this Article VI, the "Value" of any Escrow Shares
delivered in satisfaction of an indemnity claim shall equal the number of such
Escrow Shares, multiplied by the average of the last reported sale prices per
share of the Buyer Common Stock on the
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Nasdaq National Market over the ten consecutive trading days ending on the last
trading day before the date of determination (the "Determination Price");
provided, however, that if the Determination Price is less than $35.50 then the
"Value" of any Escrow Shares delivered in satisfaction of an indemnity claim
shall be based on $35.50 per share and if the Determination Price is greater
than $106.50 per share then the "Value" of any Escrow Shares delivered in
satisfaction of an indemnity claim shall be based on $106.50 per share (subject
to equitable adjustment in the event of any stock split, stock dividend, reverse
stock split or similar event affecting the Buyer Common Stock since the
beginning of such ten-day period, or, in the case of the $35.50 and $106.50 per
share prices, since the date hereof).
(d) During the 60-day period following the delivery of
a Response that reflects a Dispute, the Indemnifying Party and the Indemnified
Party shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnifying Party and the Indemnified
Party shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be nonbinding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.3(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Party and the
Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party. If the Indemnified Party is
seeking to enforce the claim that is the subject of the Dispute pursuant to the
Escrow Agreement, the Indemnifying Party and the Indemnified Party shall deliver
to the Escrow Agent, promptly following the resolution of the Dispute (whether
by mutual agreement, pursuant to an ADR Procedure, as a result of a judicial
decision or otherwise), a written notice executed by both parties instructing
the Escrow Agent as to what (if any) portion of the Escrow Shares shall be
distributed to the Buyer and/or the Company Stockholders (which notice shall be
consistent with the terms of the resolution of the Dispute).
(e) Notwithstanding the other provisions of this
Section 6.3, if a third party asserts (other than by means of a lawsuit) that an
Indemnified Party is liable to such third party for a monetary or other
obligation which may constitute or result in Damages for which such Indemnified
Party may be entitled to indemnification pursuant to this Article VI, and such
Indemnified Party reasonably determines that it has a valid business reason to
fulfill such obligation, then (i) such Indemnified Party shall be entitled to
satisfy such obligation, without prior notice to or consent from the
Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim
for indemnification in accordance with the provisions of this Article VI, and
(iii) such Indemnified Party shall be reimbursed, in accordance with the
provisions of this Article VI, for any such Damages for which it is entitled to
indemnification pursuant to this Article VI (subject to the right of the
Indemnifying Party to dispute the Indemnified Party's entitlement to
indemnification, or the amount for which it is entitled to indemnification,
under the terms of this Article VI).
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(f) For purposes of this Agreement, in the case where
the Indemnifying Parties are the Company Stockholders, references to the
"Indemnifying Party" (except provisions relating to an obligation to make or a
right to receive any payments provided for in Section 6.3 or Section 6.4) shall
be deemed to refer to the Indemnification Representative. The Indemnification
Representative shall have full power and authority on behalf of each Company
Stockholder to take any and all actions on behalf of, execute any and all
instruments on behalf of, and execute or waive any and all rights of, the
Company Stockholders under this Article VI. The Indemnification Representative
shall have no liability to any Company Stockholder for any action taken or
omitted on behalf of the Company Stockholders pursuant to this Article VI.
Notices or communications to or from the Indemnification Representative shall
constitute notice to or from each of the Company Stockholders.
6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement, the Company
Certificate or the Buyer Certificate shall (a) survive the Closing and any
investigation at any time made by or on behalf of an Indemnified Party and (b)
shall expire on the date one year following the Closing Date, except that the
representations and warranties set forth in Sections 2.1, 2.2, 2.3 (and the
portion of the Company Certificate relating thereto), 2.32, 3.1, 3.2 and 3.3
(and the portion of the Company Certificate or the Buyer Certificate relating
thereto), shall survive until 30 days following expiration of all statutes of
limitation applicable to the matters referred to therein. Each Party's
indemnification obligations with respect to representations, warranties,
covenants, and obligations in this Agreement, the Disclosure Schedule and any
other certificate or document delivered pursuant to this Agreement shall
terminate when the applicable representation, warranty, covenant, obligation
terminates pursuant to this Section; provided, however, that if an Indemnified
Party delivers to an Indemnifying Party, before expiration of a representation
or warranty, either a Claim Notice based upon a breach of such representation or
warranty, or a notice that, as a result a legal proceeding instituted by or
written claim made by a third party, the Indemnified Party reasonably expects to
incur Damages as a result of a breach of such representation or warranty (an
"Expected Claim Notice"), then such representation or warranty shall survive
until, but only for purposes of, the resolution of the matter covered by such
notice. If the legal proceeding or written claim with respect to which an
Expected Claim Notice has been given is definitively withdrawn or resolved in
favor of the Indemnified Party, the Indemnified Party shall promptly so notify
the Indemnifying Party; and if the Indemnified Party has delivered a copy of the
Expected Claim Notice to the Escrow Agent and Escrow Shares have been retained
in escrow after the Termination Date (as defined in the Escrow Agreement) with
respect to such Expected Claim Notice, the Indemnifying Party and the
Indemnified Party shall promptly deliver to the Escrow Agent a written notice
executed by both parties instructing the Escrow Agent to distribute such
retained Escrow Shares to the Company Stockholders in accordance with the terms
of the Escrow Agreement.
6.5 LIMITATIONS.
(a) The Escrow Agreement is intended to secure the
indemnification obligations of the Company Stockholders under this Agreement.
However, the rights of the Buyer under this Article VI shall not be limited to
the Escrow Amount nor shall the Escrow Agreement be the exclusive means for the
Buyer to enforce such rights; provided that (i) the Buyer shall not attempt to
collect any Damages directly from the Company Stockholders unless there are no
remaining Escrow Shares held in escrow pursuant to the Escrow Agreement, (ii)
the Company Stockholders shall not have any liability for any Damages in excess
of the amount of the Indemnity Cap (as defined below), and (iii) the liability
of the Company Stockholders other than for indemnification obligations shall be
joint and several, except that no Company Stockholder shall be liable for
Damages in excess of such Company Stockholder's percentage ownership of Company
Shares immediately prior to the Closing Date.
(b) No Company Stockholder shall have any right of
contribution against the Company or the Surviving Corporation with respect to
any breach by the Company of any of its representations, warranties, covenants
or agreements.
(c) The Company Stockholders shall not have any
liability for indemnification with respect to any matter described in Section
6.1, except for the
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representations and warranties set forth in Sections 2.1, 2.2 , 2.3 and 2.32,
(i) unless and until the aggregate amount of all such claims against the Company
Stockholders exceeds $500,000, at which time the Company Stockholders shall be
required to indemnify the Buyer Indemnified Parties for all Damages (up to the
limitation of subparagraph (ii) hereof) relating to such claim, and (ii) for any
Damages in excess of the amount (the "Indemnity Cap") equal to (i) the Adjusted
Closing Date Number divided by two (2), multiplied by (ii) the Average Closing
Price; provided, however, that this Section 6.5(c) shall not apply to any breach
of the representations and warranties of the Company or any Company Stockholder
of which the Company or such Company Stockholder, as applicable, had knowledge
at any time prior to the date on which such representation and warranty was made
or any intentional breach by the Company or any Company Stockholder, as
applicable, of any covenant or obligation, and the Company Stockholders shall be
liable for all Damages with respect to such breaches.
(d) No Buyer Indemnified Party shall have any
liability for indemnification with respect to any matter described in Section
6.2, except for the representations and warranties set forth in Sections 3.1,
3.2 and 3.3, (i) unless and until the aggregate amount of all such claims
against the Buyer Indemnified Parties exceeds $500,000, at which time the Buyer
Indemnified Parties shall be required to indemnify the Company Stockholders for
all Damages (up to the limitation of subparagraph (ii) hereof) relating to such
claim, and (ii) for any Damages in excess of the Indemnity Cap. Notwithstanding
anything to the contrary provided herein, the Buyer shall not have any liability
under this Agreement for any Damages in excess of the amount of the Indemnity
Cap.
ARTICLE 7 - TERMINATION
7.1 TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement prior to the Effective Time (whether before or after Requisite
Stockholder Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent;
(b) the Buyer may terminate this Agreement by giving
written notice to the Company in the event the Company is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
satisfied and (ii) is not cured within 30 days following delivery by the Buyer
to the Company of written notice of such breach;
(c) the Company may terminate this Agreement by giving
written notice to the Buyer in the event the Buyer or the Transitory Subsidiary
is in breach of any representation, warranty or covenant contained in this
Agreement, and such breach, individually or in combination with any other such
breach, (i) would cause the conditions set forth in clauses (c) or (d) of
Section 5.3 not to be satisfied and (ii) is not cured within 30 days following
delivery by the Company to the Buyer of written notice of such breach;
(d) the Buyer may terminate this Agreement by giving
written notice to the Company at any time after the Company Stockholders have
voted on any matter submitted to them in connection with the transactions
contemplated by this Agreement and any such matter failed to receive the vote
required to approve such matter;
(e) the Buyer may terminate this Agreement by giving
written notice to the Company if the Closing shall not have occurred on or
before December 31, 2000 by reason of the failure of any condition precedent
under Section 5.1 or 5.2 hereof (unless the failure results primarily from a
breach by the Buyer or the Transitory Subsidiary of any representation, warranty
or covenant contained in this Agreement);
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(f) the Company may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary if the Closing shall
not have occurred on or before December 31, 2000 by reason of the failure of any
condition precedent under Section 5.1 or 5.3 hereof (unless the failure results
primarily from a breach by the Company of any representation, warranty or
covenant contained in this Agreement); or
(g) by either Buyer or the Company, if any order of a
Governmental Entity, writ, injunction or decree preventing the consummation of
the Merger shall have been entered by any court of competent jurisdiction and
shall have become final and nonappealable, provided the parties hereto have used
Reasonable Best Efforts to have any such order, writ, injunction or decree
lifted.
7.2 EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 7.1, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party except (i)
Section 4.8 and Article IX shall survive any such termination, and (ii) for any
liability for the willful or intentional breach of any representation, warranty,
covenant or agreement set forth in this Agreement.
ARTICLE 8 - DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C> <C>
Additional Escrow Shares 1.10(a)
Adjusted Closing Date Number 1.5(d)
Adjusted Initial Shares 1.5(c)(i)
Adjusted Merger Shares 1.5(c)(i)
ADR Procedure 6.2(d)
ADR Service 6.2(d)
Affiliate 2.15(a)(vii)
Agreed Amount 6.2(c)
Agreement Introduction
Average Closing Price 1.5(d)
Buyer Introduction
Buyer Certificate 5.3(d)
Buyer Common Stock 1.5(a)
Buyer Indemnified Party 6.1
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Cash Consideration 1.5(c)
Cash Option 1.5(d)
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<PAGE>
DEFINED TERM SECTION
------------ -------
CERCLA 2.23(a)
Certificates 1.7(a)
Certificate of Merger 1.1
Claim Notice 6.2(b)
Claimed Amount 6.2(b)
Closing 1.2
Closing Date 1.2
Closing Date Number 1.5(c)(i)
Code 1.14
Commercial Software Licenses 2.13(a)
Common Conversion Ratio 1.5(c)(i)
Common Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Intellectual Property 2.13(a)
Company Material Adverse Effect 2.1
Company Shares 1.5(b)
Company Stockholders 1.5(c)(ii)
Controlling Party 6.2(a)
Damages 6.1
Delaware Courts 9.8
Determination Price 6.2(c)
Disclosure Schedule Article II
Disclosure Statement 4.3(a)
Dispute 6.2(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.22(a)(i)
Environmental Law 2.23(a)
ERISA 2.22(a)(ii)
ERISA Affiliate 2.22(a)(iii)
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<PAGE>
DEFINED TERM SECTION
------------ -------
Escrow Agreement 1.3(e)
Escrow Agent 1.3(e)
Escrow Shares 1.5(c)(ii)
Expected Claim Notice 6.3
Exchange Act 2.15(a)(vii)
Exchange Agent 1.3(d)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representative 1.3(e)
Indemnified Party 6.2(a)
Indemnifying Party 6.2(a)
Initial Escrow Shares 1.3(e)
Initial Shares 1.3(d)
Intellectual Property Rights 2.13(i)
Legal Proceeding 2.19
Materials of Environmental Concern 2.23(b)
Merger 1.1
Merger Shares 1.5(c)(i)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.2(a)
Options 1.9(a)
Ordinary Course of Business 2.4
Outstanding Closing Shares 1.5(c)
Parties Introduction
Permits 2.26
Preferred Cash Consideration 1.5(b)
Preferred Conversion Ratio 1.5(c)(i)
Preferred Shares 1.5(b)
Reasonable Best Efforts 4.1
43
<PAGE>
DEFINED TERM SECTION
------------ -------
Registration Effectiveness date 1.5(d)
Registration Statement 4.3
Response 6.2(c)
Securities Act 1.9(c)
Security Interest 2.4
Stockholder Meeting 4.3
Stockholder Proposals 4.3
Subsidiary 2.5(a)
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Third Party Intellectual Property Licenses 2.13(a)
Transitory Subsidiary Introduction
Value 6.2(c)
</TABLE>
ARTICLE 9 - MISCELLANEOUS
9.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or public announcement relating to the subject matter of this
Agreement without the prior written approval of the other Parties; PROVIDED,
HOWEVER, that any Party may make any public disclosure it believes in good faith
is required by applicable law, regulation or stock market rule (in which case
the disclosing Party shall use reasonable efforts to advise the other Parties
and provide them with a copy of the proposed disclosure prior to making the
disclosure).
9.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that the
provisions in Article I concerning issuance of the Merger Shares and Article VI
concerning indemnification are intended for the benefit of the Stockholders and
the Indemnified Parties.
9.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements or representations by or among
the Parties, written or oral, with respect to the subject matter hereof,
provided that the Confidentiality Agreement, dated August 2, 2000, between the
Buyer and the Company shall remain in effect in accordance with its terms.
9.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties; provided that the Transitory Subsidiary may
assign its rights, interests and obligations hereunder to an Affiliate of the
Buyer.
9.5 COUNTERPARTS FACSIMILE SIGNATURE. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which
44
<PAGE>
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature.
9.6 HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next-day delivery via
a reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
<TABLE>
<CAPTION>
IF TO THE COMPANY COPY TO:
<S> <C> <C>
Neomorphic, Inc. Steinhart & Falconer LLP
2612 8th Street 333 Market Street
Berkeley, CA 94710 Suite 3200
Attention: Cyrus Harmon San Francisco, CA 94105
Telecopier: (510) 704-1013 Attention: Robb A. Scott, Esq.
Telephone: (510) 981-8555 Telecopier: (415) 442-0856
Telephone: (415) 442-0877
IF TO THE BUYER OR THE TRANSITORY SUBSIDIARY: COPY TO:
Affymetrix, Inc. Goodwin, Procter & Hoar LLP
3380 Central Expressway Exchange Place
Santa Clara, CA 95051 Boston, MA 02109
Attention: Vern Norviel, Esq. Attention: James A. Matarese, Esq.
Telecopier: (408) 481-4709 Telecopier: (617) 523-1231
Telephone: (408) 731-5035 Telephone: (617) 570-1000
IF TO THE INDEMNIFICATION REPRESENTATIVE: COPY TO:
Cyrus Harmon Steinhart & Falconer LLP
c/o Affymetrix, Inc. 333 Market Street
2612 8th Street Suite 3200
Berkeley, CA 94710 San Francisco, CA 94105
Telecopier: (510) 704-1013 Attention: Robb A. Scott, Esq.
Telephone: (510) 981-8555 Telecopier: (415) 442-0856
Telephone: (415) 442-0877
</TABLE>
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
9.8 GOVERNING LAW; SUBMISSION TO JURISDICTION. ALL DISPUTES,
CLAIMS OR CONTROVERSIES ARISING OUT OF THIS AGREEMENT, OR THE NEGOTIATION,
VALIDITY OR PERFORMANCE OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
HEREBY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE WITHOUT REGARD TO ITS RULES OF CONFLICT OF LAWS. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
sole and exclusive jurisdiction of the courts of the State of Delaware and of
the United States of America located in the State of Delaware (the "Delaware
Courts") for any litigation among the parties hereto arising out of or relating
to this Agreement, or the negotiation, validity or performance of this Agreement
or the Merger, waives any objection to the laying of venue of any such
litigation in the Delaware Courts and
45
<PAGE>
agrees not to plead or claim in any Delaware Court that such litigation brought
therein has been brought in any inconvenient forum or that there are
indispensable parties to such litigation that are not subject to the
jurisdiction of the Delaware Courts. Each of the parties hereto agrees, (a) to
the extent such party is not otherwise subject to service of process in the
State of Delaware, to appoint and maintain an agent in the State of Delaware as
such party's agent for acceptance of legal process, and (b) that service of
process may also be made on such party by prepaid certified mail with a proof of
mailing receipt validated by the United States Postal Service constituting
evidence of valid service. Service made pursuant to (a) or (b) above shall have
the same legal force and effect as if served upon such party personally within
the State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware, 19801, as such agent.
9.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time; PROVIDED,
HOWEVER, that any amendment effected subsequent to the Requisite Stockholder
Approval shall be subject to any restrictions contained in the CCC. No amendment
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. No waiver of any right or remedy
hereunder shall be valid unless the same shall be in writing and signed by the
Party giving such waiver. No waiver by any Party with respect to any default,
misrepresentation or breach of warranty or covenant hereunder shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
9.10 SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to limit
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
9.11 CONSTRUCTION.
(a) The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
9.12 ATTORNEYS' FEES. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement the parties hereto agree that if and only if a court of competent
jurisdiction finally determines that the non-prevailing parties engaged in
willful misconduct or are liable for willful breach of this Agreement, the
prevailing party or parties shall be entitled to recover from the other party or
parties upon final judgment on the merits reasonable attorneys' fees, including
reasonable attorneys' fees for any appeal, and reasonable costs incurred in
bringing such suit or proceeding.
46
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement and Plan
of Merger as of the date first above written.
AFFYMETRIX, INC.
By: /s/ Susan E. Siegel
--------------------------------------
Name: Susan E. Siegel
Title: President
By: /s/ Vern Norviel
--------------------------------------
Name: Vern Norviel
Title: Secretary
NAUTILUS ACQUISITION CORP.
By: /s/ Edward Hurwitz
--------------------------------------
Edward Hurwitz
President
By: /s/ Edward Hurwitz
--------------------------------------
Edward Hurwitz
Secretary
NEOMORPHIC, INC.
By: /s/ Cyrus Harmon
--------------------------------------
Name: Cyrus Harmon
Title: President and Chief Executive Officer
By: /s/ Deirdre Henry
--------------------------------------
Name: Deirdre Henry
Title: Secretary
47
<PAGE>
PRINCIPAL STOCKHOLDERS:
/s/ Cyrus Harmon
---------------------------------------
Cyrus Harmon
HARMON FAMILY INVESTORS, LLC
By: /s/ Cyrus Harmon
---------------------------------------
/s/ Amy Harmon
---------------------------------------
Name: Cyrus Harmon and Amy Harmon
Title: Managers
/s/ David Kulp
------------------------------------------
David Kulp
KULP FAMILY TRUST
By: /s/ David Kulp
---------------------------------------
Name: David Kulp
Title: Trustee
/s/ Gregg Helt
-----------------------------------------
Gregg Helt
48
