<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1999, or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________.
COMMISSION FILE NO.: 0-25978
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THERAPEUTIC ANTIBODIES INC.
--------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1212485
- -------------------------------------- -------------------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1207 17TH AVENUE SOUTH, SUITE 103
NASHVILLE, TENNESSEE 37212
- -------------------------------------- -------------------------
(Address of Principal Executive (Zip Code)
Offices)
(615) 327-1027
--------------------------------------
(Registrant's Telephone Number,
Including Area Code)
NOT APPLICABLE
-----------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
As of August 13, 1999, 52,057,219 shares of the registrant's Common
Stock were outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Consolidated Balance Sheets -- June 30, 1999 and
December 31, 1998.......................................................1
Condensed Consolidated Statements of Operations and Comprehensive Loss --
Six months and three months ended June 30, 1999 and 1998...............2
Consolidated Statements of Cash Flows -- Six months ended
June 30, 1999 and 1998..................................................3
Notes to Condensed Consolidated Financial Statements............................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...............................................5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............11
</TABLE>
<PAGE> 3
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 783,313 $ 7,760,328
Restricted cash 63,587 419,168
Trade receivables 264,546 67,677
Value added tax receivable 98,620 326,849
Inventories 291,542 287,802
Other current assets 226,656 712,370
------------ ------------
Total current assets 1,728,264 9,574,194
Property and equipment, net 10,478,007 11,074,766
Patent and trademark costs, net 701,843 678,306
Other assets, net 68,853 94,236
------------ ------------
Total assets $ 12,976,967 $ 21,421,502
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 876,538 $ 1,755,098
Accrued interest 152,004 122,486
Current portion of notes payable 1,843,830 2,159,428
------------ ------------
Total current liabilities 2,872,372 4,037,012
Notes payable, net of current portion 4,707,257 4,744,216
Deferred revenue 476,345 342,363
Other liabilities -- 275,477
------------ ------------
Total liabilities 8,055,974 9,399,068
------------ ------------
Stockholders' equity:
Common stock - par value $.001 per share; 59,000,000 shares authorized,
52,057,219 issued and outstanding 52,057 52,057
Additional paid-in capital 87,097,993 87,074,215
Deficit accumulated during the development stage (1984-1999) (82,060,345) (75,301,311)
Other comprehensive income (loss) (168,712) 197,473
------------ ------------
Total stockholders' equity 4,920,993 12,022,434
------------ ------------
Total liabilities and stockholders' equity $ 12,976,967 $ 21,421,502
============ ============
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
1
<PAGE> 4
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
For the Cumulative
For the Six Months Ended For the Three Months Ended Development Stage
June 30, June 30, from August 10, 1984
---------------------------- ----------------------------- (inception) through
1999 1998 1999 1998 June 30, 1999
----------- ----------- ----------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Sales revenue $ 182,300 $ 434,554 $ 182,300 $ 369,954 $ 1,847,168
Contract revenue 179,498 55,214 114,810 30,123 2,032,707
Licensing revenue -- 1,543,925 -- 1,400,000 3,900,380
Grant income 20,258 20,623 10,047 10,336 794,265
Value-added tax and insurance recoveries -- -- -- -- 577,170
Other 9,263 31,758 2,332 23,544 310,151
----------- ----------- ----------- ------------ ------------
391,319 2,086,074 309,489 1,833,957 9,461,841
----------- ----------- ----------- ------------ ------------
Operating expenses:
Cost of sales revenue 18,853 363,319 18,853 353,640 649,296
Cost of contract revenue 66,353 20,713 31,198 11,388 421,826
Research and development 4,479,365 5,551,426 2,104,740 2,985,756 57,885,040
General and administrative 1,148,360 2,022,880 830,681 1,041,751 18,142,194
Marketing and distribution 222,469 259,236 134,314 123,300 2,746,428
Depreciation and amortization 887,599 801,651 471,798 427,683 7,961,220
Other -- -- -- -- 345,310
----------- ----------- ----------- ------------ ------------
6,822,999 9,019,225 3,591,584 4,943,518 88,151,314
----------- ----------- ----------- ------------ ------------
Operating loss (6,431,680) (6,933,151) (3,282,095) (3,109,561) (78,689,473)
Interest income 86,874 144,295 22,560 57,446 2,248,922
Interest expense (247,964) (470,124) (114,329) (257,240) (5,284,095)
Foreign currency gains -- 24,115 -- -- 1,785,984
Foreign currency losses (166,264) -- (6,465) (22,361) (1,320,086)
Debt conversion expense -- -- -- -- (801,597)
----------- ----------- ----------- ------------ ------------
Net loss (6,759,034) (7,234,865) (3,380,329) (3,331,716) (82,060,345)
Redeemable preferred stock dividends -- -- -- -- (32,877)
----------- ----------- ----------- ------------ ------------
Net loss applicable to common shareholders (6,759,034) (7,234,865) (3,380,329) (3,331,716) (82,093,222)
Other comprehensive income (loss), before
and after tax:
Change in equity due to foreign currency
translation adjustments (366,185) 34,871 (126,072) (49,779) (168,712)
----------- ----------- ----------- ------------ ------------
Total comprehensive loss $(7,125,219) $(7,199,994) $(3,506,401) $ (3,381,495) $(82,261,934)
=========== =========== =========== ============ ============
Basic and diluted net loss per share $ (0.13) $ (0.31) $ (0.06) $ (0.14)
=========== =========== =========== ============
Weighted average shares used in computing
basic and diluted net loss per share 52,057,219 23,257,950 52,057,219 23,263,075
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
2
<PAGE> 5
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Cumulative
Development Stage
For the Six Months Ended From August 10, 1984
June 30, (Inception) through
1999 1998 June 30, 1999
----------- ----------- --------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss $(6,759,034) $(7,234,865) $(82,060,345)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 887,599 801,651 7,961,220
Disposal of property and equipment -- -- 1,206,566
Foreign currency (gain) loss 166,264 (24,115) (465,898)
Warrant expense -- 48,820 486,913
Stock-based compensation expense 23,778 54,372 734,306
Debt conversion expense -- -- 801,597
Changes in:
Restricted cash 355,580 (1,000,000) (63,588)
Trade receivable 17,110 483,712 (136,895)
Inventories (3,740) 328,640 (177,369)
Other current assets 473,193 194,587 (236,069)
Accounts payable and accrued expenses (867,535) (208,910) 1,019,668
Accrued interest 23,636 65,620 886,610
Deferred revenue 145,777 (197,711) 156,803
Other (268,887) -- (279,499)
----------- ----------- ------------
Net cash used in operating activities (5,806,259) (6,688,199) (70,165,980)
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property and equipment (467,458) (555,382) (15,740,808)
Patent and trademark costs (43,906) (41,700) (804,560)
Purchase of short-term investments -- -- (13,933,294)
Maturity of short-term investments -- 2,094,508 13,933,294
Other -- -- 69,750
----------- ----------- ------------
Net cash provided by (used in) investing activities (511,364) 1,497,425 (16,475,618)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from notes payable -- 3,331,412 20,450,244
Payments on notes payable (1,806,062) (590,331) (11,329,956)
Proceeds from line of credit 1,355,401 -- 4,726,679
Payments on line of credit -- (43,836) (3,371,278)
Proceeds from convertible debt, net -- -- 9,655,000
Payments on convertible debt -- -- (4,320,325)
Proceeds from issuance of stock, net -- 51,250 71,719,109
Proceeds from issuance of warrants -- -- 65,000
Other -- (1,937) (149,467)
----------- ----------- ------------
Net cash (used in) provided by financing activities (450,661) 2,746,558 87,445,006
----------- ----------- ------------
Effect of exchange rate changes on cash and cash
equivalents (208,731) (201,948) (20,095)
----------- ----------- ------------
Net (decrease) increase in cash and cash equivalents (6,977,015) (2,646,164) 783,313
Cash and cash equivalents, beginning of period 7,760,328 4,915,077 --
----------- ----------- ------------
Cash and cash equivalents, end of period $ 783,313 $ 2,268,914 $ 783,313
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE> 6
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements are
unaudited, but include all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary for a fair statement of the
results for such periods.
The unaudited interim condensed consolidated financial statements should be read
in conjunction with the audited December 31, 1998 consolidated financial
statements of Therapeutic Antibodies Inc. (the "Company"). The December 31, 1998
condensed consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year ending December 31, 1999.
NOTE 2 - BASIC AND DILUTED EARNINGS PER COMMON SHARE
The basic and diluted loss per common share calculation was based on Statement
of Financial Accounting Standards No. 128, "Earnings per Share."
The calculations are based upon the weighted average number of shares of common
stock outstanding during each period as disclosed in the consolidated statements
of operations and comprehensive loss. Common equivalent shares from stock
options, warrants and other dilutive securities totaling 3,463,216 at June 30,
1999, and 3,603,212 at June 30, 1998 are excluded from the computations as their
effect is antidilutive.
NOTE 3 - NEW LINE OF CREDIT
On May 20, 1999, the Company announced that it had entered into an Agreement and
Plan of Merger with Proteus International plc. To provide working capital until
the closing of the merger, the Company has obtained a short-term secured bridge
facility from Barclays Bank, Plc in the amount of up to (pound)3.0 million
($4.89 million). Borrowings under the bridge facility may be drawn as needed
until maturity. The bridge facility is to be repaid in full on September 14,
1999, or at such earlier time as Barclays may demand, and bears interest at a
rate of 2.0% per annum over Barclays' base rate (currently 5.25%). The bridge
facility is secured by debentures and guarantees executed by the Company's
Polyclonal Antibodies Limited and TAb Wales Limited subsidiaries and by a second
charge over Polyclonal Antibodies Limited's manufacturing facility in Wales. At
August 9, 1999, the Company had drawn (pound)1,800,000 ($2,898,000) on the
bridge facility. It is anticipated that the bridge facility will be repaid in
full from the net proceeds of Proteus' UK (pound)7 million financing, which is
scheduled to close simultaneously with the merger.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of Therapeutic Antibodies Inc. (the "Company") should be
read in conjunction with the condensed consolidated financial statements and
notes thereto. Statements made in this Quarterly Report on Form 10-Q which are
not historical fact are forward-looking statements. In addition, the Company,
through its senior management, from time to time makes forward-looking public
statements concerning its expected future operations and performance and other
developments. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 and
are necessarily estimates reflecting the Company's best judgment based on
current information and involve a number of risks and uncertainties, and there
can be no assurance that other factors will not affect the accuracy of such
forward-looking statements. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those
estimated by the Company include those but are not limited to, changes in the
regulation of the pharmaceutical industry or in pharmaceutical product testing
or approval standards, both in the United States and internationally,
competitive pressures on the pharmaceutical industry and the Company's response
thereto, the results of clinical tests of the Company's products currently in
development, the receipt of FDA and other regulatory approvals of the Company's
products, the ability of the Company's competitors to develop and manufacture
products that compete with the Company's products, the Company's ability to
appropriately address the Year 2000 issue, general conditions in the economy and
capital markets, and other factors which may be identified from time to time in
the Company's Securities and Exchange Commission filings and other public
announcements. These and other factors are described in more detail in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Business Risks," which factors are incorporated by
reference herein.
GENERAL
Since its inception, the Company has been in the development stage,
devoting its efforts and resources to drug discovery and development programs
relating to the development of highly purified, polyclonal antibodies for the
treatment of disease. The Company's revenues have been primarily derived from
licensing agreements with corporate partners, product sales, grant income, and
interest income. The Company has incurred net losses each year since its
inception and the Company expects to continue to incur operating losses during
at least the next year due to continued spending on research, product
development and the requirements for process development, preclinical and
clinical testing, regulatory affairs, initial manufacturing activities and
administration. To fund these activities, the Company will continue to seek
contractual partners and to evaluate opportunities to raise additional capital
through the sale of debt or equity.
The Company conducts its operations from its headquarters in the United
States and through subsidiaries located in the United Kingdom and Australia.
RECENT DEVELOPMENTS
On May 20, 1999, the Company announced that is has entered into an
Agreement and Plan of Merger, dated as of May 20, 1999, with Proteus
International plc, a public company incorporated under the laws of England and
Wales. Pursuant to and subject to the terms and conditions of the merger
agreement, the Company will merge with and into PI Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Proteus, with PI Merger Sub
remaining a wholly-owned subsidiary of Proteus. At the effective time of the
merger, Company shareholders will receive 1.163 Proteus ordinary shares for each
share of Company common stock. The merger is subject to approval by the
shareholders of both the Company and Proteus and certain other conditions as
described in the merger agreement. The Company anticipates that the merger will
become effective as soon as practicable following approval by the shareholders
of both companies and satisfaction of all other closing conditions.
5
<PAGE> 8
Contingent on closing of the merger, Proteus has obtained commitments
for the placing of 23,325,000 Proteus ordinary shares for aggregate proceeds to
the combined company of U.K. (pound)7.0 million. The equity financing is
expected to close immediately following the closing of the merger.
On August 9, 1999, the Company announced that it had submitted a
product license application and establishment license application to the FDA
seeking approval of its DigiTAb(R) product, which is designed to combat the
effects of digoxin toxicity. The Company expects that the FDA will grant a
standard 12 month review period for DigiTAb(R).
RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
The Company's operating revenues for the second quarter of 1999
decreased by 83% to $309,000 from $1,834,000 for the same period in 1998. No
licensing revenue was earned during the quarter ended June 30, 1999 compared to
$1,400,000 earned during the second quarter of 1998. Milestone payments received
in the second quarter of 1998 included a $500,000 payment received under a
licensing agreement with Altana, Inc. and $900,000 received under an agreement
with G. D. Searle & Co. Sales revenue decreased 51% during the three months
ended June 30, 1999 to $182,000 from $370,000 during the same period in 1998,
which included a $219,000 sale of EchiTAb(TM). Contract income increased 281% to
$115,000 in the three months ended June 30, 1999 compared to the same period for
1998 due to an increase in the number of sheep managed by the Company under
contractual arrangements with third parties in the United Kingdom.
Total operating expenses for the quarter ended June 30, 1999 decreased
by 27% to $3,592,000 from $4,942,000 for the same period in 1998 due to the
Company's cost cutting measures which began in late 1998, particularly in the
areas of research and development and general and administrative expenses.
Research and development expenses during the same periods decreased by 30% to
$2,105,000 from $2,986,000 due to discontinuation of certain research and
clinical projects that the Company determined were less likely to result in
near-term commercial success.
General and administrative expenses for the quarter ended June 30, 1999
decreased by 20% to $831,000 from $1,042,000 for the quarter ended June 30,
1998. This decrease reflects the Company's efforts to reduce costs and downsize
the corporate structure.
Marketing and distribution expenses increased for the three months
ended June 30, 1999 by 9% to $134,000 from $123,000 for the three months ended
June 30, 1998. The Director of Business Development position was vacant during
the second quarter of 1998 and the increase reflects that the position has now
been filled.
Depreciation and amortization expense for the quarter ended June 30,
1999 increased by 10% to $472,000 from $428,000 for the quarter ended June 30,
1998, as a result of capital expenditures for replacement purification equipment
for production of CroTAb(R) and certain other purchases necessary to upkeep the
existing equipment since June 30, 1998.
Interest income during the second quarter of 1999 was $23,000, a
decrease of 61% from $57,000 in the second quarter of 1998 reflecting lower cash
holdings in 1999.
Interest expense in the three months ended June 30, 1999, decreased by
56% to $114,000 from $257,000 in the three months ending June 30, 1998 as a
result of the Company's reduction of debt obligations from $10,924,000 at June
30, 1998 to $6,551,000 at June 30, 1999.
Changes in foreign currency exchange rates resulted in the recording of
less of a foreign currency loss in 1999 than in 1998. Gains and losses are the
result of fluctuations in the exchange
6
<PAGE> 9
rates of the currencies in which Therapeutic Antibodies conducts business
compared to the United States dollar.
The Company's net loss for the quarter ended June 30, 1999, was
$3,380,000 compared to a net loss of $3,332,000 for the quarter ended June 30,
1998.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
The Company's operating revenues for the six months ending June 30,
1999 decreased by 81% to $391,000 from $2,086,000 for the same period in 1998.
No licensing revenue was earned during 1999 compared to $1,544,000 earned during
1998. Milestone payments received in the first half of 1998 included $500,000
received under the Altana, Inc. agreement and $1,000,000 received under an
agreement with G. D. Searle & Co. Sales revenue decreased 58% during the six
months ended June 30, 1999 to $182,000 from $435,000 during the same period in
1998, which included a $219,000 sale of EchiTAb(TM). Contract income increased
225% in the six months ended June 30, 1999 compared to the same period for 1998
due to an increase in the number of sheep managed by the Company under
contractual arrangements with third parties in the United Kingdom.
Total operating expenses for the six months ended June 30, 1999
decreased by 24% to $6,823,000 from $9,019,000 for the same period in 1998. The
overall decrease is due to the Company's cost cutting measures, instituted in
late 1998, particularly in the areas of research and development and general and
administrative expenses. Research and development expenses during the same
periods decreased by 19% to $4,479,000 from $5,551,000 due to discontinuation of
certain research and clinical projects that the Company determined were less
likely to result in near-term commercial success.
General and administrative expenses for the six months ended June 30,
1999 decreased by 43% to $1,148,000 from $2,023,000 for the six months ended
June 30, 1998. This decrease reflects the Company's efforts to reduce costs and
downsize the corporate structure.
Marketing and distribution expenses decreased for the six months ended
June 30, 1999 by 14% to $222,000 from $259,000 for the six months ended June 30,
1998. The Director of Business Development position was vacant from April to
December of 1998 but the position has now been filled. The comparative six month
decrease reflects cost reductions in consulting, travel and product distribution
activity related to product sales during 1999.
Depreciation and amortization expense for the six months ended June 30,
1999 increased by 11% to $888,000 from $802,000 for the six months ended June
30, 1998, as a result of added capital expenditures since June 30, 1998.
Interest income during the first half of 1999 was $87,000, a decrease
of 40% from $144,000 in the first half of 1998 reflecting lower cash holdings in
1999.
Interest expense in the six months ended June 30, 1999, decreased by
47% to $248,000 from $470,000 in the six months ending June 30, 1998 as a result
of the Company's reduction of debt obligations from $10,924,000 at June 30, 1998
to $6,551,000 at June 30, 1999.
The Company also recorded a foreign currency loss of $166,000 during
the first six months of 1999 as compared to a foreign currency gain of $24,000
during the first six months of 1998.
The Company's net loss for the six months ended June 30, 1999, was
$6,759,000 compared to a net loss of $7,235,000 for the six months ended June
30, 1998.
7
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has been in the development stage,
devoting its efforts and resources to drug discovery and development programs.
Capital resources have been used for the establishment and expansion of
production facilities, for product research and development activities, for
clinical testing and to meet the Company's overall increased working capital
requirements. Management does not expect revenues from product sales to be a
significant source of funding until additional products receive regulatory
approval. Although the Company anticipates the launch of its CroTAb(R) antivenom
product following FDA approval in late 1999, revenues from sales of CroTAb(R)
are not expected to be significant in 1999. Future capital requirements will
depend on numerous factors including, but not limited to, the progress of the
Company's research programs and clinical trials, the development of regulatory
submissions, the receipt of FDA approval of CroTAb(R), the commercial viability
of the Company's products, the ability to attract collaborative partners with
sales, distribution and marketing capabilities, and the terms of any new
licensing arrangements.
At June 30, 1999, the Company had cash and cash equivalents totaling
$847,000. The Company's net cash used in operating activities during the six
months ended June 30, 1999, totaled $5,806,000, a decrease of 13% from the six
months ended June 30, 1998. Trade receivables increased $197,000 from December
31, 1998 due to sales of ViperaTAb(R). Capital expenditures decreased 16% to
$467,000 in the first six months of 1999 from $555,000 in the first six months
of 1998 due to restrictions on expenditures. The Company anticipates that total
capital expenditures for 1999 will be approximately $1,900,000. During the
remainder of 1999, the Company intends to replace certain equipment at its
production facilities in Wales and Australia to attain greater efficiencies in
the production process as well as continue needed upkeep of existing equipment.
To provide working capital until the closing of the merger, the Company
has obtained a short-term secured bridge facility from Barclays Bank, Plc in the
amount of up to (pound)3.0 million ($4.89 million). Borrowings under the bridge
facility may be drawn as needed until maturity. The bridge facility is to be
repaid in full on September 14, 1999, or at such earlier time as Barclays may
demand, and bears interest at a rate of 2.0% per annum over Barclays' base rate
(currently 5.25%). The bridge facility is secured by debentures and guarantees
executed by the Company's Polyclonal Antibodies Limited and TAb Wales Limited
subsidiaries and by a second charge over Polyclonal Antibodies Limited's
manufacturing facility in Wales. At August 9, 1999, the Company had drawn
(pound)1,800,000 ($2,898,000) on the bridge facility. It is anticipated that the
bridge facility will be repaid in full from the proceeds of the equity
financing.
The completion of the merger and the equity financing is subject to
certain conditions, including approval by the shareholders of both the Company
and Proteus. There can be no assurance that the merger and the equity financing
will be completed. If the merger and the equity financing are not completed for
any reason, and if additional financing cannot be obtained, the Company will not
have sufficient funds to continue operations. The Company believes that in the
absence of additional financing, it will have to take action to protect the
Company from its creditors through formal insolvency proceedings, or pursue
alternative courses of action which may result in there being negligible
remaining shareholder value.
On April 30, 1999, the Company repaid the outstanding balance of an
$800,000 term loan, plus accrued interest, to Equitas, L.P. The loan bore
interest at an annual rate of 11.5%.
During 1998, the Company received milestone payments of $1,500,000
under the Altana, Inc. agreement as a result of the FDA's acceptance of the
Company's product license application and establishment license application for
CroTAb(R). The Company is entitled to receive additional payments under the
agreement based on achievement of certain milestones relating to CroTAb(R) and
the Company's DigiTAb(R) and TriTAb(R) products. The Company anticipates
receiving additional payments under the agreement of $2,000,000 in 1999 based on
FDA approval of CroTAb(R) and progression of the DigiTAb(R) and TriTAb(R)
regulatory filings with the FDA.
8
<PAGE> 11
YEAR 2000 READINESS
General
The Company utilizes management information systems and software technology that
may be affected by Year 2000 issues. During 1998, the Company implemented a plan
called the "Y2K project" to ensure that its systems would be Year 2000
compliant. The Y2K project is addressing the issue of programmable logic
controllers and computer programs being able to distinguish between dates in the
20th century and dates in the 21st century. The Y2K project is expected to make
all of the Company's business systems Year 2000 compliant, or they will be
retired.
Y2K Project
The Company's Y2K project is divided into five phases. The project phases are:
- - Phase 1: compile an inventory of all equipment
- - Phase 2: assign priorities to the equipment identified as being at risk for
Year 2000
- - Phase 3: assess the Year 2000 compliance of items identified as being
significant to the operational activities of the Company
- - Phase 4: repair or replace material items that are determined not to be Year
2000 compliant
- - Phase 5: test and validate material items
A task force has been established to carry out these tasks which includes
subgroups at each of the Company's four locations, Nashville, USA; Adelaide,
Australia; London, UK; and Llandysul, UK.
By the end of the first quarter of 1999, the Company had completed the
inventory and priority assignment phases (phases 1 and 2) for each location.
The assessment of Year 2000 compliance (phase 3) included the
identification and prioritization of critical external suppliers. The Company
has undertaken a detailed evaluation of critical suppliers by communicating with
them about their commitment, plans and progress in addressing their Year 2000
issues. Detailed plans for this evaluation of material items and suppliers are
in place and have been initiated. The assessment of critical suppliers was
approximately 75% complete at the end of the second quarter of 1999. Phase 3 is
due for completion by the end of the third quarter of 1999.
Phase 4, the repair and replacement of equipment and application
software that is not Year 2000 compliant, includes conversion, where available
from the supplier, or replacement. The testing phase will be undertaken as the
hardware and software is converted or replaced.
During 1998, the Y2K task force determined that the accounting software
used in Australia is not Year 2000 compliant. The software vendor released an
upgrade during the first quarter of 1999 that is Year 2000 compliant. This
upgrade will be installed at the Company's Australian facilities during the
third quarter of 1999. In addition, TAb has identified a possible risk to Year
2000 compliance posed by some of the programmable logic controller or embedded
systems controlling the air handling units at each of the production sites in
Wales and Australia. The extent of this risk and the optimal solution are
currently being researched. The task force has also determined that the sheep
planning aid software that is used in Australia is non-compliant. The software
will require major code modification to achieve compliance with a cost estimated
to be $7,200. The hardware and software controlling some of the manufacturing
processes at the Welsh facility have been found to be non-compliant
necessitating the installation of new hardware and software which will be
installed and validated to FDA standards during the third quarter of 1999.
9
<PAGE> 12
All phases of the Y2K project are expected to be completed before the
end of 1999. The phases are concurrent rather than consecutive; therefore, more
than one phase is in progress at the same time.
Costs
The total estimated cost associated with the required modifications to
become Year 2000 compliant is not expected to be material to the Company's
financial position. The total capital cost is estimated to be no more than
$150,000. This figure may vary depending on the cost of the replacements needed
after completion of the assessment phase of the Y2K project. The total operating
cost incurred to date attributable to staff time and effort devoted to the Y2K
project to date is $89,000. The estimated future operating cost of completing
the project is $31,000.
Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of normal business activities or operations. Due
to the inherent uncertainty when dealing with the Year 2000 issues, and from the
uncertainty of the Year 2000 readiness of suppliers, the Company is unable at
this time to determine whether or not any Year 2000 failures will have a
material effect on the Company, its operations or its financial condition. This
Year 2000 project is expected to significantly reduce the level of uncertainty
about any Year 2000 problem posed to the Company by its compliance, or by the
compliance of its material suppliers. The Company believes that with the
implementation and completion of its Year 2000 project as scheduled the
possibility of significant interruptions of normal operations should be minimal.
10
<PAGE> 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency
exchange rates and interest rates. The Company's operations consist of
manufacturing and sales activities in foreign countries exposing the Company to
the effects of changes in foreign currency rates. The Company has exposure to
changes in interest rates on certain floating rate debt instruments. The Company
does not currently purchase derivative instruments or engage in hedging
activities to mitigate the risks of fluctuations in foreign currency exchange
rates or interest rates.
The value of market risk sensitive financial instruments is subject to
change as a result of movements in market rates and prices. For purposes of
specific risk analysis, the Company uses sensitivity analysis to determine the
impact that market risk exposures may have on the Company's debt and other
financial instruments.
The Company is exposed to foreign currency gains or losses from the
translation of U.S. dollars into other foreign currencies and from sales and
purchase transactions with certain customers and suppliers in foreign countries.
For these transactions, currency exchange rates are agreed upon prior to the
time of the actual transfer of cash. The Company realizes a transaction gain or
loss based upon the actual currency exchange rate at the time the transaction is
completed and records these gains and losses in operations. To reduce exposure
to these fluctuations, the Company maintains cash balances in its primary
foreign currencies. Historically, the primary net foreign currency market
exposures have related to British pounds and Australian dollars. At June 30,
1999 the Company held cash balances of $531,000 denominated in British pounds
and $140,000 denominated in Australian dollars.
As of June 30,1999 a hypothetical 10 percent weakening in the levels of
foreign currency exchange rates against the U.S. dollar with all other variables
held constant would result in a decrease in the Company's results of operations
and the fair value of its financial instruments of $417,000, as compared to a
decrease of $527,000 as of December 31,1998. Actual results may differ.
A hypothetical 10 percent movement in interest rates affecting the
Company's floating rate debt instruments would have an immaterial effect on the
Company's operations.
11
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------ -----------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated May 20, 1999, among Therapeutic
Antibodies Inc., Proteus International plc and PI Merger Sub, Inc. (as
directed by Item 601(b)(2) of Regulation S-K, certain schedules to the
document are omitted from this filing, and Therapeutic Antibodies Inc.
agrees to furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request).
3.1 Amended and Restated Certificate of Incorporation of Therapeutic
Antibodies Inc.(1)
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Therapeutic Antibodies Inc., filed May 13, 1998.(2)
3.3 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Therapeutic Antibodies Inc., filed November 6,
1998.(3)
3.4 Amended and Restated Bylaws of Therapeutic Antibodies Inc.(1)
27.1 Financial Data Schedule (SEC use only)
</TABLE>
- --------------------
(1) Incorporated by reference to appendices filed with the Company's Proxy
Statement relating to the Special Meeting of Shareholders held on July
5, 1996.
(2) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1998.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1998.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on May 26, 1999
announcing the execution of the Agreement and Plan of Merger, dated May
20, 1999, among the Company, Proteus International plc and PI Merger
Sub, Inc. whereby the Company will merge with and into PI Merger Sub,
Inc., with PI Merger Sub, Inc. remaining a wholly-owned subsidiary of
Proteus International plc.
12
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 1999 /s/ Andrew J. Heath, M.D., Ph.D.
------------------------------------------
Andrew J. Heath, M.D., Ph.D
Chief Executive Officer (Interim Principal
Financial and Accounting Officer)
13
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 20, 1999
AMONG
PROTEUS INTERNATIONAL PLC
PI MERGER SUB, INC.
AND
THERAPEUTIC ANTIBODIES INC.
A-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. THE MERGER................................................. A-8
1.1. The Merger.................................................. A-8
1.2. Closing..................................................... A-8
1.3. Effective Time.............................................. A-9
1.4. Effects of the Merger....................................... A-9
1.5. Certificate of Incorporation................................ A-9
1.6. Bylaws...................................................... A-9
1.7. Directors of Surviving Corporation.......................... A-9
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES.................. A-9
2.1. Effect on Capital Stock..................................... A-9
2.2. Exchange of Certificates.................................... A-10
2.3. Dissenting Shares........................................... A-12
2.4. Options, Warrants and Convertible Notes..................... A-12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ A-14
3.1. Organization, Standing and Power; Subsidiaries.............. A-14
3.2. Capital Structure........................................... A-14
3.3. Authority; No Conflicts..................................... A-15
3.4. Reports and Financial Statements............................ A-16
3.5. Information Supplied........................................ A-17
3.6. Compliance with Law......................................... A-17
3.7. Litigation.................................................. A-17
3.8. Taxes....................................................... A-18
3.9. Absence of Certain Changes or Events........................ A-20
3.10. Vote Required............................................... A-20
3.11. Certain Agreements.......................................... A-21
3.12. Employee Benefit Plans...................................... A-21
3.13. Brokers or Finders.......................................... A-23
3.14. Opinion of Financial Advisor................................ A-23
3.15. Environmental............................................... A-23
3.16. Labor Matters............................................... A-25
3.17. Proprietary Rights.......................................... A-25
3.18. Insurance................................................... A-27
3.19. Permits; Licenses........................................... A-28
3.20. Absence of Undisclosed Liabilities.......................... A-28
3.21. Books and Records........................................... A-28
3.22. Title to Properties; Condition of Properties................ A-28
3.23. Consequence of Consummation of the Merger................... A-29
3.24. Product Regulatory Requirements............................. A-29
3.25. Year 2000................................................... A-29
3.26. Additional Representations.................................. A-30
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT.................. A-30
4.1. Organization, Standing and Power; Subsidiaries.............. A-30
4.2. Capital Structure........................................... A-31
4.3. Authority; No Conflicts..................................... A-31
4.4. LSE Reports and Financial Statements........................ A-32
</TABLE>
A-2
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.5. Information Supplied........................................ A-33
4.6. Compliance with Law......................................... A-33
4.7. Litigation.................................................. A-34
4.8. Taxes....................................................... A-34
4.9. Absence of Certain Changes or Events........................ A-35
4.10. Vote Required............................................... A-35
4.11. Certain Agreements.......................................... A-36
4.12. Employee Share and Other Schemes............................ A-36
4.13. Brokers or Finders.......................................... A-37
4.14. Environmental............................................... A-37
4.15. Labour Matters.............................................. A-39
4.16. Proprietary Rights.......................................... A-39
4.17. Insurance................................................... A-41
4.18. Permits; Licenses........................................... A-41
4.19. Absence of Undisclosed Liabilities.......................... A-42
4.20. Books and Records........................................... A-42
4.21. Title to Properties; Condition of Properties................ A-42
4.22. Consequence of Consummation of the Merger................... A-43
4.23. Product Regulatory Requirements............................. A-43
4.24. Year 2000................................................... A-43
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF MERGER SUB............... A-43
5.1. Organization and Corporate Power............................ A-43
5.2. Corporate Authorization..................................... A-44
5.3. Non-Contravention........................................... A-44
5.4. No Business Activities...................................... A-44
ARTICLE VI. COVENANTS RELATING TO CONDUCT OF BUSINESS................. A-44
6.1. Covenants of the Company.................................... A-44
6.2. Covenants of Parent and Merger Sub.......................... A-47
6.3. Advice of Changes; Government Filings....................... A-49
6.4. Control of Other Party's Business........................... A-49
ARTICLE VII. ADDITIONAL AGREEMENTS.................................... A-50
7.1. Preparation of Form F-4 and Proxy Statement; the
Stockholders Meetings....................................... A-50
7.2. Preparation of Parent Disclosure Circular................... A-51
7.3. Access to Information....................................... A-51
7.4. Approvals and Consents; Cooperation......................... A-52
7.5. Acquisition Proposals....................................... A-52
7.6. Fees and Expenses........................................... A-54
7.7. Indemnification; Directors' and Officers' Insurance......... A-55
7.8. Public Announcements........................................ A-55
7.9. Tax and Accounting Treatment................................ A-55
7.10. Affiliates.................................................. A-55
7.11. Stock Exchange Listing...................................... A-56
7.12. Takeover Statutes........................................... A-56
7.13. Directors and Senior Management of Parent................... A-56
7.14. Patent Opinion.............................................. A-56
7.15. Further Assurances.......................................... A-56
</TABLE>
A-3
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VIII. CONDITIONS PRECEDENT.................................... A-56
8.1. Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-56
8.2. Additional Conditions to Obligations of Parent and Merger
Sub......................................................... A-57
8.3. Additional Conditions to Obligations of the Company......... A-59
ARTICLE IX. TERMINATION AND AMENDMENT................................. A-61
9.1. Termination................................................. A-61
9.2. Effect of Termination....................................... A-63
9.3. Certain Payments in the Event of Termination................ A-63
9.4. Amendment................................................... A-65
9.5. Extension; Waiver........................................... A-65
ARTICLE X. GENERAL PROVISIONS......................................... A-65
10.1. Non-Survival of Representations, Warranties and Agreements;
No Other Representations and Warranties..................... A-65
10.2. Notices..................................................... A-66
10.3. Interpretation.............................................. A-66
10.4. Counterparts................................................ A-66
10.5. Entire Agreement; No Third Party Beneficiaries.............. A-66
10.6. Governing Law............................................... A-67
10.7. Severability................................................ A-67
10.8. Assignment.................................................. A-67
10.9. Enforcement; Other Remedies................................. A-67
10.10. Definitions................................................. A-67
</TABLE>
A-4
<PAGE> 5
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
---------- ------------
<S> <C>
1990 Plan................................................... Section 2.4(a)(i)
1997 Plan................................................... Section 2.4(a)(ii)
Affiliate................................................... Section 10.10(a)
Agreement................................................... Preamble
Board of Directors.......................................... Section 10.10(b)
Break-Up Fee................................................ Section 9.3(b)
Bridge Financing............................................ Section 6.1(g)
Business Day................................................ Section 10.10(c)
Certificate of Merger....................................... Section 1.3
Certificates................................................ Section 2.2(b)
Cleanup..................................................... Section 3.15(g)(i)
Closing..................................................... Section 1.2
Closing Date................................................ Section 1.2
Code........................................................ Recitals
Companies Act............................................... Section 4.3(a)
Company..................................................... Preamble
Company Acquisition Proposal................................ Section 7.5(a)
Company Balance Sheet....................................... Section 3.20
Company Common Stock........................................ Recitals
Company Disclosure Schedule................................. Article III
Company Environmental Claim................................. Section 3.15(g)(ii)
Company Environmental Permits............................... Section 3.15(a)
Company Licensed Proprietary Rights......................... Section 3.17(a)
Company Options............................................. Section 3.2(a)
Company Proprietary Rights.................................. Section 3.17(a)
Company Stock Option Plans.................................. Section 10.10(d)
Company Stockholders Meeting................................ Section 7.1(b)
Company Subsidiaries........................................ Section 3.1(b)
Company Superior Proposal................................... Section 7.5(b)
Company Voting Debt......................................... Section 3.2(b)
Company Warrants............................................ Section 2.4(b)
Conversion Number........................................... Section 2.1(c)
Copyrights.................................................. Section 3.17(a)
DGCL........................................................ Recitals
Dissenting Shares........................................... Section 2.3
Effective Time.............................................. Section 1.3
ERISA....................................................... Section 3.12(c)
Employee Plan............................................... Section 3.12(g)(i)
Environmental Laws.......................................... Section 3.15(g)(iii)
Exchange Act................................................ Section 3.3(c)
Exchange Agent.............................................. Section 2.2(a)
Exchange Fund............................................... Section 2.2(a)
Expenses.................................................... Section 7.6
FDA......................................................... Section 3.26
Financing................................................... Section 8.1(f)
</TABLE>
A-5
<PAGE> 6
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
---------- ------------
<S> <C>
FSA......................................................... Section 3.5(b)
Form F-4.................................................... Section 3.5(a)
Governmental Entity......................................... Section 3.3(c)
Harm........................................................ Section 4.14(g)(i)
Hazardous Materials......................................... Section 3.15(g)(iv)
Hazardous Matters........................................... Section 4.15(g)(ii)
IRS......................................................... Section 3.12(b)
Leased Property............................................. Section 3.22(b)
Leases...................................................... Section 3.22(b)
LSE......................................................... Section 2.2
LSE Reports................................................. Section 4.4
Marks....................................................... Section 3.17(a)
Material Adverse Effect..................................... Section 10.10(e)
Material Contracts.......................................... Section 3.11
Mazars...................................................... Section 7.1(e)
Merger...................................................... Recitals
Merger Sub.................................................. Preamble
Multiemployer Plan.......................................... Section 3.12(g)(iv)
Mutual Secrecy Agreement.................................... Section 7.3
Noon Buying Rate............................................ Section 2.2(e)
Organizational Documents.................................... Section 10.10(f)
Outside Date................................................ Section 9.1(b)
Owned Copyrights............................................ Section 3.17(f)
Owned Marks................................................. Section 3.17(e)
Owned Patents............................................... Section 3.17(d)
Owned Trade Secrets......................................... Section 3.17(g)
Parent...................................................... Preamble
Parent Acquisition Proposal................................. Section 7.5(c)
Parent Balance Sheet........................................ Section 4.19
Parent Disclosure Circular.................................. Section 3.5(b)
Parent Disclosure Schedule.................................. Article IV
Parent Environmental Laws................................... Section 4.14(g)(iv)
Parent Environmental Permits................................ Section 4.14(a)
Parent Leases............................................... Section 4.21(b)
Parent Licensed Proprietary Rights.......................... Section 4.16(a)
Parent Material Contracts................................... Section 4.11
Parent Option Shares........................................ Section 2.4(a)
Parent Options.............................................. Section 4.2(a)
Parent Ordinary Shares...................................... Recitals
Parent Owned Copyrights..................................... Section 4.16(f)
Parent Owned Marks.......................................... Section 4.16(e)
Parent Owned Patents........................................ Section 4.16(d)
Parent Owned Trade Secrets.................................. Section 4.16(g)
Parent Permits.............................................. Section 4.18
Parent Properties........................................... Section 4.21(a)
Parent Proprietary Rights................................... Section 4.16(a)
Parent Shareholder Meeting.................................. Section 3.5(b)
</TABLE>
A-6
<PAGE> 7
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
---------- ------------
<S> <C>
Parent Subsidiaries......................................... Section 4.1(b)
Parent Superior Proposal.................................... Section 7.5(e)
Parent Voting Debt.......................................... Section 4.2(b)
Parent Warrant Shares....................................... Section 2.4(b)
Parent Warrants............................................. Section 2.4(b)
Patent Opinion.............................................. . Section 7.14
Patents..................................................... Section 3.17(a)
Permits..................................................... Section 3.19
Person...................................................... Section 10.10(g)
Preferred Stock............................................. Section 3.2(a)
Proxy Statement............................................. Section 3.5(a)
Registrar of Companies...................................... Section 4.1(a)
Release..................................................... Section 3.15(g)(v)
Removal..................................................... Section 4.14(g)(vi)
Required Company Votes...................................... Section 3.10
Required Parent Votes....................................... Section 4.10
Required Regulatory Approvals............................... Section 8.1(d)
SEC......................................................... Section 3.3(c)
SEC Reports................................................. Section 3.4
Securities Act.............................................. Section 3.3(c)
Subsidiary.................................................. Section 10.10(h)
Surviving Corporation....................................... Section 1.1
Taxation Authority.......................................... Section 4.8(e)
Taxation Statute............................................ Section 4.8(f)
Tax Returns................................................. Section 3.8(g)
Taxes....................................................... Section 3.8(f)
Terminating Company Breach.................................. Section 9.1(h)
Terminating Parent Breach................................... Section 9.1(i)
The other party............................................. Section 10.10(i)
Trade Secrets............................................... Section 3.17(a)
U.K. GAAP................................................... Recitals
U.S. GAAP................................................... Section 3.4
Unexercised Option.......................................... Section 2.4(a)
Unqualified Company Representations......................... Section 8.2(a)
Unqualified Parent Representations.......................... Section 8.3(a)
Voting Agreements........................................... Recitals
Wallis Deed................................................. Section 7.1(c)
Year 2000 Problem........................................... Section 3.25
</TABLE>
A-7
<PAGE> 8
This AGREEMENT AND PLAN OF MERGER, dated as of May 20, 1999 (this
"Agreement"), is entered into by and among Proteus International plc, a public
company incorporated under the laws of England and Wales ("Parent"), PI Merger
Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub"), and Therapeutic Antibodies Inc., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have each determined that the Merger (as defined below) is in the best
interests of their respective stockholders and have approved the Merger upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of Common Stock, par value $.001 per share, of the
Company ("Company Common Stock"), other than shares owned directly or indirectly
by Parent or by the Company and Dissenting Shares (as defined herein), will be
converted into the right to receive the Conversion Number (as defined herein) of
an Ordinary Share of Parent (the "Parent Ordinary Shares");
WHEREAS, in order to effectuate the foregoing, the Company, upon the terms
and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL"), will merge with and into Merger
Sub (the "Merger");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
WHEREAS, it is intended that certain stockholders of the Company will enter
into voting agreements ("Voting Agreements") with Parent concurrently herewith;
WHEREAS, for United States federal income tax purposes it is intended that
the Merger qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a merger accounting transaction under U.K. generally
accepted accounting principles ("U.K. GAAP").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, the Company shall be merged
with and into Merger Sub at the Effective Time (as defined below). Following the
Merger, the separate corporate existence of the Company shall cease and Merger
Sub shall continue as the surviving corporation (the "Surviving Corporation") in
accordance with the DGCL.
1.2. CLOSING. The closing of the Merger (the "Closing") will take place as
soon as practicable after satisfaction or waiver (as permitted by this Agreement
and applicable law) of the conditions set forth in Article VIII hereof (the
"Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Latham & Watkins,
885 Third Avenue, New York, New York 10022, or at such other place as the
parties may agree.
1.3. EFFECTIVE TIME. Upon the Closing, the parties shall file with the
Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings, recordings or publications required under the DGCL in connection with
the Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such
A-8
<PAGE> 9
later time as the parties may agree and specify in the Certificate of Merger
(the time the Merger becomes effective being the "Effective Time").
1.4. EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in this Agreement, the Certificate of Merger and
the DGCL.
1.5. CERTIFICATE OF INCORPORATION. At the Effective Time, the Certificate
of Incorporation of Merger Sub shall be the Certificate of Incorporation of the
Surviving Corporation; provided, however, that Article I thereof shall be
amended so that the name of the Surviving Corporation shall be a name agreed
upon by Parent and the Company.
1.6. BYLAWS. At the Effective Time, the Bylaws of Merger Sub shall be the
Bylaws of the Surviving Corporation.
1.7. DIRECTORS OF SURVIVING CORPORATION. Immediately following the
Effective Time, the directors of the Surviving Corporation shall be Barry Riley,
Arthur Rushton, Andrew Heath and James Christie.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall remain outstanding and continue to
represent fully paid and nonassessable shares of common stock, par value
$.001 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock that is owned by the Company or by a wholly owned
subsidiary of the Company and each share of Company Common Stock that is
owned by Parent, Merger Sub or any other wholly owned subsidiary of Parent
shall automatically be canceled and retired and shall cease to exist, and
no Parent Ordinary Shares or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b) and Dissenting
Shares) shall be converted into the right to receive the Conversion Number
of fully paid Parent Ordinary Shares. The "Conversion Number" shall mean
1.163, as adjusted pursuant to Section 2.1(e). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto, except the right
to receive, upon the surrender of such certificates, certificates
representing the Parent Ordinary Shares, and cash in lieu of fractional
Parent Ordinary Shares to the extent provided in Section 2.2(c) to be
issued or paid in consideration therefor upon surrender of such
certificates in accordance with Section 2.2, without interest.
(d) Dissenting Shares. All Dissenting Shares shall be handled in
accordance with Section 2.3.
(e) Adjustment of Conversion Number. In the event of any sub-division,
consolidation or reclassification of any Parent Ordinary Share or any
issuance or the authorization of any issuance of any other securities in
exchange or in substitution for Parent Ordinary Shares at any time during
the period from the date of this Agreement to the Effective time, the
Company and Parent shall make such adjustment to the Conversion Number as
the Company and Parent shall mutually agree so as to preserve the economic
benefits that the Company and Parent each reasonably expected on the date
of this Agreement to receive as a result of the consummation of the Merger
and the other transactions contemplated by this Agreement.
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2.2. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Immediately following the Effective Time, Parent
shall deposit with a bank or trust company designated by Parent and the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates representing the Parent Ordinary
Shares issuable pursuant to Section 2.1 in exchange for outstanding shares
of Company Common Stock together with amounts sufficient in the aggregate
to provide all funds necessary for the Exchange Agent to make payments in
lieu of fractional shares pursuant to Section 2.2(e) (such Parent Ordinary
Shares and funds being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder
of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock, other than shares to be canceled or retired in
accordance with Section 2.1(b), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for effecting the
surrender of the Certificates in exchange for certificates representing
Parent Ordinary Shares. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole Parent Ordinary
Shares which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the
Company, a certificate representing the proper number of Parent Ordinary
Shares may be issued to a Person other than the Person in whose name the
Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment shall pay any transfer or other taxes
required by reason of the issuance of Parent Ordinary Shares to a Person
other than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing the
appropriate number of whole Parent Ordinary Shares, and cash in lieu of any
fractional Parent Ordinary Shares to the extent provided in Section 2.2(c)
as contemplated by this Section 2.2. No interest will be paid or will
accrue on any cash payable in lieu of any fractional Parent Ordinary
Shares.
(c) Cash Payments with Respect to Unexchanged Shares. No cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the surrender of the Certificate in accordance with
this Article II. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificate representing whole Parent Ordinary Shares issued in exchange
therefor, without interest, at the time of such surrender, the amount of
any cash payable in lieu of a fractional Parent Ordinary Share to which
such holder is entitled pursuant to Section 2.2(e).
(d) No Further Ownership Rights in Company Common Stock. All Parent
Ordinary Shares issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
(credited as fully paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of
Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent for any reason, they shall
be canceled and exchanged as provided in this Article II, except as
otherwise provided by law.
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(e) No Fractional Shares. No certificates or scrip representing
fractional Parent Ordinary Shares shall be issued upon the surrender for
exchange of Certificates. No fractional interest shall entitle the owner to
vote or to any other rights of a security holder. In lieu of fractional
shares, each individual or entity who would otherwise have been entitled to
a fractional Parent Ordinary Share hereunder, will receive an amount in
cash (without interest) in British sterling or, in the case of U.S. holders
of Certificates, in U.S. dollars (calculated using the Noon Buying Rate in
effect on the date the Effective Time occurs) determined by multiplying
such fraction by the average of the closing mid-market prices of the Parent
Ordinary Shares on the London Stock Exchange ("LSE") (as derived from the
LSE Daily Official List) on each of the last five trading days immediately
preceding the date on which the Effective Time occurs. For purposes of this
Section 2.2(e), Noon Buying Rate shall mean the noon buying rate in New
York City for cable transfers in pounds sterling as certified for customs
purposes by the Federal Reserve Bank of New York.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for payment of their claim for
Parent Ordinary Shares and any cash in lieu of fractional Parent Ordinary
Shares. In no event shall Parent be deemed to have any ownership interest
in any portion of the Exchange Fund held by Parent.
(g) No Liability. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any Parent
Ordinary Shares or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Parent.
(i) Lost Certificates. In the event that 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 and, if required by Parent, the posting by such Person of a bond
in such reasonable amount as Parent may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Parent Ordinary Shares and any cash in lieu of fractional
shares to which they are entitled pursuant to this Agreement.
(j) Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law, including the tax laws of the United
Kingdom. To the extent that amounts are so withheld by the Surviving
Corporation or Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made.
(k) Further Assurances. The officers and directors of the Surviving
Corporation are hereby authorized, at and after the Effective Time, to
execute and deliver, in the name and on behalf of the Company or Merger
Sub, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Sub, any other
actions and thing to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the
Merger.
2.3. DISSENTING SHARES.
(a) Shares of Company Common Stock held by a stockholder who has
properly exercised appraisal rights with respect thereto in accordance with
Section 262 of the DGCL (collectively, the "Dissenting
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Shares") shall not be converted into Parent Ordinary Shares. From and after
the Effective Time, a stockholder who has properly exercised such appraisal
rights shall no longer retain any rights of a stockholder of the Company or
the Surviving Corporation, except those provided under Section 262 of the
DGCL.
(b) The Company shall give Parent (i) prompt notice of any written
demand under Section 262 of the DGCL with respect to any shares of Company
Common Stock, any withdrawal of any such demand and any other instruments
served pursuant to the DGCL and received by the Company and (ii) the right
to participate in all negotiations and proceedings with respect to any such
demands. The Company shall cooperate with Parent concerning, and shall not,
except with the prior written consent of Parent, voluntarily make any
payment with respect to, or offer to settle or settle, any such demands.
2.4. OPTIONS, WARRANTS AND CONVERTIBLE NOTES.
(a) Company Options.
(i) At the Effective Time, each outstanding and unexercised option
("Unexercised Option") to purchase shares of Company Common Stock
pursuant to the Company's 1990 Stock Incentive Plan (the "1990 Plan")
shall be converted into an option to purchase the number of Parent
Ordinary Shares equal to the Conversion Number multiplied by the number
of shares of Company Common Stock which could have been purchased
immediately prior to the Effective Time upon the exercise of the
Unexercised Option (provided that any fractional shares resulting from
such conversion shall be rounded down to the nearest share) (the "Parent
Option Shares") at an exercise price per Parent Option Share determined
by dividing the aggregate exercise price that would have been payable
upon exercising the Unexercised Option in full immediately prior to the
Effective Time by the number of Parent Option Shares (provided that the
exercise price per Parent Option Share shall be rounded up to the
nearest whole cent). The vesting schedule and other terms of the new
option shall be the same as the Unexercised Option except that all
references to the Company shall be deemed to be references to Parent.
The Company has taken or will take all such actions as may be required
to provide for the conversion of Unexercised Options in accordance with
this Section 2.4(a).
(ii) At the Effective Time, the Company's 1997 Stock Option Plan
(the "1997 Plan") shall terminate and each outstanding option to
purchase a share Company Common Stock pursuant to the 1997 Plan shall
terminate; provided, however, pursuant to Section 8.3 of the 1997 Plan,
any holder of an option under the 1997 Plan shall have the right,
immediately prior to the Effective Time, to exercise such option in
whole or in part whether or not the applicable vesting requirements have
been satisfied.
(b) Company Warrants. At the Effective Time, each outstanding warrant
to purchase or otherwise acquire Company Common Stock ("Company Warrants")
shall cease to represent a right to purchase or otherwise acquire Company
Common Stock and shall be converted into a warrant ("Parent Warrant") to
acquire that number of Parent Ordinary Shares (the "Parent Warrant Shares")
obtained by multiplying the number of shares of Company Common Stock which
could have been purchased immediately prior to the Effective Time upon
exercise of the Company Warrant by the Conversion Number. If the foregoing
calculation results in a warrant being exercisable for a fraction of a
Parent Ordinary Share, then the number of Parent Warrant Shares shall be
rounded down to the nearest whole number. The exercise price per Parent
Warrant Share of each Parent Warrant shall be determined by dividing the
aggregate exercise price that would have been payable upon the exercise of
the Company Warrant in full immediately prior to the Effective Time by the
number of Parent Warrant Shares rounded up to the nearest cent. The other
terms of the Parent Warrants shall be the same as the Company Warrants
except that all references to the Company shall be deemed to be references
to Parent. The Company has taken or will take all such actions as may be
required to provide for the conversion of Company Warrants in accordance
with this Section 2.4(b).
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(c) Convertible Notes. At the Effective Time, each of the Company's 6%
Convertible Notes, Due October 1, 2000, shall be assumed automatically by,
and become an obligation of, the Surviving Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule delivered by the
Company to Parent at or prior to the execution of this Agreement (the "Company
Disclosure Schedule"), the Company represents and warrants to Parent and Merger
Sub as follows:
3.1. ORGANIZATION, STANDING AND POWER; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, lease and operate its
assets and to carry on its business as it is now being conducted. The
Company is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or in good
standing which would not have a Material Adverse Effect on the Company.
Copies of the Certificate of Incorporation, as amended, and Bylaws, as
amended, of the Company heretofore delivered to Parent are accurate and
complete as of the date hereof.
(b) The only subsidiaries of the Company are those listed in the
Company Disclosure Schedule (the "Company Subsidiaries"). The Company is,
directly or indirectly, the record and beneficial owner of all of the
outstanding shares of capital stock of each of the Company Subsidiaries and
there are no irrevocable or other proxies with respect to such shares.
There are no contracts, commitments, understandings or arrangements by
which the Company or any Company Subsidiary is bound to transfer shares or
issue additional shares of capital stock or other equity securities of a
Company Subsidiary or options, warrants or other rights to purchase such
shares or other equity securities or securities convertible into or
exchangeable for such shares or equity securities. All of the shares of
capital stock of each Company Subsidiary are fully paid and nonassessable
and are owned by the Company or a Company Subsidiary free and clear of any
claim, lien, encumbrance, restriction or agreement with respect thereto.
Each Company Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and
has the requisite corporate power to carry on its business as it is now
being conducted. Each Company Subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except for failures to be so
qualified or in good standing which would not have a Material Adverse
Effect on the Company. Copies of the organizational documents of each
Company Subsidiary, which have been heretofore delivered to Parent, are
accurate and complete as of the date hereof. The Company and the Company
Subsidiaries are not, and have not agreed to become, the holder or owner of
any class of shares or other securities of, or any investment (whether
equity, debt, loan or advance) in, any Person other than the Company
Subsidiaries.
3.2. CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of 59,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock, par
value $0.01 per share (the "Preferred Stock"). As of the date of this
Agreement, (i) 52,057,219 shares of Company Common Stock are validly issued
and outstanding, fully paid and nonassessable and no other shares of
Company Common Stock are outstanding or are held in the Company's treasury
and (ii) no shares of Preferred Stock are issued and outstanding. All
outstanding shares of Company Common Stock have been duly authorized and
validly issued, and are fully paid, nonassessable and free of preemptive
rights. As of the date of this Agreement, there are no outstanding options,
warrants or other rights to acquire capital stock from the Company other
than 1,481,289 shares of Company Common Stock issuable upon exercise of
outstanding options under the 1990 Plan, 1,102,220 shares of Company Common
Stock issuable upon exercise of outstanding
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options under the 1997 Plan (collectively, the "Company Options") and
1,000,332 shares of Company Common Stock issuable upon exercise of
outstanding Company Warrants. There are not now and at the Effective Time
there will not be, any other shares of capital stock (other than shares of
Company Common Stock issued upon exercise of Company Options and Company
Warrants outstanding on the date hereof), or other equity securities of the
Company outstanding, or any other outstanding options, warrants, rights to
subscribe to (including any preemptive rights), calls or commitments of any
character whatsoever to which the Company or any Company Subsidiary is a
party or may be bound, requiring the issuance, transfer or sale of, shares
of any capital stock or other equity securities of the Company or
securities or rights convertible into or exchangeable for such shares or
other equity securities. There are not now and at the Effective Time will
not be any contracts, commitments, understandings or arrangements (other
than Company Options or Company Warrants outstanding on the date hereof) by
which the Company is or may become bound to issue additional shares of its
capital stock or other equity securities or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or other
equity securities or securities convertible into or exchangeable for such
shares or other equity securities. There are not now and at the Effective
Time will not be any outstanding contracts, commitments, understandings or
arrangements of the Company to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company. The Company Disclosure Schedule
sets forth, with respect to each Company Option, the grant or issue date,
expiration date, vesting schedule, exercise price and holder thereof. The
Company Disclosure Schedule sets forth, with respect to each Company
Warrant, the number of shares of Company Common Stock subject to such
Company Warrant, the exercise price and the expiration date.
(b) No bonds, debentures, notes or other indebtedness of the Company
having the right to vote on any matters on which stockholders may vote
("Company Voting Debt") are issued or outstanding.
3.3. AUTHORITY; NO CONFLICTS.
(a) The Company has all requisite corporate power and corporate
authority to enter into and deliver this Agreement and, subject to the
adoption of this Agreement by the requisite vote of the holders of Company
Common Stock, to consummate the transactions contemplated hereby. The Board
of Directors of the Company has duly authorized and approved this Agreement
and the transactions contemplated by this Agreement and has resolved to
recommend to the Company's stockholders that they approve this Agreement
and the transactions contemplated under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company, subject in the case of the consummation
of the Merger to the adoption of this Agreement by the stockholders of the
Company. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding agreement of the Company, enforceable
against it in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally and by general
equity principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(b) The delivery and performance of this Agreement by the Company and
consummation by it of the transactions contemplated hereby will not (i)
violate any provision of the organizational documents of the Company or any
Company Subsidiary; (ii) violate, conflict with or result in the breach of
any of the terms or conditions of, result in modification of the effect of,
or otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default
under, any material instrument, contract or other agreement to which the
Company or a Company Subsidiary is party or to which either of them or any
of their assets or properties is bound or subject; (iii) violate any law,
ordinance or regulation or any order, judgment, injunction, decree or
requirement of any court, arbitrator or governmental or regulatory body
applicable to the Company or a Company Subsidiary or by which any of their
assets or properties is bound; or (iv) result in the creation of any lien
or other encumbrance on the assets or properties of the Company or a
Company Subsidiary, excluding from the foregoing clauses (ii), (iii) and
(iv) violations, breaches and defaults which, and filings, notices,
permits,
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consents and approvals the absence of which, in the aggregate, would not
have a Material Adverse Effect on the Company.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any U.K., U.S. or foreign supranational,
national, state, municipal or local government, any instrumentality,
subdivision, court, administrative agency or commission or other authority
thereof, or any quasi-governmental or private body exercising any
regulatory, taxing, or other governmental or quasi-governmental authority
(a "Governmental Entity"), is required to be obtained by the Company or any
Company Subsidiary in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (x) those required under or in
relation to (A) U.S. state securities or "blue sky" laws, (B) the
Securities Act of 1933, as amended (the "Securities Act"), including the
filing of the Form F-4 (as defined below) with the Securities and Exchange
Commission ("SEC"), (C) the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including the filing of the Proxy Statement (as
defined below), (E) the DGCL with respect to the filing and recordation of
appropriate merger or other documents, (F) rules and regulations of the
LSE, and (G) antitrust or other competition laws of other jurisdictions,
and (y) such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain could not
reasonably be expected to have a Material Adverse Effect on the Company or
impair or delay the ability of the Company to consummate the transactions
contemplated hereby.
3.4. REPORTS AND FINANCIAL STATEMENTS. The Company has filed with the SEC
all reports, forms, definitive proxy statements and documents required to be
filed by the Company with the SEC since January 1, 1997 (the "SEC Reports"). As
of their respective dates, the SEC Reports (including all financial statements,
exhibits and schedules thereto and documents incorporated by reference therein)
complied, and all reports filed by the Company between the date of this
Agreement and the Effective Time will comply, in all material respects with
applicable SEC requirements and did not, or in the case of reports filed on or
after the date hereof will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company and the
Company Subsidiaries included or incorporated by reference in the SEC Reports
heretofore delivered to Parent, have been prepared from, and are in accordance
with, the Company's books and records, are in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and fairly present the consolidated assets, liabilities and financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments which are not, in the aggregate,
material).
3.5. INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in (i) the registration
statement on Form F-4 to be filed with the SEC by Parent in connection with
the issuance of Parent Ordinary Shares in the Merger (the "Form F-4") will
at the time it becomes effective under the Securities Act, 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
not misleading, or (ii) the proxy statement related to the meeting of the
Company's stockholders to be held in connection with the Merger and the
transactions contemplated by this Agreement (the "Proxy Statement") will,
on the date it is first mailed to the Company's stockholders or at the time
of the Company Stockholders Meeting (as defined below), contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by the
Company with respect to statements made or incorporated by reference in the
Proxy Statement or Form F-4 relating to Parent or Merger Sub or based on
information supplied by Parent or Merger Sub for inclusion or incorporation
by reference therein. The
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Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(b) None of the information supplied or to be supplied by the Company
for inclusion in the Class 1 Shareholder Circular (which will include
listing particulars under Part IV of the Financial Services Act 1986 of the
United Kingdom, as amended (the "FSA")) (the "Parent Disclosure Circular")
will, on the date the Parent Disclosure Circular is first mailed to
shareholders of Parent and at the time of the extraordinary general meeting
of Parent shareholders (the "Parent Shareholder Meeting") to vote on
approval of the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.6. COMPLIANCE WITH LAW. None of the Company or the Company Subsidiaries
has violated or failed to comply in any respect with any statute, law,
ordinance, regulation, rule or order of any foreign, federal, state or local
government or any other governmental department or agency, or any judgment,
decree, order or requirement of any court, applicable to its business,
operations, properties and assets which violation or failure would, individually
or in the aggregate with all other violations and failures, have a Material
Adverse Effect on the Company. The conduct of the Company's and the Company
Subsidiaries' business is in conformity with all labor, employment, energy,
public utility, zoning, building code, health, OSHA and environmental
requirements and all other material foreign, federal, state and local
governmental and regulatory requirements applicable to its business, operations,
properties and assets, except for such failures to conform which would not
individually or in the aggregate have a Material Adverse Effect on the Company.
Neither the Company nor any Company Subsidiary has received any notice asserting
a failure to comply with any such statute, law, ordinance, regulation, rule,
judgment, decree or order.
3.7. LITIGATION. There are no actions, suits, proceedings, arbitration,
mediation or investigations pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary, nor is the Company or
any Company Subsidiary subject to any order, judgment, writ, injunction or
decree of any court or governmental or regulatory authority or body. To the best
knowledge of the Company, there is no fact, event or circumstance now in
existence that reasonably could be expected to give rise to any material action,
suit, claim, proceeding or investigation against the Company or any Company
Subsidiary.
3.8. TAXES.
(a) Filing of Tax Returns. The Company (including, for purposes of
this Section 3.8, each of its subsidiaries from time to time) has timely
filed with the proper taxing or other Governmental Entities all Tax Returns
(as such term is defined herein) required to be filed through the date
hereof. Such Tax Returns are complete, correct and accurate in all material
respects. The Company has delivered to Parent complete and accurate copies
of all of the Company's federal, state and local Tax Returns filed for its
taxable years ended December 31, 1995, 1996 and 1997. The Company has not
filed any federal, state or local Tax Returns for its taxable year ended
December 31, 1998.
(b) Payment of Taxes. All Taxes for which the Company is shown as
owing on any Tax Return for any period or portion thereof heretofore ended,
have been paid, or an adequate reserve (in conformity with U.S. GAAP
applied on a consistent basis and in a manner consistent with the Company's
past custom and practice) has been established therefor in the Company's
financial statements, and the Company has no material liability for Taxes
in excess of the amounts so paid or reserves so established. All Taxes that
the Company has been required to collect or withhold have been duly
collected or withheld and, to the extent required when due, have been or
will be duly paid to the proper taxing or other governmental authority.
(c) Audit History.
(i) No deficiencies for Taxes of the Company have been claimed,
proposed or assessed by any taxing or other governmental authority.
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(ii) There are no pending or, to the best of the Company's
knowledge, threatened audits, investigations or claims for or relating
to any liability in respect of Taxes of the Company, and there are no
matters under discussion with any taxing or other governmental authority
with respect to Taxes of the Company.
(iii) All audits of federal, state and local returns for Taxes by
the relevant taxing or other governmental authority have been completed
for all periods, and the Company has made available to Parent all
examination reports and statements of deficiencies assessed against or
agreed to by the Company for any period.
(iv) The Company has not been notified that any taxing or other
governmental authority intends to audit a Tax Return for any other
period.
(v) No extension of a statute of limitations relating to Taxes is
in effect with respect to the Company.
(vi) The Company does not have any knowledge of any claim made by
an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
(d) Tax Elections.
(i) There are no material elections with respect to Taxes affecting
the Company.
(ii) The Company has not made an election, and is not required, to
treat any asset of the Company as owned by another person or as
tax-exempt bond financed property or tax-exempt use property within the
meaning of Section 168 of the Code or under any comparable state or
local income Tax or other Tax provision.
(iii) The Company is not a party to or bound by any binding tax
sharing, tax indemnity or tax allocation agreement or other similar
arrangement with any other person or entity.
(iv) The Company has not filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state or local law) or agreed to have
Sections 341(f)(2) of the Code (or any corresponding provision of state
or local law) apply to any disposition of any asset owned by it.
(e) Additional Representations.
(i) There are no liens for Taxes (other than for Taxes not yet
delinquent) upon the assets of the Company.
(ii) The Company has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code, nor has the
Company or any present or former subsidiary, or any predecessor or
affiliate of any of them, become liable (whether by contract, as
transferee or successor, by law or otherwise) for the Taxes of any other
person or entity under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign law.
(iii) The Company has not made, requested or agreed to make, nor is
it required to make, any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise for any taxable
year.
(iv) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in
the aggregate, in the payment of any amount as to which a deduction may
be denied under Section 162(m) or 280G of the Code.
(v) The Company is not a party to any joint venture, partnership,
or other arrangement or contract which could be treated as a partnership
for federal, state, local or foreign Tax purposes.
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(vi) The Company has prepared and made available to Parent all of
the Company's books and working papers that clearly demonstrate the
income and activities of the Company for the last full reporting period
ending prior to the date hereof.
(vii) The Company has not 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).
(viii) The Company has properly requested, received and retained
all necessary exemption certificates and other documentation supporting
any claimed exemption or waiver of Taxes on sales or other transactions
as to which the Company would have been obligated to collect or withhold
Taxes except for any failure to do so which would not be expected to
have a Material Adverse Effect on the Company.
(f) Definition of Taxes. For purposes of this Article III, the term
"Taxes" shall mean any federal, state, local or foreign income, gross
receipts, profits, occupation, franchise, capital stock, real or personal
property, sales, use, registration, value added, transfer, license,
commercial rent, payroll, employment, unemployment, social security,
disability, withholding, alternative or add-on minimum, customs, excise,
severance, stamp, environmental, estimated, or other tax of any kind
whatsoever, including any interest, penalties or additions thereto, whether
disputed or not.
(g) Definition of Tax Return. For purposes of this Article III, the
term "Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by this
Agreement, since December 31, 1998, none of the following have occurred: (i) any
change, event or condition (or any development involving a prospective change,
event or condition) or any threat thereof, which change, event or condition has
had, or is reasonably likely to have, a Material Adverse Effect on the Company;
(ii) any change in accounting methods, principles or practices by the Company
affecting its assets, liabilities or business; (iii) any revaluation by the
Company or any of the Company Subsidiaries of any of their assets; (iv) any
damage, destruction or loss having a Material Adverse Effect on the Company; (v)
any cancellation of any material debts or waiver or release of any material
right or claim of the Company relating to its business activities or properties;
(vi) any declaration, setting aside or payment of dividends or distributions in
respect of any shares of capital stock or any redemption, purchase or other
acquisition of any securities of the Company or the Company Subsidiaries; (vii)
any issuance by the Company or any Company Subsidiary of, or commitment of the
Company or any Company Subsidiary to issue, any shares of stock, options,
warrants or other equity securities or obligations or securities convertible
into or exchangeable for shares of stock, options, warrants or other equity
securities, other than upon exercise of Company Options or Company Warrants;
(viii) negotiation or execution of any material arrangement, agreement or
understanding to which the Company or any Company Subsidiary is a party which
cannot be terminated by it on notice of 30 days or less without cost or penalty;
(ix) the making of any loan or payment, the entering into of any arrangement,
agreement or understanding or similar transaction with any Person who is an
officer, director or stockholder of the Company or any Company Subsidiary, or
who is an affiliate or associate of such a Person; (x) any capital expenditures
other than in the ordinary course of business and consistent with past practice
by the Company or any Company Subsidiary in an aggregate amount that exceeds
$80,000; (xi) any adoption of a plan of liquidation or resolutions providing for
the liquidation, dissolution, merger, consolidation or other reorganization of
the Company or any Company Subsidiary; (xii) any increase in salary, bonus,
fringe benefit, severance, retention bonus or incentive or other compensation
payable or to become payable to any officer, director, employee or other Person
receiving compensation of any nature from the Company or any Company Subsidiary;
any increase in the number of shares obtainable under, or the acceleration or
creation of any rights of any Person to benefits under, any Employee Plan (as
defined herein) (including, without limitation, the acceleration of the vesting
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement), or the
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entering into of any employment, consulting, severance or other employee related
agreement, arrangement or understanding with the Company or any Company
Subsidiary; (xiii) any delay or failure to repay when due any material
obligation of the Company or any Company Subsidiary; (xiv) any notice of
termination of employment by any officer or employee or resignation by any
director; or (xv) any agreement by the Company or any Company Subsidiary to do
any of the things described in the preceding clauses (i) through (xiv) other
than as expressly provided for herein.
3.10. VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock (the "Required Company Votes")
adopting this Agreement and approving the consummation of the transactions
contemplated hereby is the only vote or action of the holders of any class or
series of the Company capital stock necessary to consummate the transactions
contemplated hereby.
3.11. CERTAIN AGREEMENTS. The Company Disclosure Schedule lists all
Material Contracts. For purposes of this Agreement, unless otherwise indicated,
"Material Contracts" means all contracts of the following types to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary or any of their respective properties is bound, including
real property leases, labor or employment-related agreements, and contracts
relating to intellectual property: (a) joint venture and limited or general
partnership agreements, shareholder agreements with respect to the Company
Subsidiaries, joint ventures or partnerships or other contracts involving
sharing of profits, losses, costs or liabilities, (b) mortgages, indentures,
loan or credit agreements, letters of credit, reimbursement agreements, personal
property leases, security agreements and other agreements and instruments
relating to the borrowing of money or extension of credit in any case in excess
of $80,000, (c) other contracts which are not cancelable by the Company or any
Company Subsidiary on notice of sixty (60) days or less and which require
payment by the Company after the date hereof of more than $80,000 in any one
calendar year, (d) material license or royalty agreements, whether the Company
or any Company Subsidiary is the licensor or licensee thereunder, (e)
confidentiality and non-disclosure agreements, (whether the Company or any
Company Subsidiary is the beneficiary or the obligated party thereunder) other
than such agreements entered into with consultants to the Company and the
Company Subsidiaries or entered into in connection with possible acquisitions,
(f) contracts containing covenants limiting the freedom of the Company or any
Company Subsidiary or any of their respective officers to engage in any line of
business or compete with any Person that relates directly or indirectly to the
Company's business, (h) indemnification agreements with respect to any
acquisition or disposition of assets, securities or business, whether the
Company or any Company Subsidiary is the indemnitor or indemnitee, (i) contracts
currently outstanding or which have been outstanding at any time in the last
three years with any Person known to be an affiliate, director, officer,
employee or shareholder of the Company (other than the Company and the Company
Subsidiaries), (j) any executory contract relating to any material acquisitions
or dispositions of assets, securities or businesses by the Company or any
Company Subsidiary, (k) any agreement with a change of control provision or with
restrictions or limitations on, or consent requirements with respect to,
assignments, (l) any research, development or governmental grants made by any
Person to the Company or any Company Subsidiary in the last three years and (m)
contracts under which the Company or any Company Subsidiary is responsible for
the indebtedness or obligations of any other Person or which evidence any
guaranty or surety by the Company or any Company Subsidiary. The Company and the
Company Subsidiaries have made available to Parent a true and correct copy of
each Material Contract. The Company and the Company Subsidiaries are in
compliance in all material respects with their respective obligations under the
Material Contracts. All of the Material Contracts are in full force and effect,
are valid and binding obligations of the Company and the Company Subsidiaries
and enforceable in all material respects by the Company and the Company
Subsidiaries in accordance with their terms except to the extent that such
enforceability may be limited by bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium, receivership or similar laws affecting
creditors' rights generally and by general principles of equity (whether
considered at law or in equity). To the knowledge of the Company, the other
party to a Material Contract is in compliance with its material obligations
thereunder.
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3.12. EMPLOYEE BENEFIT PLANS.
(a) The Company Disclosure Schedule lists every Employee Plan (as
defined below) that has been maintained (as defined below) by the Company
or any Company Subsidiary at any time during the three-year period ending
at the Effective Time.
(b) Each Employee Plan maintained by the Company or any Company
Subsidiary and intended to qualify under Section 401(a) or 501(c)(9) of the
Code has received a favorable determination or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification under such
section. To the best knowledge of the Company, no event or omission has
occurred which would cause any such Employee Plan to lose its qualification
under the applicable Code section.
(c) Neither the Company nor any Company Subsidiary knows or has reason
to know of any material failure of any party to comply with any laws
applicable to the Employee Plans that have been maintained by the Company
or any Company Subsidiary. With respect to any Employee Plan ever
maintained by the Company or any Company Subsidiary, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Code, or breach of any duty under ERISA or other applicable law
(including, without limitation, any health care continuation requirements
or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan), which could result, directly or
indirectly, in any taxes, penalties or other liability to the Company, any
Company Subsidiary, Parent or Merger Sub. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other
proceeding (other than those relating to routine claims for benefits) is
pending or, to the Company's knowledge, threatened with respect to any
Employee Plan maintained by the Company or any Company Subsidiary.
(d) Neither the Company, nor any Company Subsidiary nor any of their
Affiliates (as defined below) (i) has ever maintained any Employee Plan
which has been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code (including, but not limited to, any Multiemployer
Plan (as defined below)), (ii) has ever maintained any other Multiemployer
Plan, or (iii) has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than
as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(e) With respect to each Employee Plan maintained by the Company or
any Company Subsidiary within the three years preceding the Effective Time,
complete and correct copies of the following documents (if applicable to
such Employee Plan) have previously been delivered to Parent: (i) all
documents embodying or governing such Employee Plan, and any funding medium
for the Employee Plan (including, without limitation, trust agreements) as
they may have been amended; (ii) the most recent IRS determination or
approval letter with respect to such Employee Plan under Code Sections 401
or 501(c)(9), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three most recently filed IRS
Forms 5500, with all applicable schedules and accountants' opinions
attached thereto; (iv) the summary plan description for such Employee Plan
(or other descriptions of such Employee Plan provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Plan; (vi) any
documents evidencing any loan to an Employee Plan that is a leveraged
employee stock ownership plan; and (vii) all other materials reasonably
necessary for Parent or Merger Sub to perform any of its responsibilities
with respect to any Employee Plan subsequent to the Effective Time
(including, without limitation, health care continuation requirements).
(f) Each Employee Plan listed on the Company Disclosure Schedule may
be amended, terminated, modified or otherwise revised prospectively by the
Company or any Company Subsidiary as applicable, including the elimination
of any and all future benefit accruals under any Employee Plan.
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(g) For purposes of this section:
(i) "Employee Plan" means (A) all employee benefit plans within the
meaning of ERISA Section 3(3), including, but not limited to, multiple
employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes
and employee benefit plans (such as foreign or excess benefit plans)
which are not subject to ERISA; and (B) all stock option plans, bonus or
incentive award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements, vacation
plans, and all other employee benefit plans, agreements, and
arrangements not described in (A) above. In the case of an Employee Plan
funded through an organization described in Code Section 501(c)(9), each
reference to such Employee Plan shall include a reference to such
organization.
(ii) An entity "maintains" or has "maintained" an Employee Plan if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Plan, or has sponsored,
contributed to or been obligated to contribute to such Employee Plan, or
has any obligation (by agreement or under applicable law) to contribute
to or provide benefits under such Employee Plan, or if such Employee
Plan provides or has provided benefits to or otherwise covers employees
of such entity, or their spouses, dependents, or beneficiaries, or such
entity has or may incur any liability under such Employee Plan.
(iii) For purposes of this Section 3.12, an entity is an
"Affiliate" of the Company or any Company Subsidiary if it would have
ever been considered a single employer with the Company or any Company
Subsidiary, respectively, under ERISA Section 4001(b) or part of the
same "controlled group" as the Company or any Company Subsidiary or any
of their respective subsidiaries for purposes of ERISA Section
302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension) employee
benefit plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements
(including, but not limited to, any "multiemployer plan" within the
meaning of Section 3(37) or 4001(a)(3) of ERISA).
3.13. BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except The British Linen Bank Limited.
3.14. OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of The British Linen Bank Limited as of the date of this Agreement, to the
effect that, as of such date, the Conversion Number is fair, from a financial
point of view, to the holders of Company Common Stock.
3.15. ENVIRONMENTAL.
(a) The Company and the Company Subsidiaries are in compliance with
all applicable Environmental Laws (as defined below) (which compliance
includes, but is not limited to, the possession by the Company and the
Company Subsidiaries of all permits and other governmental authorizations
required under applicable Environmental Laws (collectively, "Company
Environmental Permits"), and compliance with the terms and conditions
thereof), except for any noncompliance that individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect on the Company. Neither the Company nor any Company Subsidiary has
received any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the
Company is not in such compliance, and there are no past or present
actions, activities, circumstances, conditions, events or incidents that
may prevent or interfere with such compliance in the future.
(b) There is no Company Environmental Claim (as defined below) pending
or, to the knowledge of the Company, threatened against the Company or any
Company Subsidiary, or to the knowledge of the Company, against any person
or entity whose liability for any Company Environmental Claim the Company
or any Company Subsidiary has retained or assumed either contractually or
by operation of
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law, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on the Company.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents (including, without limitation, the
release, omission, discharge, presence or disposal of any Hazardous
Material) (as defined below) which could form the basis of any Company
Environmental Claim against the Company or any Company Subsidiary, or, to
the knowledge of the Company, against any person or entity whose liability
for any Company Environmental Claim the Company or any Company Subsidiary
has or may have retained or assumed either contractually or by operation of
law, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on the Company.
(d) Neither the Company nor any Company Subsidiary has, and to the
knowledge of Company, no other person has Released (as defined below),
placed, stored, buried or dumped Hazardous Materials on, beneath or
adjacent to any property owned, operated or leased or formerly owned,
operated or leased by the Company or any Company Subsidiary and neither the
Company nor any Company Subsidiary has received notice that it is a
potentially responsible party for the Cleanup (as defined below) of any
property, whether or not owned or operated by the Company or any Company
Subsidiary, which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect on the Company.
(e) The Company and the Company Subsidiaries have delivered or
otherwise made available for inspection to Parent true, complete and
correct copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Company or any Company Subsidiary
pertaining to Hazardous Materials on, beneath or adjacent to the property
owned or leased by the Company or any Company Subsidiary or regarding the
Company's and the Company Subsidiaries' compliance with applicable
Environmental Laws.
(f) No transfers of Company Environmental Permits and no additional
Company Environmental Permits will be required to permit the Company and
the Company Subsidiaries or the Surviving Corporation and its subsidiaries,
as the case may be, to be in full compliance all applicable Environmental
Laws for the period immediately following the transactions contemplated
hereby, as conducted by the Company and the Company Subsidiaries
immediately prior to the date hereof.
(g) The following terms as used in this Section 3.15 shall have the
following meanings:
(i) "Cleanup" means all actions required by governmental entities
or Environmental Laws to: (1) clean-up, remove, treat or remediate
Hazardous Materials in the indoor or outdoor environment; (2) prevent
the Release of Hazardous Materials so that they do not migrate, endanger
or threaten to endanger public health or welfare or the indoor or
outdoor environment; (3) perform pre-remedial studies and investigations
and post-remedial monitoring and care; or (4) respond to any government
requests for information or documents in any way relating to cleanup,
removal, treatment or remediation or Hazardous Materials in the indoor
or outdoor environment.
(ii) "Company Environmental Claim" means any claim, action, cause
of action, investigation or written notice by any person or entity
alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, monitoring costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or Release into the indoor or outdoor
environment, of any Hazardous Materials at any location, whether or not
owned or operated by the Company or any Company Subsidiary or (b)
circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
(iii) "Environmental Laws" means all federal, state, local and
foreign laws and regulations relating to pollution or protection of
human health or the environment, including without limitation, laws
relating to Releases or threatened Releases of Hazardous Materials into
the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment,
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storage, Release, disposal, transport or handling of Hazardous Materials
and all laws and regulations with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Hazardous Materials.
(iv) "Hazardous Materials" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National
Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
sec. 300.5, or defined as such by, or regulated as such by or under any
Environmental Law.
(v) "Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including,
without limitation, ambient air, surface water, groundwater and surface
or subsurface strata) or into or out of any property, including the
movement of Hazardous Materials through or in the air, soil, surface
water, groundwater or property.
3.16. LABOR MATTERS. The Company and the Company Subsidiaries are not a
party to any labor agreement with respect to their employees with any labor
organization, group or association. The Company and the Company Subsidiaries are
in compliance in all material respects with all applicable laws respecting
employment practices, terms and conditions of employment and wages and hours and
are not engaged in any unfair labor practice. There is no unfair labor practice
charge or complaint against the Company or any Company Subsidiary pending before
the National Labor Relations Board or any other governmental agency, and the
Company has no knowledge of any facts or information which would give rise
thereto. There is no labor strike or labor disturbance pending or, to the
Company's knowledge, threatened against the Company or any Company Subsidiary
nor is any grievance currently being asserted; and the Company and the Company
Subsidiaries have not experienced a work stoppage or other labor difficulty.
3.17. PROPRIETARY RIGHTS.
(a) The term "Company Proprietary Rights" includes: (i) fictitious
business names, trading names, registered and unregistered trademarks,
service marks, and applications (collectively "Marks"); (ii) patents,
patent applications, disclosures, and inventions and discoveries that may
be patentable (collectively "Patents"); (iii) copyrights in both published
works and unpublished works (collectively "Copyrights"); (iv) know-how,
trade secrets, confidential information, customer lists, software,
technical information, data, process technology, plans, drawings, blue
prints and other similar material (collectively "Trade Secrets"); and (v)
any of the foregoing licensed by the Company from third parties (the
"Company Licensed Proprietary Rights") in each case, used in the Company's
business.
(b) The Company Disclosure Schedule sets forth with respect to the
Company Proprietary Rights: (i) for each Patent and patent application,
including petty patents and utility models and applications therefor, as
applicable, the number, normal expiration date, title and priority
information for each country in which such patent has been issued, or, the
application number, date of filing, title and priority information for each
country and (ii) all Company Licensed Proprietary Rights.
(c) The Company Proprietary Rights are all those necessary for the
operation of the Company's business as it is currently conducted and as
presently contemplated, including the design, manufacture and sale of all
products currently under development or in production. Except for the
rights of third parties that may exist with respect to the Company Licensed
Proprietary Rights, the Company is the owner of all right, title, and
interest in each of the Company Proprietary Rights, free and clear of all
security interests, charges, encumbrances, and other adverse claims, and
has the right to use without payment to a third party (except for payments
under licenses of Company Licensed Proprietary Rights) and without
infringing the rights of any third party all of the Company Proprietary
Rights. To the Company's best knowledge, no employee of the Company has
entered into any agreement that requires the employee to transfer, assign,
or disclose information concerning his work on behalf of the Company to
anyone other than the Company. No other Person (a) has notified the Company
or any Company Subsidiary that it is claiming any ownership of, or right to
use, any Company Proprietary Rights or (b) to
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the best of the Company's knowledge, has interfered with, infringed upon or
otherwise come into conflict with or challenged the validity of any Company
Proprietary Rights.
(d) The Company Disclosure Schedule contains a complete and accurate
list and summary description of all Patents owned by the Company ("Owned
Patents"). The Company is the owner of all right, title and interest in and
to each of the Owned Patents, free and clear of all liens, security
interests, charges, encumbrances, and other adverse claims; all of the
issued Owned Patents are currently in compliance with formal legal
requirements (including payment of filing, examination and maintenance fees
and proofs of working or use), are valid and enforceable; no Owned Patent
material to the Company's business as conducted or proposed to be conducted
has been or is now involved in any interference, reissue, reexamination, or
opposition proceeding, and to the Company's best knowledge, there is no
potentially interfering patent or patent application of any third party; to
the Company's best knowledge, no Owned Patent is infringed or has been
challenged or threatened in any way; the operation of the Company's
business and any process or know-how used does not infringe any third party
proprietary right of any other person or entity; and any products made,
used or sold under the Owned Patents have been marked with the proper
patent notice. The Company has conducted an inquiry regarding the presence
of activities which might materially infringe the Owned Patents and has
provided a summary of the results of such inquiry to Parent.
(e) The Company Disclosure Schedule contains a complete and accurate
list and summary description of all registered Marks owned by the Company
("Owned Marks"); the Company is the owner of all right, title and interest
in and to each of the Owned Marks, free and clear of all liens, security
interests, charges, encumbrances, and other adverse claims; all Owned Marks
that have been registered with the USPTO are currently in compliance with
all formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications),
are valid and enforceable; no Owned Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to the Company's best
knowledge, no such action is threatened with respect to any of the Owned
Marks; to the Company's best knowledge, there is no potentially interfering
trademark or trademark application of any third party; to the Company's
best knowledge, no Owned Mark is infringed or has been challenged or
threatened in any way; none of the Owned Marks used in conjunction with the
Company's business infringes or, to the Company's best knowledge, is
alleged to infringe any trade name, trademark, or service mark of any third
party; and all products and materials containing an Owned Mark bear the
proper federal registration notice where permitted by law.
(f) The Company Disclosure Schedule contains a complete and accurate
list and summary description of all material Copyrights owned by the
Company ("Owned Copyrights"); the Company is the owner of all right, title
and interest in and to each of the Owned Copyrights, free and clear of all
liens, security interests, charges, encumbrances, and other adverse claims;
to the Company's best knowledge, no Owned Copyright is infringed or has
been challenged or threatened in any way; the subject matter of any of the
Owned Copyrights does not infringe and, to the Company's best knowledge, is
not alleged to infringe any copyright of any third party or is a derivative
work based on the work of a third party; and all material works encompassed
by the Owned Copyrights have been marked with proper copyright notices.
(g) With respect to each Trade Secret relating to, or used in
conjunction with, the Company's business ("Owned Trade Secrets"): the
documentation relating to such Owned Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to allow
its full and proper use without reliance on the knowledge or memory of any
individual; the Company has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of the Owned Trade Secrets; the Company
has good title and an absolute (but not necessarily exclusive) right to use
any Owned Trade Secret; to the Company's best knowledge, the Owned Trade
Secrets are not part of the public knowledge or literature, and have not
been used, divulged or appropriated either for the benefit of any third
party person or entity or to the detriment of the Company; and to the
Company's best knowledge, no Owned Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
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(h) The Company Disclosure Schedule lists all payments due to third
parties in respect of commercial exploitation of the products currently
under development by the Company. (i) The Company Disclosure Schedule lists
all material licenses or rights which have been granted by the Company.
(i) The Company Disclosure Schedule lists all material licenses or
rights which have been granted by the Company.
(j) The consummation of the Merger will not adversely affect the
rights of the Company under any of the Company Proprietary Rights.
3.18. INSURANCE. The Company Disclosure Schedule sets forth a complete and
accurate list, as of the date hereof, of the material policies of insurance
maintained by the Company and the Company Subsidiaries with respect to the
products, properties, assets, operations and business of the Company and the
Company Subsidiaries since 1996. All insurance coverage applicable to the
Company and the Company Subsidiaries is in full force and effect, insures the
Company and the Company Subsidiaries in sufficient amounts (consistent with
industry standards) against all risks usually insured against by Persons
operating similar businesses or properties of similar size in the localities
where such businesses or properties are located, provides coverage as may be
required by all regulations which the Company and the Company Subsidiaries are
subject and has been issued by insurers of recognized responsibility. There is
no default under any such coverage nor has there been any failure to give notice
or present any claim under any such coverage in a due and timely fashion. There
are no outstanding unpaid premiums except in the ordinary course of business and
no notice of cancellation or nonrenewal of any such coverage has been received.
There are no provisions in such insurance policies for retroactive or
retrospective premium adjustments. There are no facts upon which an insurer
might be justified in reducing coverage or increasing premiums on existing
policies or binders. There are no outstanding unpaid claims under any such
policies or binders.
3.19. PERMITS; LICENSES. The Company and each Company Subsidiary has, and
at all times has had, all material licenses, permits, authorizations, approvals
and registrations required under any statute, law, ordinance, regulation, rule
or order of any foreign, federal, state or local government or any other
governmental department or agency in the operation of the Company's business
(collectively, "Permits") and owns or possesses such Permits free and clear of
all encumbrances. The Company and each Company Subsidiary is in material
compliance with all Permits and neither the Company nor any Company Subsidiary
is in default or received any notice of any claim of default with respect to any
such Permit. There are no proceedings, investigations or audits pending, or to
the Company's knowledge, threatened against the Company or any Company
Subsidiary by any governmental agency relating to any Permit. All such Permits
are renewable by their terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to pay any amounts
other than routine filing fees and will not be adversely affected by the
completion of the Merger or the transactions contemplated hereby. No present or
former stockholder, director, officer or employee of the Company or any
affiliate thereof, or any other person, firm, corporation or other entity, owns
or has any proprietary, financial or other interest (direct or indirect) in any
Permit which the Company owns, possesses or uses.
3.20. ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
Company Subsidiary has any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due (including, without
limitation, all tax liabilities and liabilities for all money borrowed) which
would be required to be disclosed in financial statements, including the
footnotes thereto, prepared in accordance with U.S. GAAP, and which are not
adequately reflected or reserved against in the Company's balance sheet as of
December 31, 1998, including the footnotes thereto (the "Company Balance
Sheet"), except such as have arisen in the ordinary course of business since
such date. The Company has not engaged, and prior to the Effective Time will not
engage, in any hedging transactions or transactions in derivative securities.
The total amount borrowed by the Company and the Company Subsidiaries does not,
and at the Effective Time will not, exceed any limitation on borrowing in any
agreement to which the Company or any Company Subsidiary is a party.
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3.21. BOOKS AND RECORDS. The minute books and other records of the
Company, all of which have been made available to Parent, are complete and
correct in all material respects and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Exchange Act, including the maintenance of an adequate system of internal
controls. The Company minute books contain in all material respects accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors and committees of the board of directors of
the Company, and no meeting of any such stockholders, Board of Directors or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.
3.22. TITLE TO PROPERTIES; CONDITION OF PROPERTIES.
(a) The Company and each Company Subsidiary has good, valid and
marketable title (in fee simple absolute in the case of real property) to
all properties and assets used in its business, except for leased
properties and assets; none of those owned properties is subject to any
mortgage, deed of trust, pledge, lien, claim, charge, equity, covenant,
condition, restriction easement, right-of-way or encumbrance, except (i)
liens, claims, charges and encumbrances disclosed, or reserved against, in
the Company Balance Sheet, (ii) liens for current taxes not yet due and
payable, and (iii) minor imperfections of title not material (individually
or in the aggregate) and not materially detracting from the value, or the
use (either actual or intended) the Company and the Company Subsidiaries
make, of the property in question. All of the buildings, fixtures,
machinery and equipment owned or used by the Company and the Company
Subsidiaries are in good operating condition and repair, and comply in all
material respects with applicable zoning, building, fire and safety codes.
(b) The Company Disclosure Schedule lists all leases (the "Leases")
pursuant to which the Company and the Company Subsidiaries lease real
property (the "Leased Property"), including without limitation a general
description of the Leased Property, the terms, the applicable rent and any
and all renewal options. All such Leases are valid, binding and enforceable
in accordance with their terms and are in full force and effect and no
event of default has occurred which (whether with or without notice, lapse
of time or both or the happening or occurrence of any other event) would
constitute a default thereunder on the part of the Company or any Company
Subsidiary. To the Company's knowledge, each Lease that terminates within
two years of the date hereof and which does not provide for a renewal term,
will be renewed. Except as set forth in the Company Disclosure Schedule,
each Lease is fully assignable.
(c) There are no pending, or to the knowledge of the Company,
threatened condemnation proceedings with respect to the Leased Property, or
pending or, or to the knowledge of the Company, threatened litigation or
administrative actions relating to the Leased Property.
(d) There are no subleases, licenses, options, rights, concessions or
other agreements or arrangements, written or oral, granting to any Person
the right to use or occupy the Leased Property or any portion thereof or
interest therein.
3.23. CONSEQUENCE OF CONSUMMATION OF THE MERGER. The consummation of the
Merger will not: (a) relieve any Person of any obligation to the Company or any
Company Subsidiary (whether contractual or otherwise) or legally entitle any
Person to terminate any such obligation or any right or benefit enjoyed by the
Company or any Company Subsidiary or to exercise any right whether under an
agreement with or otherwise in respect of the Company or any Company Subsidiary;
(b) result in any present or future indebtedness of the Company becoming due and
payable or capable of being declared due and payable prior to its stated
maturity; or (c) give rise to a right of termination of any agreement for the
employment of any director, officer or senior employee of the Company.
3.24. PRODUCT REGULATORY REQUIREMENTS.
(a) The Company and the Company Subsidiaries have not manufactured for
commercial supply, marketed, sold or supplied any product which was at the
time not fully compliant with (i) the requirements of all applicable laws
and the laws of any territory in which any product has been placed on
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the market; (ii) the terms of any applicable recognized national or
international product standards; and (iii) any representation or warranty
(whether express or implied) given in respect of any product.
(b) At no time has the Company or any Company Subsidiary had knowledge
of or received any notice, claim, governmental enforcement action or other
communication from any person alleging any defect in any product
manufactured for commercial supply, marketed, sold or supplied by the
Company or any Company Subsidiary or any contravention of any applicable
law or standard relating to any such product.
3.25. YEAR 2000. The Company and the Company Subsidiaries are reviewing
their respective operations and those of any third parties with which the
Company or any Company Subsidiary has a material relationship to evaluate the
extent to which the business or operations of the Company or any Company
Subsidiary will be affected by the Year 2000 Problem. As a result of such
review, none of the Company or any Company Subsidiary has reason to believe, and
do not believe, that the Year 2000 Problem will have a Material Adverse Effect
on the Company. The "Year 2000 Problem" as used herein means any significant
risk that computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical systems of
any kind will not, in the case of dates or time periods occurring after December
31, 1999, function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000.
3.26. ADDITIONAL REPRESENTATIONS.
(a) The Company has no reason to believe that it will be unable to
submit a Product License Application for DigiTAb to the U.S. Food and Drug
Administration ("FDA") on or before July 31, 1999.
(b) The Company has no reason to believe that it will be unable to
realize $300,000 in CroTAb revenues and $750,000 in CroTAb license fees in
each of September and October 1999.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the Parent Disclosure Schedule delivered by Parent
to the Company at or prior to the execution of this Agreement (the "Parent
Disclosure Schedule"), Parent represents and warrants to the Company as follows:
4.1. ORGANIZATION, STANDING AND POWER; SUBSIDIARIES.
(a) Parent is a public limited company duly organized and validly
existing under the laws of England and Wales and has the requisite
corporate power and authority to own, lease and operate its assets and to
carry on its business as it is now being conducted. According to the
documents on the file of Parent in the custody of the Registrar of
Companies for England and Wales (the "Registrar of Companies"), Parent has
been in continuous and unbroken existence since the date of its
incorporation; no action is currently being taken by the Registrar of
Companies for striking Parent off the register and dissolving it as defunct
and Parent is not in liquidation or subject to an administrative order and
no receiver or manager of Parent's properties has been appointed. Copies of
the memorandum and articles of association of Parent heretofore delivered
to the Company are accurate and complete as of the date hereof.
(b) The only subsidiaries of Parent are those listed in the Parent
Disclosure Schedule (the "Parent Subsidiaries"). Parent is, directly or
indirectly, the legal and beneficial owner of all of the issued shares of
each of the Parent Subsidiaries. There are no contracts, commitments,
understandings or arrangements by which Parent or any Parent Subsidiary is
bound to transfer shares or issue additional shares or other equity
securities of a Parent Subsidiary or options, warrants or other rights to
purchase such shares or other equity securities or securities convertible
into or exchangeable for such shares or equity securities. All of the
issued shares of each Parent Subsidiary are fully paid or credited as fully
paid and are owned by
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Parent or a Parent Subsidiary free and clear of any claim, lien,
encumbrance, restriction or agreement with respect thereto. Each Parent
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power to carry on its business as it is now being
conducted. Copies of the memorandum and articles of association (or
equivalent organizational documents) of each Parent Subsidiary, which have
been heretofore delivered to the Company, are accurate and complete as of
the date hereof. Parent and the Parent Subsidiaries are not, and have not
agreed to become, the holder or owner of any shares, debentures or other
securities of, or any investment (whether equity, debt, loan or advance)
in, any Person other than the Parent Subsidiaries.
4.2. CAPITAL STRUCTURE.
(a) The authorized equity share capital of Parent consists of
100,000,000 Parent Ordinary Shares of 2p each. As of the date of this
Agreement, 73,999,954 Parent Ordinary Shares are issued and fully paid or
credited as fully paid. The Parent Ordinary Shares to be issued in the
Merger will, when issued in accordance with the terms of this Agreement, be
duly and validly issued and will rank pari passu with all other issued
Ordinary Shares in the capital of Parent. All issued Parent Ordinary Shares
have been duly authorized and validly issued, and are fully paid or
credited as fully paid. As of the date of this Agreement, there are no
outstanding options, warrants or other rights to acquire shares in Parent
other than 2,762,050 Parent Ordinary Shares issuable upon exercise of
outstanding options to acquire Parent Ordinary Shares ("Parent Options").
There are not now and at the Effective Time there will not be, any other
shares (other than Parent Ordinary Shares issued upon exercise of Parent
Options outstanding on the date hereof or allotted pursuant to this
Agreement and the Financing (as defined herein)), or other equity
securities of Parent outstanding, or any other outstanding options,
warrants, rights to subscribe to (including any pre-emptive rights), calls
or commitments of any character whatsoever to which Parent or any Parent
Subsidiary is a party or may be bound, requiring the issuance, transfer or
sale of, shares or other equity securities of Parent or securities or
rights convertible into or exchangeable for such shares or other equity
securities. There are not now and at the Effective Time will not be any
contracts, commitments, understandings or arrangements (other than Parent
Options outstanding on the date hereof or as contemplated by this Agreement
and the Financing) by which Parent is or may become bound to issue
additional shares or other equity securities or options, warrants or rights
to purchase or acquire any additional shares or other equity securities or
securities convertible into or exchangeable for such shares or other equity
securities. There are not now and at the Effective Time will not be any
outstanding contracts, commitments, understandings or arrangements of
Parent to repurchase, redeem or otherwise acquire any shares of Parent. The
Parent Disclosure Schedule sets forth, with respect to each Parent Option,
the grant or issue date, expiration date, vesting schedule, exercise price
and holder thereof.
(b) No bonds, debentures, notes or other indebtedness of Parent having
the right to vote on any matters on which shareholders may vote ("Parent
Voting Debt") are issued or outstanding.
4.3. AUTHORITY; NO CONFLICTS.
(a) Parent has all requisite corporate power and corporate authority
to enter into and deliver this Agreement and, subject to the adoption of
this Agreement and approval of the Merger by the requisite vote of the
holders of Parent Ordinary Shares, the creation and issue of a sufficient
amount of authorized ordinary share capital of Parent, the granting of
authority pursuant to Section 80 of the Companies Act 1985 ("Companies
Act"), the disapplication of Section 89 of the Companies Act and the
satisfaction of the conditions of this Agreement, to consummate the
transactions contemplated hereby. The Board of Directors of Parent has duly
authorized and approved this Agreement and the transactions contemplated by
this Agreement and has resolved to recommend to Parent's shareholders that
they approve this Agreement and the transactions contemplated under this
Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent, subject
to the approval of the shareholders of Parent of the Merger and this
Agreement, the creation and issue of a sufficient amount of authorized
ordinary share capital of Parent, the disapplication of Section 89 of the
Companies Act and the granting of
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authority pursuant to Section 80 Companies Act. This Agreement has been
duly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(b) The delivery and performance of this Agreement by Parent and
consummation by it of the transactions contemplated hereby will not (i)
violate any provision of the articles of association of Parent; (ii)
violate, conflict with or result in the breach of any of the terms or
conditions of, result in modification of the effect of, or otherwise give
any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any material
instrument, contract or other agreement to which Parent or any Parent
Subsidiary is party or to which either of them or any of their assets or
properties is bound or subject; (iii) violate any law, ordinance or
regulation or any order, judgment, injunction, decree or requirement of any
court, arbitrator or governmental or regulatory body applicable to Parent
or any Parent Subsidiary or by which any of their assets or properties is
bound; or (iv) result in the creation of any lien or other encumbrance on
the assets or properties of Parent or any Parent Subsidiary, excluding from
the foregoing clauses (ii), (iii) and (iv) violations, breaches and
defaults which, and filings, notices, permits, consents and approvals the
absence of which, in the aggregate, would not have a Material Adverse
Effect on Parent.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be
obtained by Parent or any Parent Subsidiary in connection with the
execution and delivery of this Agreement by Parent or the consummation by
Parent of the transactions contemplated hereby, except for (x) those
required under or in relation to (A) U.S. state securities or "blue sky"
laws, (B) the Securities Act, including the filing of the Form F-4 (C) the
Exchange Act, including the filing of the Proxy Statement (E) the DGCL with
respect to the filing and recordation of appropriate merger or other
documents, (F) rules and regulations of the LSE, and (G) antitrust or other
competition laws of other jurisdictions, and (y) such consents, approvals,
orders, authorizations, registrations, declarations and filings the failure
of which to make or obtain could not reasonably be expected to have a
Material Adverse Effect on Parent or impair or delay the ability of Parent
to consummate the transactions contemplated hereby.
4.4. LSE REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1997, Parent
has, and all Parent Subsidiaries organized under the laws of England and Wales
have, filed in a timely manner with the LSE all documents and announcements
required to be filed by it pursuant to the rules of the LSE and the Financial
Services Act 1986 (the "LSE Reports"). As of their respective dates, the LSE
Reports (including all financial statements, exhibits, and schedules thereto)
complied, and all documents to be filed by Parent with the LSE between the date
of this Agreement and the Effective Time will comply, in all material respects
with applicable LSE requirements and did not, or in the case of reports filed on
or after the date hereof will 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 audited consolidated financial statements and
unaudited consolidated interim financial statements of Parent and the Parent
Subsidiaries for each of the three years ended March 31, 1999, have been
prepared from, and are in accordance with, Parent's books and records, are in
accordance with U.K. GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), and give a true and
fair view of the consolidated assets, liabilities and financial position of
Parent and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments which are not, in the aggregate,
material).
4.5. INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by Parent or
Merger Sub for inclusion or incorporation by reference in (i) the Form F-4
will at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be
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stated therein or necessary to make the statements therein not misleading
or (ii) the Proxy Statement will, on the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Form F-4 will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act
and the rules and regulations of the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by Parent or Merger Sub
with respect to statements made or incorporated by reference in the Proxy
Statement or Form F-4 relating to the Company or based on information
supplied by the Company for inclusion or incorporation by reference
therein.
(b) None of the information supplied or to be supplied by Parent for
inclusion in the Parent Disclosure Circular will, on the date the Parent
Disclosure Circular is first mailed to shareholders of Parent and at the
time of the Parent Shareholder Meeting to vote on approval of the Merger,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Parent Disclosure Circular will, in accordance
with the requirements of Section 146 of the FSA, contain all such
information as investors and their professional advisors would reasonably
require, and reasonably expect to find there, for the purpose of making an
informed assessment of the assets and liabilities, financial position,
profits and losses, and prospects of Parent and the rights attaching to the
Parent Ordinary Shares, having regard to the matters specified in Section
146(3) of the FSA. Notwithstanding the foregoing, no representation or
warranty is made by Parent with respect to statements to be made or
incorporated by reference in the Parent Disclosure Circular relating to the
Company or based on information supplied by the Company for inclusion or
incorporation by reference therein.
4.6. COMPLIANCE WITH LAW. None of Parent or the Parent Subsidiaries has
violated or failed to comply in any respect with any statute, law, ordinance,
regulation, rule or order of any governmental department or agency, or any
judgment, decree, order or requirement of any court, applicable to its business,
operations, properties and assets which violation or failure would, individually
or in the aggregate with all other violations and failures, have a Material
Adverse Effect on Parent. The conduct of Parent's and the Parent Subsidiaries'
business is in conformity with all labour, employment, energy, public utility,
planning, building regulations, health and safety and environmental requirements
and all other material governmental and regulatory requirements applicable to
its business, operations, properties and assets, except for such failures to
conform which would not individually or in the aggregate have a Material Adverse
Effect on Parent. Neither Parent nor any Parent Subsidiary has received any
notice asserting a failure to comply with any such statute, law, ordinance,
regulation, rule, judgment, decree or order.
4.7. LITIGATION. There are no actions, suits, proceedings, arbitration,
mediation or investigations pending or, to the knowledge of Parent, threatened
against Parent or any Parent Subsidiary, nor is Parent or any Parent Subsidiary
subject to any order, judgment, writ, injunction or decree of any court or
governmental or regulatory authority or body. To the best knowledge of Parent,
there is no fact, event or circumstance now in existence that reasonably could
be expected to give rise to any material action, suit, claim, proceeding or
investigation against Parent or any Parent Subsidiary.
4.8. TAXES.
(a) Filing of Tax Returns. Parent (including, for purposes of this
Section 4.8, each of its subsidiaries from time to time) has timely filed
with the proper Taxation Authority (as such term is defined herein) all Tax
Returns required to be filed through the date hereof. Such Tax Returns are
complete, correct and accurate in all material respects. Parent has
delivered to the Company complete and accurate copies of all of Parent's
Tax Returns filed for its taxable years ended December 31, 1996, 1997 and
1998.
(b) Payment of Taxes. All Taxes for which Parent is liable to pay for
any period or portion thereof heretofore ended, have been paid, or proper
provision shall have been made in conformity with U.K.
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GAAP applied on a consistent basis and in a manner consistent with Parent's
past custom and practice has been established therefor in Parent's
financial statements, and Parent has no material liability for Taxes in
excess of the amounts so paid or reserves so established. All Taxes that
Parent has been required to collect or withhold have been duly collected or
withheld and, to the extent required when due, have been or will be duly
paid to the proper Taxation Authority.
(c) Audit History.
(i) All notices, returns, computations and registrations of Parent
for the purposes of Taxation have been made punctually on a proper basis
and are correct and none of them is, or to the knowledge of Parent is
likely to be, the subject of any dispute with any Taxation Authority.
(ii) Parent has not within the period of seven years ending on the
date of this Agreement paid or become liable to pay any penalty, fine,
surcharge or interest charged by virtue of the provisions of the Taxes
Management Act 1970 or any other Taxation Statute.
(iii) Parent has not been subject to any audit, investigation,
discovery or access order by any Taxation Authority and, to the
knowledge of Parent, there are no circumstances existing which make it
likely that an audit, investigation, discovery or access order will be
made other than on a routine basis.
(d) Definition of Taxes or Taxation. For purposes of this Section 4.8,
the term "Taxes" or "Taxation" shall mean all forms of taxation including
any charge, tax, national insurance and social security liabilities, duty,
levy, impost, withholding or liability wherever chargeable whether of the
United Kingdom or any other jurisdiction; and any penalty, fine, surcharge,
interest, charges or costs payable in connection with any taxation in
connection therewith.
(e) Definition of Taxation Authority. For purposes of this Section
4.8, the term "Taxation Authority" shall mean the Inland Revenue, Customs &
Excise, the Department of Social Security, the Contributions Agency and any
other governmental or other authority whatsoever competent to impose any
Taxation, whether in the United Kingdom or elsewhere.
(f) Definition of Taxation Statute. For purposes of this Section 4.8,
the term "Taxation Statute" shall mean any directive, statute, enactment,
law, or regulation or similar measure, wheresoever enacted or issued,
coming into force or entered into providing for or imposing any Taxation
and shall include orders, regulations, instruments, bye-laws or other
subordinate legislation made under the relevant statute or statutory
provision and any such measure which amends, extends, consolidates or
replaces, or which has been amended, extended, consolidated or replaced by,
any such measure.
(g) Definition of Tax Return. For purposes of this Article IV, "Tax
Return" shall mean all notices, returns, computations and registrations of
Parent for the purposes of Taxation.
4.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by this
Agreement, since March 31, 1999, none of the following have occurred: (i) any
change, event or condition (or any development involving a prospective change,
event or condition) or any threat thereof shall have occurred or be threatened,
which change, event or condition has had, or is reasonably likely to have, a
Material Adverse Effect on Parent; (ii) any change in accounting methods,
principles or practices by Parent affecting its assets, liabilities or business;
(iii) any revaluation by Parent or any of the Parent Subsidiaries of any of
their assets, (iv) any damage, destruction or loss having a Material Adverse
Effect on Parent; (v) any cancellation of any material debts or waiver or
release of any material right or claim of Parent relating to its business
activities or properties; (vi) any declaration, setting aside or payment of
dividends or distributions in respect of any shares or any redemption, purchase
or other acquisition of any securities of Parent or the Parent Subsidiaries;
(vii) any issuance by Parent or any Parent Subsidiary of, or commitment of
Parent or any Parent Subsidiary to issue, any shares, options, warrants or other
equity securities or obligations or securities convertible into or exchangeable
for shares, options, warrants or other equity securities, other than upon
exercise of share options in Parent or in any of the Parent Subsidiaries; (viii)
negotiation or execution of any material arrangement, agreement or understanding
to which Parent or any Parent Subsidiary is a party which cannot be terminated
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by it on notice of 30 days or less without cost or penalty; (ix) the making of
any loan or payment, the entering into of any arrangement, agreement or
understanding or similar transaction with any Person who is an officer, director
or shareholder of Parent or any Parent Subsidiary, or who is an affiliate or
associate of such a Person; (x) any capital expenditures other than in the
ordinary course of business and consistent with past practice by Parent or any
Parent Subsidiary in an aggregate amount that exceeds $80,000; (xi) any entering
into of any scheme of arrangement or any arrangement providing for the winding
up liquidation, administration, dissolution, merger, consolidation or other
reorganization of Parent or any Parent Subsidiary; (xii) any increase in salary,
bonus, emoluments, benefits, severance, bonus or incentive or other compensation
payable or to become payable to any officer, director, employee or other Person
receiving compensation of any nature from Parent or any Parent Subsidiary; any
increase in the number of shares obtainable under, or the acceleration or
creation of any rights of any Person to benefits under, any employee share
option scheme operated by Parent (including, without limitation, the
acceleration of the vesting or exercisability of any share options, the
acceleration of the accrual or vesting of any benefits under any pension scheme
operated by Parent or the acceleration or creation of any rights under any
severance, parachute or change in control agreement), or the entering into of
any employment, consulting, severance or other employee related agreement,
arrangement or understanding with Parent or any Parent Subsidiary; (xiii) any
delay or failure to repay when due any material obligation of Parent or any
Parent Subsidiary; (xiv) any notice of termination of employment by any officer
or employee or resignation by any director; or (xv) any agreement by Parent or
any Parent Subsidiary to do any of the things described in the preceding clauses
(i) through (xiv) other than as expressly provided for herein.
4.10. VOTE REQUIRED. The passing of (A) ordinary resolutions of Parent to
(i) approve this Agreement and the Merger, (ii) increase the authorized share
capital of Parent and (iii) authorize the Board of Directors of Parent pursuant
to Section 80 of the Companies Act to allot Parent Ordinary Shares pursuant to
this Agreement and pursuant to the Financing (as defined herein) and (B) a
special resolution of Parent disapplying the statutory pre-emption rights of
Section 89 of the Companies Act in respect of Parent Ordinary Shares to be
allotted pursuant to the Financing are the only actions of the holders of the
Parent Ordinary Shares necessary for the consummation of the transactions
contemplated hereby (the "Required Parent Votes").
4.11. CERTAIN AGREEMENTS. The Parent Disclosure Schedule lists all Parent
Material Contracts. For the purposes of this Section 4.11, unless otherwise
indicated, "Parent Material Contracts" means all contracts of the following
types to which Parent or any Parent Subsidiary is a party or by which Parent or
any Parent Subsidiary or any of their respective properties is bound, including
real property leases, labour or employment-related agreements, and contracts
relating to intellectual property: (a) joint venture and limited or general
partnership agreements, shareholder agreements with respect to the Parent
Subsidiaries, joint ventures or partnerships or other contracts involving
sharing of profits, losses, costs or liabilities, (b) mortgages, indentures,
loan or credit agreements, letters of credit, reimbursement agreements, personal
property leases, security agreements and other agreements and instruments
relating to the borrowing of money or extension of credit in any case in excess
of $80,000, (c) other contracts which are not cancelable by Parent or any Parent
Subsidiary on notice of sixty (60) days or less and which require payment by
Parent after the date hereof of more than $80,000 in any one calendar year, (d)
material license or royalty agreements, whether Parent or any Parent Subsidiary
is the licensor or licensee thereunder, (e) confidentiality and non-disclosure
agreements (whether Parent or any Parent Subsidiary is the beneficiary or the
obligated party thereunder) other than such agreements entered into with
consultants to Parent and the Parent Subsidiaries or entered into in connection
with possible acquisitions, (f) contracts containing covenants limiting the
freedom of Parent or any Parent Subsidiary or any of their respective officers
to engage in any line of business or compete with any Person that relates
directly or indirectly to Parent's business, (h) indemnification agreements with
respect to any acquisition or disposition of assets, securities or business,
whether Parent or any Parent Subsidiary is the indemnitor or indemnitee, (i)
contracts currently outstanding or which have been outstanding at any time in
the last three years with any Person known to be an affiliate, director,
officer, employee or shareholder of Parent (other than Parent and the Parent
Subsidiaries), (j) any executory contract relating to any material acquisitions
or dispositions of assets, securities or businesses by Parent or any Parent
Subsidiary, (k) any agreement with a change of control provision or with
restrictions or limitations on, or consent requirements
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with respect to, assignments, (l) any research or development grants made by any
Person to Parent or any Parent Subsidiary in the last three years and (m)
contracts under which Parent or any Parent Subsidiary is responsible for the
indebtedness or obligations of any other Person or which evidence any guaranty
or surety by Parent or any Parent Subsidiary. Parent and the Parent Subsidiaries
have made available to the Company a true and correct copy of each Parent
Material Contract. Parent and the Parent Subsidiaries are in compliance in all
material respects with their respective obligations under the Parent Material
Contracts. All of the Parent Material Contracts are in full force and effect,
are valid and binding obligations of Parent and the Parent Subsidiaries and
enforceable in all material respects by Parent and the Parent Subsidiaries in
accordance with their terms except to the extent that such enforceability may be
limited by bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or similar laws affecting creditors' rights generally
and by general principles of equity (whether considered at law or in equity. To
the knowledge of Parent, the other party to a Parent Material Contract is in
compliance with its material obligations thereunder.
4.12. EMPLOYEE SHARE AND OTHER SCHEMES.
(a) The Parent Disclosure Schedule lists all schemes and arrangements
that exist for the provision of pension or other benefits for employees of
Parent. Each pension scheme (i) is either approved by the Board of Inland
Revenue for purposes of Chapter 1 of Part XIV of the Income and Corporation
Taxes Act 1988 or is the scheme under which the benefits provided or to be
provided are consistent with the approval of the scheme by the Board of
Inland Revenue for such purposes and is a scheme in respect of which an
application for such approval has been made and has not been withdrawn or
refused and the Board of Inland Revenue have not given notice to the
applicant that it believes the application has been dropped, (ii) is
established under irrevocable trusts and (iii) has been administered in
accordance with all applicable laws, regulations and requirements of any
competent governmental body or regulatory authority and the trust and rules
of each pension scheme.
(b) No claim has been made or litigation commenced against the
trustees or administrator of any pension scheme against Parent. To Parent's
best knowledge, there are no circumstances which may give rise to any such
claim or litigation.
4.13. BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except WestLB Panmure Limited and Deloitte
& Touche.
4.14. ENVIRONMENTAL.
(a) Parent and the Parent Subsidiaries are in compliance with all
applicable Parent Environmental Laws (as defined below) (which compliance
includes, but is not limited to, the possession by Parent and the Parent
Subsidiaries of all permits and other governmental authorizations required
under applicable Parent Environmental Laws (collectively, "Parent
Environmental Permits"), and compliance with the terms and conditions
thereof), except for any non-compliance that individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect on Parent. Neither Parent nor any Parent Subsidiary has received any
communication (written or oral), whether from a governmental authority,
citizens group, employee or otherwise, that alleges that Parent is not in
such compliance, and there are no past or present actions, activities,
circumstances, conditions, events or incidents that may prevent or
interfere with such compliance in the future.
(b) There is no Parent Environmental Claim (as defined below) pending
or, to the knowledge of Parent, threatened against Parent or any Parent
Subsidiary, or to the knowledge of Parent, against any person or entity
whose liability for any Parent Environmental Claim Parent or any Parent
Subsidiary has retained or assumed either contractually or by operation of
law, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on Parent.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents (including, without limitation, the
release, omission, discharge, presence or disposal of any Hazardous Matter)
(as defined below) which could form the basis of any Parent Environmental
Claim against
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Parent or any Parent Subsidiary, or, to the knowledge of Parent, against
any person or entity whose liability for any Parent Environmental Claim
Parent or any Parent Subsidiary has or may have retained or assumed either
contractually or by operation of law, which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect on
Parent.
(d) Neither Parent nor any Parent Subsidiary has, and to the knowledge
of Parent, no other person has Released (as defined in Section 4.14(g)(v)),
placed, stored, buried or dumped Hazardous Matter on, beneath or adjacent
to any property owned, operated or leased or formerly owned, operated or
leased by Parent or any Parent Subsidiary and neither Parent nor any Parent
Subsidiary has received notice that it may be liable for the Removal (as
defined below) of any property, whether or not owned or operated by Parent
or any Parent Subsidiary, which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on Parent.
(e) Parent and the Parent Subsidiaries have delivered or otherwise
made available for inspection to the Company true, complete and correct
copies and results of any reports, studies, analyses, tests or monitoring
possessed or initiated by Parent or any Parent Subsidiary pertaining to
Hazardous Matter on, beneath or adjacent to the property owned or leased by
Parent or any Parent Subsidiary or regarding Parent's and the Parent
Subsidiaries' compliance with applicable Environmental Laws.
(f) No transfers of Parent Environmental Permits and no additional
Parent Environmental Permits or other governmental authorizations under
Parent Environmental Laws, will be required to permit Parent and the Parent
Subsidiaries or the Surviving Corporation and its subsidiaries, as the case
may be, to be in full compliance all applicable Parent Environmental Laws
for the period immediately following the transactions contemplated hereby,
as conducted by Parent and the Parent Subsidiaries immediately prior to the
date hereof.
(g) The following terms as used in this Section 4.14 shall have the
following meanings:
(i) "Harm" means material harm or damage to, or other interference
with, the environment and includes any detrimental effects on the health
of living organisms or other interference with the ecosystems of which
they form part and, in the case of man, includes offense caused to any
of his senses or harm or damage to his property;
(ii) "Hazardous Matter" means any and all matter (whether alone or
in combination with other matter) including electricity, heat,
vibration, noise or other vibration which may or is liable to cause
Harm.
(iii) "Parent Environmental Claim" means any claim, action, cause
of action, investigation or written notice by any person or entity
alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, monitoring costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or Release (as defined in Section
4.14(g)(v)) into the indoor or outdoor environment, of any Hazardous
Matter at any location, whether or not owned or operated by Parent or
any Parent Subsidiary or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(iv) "Parent Environmental Laws" means all international, European
Union, U.K., federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment,
including without limitation, Section 57 of and Schedule 22 to the U.K.
Environment Act 1995 and the guidance and regulations adopted
thereunder, and laws relating to Releases (as defined in Section
4.14(g)(v)) or threatened Releases (as defined in Section 4.15(g)(v)) of
Hazardous Matter into the indoor or outdoor environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, Release (as defined
in Section 4.15(g)(v)), disposal, transport or handling of Hazardous
Matter and all laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Matter.
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(v) "Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including,
without limitation, ambient air, surface water, groundwater and surface
or subsurface strata) or into or out of any property, including the
movement of Hazardous Matter through or in the air, soil, surface water,
groundwater or property.
(vi) "Removal" means all actions required by governmental entities
or Environmental Laws to: (1) clean-up, remove, treat or remediate
Hazardous Matter in the indoor or outdoor environment; (2) prevent the
Release (as defined in Section 4.14(g)(v)) of Hazardous Matter so that
they do not migrate, endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; (3) perform pre-remedial
studies and investigations and post-remedial monitoring and care; or (4)
respond to any government requests for information or documents in any
way relating to cleanup, removal, treatment or remediation or Hazardous
Matter in the indoor or outdoor environment.
4.15. LABOUR MATTERS.
(a) Parent and the Parent Subsidiaries are not a party to any
agreement or arrangement with or commitment to any trade unions or staff
association nor are any of its employees members of any trade union or
staff association.
(b) Parent and the Parent Subsidiaries have in relation to each of its
employees (and so far as relevant to each of its former employees) complied
with:
(i) all material obligations imposed on it by all relevant
statutes, regulations and codes of conduct and practice affecting its
employment of any persons and all relevant orders and awards made
thereunder and has maintained current, adequate and suitable records
regarding the service, terms and conditions of employment of each of its
employees; and
(ii) all material collective agreements, recognition agreements and
customs and practices for the time being affecting its employees or
their conditions of service.
(c) No material dispute exists between Parent and the Parent
Subsidiaries and a material number or category of its employees or any
trade union(s) and there are no wage or other claims outstanding against
Parent and the Parent Subsidiaries by any person who is now or has been a
director, officer or employee of Parent and the Parent Subsidiaries.
(d) Parent and the Parent Subsidiaries have not had during the last
three years any strike, work stoppages, slow-down or work-to-rule by its
employees or lock-out, nor, to Parent's knowledge, is any anticipated,
which has caused, or is likely to cause Parent and the Parent Subsidiaries
to be materially incapable of carrying on their business in the normal and
ordinary course.
4.16. PROPRIETARY RIGHTS.
(a) The term "Parent Proprietary Rights" includes Marks, Patents,
Copyrights, Trade Secrets and any of the foregoing licensed by Parent from
third parties (the "Parent Licensed Proprietary Rights") in each case, used
in Parent's business.
(b) The Parent Disclosure Schedule sets forth with respect to Parent
Proprietary Rights: (i) for each Patent and patent application, including
petty patents and utility models and applications therefor, as applicable,
the number, normal expiration date, title and priority information for each
country in which such patent has been issued, or, the application number,
date of filing, title and priority information for each country and (ii)
all Parent Licensed Proprietary Rights.
(c) The Parent Proprietary Rights are all those necessary for the
operation of Parent's business as it is currently conducted and as
presently contemplated, including the design, manufacture and sale of all
products currently under development or in production. Except for rights of
third parties that may exist with respect to the Parent Licensed
Proprietary Rights, Parent is the owner of all right, title, and interest
in each of the Parent Proprietary Rights, free and clear of all security
interests, charges, encumbrances,
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and other adverse claims, and has the right to use without payment to a
third party (except for payments under licenses of Parent Licensed
Proprietary Rights) and without infringing the rights of any third party
all of the Parent Proprietary Rights. To Parent's best knowledge, no
employee of Parent has entered into any agreement that requires the
employee to transfer, assign, or disclose information concerning his work
on behalf of Parent to anyone other than Parent. No other Person (a) has
notified Parent or any Parent Subsidiary that it is claiming any ownership
of, or right to use, any such Parent Proprietary Rights or (b) to the best
of Parent's knowledge, has interfered with, infringed upon or otherwise
come into conflict with or challenged the validity of any such Parent
Proprietary Rights.
(d) The Parent Disclosure Schedule contains a complete and accurate
list and summary description of all Patents owned by Parent ("Parent Owned
Patents"). Parent is the owner of all right, title and interest in and to
each of the Parent Owned Patents, free and clear of all liens, security
interests, charges, encumbrances, and other adverse claims; all of the
issued Parent Owned Patents are currently in compliance with formal legal
requirements (including payment of filing, examination and maintenance fees
and proofs of working or use), are valid and enforceable; no Parent Owned
Patent material to Parent's business as conducted or proposed to be
conducted has been or is now involved in any interference, reissue,
reexamination, or opposition proceeding, and to Parent's best knowledge,
there is no potentially interfering patent or patent application of any
third party; to Parent's best knowledge, no Parent Owned Patent is
infringed or has been challenged or threatened in any way; the operation of
Parent's business and any process or know-how used does not infringe any
third party proprietary right of any other person or entity; and any
products made, used or sold under the Parent Owned Patents have been marked
with the proper patent notice. Parent has conducted an inquiry regarding
the presence of activities which might materially infringe the Parent Owned
Patents and has provided a summary of the results of such inquiry to the
Company.
(e) Parent Disclosure Schedule contains a complete and accurate list
and summary description of all registered Marks owned by Parent ("Parent
Owned Marks"); Parent is the owner of all right, title and interest in and
to each of the Parent Owned Marks, free and clear of all liens, security
interests, charges, encumbrances, and other adverse claims; all Parent
Owned Marks that have been registered with the appropriate authority are
currently in compliance with all formal legal requirements (including the
timely post-registration filing of affidavits of use and incontestability
and renewal applications), are valid and enforceable; no Parent Owned Mark
has been or is now involved in any opposition, invalidation, or
cancellation and, to Parent's best knowledge, no such action is threatened
with respect to any of the Parent Owned Marks; to Parent's best knowledge,
there is no potentially interfering trademark or trademark application of
any third party; to Parent's best knowledge, no Parent Owned Mark is
infringed or has been challenged or threatened in any way; none of the
Parent Owned Marks used in conjunction with Parent's business infringes or
is alleged to infringe any trade name, trademark, or service mark of any
third party; and all products and materials containing a Parent Owned Mark
bear the proper federal registration notice where permitted by law.
(f) Parent is the owner of all right, title and interest in and to all
material Copyrights owned by Parent (the "Parent Owned Copyrights") free
and clear of all liens, security interests, charges, encumbrances, and
other adverse claims; to Parent's best knowledge, no Parent Owned Copyright
is infringed or has been challenged or threatened in any way; the subject
matter of any of the Parent Owned Copyrights does not infringe and is not
alleged to infringe any copyright of any third party or is a derivative
work based on the work of a third party; and all material works encompassed
by the Parent Owned Copyrights have been marked with proper copyright
notices.
(g) With respect to each Trade Secret relating to, or used in
conjunction with, the Parent's business ("Parent Owned Trade Secrets"): the
documentation relating to such Parent Owned Trade Secret is current,
accurate, and sufficient in detail and content to identify and explain it
and to allow its full and proper use without reliance on the knowledge or
memory of any individual; Parent has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of the Parent Owned Trade
Secrets; Parent has good title and an absolute (but not necessarily
exclusive) right to use any Parent Owned Trade Secret; to Parent's best
knowledge, the Parent Owned Trade Secrets are not part of the
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public knowledge or literature, and have not been used, divulged or
appropriated either for the benefit of any third party person or entity or
to the detriment of Parent; and to Parent's best knowledge, no Parent Owned
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
(h) The Parent Disclosure Schedule lists all payments due to third
parties in respect of commercial exploitation of the products currently
under development by Parent.
(i) The Parent Disclosure Schedule lists all material licenses or
rights which have been granted by Parent.
(j) The consummation of the Merger will not adversely affect the
rights of Parent under any of the Parent Proprietary Rights.
4.17. INSURANCE. The Parent Disclosure Schedule sets forth a complete and
accurate list, as of the date hereof, of the material policies of insurance
maintained by Parent and the Parent Subsidiaries with respect to the products,
properties, assets, operations and business of Parent and the Parent
Subsidiaries since 1996. All insurance coverage applicable to Parent and the
Parent Subsidiaries is in full force and effect, insures Parent and the Parent
Subsidiaries in sufficient amounts (consistent with industry standards) against
all risks usually insured against by Persons operating similar businesses or
properties of similar size in the localities where such businesses or properties
are located, provides coverage as may be required by all regulations which
Parent and the Parent Subsidiaries are subject and has been issued by insurers
of recognized responsibility. There is no default under any such coverage nor
has there been any failure to give notice or present any claim under any such
coverage in a due and timely fashion. There are no outstanding unpaid premiums
except in the ordinary course of business and no notice of cancellation or
nonrenewal of any such coverage has been received. There are no provisions in
such insurance policies for retroactive or retrospective premium adjustments.
There are no facts upon which an insurer might be justified in reducing coverage
or increasing premiums on existing policies or binders. There are no outstanding
unpaid claims under any such policies or binders.
4.18. PERMITS; LICENSES. Parent and each Parent Subsidiary has, and at all
times has had, all material licenses (including statutory licenses), permits,
consents and authorities (public and private) required under any statute, law,
ordinance, regulation, rule or order of any foreign, local government or any
other governmental department or agency in the operation of the business
(collectively, "Parent Permits") and owns or possesses such Parent Permits free
and clear of all encumbrances. Parent and each Parent Subsidiary is in material
compliance with all Parent Permits and neither Parent nor any Parent Subsidiary
is in default or received any notice of any claim of default with respect to any
such Parent Permit. There are no proceedings, investigations or audits pending,
or to Parent's knowledge, threatened against Parent or any Parent Subsidiary by
any governmental agency relating to any Parent Permit. All such Parent Permits
are renewable by their terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to pay any amounts
other than routine filing fees and will not be adversely affected by the
completion of the Merger or the transactions contemplated hereby. No present or
former shareholder, director, officer or employee of Parent or any affiliate
thereof, or any other person, firm, corporation or other entity, owns or has any
proprietary, financial or other interest (direct or indirect) in any Parent
Permit which Parent owns, possesses or uses.
4.19. ABSENCE OF UNDISCLOSED LIABILITIES. Neither Parent nor any Parent
Subsidiary has any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due (including, without
limitation, all tax liabilities and liabilities for all money borrowed) which
would be required to be disclosed in financial statements, including the
footnotes thereto, prepared in accordance with U.K. GAAP, and which are not or
will not be adequately reflected or reserved against in Parent's balance sheet
as of March 31, 1999, including the footnotes thereto (the "Parent Balance
Sheet"), except such as have arisen in the ordinary course of business since
such date. Parent has not engaged, and prior to the Effective Time will not
engage, in any hedging transactions or transactions in derivative securities.
The total amount borrowed by Parent and the Parent Subsidiaries does not, and at
the Effective Time will not, exceed any limitation on borrowing in any agreement
to which Parent or any Parent Subsidiary is a party.
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4.20. BOOKS AND RECORDS.
(a) The statutory books (including all registers and minute books) of
Parent and the Parent Subsidiaries have been properly kept and contain an
accurate and complete record of the matters which should be dealt with in
those books, and no written notice or allegation that any of them is
incorrect or should be rectified has been received.
(b) Parent has complied with the provisions of the Companies Acts 1985
and 1989 and all returns, particulars, resolutions and other documents
required to be filed with or delivered to the Registrar of Companies or to
any other authority whatsoever by Parent have been correctly and properly
prepared and so filed or delivered.
4.21. TITLE TO PROPERTIES; CONDITION OF PROPERTIES.
(a) The properties listed on the Parent Disclosure Schedule comprise
all the freehold and leasehold land owned, used or occupied by Parent in
its business (the "Parent Properties"). Parent has good, valid and
marketable title to the Parent Properties which title is freehold or
leasehold as indicated the Parent Disclosure Schedule and Parent is solely
legally and beneficially entitled to the Parent Properties for an
unencumbered estate in possession, except for (i) liens, claims, charges
and encumbrances disclosed, or reserved against, in the Parent Balance
Sheet, (ii) liens for current taxes not yet due and payable, and (iii)
minor imperfections of title not material (individually or in the
aggregate) and not materially detracting from the value, or the use (either
actual or intended) Parent and the Parent Subsidiaries make, of the
property in question. All of the buildings, fixtures, machinery and
equipment owned or used by Parent and the Parent Subsidiaries are in good
operating condition and repair, and comply in all material respects with
applicable planning, building, fire and safety codes.
(b) Each of the Parent Properties which is a leasehold is held under a
lease (the "Parent Leases") described in the Parent Disclosure Schedule.
All such Parent Leases are valid, binding and enforceable in accordance
with their terms and are in full force and effect and no event of default
has occurred which (whether with or without notice, lapse of time or both
or the happening or occurrence of any other event) would constitute a
default thereunder on the part of Parent or any Parent Subsidiary. To
Parent's knowledge, each Parent Lease that terminates within two years of
the date hereof and which does not provide for a renewal term, will be
renewed.
(c) There are no pending, or to the knowledge of Parent, threatened
proceedings with respect to the Parent Properties, or pending or, or to the
knowledge of Parent, threatened litigation or administrative actions
relating to the Parent Properties.
(d) There are no subleases, licenses, options, rights, concessions or
other agreements or arrangements, written or oral, granting to any Person
the right to use or occupy the property subject to the Parent Leases or any
portion thereof or interest therein.
4.22. CONSEQUENCE OF CONSUMMATION OF THE MERGER. The consummation of the
Merger will not: (a) relieve any Person of any obligation to Parent or any
Parent Subsidiary (whether contractual or otherwise) or legally entitle any
Person to terminate any such obligation or any right or benefit enjoyed by
Parent or any Parent Subsidiary or to exercise any right whether under an
agreement with or otherwise in respect of Parent or any Parent Subsidiary; (b)
result in any present or future indebtedness of Parent becoming due and payable
or capable of being declared due and payable prior to its stated maturity; or
(c) give rise to a right of termination of any agreement for the employment of
any director, officer or senior employee of Parent.
4.23. PRODUCT REGULATORY REQUIREMENTS.
(a) Parent and the Parent Subsidiaries have not manufactured for
commercial supply, marketed, sold or supplied any product which was at the
time not fully compliant with (i) the requirements of all applicable laws
and the laws of any territory in which any product has been placed on the
market; (ii) the terms of any applicable recognized national or
international product standards; and (iii) any representation or warranty
(whether express or implied) given in respect of any product.
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(b) At no time has Parent or any Parent Subsidiary had knowledge of or
received any notice, claim, governmental enforcement action or other
communication from any person alleging any defect in any product
manufactured for commercial supply, marketed, sold or supplied by Parent or
any Parent Subsidiary or any contravention of any applicable law or
standard relating to any such product.
4.24. YEAR 2000. Parent and the Parent Subsidiaries are reviewing their
respective operations and those of any third parties with which Parent or any
Parent Subsidiary has a material relationship to evaluate the extent to which
the business or operations of Parent or any Parent Subsidiary will be affected
by the Year 2000 Problem. As a result of such review, none of Parent or any
Parent Subsidiary has reason to believe, and do not believe, that the Year 2000
Problem will have a Material Adverse Effect on Parent.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
5.1. ORGANIZATION AND CORPORATE POWER. Merger Sub is corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.
Copies of the Certificate of Incorporation and Bylaws of Merger Sub heretofore
delivered to the Company are accurate and complete as of the date hereof.
5.2. CORPORATE AUTHORIZATION. Merger Sub has all requisite corporate power
and corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3. NON-CONTRAVENTION. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
Certificate of Incorporation or Bylaws of Merger Sub.
5.4. NO BUSINESS ACTIVITIES. Merger Sub is not a party to any material
agreements and has not conducted any activities other than in connection with
the organization of Merger Sub, the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby.
ARTICLE VI.
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. COVENANTS OF THE COMPANY. The Company covenants and agrees that during
the period from the date of this Agreement and continuing until the Effective
Time (except as expressly contemplated or permitted by this Agreement or to the
extent that Parent shall otherwise consent in writing):
(a) Ordinary Course of Business. The business of the Company and the
Company Subsidiaries shall be conducted only in, and the Company and the
Company Subsidiaries shall not take any action except in, the ordinary
course of business and consistent with past practices.
(b) Preservation of Organization. The Company shall use its reasonable
best efforts to maintain and preserve its business organization, present
relationships with customers, suppliers and others having business dealings
with the Company and its subsidiaries, assets, employees, regulatory
licenses and approvals and advantageous business relationships. Neither the
Company nor any Company Subsidiary shall, directly or indirectly, amend or
propose to amend its organizational documents.
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(c) Capitalization Changes. Neither the Company nor any Company
Subsidiary shall directly or indirectly (i) issue, sell, transfer, pledge,
dispose of or encumber, or authorize, or propose or agree to the issuance,
sale, pledge, transfer, disposition or encumbrance of, any capital stock of
the Company (except for shares issuable upon exercise of Company Options or
Company Warrants outstanding on the date hereof) or any Company Subsidiary;
(ii) issue, sell, pledge, transfer or dispose of, or authorize, propose or
agree to the issuance, sale, pledge, transfer or disposition of any
options, warrants or rights of any kind to acquire any shares of or any
securities convertible into or exchangeable for any shares of, any capital
stock of any class or any other equity securities of the Company or any
Company Subsidiary; (iii) authorize, recommend or propose any change in its
capitalization; or (iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any company Subsidiary (other than
the Merger).
(d) Sale of Assets. Neither the Company nor any Company Subsidiary
shall directly or indirectly (i) except in the ordinary course of business
and consistent with past practices, sell, pledge, transfer, lease, sell and
leaseback, assign, license, dispose of or encumber any assets of the
Company or of any Company Subsidiary (including without limitation, any
indebtedness owed to them or any claims held by them) or (ii) whether or
not in the ordinary course of business, sell, pledge, transfer, lease, sell
and leaseback, assign, license (other than the license of Company
Proprietary Rights in the ordinary course of business), dispose of or
encumber any material assets of the Company or any Company Subsidiary;
provided, however, that (a) the Company may sell its Gernos farm and its
contract antisera manufacturing business conducted at its Welsh facilities
to John Landon, M.D., on the terms set forth in Section 6.1(d) of the
Company Disclosure Schedule prior to the Effective Time, and (b) in
connection with the Bridge Financing (as defined below), the Company may
pledge or grant to the lender(s) a security interest in certain of the
Company's or the Company Subsidiaries' assets, including the assets
comprising the Company's manufacturing facilities in Llandysul, Dyfed,
Wales. Parent and the Company acknowledge that the Company is contemplating
the sale or sale and leaseback of (i) the real property and improvements
comprising its manufacturing operations at Llandysul, Dyfed, Wales and (ii)
the real property and improvements comprising its manufacturing operations
at Adelaide, Australia and that the Company may, with the written consent
of Parent, sell or enter into an agreement to sell and leaseback either or
both of these operations.
(e) Dividends and Repurchases. Neither the Company nor any Company
Subsidiary shall directly or indirectly (i) split, combine or reclassify
any shares of its capital stock or declare, set aside or pay any dividend
or distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock other than dividends and distributions
by a Company Subsidiary to the Company or to any other Company Subsidiary
all of the capital stock of which is owned directly or indirectly by the
Company, or (ii) redeem, purchase or otherwise acquire or offer or agree to
redeem, purchase or otherwise acquire any capital stock of the Company or
any Company Subsidiary.
(f) Acquisitions; Investments. Neither the Company nor any Company
Subsidiary shall, directly or indirectly, except in the ordinary course of
business and consistent with past practices, acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
investment either by purchase of stock or securities, contributions to
capital, loans, advances, property transfer or purchase of any amount of
property or assets, in any other individual or entity (other than Company
Subsidiaries).
(g) Indebtedness. Neither the Company nor any Company Subsidiary
shall, directly or indirectly, incur any indebtedness for borrowed money
other than in the ordinary course of business, issue any debt securities or
enter into any capitalized leases or assume, guarantee, endorse, secure or
otherwise as an accommodation become responsible for, the obligations of
any other Person (other than the Company and the Company Subsidiaries);
provided, however, that the Company may, prior to the Closing Date, borrow
from one or more commercial banks or lending institutions up to L4 million
on a short-term basis to fund the Company's working capital needs pending
the closing of the Financing, of which up to L3 million may come from
Barclays Bank, plc in the form of a secured loan, the principal terms of
which are described in the Company Disclosure Schedule, and that such
loan(s) may be secured, in whole or in
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part, by the written guaranty of one or more of the Company Subsidiaries
(collectively, the "Bridge Financing").
(h) Severance and Termination Pay. Neither the Company nor any Company
Subsidiary shall take any action with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies or written
agreements of the Company in effect on the date hereof) or with respect to
any increase of benefits payable under its severance or termination pay
policies or written agreements in effect on the date hereof; provided,
however, that the Company may grant severance benefits to one employee at a
total cost to the Company not exceeding L90,000 in the aggregate.
(i) Employee Benefits. Neither the Company nor any Company Subsidiary
shall adopt, enter into or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment,
severance, retention or stay or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any
director, officer or employee or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan, arrangement or agreement in effect on the date
hereof.
(j) Tax Election; Accounting. Neither the Company nor any Company
Subsidiary shall make any tax election or settle or compromise any federal,
state, local or foreign income tax liability. Each of the Company and the
Company Subsidiaries shall maintain its books of account and records in its
usual, regular and ordinary manner, consistent with its past practices, and
except as may be required as a result of a change in law or in U.S. GAAP,
shall not make any change in any accounting principle or accounting
practice.
(k) Subsequent Financials. The Company shall deliver to Parent all of
the Company's monthly, if any, and quarterly financial statements for
periods and dates subsequent to the date hereof, as soon as the same are
available to the Company.
(l) Contracts. The Company and the Company Subsidiaries will not enter
into any contract or agreement other than in the ordinary course of
business. The Company and the Company Subsidiaries will not amend,
terminate or modify any Material Contract and will not enter into any
contract or agreement which would have been a Material Contract if entered
into prior to the date of this Agreement.
(m) Affiliates. The Company and the Company Subsidiaries will not
enter into, amend, modify or terminate any contract or agreement with, or
make any payment other than pursuant to a written agreement existing on the
date hereof to, any affiliate (other than the Company or any Company
Subsidiary) of the Company or the Company Subsidiaries.
(n) Litigation. The Company and the Company Subsidiaries will not
settle or compromise any pending or threatened suit, action or claim for an
amount in excess of $50,000 per suit, action or claim or which relates to
the transactions contemplated hereby.
(o) Capital Expenditures. The Company and the Company Subsidiaries
will not authorize or make any expenditure for capital or acquisitions
which are not specifically provided for in the Company's capital budget (a
true and correct copy of which has been delivered to Parent and is set
forth in the Company Disclosure Schedule).
(p) Proprietary Rights. The Company and the Company Subsidiaries will
use best efforts to protect the Company Proprietary Rights.
(q) Other Actions. The Company shall not, and shall not permit any
Company Subsidiary to, take any action that could reasonably be expected to
result in (i) any of the representations or warranties of the Company set
forth in this Agreement that are qualified as to materiality becoming
untrue (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) except as
otherwise permitted by Section 7.5, any of the conditions to the Merger set
forth in Article VIII not being satisfied.
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6.2. COVENANTS OF PARENT AND MERGER SUB. Parent and Merger Sub covenant and
agree that during the period from the date of this Agreement and continuing
until the Effective Time (except as expressly contemplated or permitted by this
Agreement or to the extent that the Company shall otherwise consent in writing):
(a) Ordinary Course of Business. The business of Parent and the Parent
Subsidiaries shall be conducted only in, and Parent and the Parent
Subsidiaries shall not take any action except in, the ordinary course of
business and consistent with past practices.
(b) Preservation of Organization. Parent shall use its reasonable best
efforts to maintain and preserve its business organization, present
relationships with customers, suppliers and others having business dealings
with Parent and its subsidiaries, assets, employees, regulatory licenses
and approvals and advantageous business relationships. Neither Parent nor
any Parent Subsidiary shall, directly or indirectly, amend or propose to
amend its memorandum or articles of association except to the extent
necessary to consummate the transactions contemplated by this Agreement.
(c) Capitalization Changes. Neither Parent nor any Parent Subsidiary
shall directly or indirectly (i) issue, allot, sell, transfer, pledge,
dispose of or encumber, or propose or agree to the issuance, sale, pledge,
transfer, disposition or encumbrance of, any capital stock of Parent
(except for shares issuable upon exercise of Parent Options outstanding on
the date hereof or in connection with actions to be approved at the Parent
Shareholder Meeting) or any Parent Subsidiary; (ii) issue, sell, pledge,
transfer or dispose of, or authorize, propose or agree to the issuance,
sale, pledge, transfer or disposition of any options, warrants or rights of
any kind to acquire any shares of or any securities convertible into or
exchangeable for any shares of, any capital stock of any class or any other
equity securities of Parent or any Parent Subsidiary; provided, however,
that Parent may issue options to acquire Parent Ordinary Shares; (iii)
authorize, recommend or propose any change in its capitalization (except in
connection with actions to be approved at the Parent Shareholder Meeting
and resolutions to be proposed at the extraordinary general meeting of
Parent seeking the authority of Parent's shareholders under Section 80 of
the Companies Act and the disapplication of statutory pre-emption rights
contained in Section 89 of the Companies Act, both in accordance with the
guidelines of the Association of British Insurers); or (iv) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Parent or any
Parent Subsidiary (other than the Merger).
(d) Sale of Assets. Neither Parent nor any Parent Subsidiary shall
directly or indirectly (i) except in the ordinary course of business and
consistent with past practices, sell, pledge, transfer, lease, sell and
leaseback, assign, license, dispose of or encumber any assets of Parent or
of any Parent Subsidiary (including without limitation, any indebtedness
owed to them or any claims held by them) or (ii) whether or not in the
ordinary course of business, sell, pledge, transfer, lease, sell and
leaseback, assign, license (other than the license of Parent Proprietary
Rights in the ordinary course of business), dispose of or encumber any
material assets of Parent or any Parent Subsidiary.
(e) Acquisitions; Investments. Neither Parent nor any Parent
Subsidiary shall, directly or indirectly, except in the ordinary course of
business and consistent with past practices, acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
investment either by purchase of stock or securities, contributions to
capital, loans, advances, property transfer or purchase of any amount of
property or assets, in any other individual or entity (other than Parent
Subsidiaries).
(f) Indebtedness. Neither Parent nor any Parent Subsidiary shall,
directly or indirectly, incur any indebtedness for borrowed money, issue
any debt securities or enter into any capitalized leases or assume,
guarantee, endorse, secure or otherwise as an accommodation become
responsible for, the obligations of any other Person (other than Parent and
the Parent Subsidiaries).
(g) Severance and Termination Pay. Neither Parent nor any Parent
Subsidiary shall take any action with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies or written
agreements of Parent in effect on the date hereof) or with respect to any
increase of benefits
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payable under its severance or termination pay policies or written
agreements in effect on the date hereof; provided, however, that Parent may
grant severance benefits to one employee at a total cost to Parent not
exceeding L90,000 in the aggregate.
(h) Employee Benefits. Neither Parent nor any Parent Subsidiary shall
adopt, enter into or amend any bonus, profit sharing, compensation, share
option, pension, retirement, deferred compensation, employment, severance,
retention or stay or other employee benefit plan, agreement, trust, fund or
other arrangement for the benefit or welfare of any director, officer or
employee or increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
plan, arrangement or agreement in effect on the date hereof; provided,
however, that Parent shall be entitled to amend its directors and senior
employees service contracts to minimize tax liability on termination of
these contracts.
(i) Tax Election; Accounting. Neither Parent nor any Parent Subsidiary
shall make any tax election or settle or compromise any U.K., federal,
state, local or foreign or other tax liability for Taxes as defined in
Section 4.8. Each of Parent and the Parent Subsidiaries shall maintain its
books of account and records in its usual, regular and ordinary manner,
consistent with its past practices, and except as may be required as a
result of a change in law or in U.K. GAAP, shall not make any change in any
accounting principle or accounting practice.
(j) Subsequent Financials. Parent shall deliver to the Company all of
Parent's monthly, if any, and quarterly financial statements for periods
and dates subsequent to the date hereof, as soon as the same are available
to Parent.
(k) Contracts. Parent and the Parent Subsidiaries will not enter into
any contract or agreement other than in the ordinary course of business.
Parent and the Parent Subsidiaries will not amend, terminate or modify any
Parent Material Contract and will not enter into any contract or agreement
which would have been a Parent Material Contract if entered into prior to
the date of this Agreement.
(l) Affiliates. Parent and the Parent Subsidiaries will not enter
into, amend, modify or terminate any contract or agreement with, or make
any payment other than pursuant to a written agreement existing on the date
hereof to, any affiliate (other than Parent or any Parent Subsidiary) of
Parent or the Parent Subsidiaries.
(m) Litigation. Parent and the Parent Subsidiaries will not settle or
compromise any pending or threatened suit, action or claim for an amount in
excess of $50,000 per suit, action or claim or which relates to the
transactions contemplated hereby.
(n) Capital Expenditures. Parent and the Parent Subsidiaries will not
authorize or make any expenditure for capital or acquisitions in excess of
L50,000 in the aggregate which are not specifically provided for in
Parent's capital budget (a true and correct copy of which has been
delivered to the Company and is set forth in the Parent Disclosure
Schedule).
(o) Proprietary Rights. Parent and the Parent Subsidiaries will use
best efforts to protect the Parent Proprietary Rights.
(p) Other Actions. Parent shall not, and shall not permit any Parent
Subsidiary to, take any action that could reasonably be expected to result
in (i) any of the representations or warranties of Parent set forth in this
Agreement that are qualified as to materiality becoming untrue (ii) any of
such representations and warranties that are not so qualified becoming
untrue in any material respect or (iii) except as otherwise permitted by
Section 7.5, any of the conditions to the Merger set forth in Article VIII
not being satisfied.
6.3. ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall (a) confer on
a regular and frequent basis with the other, (b) report (to the extent permitted
by law, regulation and any applicable confidentiality agreement) to the other on
operational matters and (c) promptly advise the other orally and in writing of
(i) any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified
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becoming untrue or inaccurate in any material respect, (ii) the failure by it
(A) to comply with or satisfy in any respect any covenant, condition or
agreement required to be complied with or satisfied by it under this Agreement
that is qualified as to materiality or (B) to comply with or satisfy in any
material respect any covenant, condition or agreement required to be complied
with or satisfied by it under this Agreement that is not so qualified as to
materiality or (iii) any change, event or circumstance that has had or could
reasonably be expected to have a Material Adverse Effect on such party or
materially adversely affect its ability to consummate the Merger in a timely
manner; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall file all reports required to be filed by each of them with the
SEC and the LSE (and all other Governmental Entities) between the date of this
Agreement and the Effective Time and shall (to the extent permitted by law or
regulation or any applicable confidentiality agreement) deliver to the other
party copies of all such reports promptly after the same are filed. Subject to
applicable laws relating to the exchange of information, each of the Company and
Parent shall have the right to review in advance, and to the extent practicable
each will consult with the other, with respect to all the information relating
to the other party and each of their respective subsidiaries, which appears in
any filings, announcements or publications made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party agrees that, to the extent practicable, it will consult
with the other party with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party apprised of the status of
matters relating to completion of the transactions contemplated hereby.
6.4. CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this Agreement
shall give the Company, directly or indirectly, the right to control or direct
Parent's operations prior to the Effective Time. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, each of the Company and Parent shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
ARTICLE VII.
ADDITIONAL AGREEMENTS
7.1. PREPARATION OF FORM F-4 AND PROXY STATEMENT; THE STOCKHOLDERS
MEETINGS.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy Statement
and Parent shall prepare and file with the SEC the Form F-4, in which the
Proxy Statement shall be included as a prospectus, together with any other
documents required by the Securities Act or Exchange Act in connection with
the Merger. Subject to the provisions of Section 7.5, the Proxy Statement
shall include the recommendation of the Board of Directors of the Company
in favor of the Merger. Each of the Company and Parent shall use reasonable
efforts to have the Form F-4 declared effective under the Securities Act as
promptly as practicable after such filing. The Company shall use reasonable
efforts to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after the Form F-4 is declared
effective under the Securities Act. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is
not now so qualified) required to be taken under any applicable securities
laws of the United States or United Kingdom or "blue sky" laws in
connection with the issuance of Parent Ordinary Shares pursuant to the
Merger, and the Company shall furnish all information concerning the
Company and the holders of the Company Common Stock and rights to acquire
Company Common Stock pursuant to the Company Stock Option Plans and Company
Warrants as may be reasonably requested in connection with any such action.
(b) The Company shall duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of obtaining the Required Company Votes, and,
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the Company's Board of Directors shall, subject to its fiduciary duties to
stockholders (as determined in good faith by the Company's Board of
Directors based upon the advice of counsel) and the terms of Section 7.5(b)
of this Agreement, recommend to its stockholders that they approve the
transactions contemplated by this Agreement. Parent shall vote or cause to
be voted all the shares of Company Common Stock, if any, owned of record by
Parent or any of its subsidiaries in favor of the transactions contemplated
by this Agreement.
(c) Parent shall duly call, give notice of, convene and hold the
Parent Shareholder Meeting for the purpose of obtaining the Required Parent
Votes, and, Parent's Board of Directors shall, subject to its fiduciary
duties to shareholders (as determined in good faith by Parent's Board of
Directors based upon the advice of counsel) and Sections 7.5(e) and (f) of
this Agreement, recommend to its shareholders that they approve the
transactions contemplated by this Agreement. The Company shall vote or
cause to be voted all Parent Ordinary Shares, if any, owned of record by
the Company or any of its subsidiaries in favor of the transactions
contemplated by this Agreement. Parent agrees that (i) there shall be
presented at the Parent Shareholder Meeting a resolution to authorize the
Board of Directors of Parent to allot Parent Ordinary Shares pursuant to
Section 80 of the Companies Act, without regard to Section 89 of the
Companies Act, pursuant to that certain Deed of even date herewith between
Parent, the Company, Therapeutic Antibodies U.K. Limited and Stuart M.
Wallis (the "Wallis Deed") and (ii) Parent shall, through its Board of
Directors, subject to its fiduciary duties to shareholders (as determined
by Parent's Board of Directors based upon the advice of counsel), recommend
to its shareholders that they vote in favour of such resolution.
(d) The Company shall use reasonable efforts to cause to be delivered
to Parent "comfort" letters of PricewaterhouseCoopers LLP, the Company's
independent public accountants, dated (i) a date within two Business Days
before the date on which the Form F-4 shall become effective and (ii) the
Closing Date, and addressed to Parent, in form reasonably satisfactory to
Parent and customary in scope for letters delivered by independent public
accountants in connection with registration statements similar to the Form
F-4.
(e) Parent shall use reasonable efforts to cause to be delivered to
the Company "comfort" letters of Mazars Neville Russell ("Mazars"),
Parent's independent public accountants, dated (i) a date within two
business days before the date on which the Form F-4 shall become effective
and (ii) the Closing Date, and addressed to the Company, in form reasonably
satisfactory to the Company and customary in scope for letters delivered by
independent public accountants in connection with registration statements
similar to the Form F-4.
7.2. PREPARATION OF PARENT DISCLOSURE CIRCULAR. Parent shall, (i) as soon
as practicable after the date of this Agreement and in accordance with the
listing rules of the LSE and applicable law and in cooperation with the Company,
prepare and submit to the LSE for approval the Parent Disclosure Circular, and
shall use reasonable commercial efforts to have such document formally cleared
by the LSE and shall thereafter publish the Parent Disclosure Circular, file it
with the Registrar of Companies in England and mail the same to its shareholders
in compliance with all legal requirements applicable to the Parent Shareholder
Meeting and the listing rules of the LSE and (ii) if necessary, after the Parent
Disclosure Circular has been so posted, promptly circulate amended, supplemental
or supplemented materials and, if required in connection therewith, resolicit
votes.
7.3. ACCESS TO INFORMATION. Upon reasonable notice, each of the Company and
Parent shall (and shall cause its subsidiaries, to the extent permitted by the
organizational documents or other pertinent agreements of such entity, to)
afford to the officers, employees, accountants, counsel, financial advisors and
other representatives of the other reasonable access during normal business
hours, during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records and its officers, employees and
representatives and, during such period, each of the Company and Parent shall
(and shall cause its subsidiaries, to the extent permitted by the organizational
documents or other pertinent agreements of such entity, to) furnish promptly to
the other (a) a copy of each report, schedule, registration statement and other
document filed, published, announced or received by it during such period
pursuant to the requirements of
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Federal or state securities laws, as applicable (other than reports or documents
which such party is not permitted to disclose under applicable law) and (b)
consistent with its legal obligations, all other information concerning its
business, properties and personnel as the other party may reasonably request,
including any information requested with respect to stockholder approval at
either the Company Stockholders Meeting or the Parent Shareholder Meeting and
the status of efforts to obtain such approval; provided, however, that either
the Company or Parent may restrict the foregoing access to the extent that (i) a
Governmental Entity requires such party or its subsidiary to restrict access to
any properties or information reasonably related to any such contract on the
basis of applicable laws and regulations or (ii) any law, treaty, rule or
regulation of any Governmental Entity applicable to such party or its subsidiary
requires such party or its subsidiary to restrict access to any properties or
information. Such information shall be held in confidence to the extent required
by, and in accordance with, the provisions of the mutual secrecy agreement (the
"Mutual Secrecy Agreement") dated January 25, 1999, between the Company and
Parent, which Mutual Secrecy Agreement shall remain in full force and effect.
7.4. APPROVALS AND CONSENTS; COOPERATION. Each of the Company and Parent
shall cooperate with each other and use (and shall cause their respective
subsidiaries to use) its reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on their part under this Agreement and applicable laws to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
as soon as practicable, including (i) preparing and filing as promptly as
practicable all documentation to effect all necessary applications, notices,
petitions, filings, tax ruling requests and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders, registrations,
approvals, permits, tax rulings and authorizations necessary or advisable to be
obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement, (ii) taking all reasonable steps as may be necessary to obtain all
such consents, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals and (iii) subject to fiduciary duties, the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed. Without limiting the generality of the foregoing, each of
the Company and Parent agrees to make all necessary filings in connection with
the Required Regulatory Approvals (as defined herein) as promptly as practicable
after the date of this Agreement, and to use its reasonable efforts to furnish
or cause to be furnished, as promptly as practicable, all information and
documents requested with respect to such Required Regulatory Approvals and shall
otherwise cooperate with the applicable Governmental Entity in order to obtain
any Required Regulatory Approvals in as expeditious a manner as possible. Each
of the Company and Parent shall use its reasonable efforts to resolve such
objections, if any, as any Governmental Entity may assert with respect to this
Agreement and the transactions contemplated hereby in connection with the
Required Regulatory Approvals. In the event that a suit is instituted by a
Person or Governmental Entity challenging this Agreement and the transactions
contemplated hereby as violative of applicable antitrust or competition laws,
each of the Company and Parent shall use its reasonable efforts to resist or
resolve such suit. The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its subsidiaries,
directors, officers and stockholders and such other matters as may reasonably be
necessary or advisable in connection with the Form F-4 or Proxy Statement or any
other statement, filing, tax ruling request, notice or application made by or on
behalf of the Company, Parent or any of their respective subsidiaries to any
third party and/or any Governmental Entity in connection with the Merger or the
other transactions contemplated by this Agreement.
7.5. ACQUISITION PROPOSALS.
(a) The Company agrees that, prior to the Effective Time, it shall not
and shall not authorize or permit any Company Subsidiary or any of its or
its subsidiaries, directors, officers, employees, agents or representatives
to, directly or indirectly, solicit, initiate, facilitate or encourage any
inquiries or the making of any proposal with respect to any tender offer,
exchange offer, merger, consolidation, sale of assets, sales of capital
stock or other business combination involving the Company or the Company
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Subsidiaries or the acquisition of 15% or more of the assets or capital
stock of the Company and the Company Subsidiaries taken as a whole (a
"Company Acquisition Proposal"), or negotiate, explore or otherwise
communicate in any way with, or provide or furnish any information to, any
Person (other than Parent or Merger Sub) with respect to any Company
Acquisition Proposal or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by this Agreement.
(b) Notwithstanding anything to the contrary contained in Section
7.5(a) or elsewhere in this Agreement, prior to the Effective Time, the
Company may, in response to an unsolicited written binding offer with
respect to a Company Acquisition Proposal from a Person with sufficient
financial resources available to it to consummate such transaction which
contains no financing condition, participate in discussion or negotiations
with, and furnish non-public information, and afford access to the
properties, books, records, officers, employees and representatives of the
Company to any Person, entity or group, in each case only if the Board of
Directors of the Company determines in good faith, (A) after consultation
with its outside counsel and financial advisors, that the Company
Acquisition Proposal would, upon consummation thereof, result in a
transaction which is more favorable to the Company's stockholders from a
financial point of view than the Merger and that such transaction is likely
to be consummated, and (B) after advice of outside counsel, that failing to
take such action would constitute a breach of the Company's Board of
Directors' fiduciary duties under applicable law (a "Company Superior
Proposal"). In the event the Company receives a Company Superior Proposal,
nothing contained in this Agreement (but subject to the terms of this
paragraph (b)) shall prevent the Board of Directors of the Company from
executing or entering into an agreement relating to such Company Superior
Proposal and recommending such Company Superior Proposal to its
stockholders; in such case, the Board of Directors of the Company may
withdraw, modify or refrain from making its recommendation of the Merger,
and, to the extent it does so, the Company may refrain from calling,
providing notice of and holding the Company Stockholders Meeting to adopt
this Agreement and from soliciting proxies or consents to secure the vote
or written consent of its stockholders to adopt this Agreement and may
terminate this Agreement; provided, however, that the Company shall (i)
provide Parent written notice of the Company's receipt of a Company
Superior Proposal, including a copy of such Company Superior Proposal
within 24 hours of such receipt, (ii) provide Parent written notice of the
Company's receipt of a Company Acquisition Proposal, including a copy of
such Company Acquisition Proposal within 48 hours of such receipt and (iii)
provide Parent written notice of the Company's intention to execute or
enter into an agreement relating to a Company Superior Proposal at least
three Business Days prior to the Company's execution of or entry into such
an agreement. Notwithstanding anything to the contrary contained in Section
7.5 or elsewhere in this Agreement, prior to the Effective Time, the
Company may, in connection with a possible Company Acquisition Proposal,
refer any third party to this Section 7.5 and Section 9.3(b) and make a
copy of this Section 7.5 and Section 9.3(b) available to a third party.
(c) Parent agrees that, prior to the Effective Time, it shall not and
shall not authorize or permit any Parent Subsidiary or any of its or its
subsidiaries, directors, officers, employees, agents or representatives to,
directly or indirectly, solicit, initiate or encourage any inquiries or the
making of any proposal with respect to any tender offer, exchange offer,
merger, consolidation, sale of assets, sales of capital stock or other
business combination involving Parent or the Parent Subsidiaries or the
acquisition of 15% or more of the assets or capital stock of Parent and the
Parent Subsidiaries taken as a whole (a "Parent Acquisition Proposal"), or
negotiate or explore with any Person (other than the Company) with respect
to any Parent Acquisition Proposal or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate
the Merger or any other transaction contemplated by this Agreement.
(d) Parent agrees that, prior to the Effective Time, it shall not and
shall not authorize or permit any Parent Subsidiary or any of its or its
subsidiaries, directors, officers, employees, agents, or representatives to
directly facilitate the making of a Parent Acquisition Proposal or
otherwise communicate in any way with, or provide or furnish any
information to, any Person (other than the Company) with respect to any
Parent Acquisition Proposal.
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(e) Notwithstanding anything to the contrary contained in Sections
7.5(c) and (d) or elsewhere in this Agreement, prior to the Effective Time,
Parent may, in response to an unsolicited written binding offer with
respect to a Parent Acquisition Proposal from a Person with sufficient
financial resources available to it to consummate such transaction which
contains no financing condition, participate in discussion or negotiations
with, and furnish non-public information, and afford access to the
properties, books, records, officers, employees and representatives of
Parent to any Person, entity or group, in each case only if the Board of
Directors of Parent determines in good faith, (A) after consultation with
its outside counsel and financial advisors, that the Parent Acquisition
Proposal would, upon consummation thereof, result in a transaction which is
more favorable to Parent's shareholders from a financial point of view than
the Merger and that such transaction is likely to be consummated, and (B)
after advice of outside counsel, that failing to take such action would
constitute a breach of Parent's Board of Directors' fiduciary duties under
applicable law (a "Parent Superior Proposal"). In the event Parent receives
a Parent Superior Proposal, nothing contained in this Agreement (but
subject to the terms of this paragraph (e)) shall prevent the Board of
Directors of Parent from executing or entering into an agreement relating
to such Parent Superior Proposal and recommending such Parent Superior
Proposal to its shareholders; in such case, the Board of Directors of
Parent may withdraw, modify or refrain from making its recommendation of
the Merger, and, to the extent it does so, Parent may refrain from calling,
providing notice of and holding the Parent Shareholder Meeting to adopt
this Agreement and from soliciting proxies or consents to secure the vote
or written consent of its shareholders to adopt this Agreement and may
terminate this Agreement; provided, however, that Parent shall (i) provide
the Company written notice of Parent's receipt of a Parent Superior
Proposal, including a copy of such Parent Superior Proposal within 24 hours
of such receipt, (ii) provide the Company written notice of Parent's
receipt of a Parent Acquisition Proposal, including a copy of such Parent
Acquisition Proposal within 48 hours of such receipt and (iii) provide the
Company written notice of Parent's intention to execute or enter into an
agreement relating to a Parent Superior Proposal at least three Business
Days prior to Parent's execution of or entry into such an agreement.
Notwithstanding anything to the contrary contained in Section 7.5 or
elsewhere in this Agreement, prior to the Effective Time, Parent may, in
connection with a possible Parent Acquisition Proposal, refer any third
party to this Section 7.5 and Section 9.3(f) and make a copy of this
Section 7.5 and Section 9.3(f) available to a third party.
(f) Nothing contained in Section 7.5(d) or (e) shall prohibit Parent
from taking any action and making such recommendations as the Board of
Directors of Parent, upon advice from WestLB Panmure Limited, reasonably
consider necessary so as to comply with any obligations imposed on them or
Parent by the City Code on Takeovers and Mergers in relation to any Parent
Acquisition Proposal.
7.6. FEES AND EXPENSES. Subject to Article IX, the Company and Parent
shall bear their respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby, including without limitation, all fees and expenses of
agents, representatives, counsel and accountants. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Form F-4 and Proxy Statement and the solicitation of stockholder approvals
and all other matters related to the transactions contemplated hereby.
7.7. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) For a period of six years after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless the officers and
directors of the Company as of the date hereof against all losses, claims,
damages, expenses or liabilities arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time to
the same extent and on the same terms and conditions (including with
respect to advancement of expenses) provided for in the Company's
Certificate of Incorporation and Bylaws in effect at the date hereof (to
the extent consistent with applicable law).
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(b) From and after the Effective Time until the sixth anniversary
thereof, the Surviving Corporation shall maintain in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that the Parent or the Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous) with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that the Surviving Corporation shall not
be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 150% of the premiums paid as of the date hereof
by the Company for such insurance.
7.8. PUBLIC ANNOUNCEMENTS. The Company and Parent shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
7.9. TAX AND ACCOUNTING TREATMENT. Each of Parent, Merger Sub and the
Company shall not take any action and shall not fail to take any action which
action or failure to act would prevent, or would be likely to prevent, the
Merger from qualifying (i) as a reorganization within the meaning of Section
368(a) of the Code, (ii) for pooling of interests accounting treatment under
U.S. GAAP or (iii) for merger accounting treatment under U.K. GAAP.
7.10. AFFILIATES.
(a) Prior to the Closing Date, the Company shall deliver to Parent a
letter identifying all Persons who are, at the time this Agreement is
submitted for approval to the stockholders of the Company, "affiliates" of
the Company (including all directors of the Company and the stockholders
identified on Schedule 7.10(a)) for purposes of Rule 145 under the
Securities Act or under applicable SEC accounting releases with respect to
pooling of interests accounting treatment. The Company shall use reasonable
efforts to cause each such Person to deliver to Parent on or prior to the
Closing Date a written agreement substantially in the form attached hereto
as Exhibit A.
(b) Prior to the Closing Date, Parent shall deliver to the Company a
letter identifying all Persons who are, at the time this Agreement is
submitted for approval to the stockholders of the Company, "affiliates" of
Parent (including all directors of Parent) under applicable SEC accounting
releases with respect to pooling of interests accounting treatment. Parent
shall use reasonable efforts to cause each such Person to deliver to the
Company on or prior to the Closing Date a written agreement substantially
in the form attached hereto as Exhibit B.
7.11. STOCK EXCHANGE LISTING. Parent shall use reasonable efforts to cause
the Parent Ordinary Shares to be issued in the Merger and the Financing to be
admitted to the Official List of the LSE.
7.12. TAKEOVER STATUTES. If any "fair price," "moratorium," "control share
acquisition," or other anti-takeover statute or similar statute or regulation,
or any provision of the Company's Certificate of Incorporation, Bylaws or other
constitutive documents shall become applicable to the Merger, this Agreement or
any of the other transactions contemplated hereby or thereby, the Company and
its Board of Directors shall take all action necessary to ensure that the
Merger, this Agreement and the other transactions contemplated hereby and
thereby may be consummated as promptly as practicable and otherwise to minimize
the effect of such statute, regulation or provisions on the Merger, this
Agreement and the other transactions contemplated hereby.
7.13. DIRECTORS AND SENIOR MANAGEMENT OF PARENT. The Board of Directors of
Parent shall take action to cause the directors comprising the full Board of
Directors of Parent at the Effective Time to be the persons listed on Schedule
7.13(a). The Board of Directors of Parent shall also take action to cause the
persons identified on Schedule 7.13(b) to be elected to the offices specified
opposite each person's name.
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7.14. PATENT OPINION. Within 21 days following the date of this Agreement,
the Company shall retain U.S. patent counsel nationally recognized to be
experienced in rendering opinions on the validity of U.S. patents and approved
by Parent (which approval shall not be unreasonably withheld) to render an
opinion to Parent and the Company in relation to such matters and in relation to
such patents as Parent and the Company shall mutually agree (the "Patent
Opinion"). The Company shall use reasonable efforts to cause the Patent Opinion
to be delivered to Parent not later than the 70th day following the date of this
Agreement.
7.15. FURTHER ASSURANCES. In case at any time after the Effective Time any
further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE VIII.
CONDITIONS PRECEDENT
8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company shall have obtained the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock adopting this Agreement and approving the consummation
of the transactions contemplated hereby and Parent's shareholders shall
have passed (A) ordinary resolutions to (i) approve this Agreement and the
Merger, (ii) increase the authorized share capital of Parent and (iii)
authorize the Board of Directors of Parent pursuant to Section 80 of the
Companies Act to allot Parent Ordinary Shares pursuant to this Agreement
and pursuant to the Financing (as defined below) and (B) a special
resolution disapplying the statutory pre-emption rights of Section 89 of
the Companies Act in respect of Parent Ordinary Shares to be allotted
pursuant to the Financing.
(b) Effective Registration Statement. The Form F-4 shall have been
declared effective by the SEC under the Securities Act, and no stop order
suspending the effectiveness of the Form F-4 shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or, to
the knowledge of the Parent or the Company, threatened by the SEC, and all
necessary approvals under blue sky laws relating to the issuance of the
Parent Ordinary Shares to be issued to the stockholders of the Company in
connection with the Merger shall have been received.
(c) No Injunctions or Restraints, Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court
or other Governmental Entity of competent jurisdiction shall be in effect
and have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(d) Required Regulatory Approvals. All authorizations, consents,
orders and approvals of, and declarations and filings with, and all
expirations of waiting periods imposed by, any Governmental Entity which,
if not obtained in connection with the consummation of the transactions
contemplated hereby, could reasonably be expected to have a Material
Adverse Effect on Parent or the Company (collectively, "Required Regulatory
Approvals"), shall have been obtained, have been declared or filed or have
occurred, as the case may be, and all such Required Regulatory Approvals
shall be in full force and effect.
(e) Admission to LSE. The LSE shall have agreed to admit to the
Official List (subject to allotment) the Parent Ordinary Shares to be
issued in the Merger and in the Financing (as defined herein) and such
agreement shall not have been withdrawn.
(f) Capital Raising. The placing agreement, dated as of the date
hereof, between Parent and WestLB Panmure Limited (the "Financing") shall
be unconditional in all respects; provided, however, that such placing
agreement may still be conditional on the consummation of the transactions
contemplated by this Agreement and the admission of the Parent Ordinary
Shares to be issued in the Financing and the Merger to the Official List of
the LSE as contemplated in the placing agreement.
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(g) Exon-Florio Act. Parent shall have received all consents or
approvals necessary under the Exon-Florio provisions of the Omnibus Trade
and Competitiveness Act of 1988.
8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent, on or prior to the Closing Date, of the
following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement that is qualified as
to materiality shall have been true and correct when made and shall be true
and correct on and as of the Closing Date as if made on and as of such date
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date),
and each of the representations and warranties of the Company that is not
so qualified (the "Unqualified Company Representations") shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects on and as of the Closing Date as if made
on and as of such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct
in all material respects as of such certain date). For purposes of this
Section 8.2(a), an Unqualified Company Representation shall be deemed not
to have been true and correct in all material respects only if Parent
reasonably determines in good faith that the failure of the Unqualified
Company Representation to be true and correct is material to its decision
with respect to whether to consummate the transactions provided for herein.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality and shall have performed or complied in all
material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are not so qualified as to materiality.
(c) Tax Opinion. Parent shall have received an opinion from
PricewaterhouseCoopers, dated on or about the date the Proxy Statement is
mailed to the Company's stockholders, in form and substance reasonably
satisfactory to Parent and based on customary representations of Parent,
Merger Sub and the Company and on the basis of facts and assumptions set
forth in such opinion, which are consistent with the state of facts
existing at the Effective Time, substantially to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and (ii) no gain or loss will be recognized by the
Company, Parent or Merger Sub in connection with or as a result of the
Merger for United States federal income tax purposes Further, the opinion
of PricewaterhouseCoopers delivered pursuant to this section shall not have
been withdrawn or modified in any material respect on or prior to the
Effective Time.
(d) Absence of Company Material Adverse Effect. There shall not have
occurred since the date of this Agreement any Material Adverse Effect on
the Company.
(e) Secretary of State Certificate. The Company shall have delivered a
copy of the Certificate of Incorporation of the Company, as in effect
immediately prior to the Closing Date, certified by the Delaware Secretary
of State and a certificate, as of the most recent practicable date, of the
Delaware Secretary of State as to the Company's corporate good standing.
(f) Secretary's Certificate. The Company shall have delivered a
certificate of the Secretary of the Company dated as of the Closing Date,
certifying as to (i) the incumbency of officers of the Company executing
documents executed and delivered in connection herewith, (ii) a copy of the
Certificate of Incorporation of the Company as in effect immediately prior
to the Closing Date; (iii) a copy of the Bylaws of the Company, as in
effect on and as of the Closing Date, (iv) a copy of the resolutions of the
Board of Directors of the Company authorizing and approving the applicable
matters contemplated hereunder and (v) a copy of the resolutions of the
stockholders of the Company authorizing and approving the applicable
matters contemplated hereunder.
(g) Affiliate Letters. Parent shall have received the Affiliate
Letters referred to in Section 7.10.
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(h) Consents. The Company shall have received all written consents,
assignments, waivers, authorizations or other certificates contemplated by
this Agreement or the Company Disclosure Schedule or reasonably deemed
necessary by Parent's legal counsel to provide for the continuation in full
force and effect of all Material Contracts and Leases of the Company and
for Parent to consummate the transactions contemplated hereby, each in form
and substance satisfactory to Parent, except where the failure to obtain
such consents, assignments, waivers, authorizations or other certificate
would not have a Material Adverse Effect on the Company.
(i) Dissenting Shares. The Dissenting Shares of Company Common Stock
shall not exceed 2.5% of the shares of Company Common Stock outstanding on
the Closing Date.
(j) Opinion of Counsel. Parent shall have received the written opinion
of Waller Lansden, Dortch & Davis, counsel to the Company, substantially in
the form attached hereto as Exhibit C.
(k) Voting Agreements. Each of the Voting Agreements shall be in full
force and effect and each party thereto shall have complied with all
covenants contained therein to be performed by them prior to the Closing
Date.
(l) Taxation. Parent shall have received a letter from the U.K.
Treasury that it consents to the Merger for purposes of 765(1)(c) of the
Income and Corporations Taxes Act 1988.
(m) Bridge Financing. No event of default shall have occurred and be
continuing under the Bridge Financing and, unless Parent shall have
consented in writing, the borrowings under the Bridge Financing shall be
outstanding and shall not have been repaid other than through the
application of proceeds of a financing approved by Parent for the purpose
of repayment of the Bridge Financing.
(n) Wallis Deed. The Wallis Deed shall not have been amended,
supplemented or modified in any way and the Company shall not have any
other arrangement, agreement or understanding, whether written or oral,
with Mr. Wallis regarding the subject matter of the Wallis Deed.
8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to effect the Merger are subject to the satisfaction of, or
waiver by the Company on or prior to the Closing Date of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement that is
qualified as to materiality shall have been true and correct when made and
shall be true and correct on and as of the Closing Date as if made on and
as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct as of
such certain date), and each of the representations and warranties of each
of Parent and Merger Sub that is not so qualified (the "Unqualified Parent
Representations") shall have been true and correct in all material respects
when made and shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date). For purposes of this Section 8.3(a), an Unqualified Parent
Representation shall be deemed not to have been true and correct in all
material respects only if the Company reasonably determines in good faith
that the failure of the Unqualified Parent Representation to be true and
correct is material to its decision with respect to whether to consummate
the transactions provided for herein.
(b) Performance of Obligations of Parent. Parent shall have performed
or complied with all agreements and covenants required to be performed by
it under this Agreement at or prior to the Closing Date that are qualified
as to materiality and shall have performed or complied in all material
respects with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are not so
qualified as to materiality.
(c) Tax Opinion. The Company shall have received an opinion from
PricewaterhouseCoopers LLP, dated on or about the date the Proxy Statement
is mailed to the Company's stockholders, in form and substance reasonably
satisfactory to the Company and based on customary representations of
Parent, Merger Sub and the Company and on the basis of facts and
assumptions set forth in such opinion, which
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are consistent with the state of facts existing at the Effective Time,
substantially to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and (ii) no
gain or loss will be recognized by the Company, Parent or Merger Sub in
connection with or as a result of the Merger for United States federal
income tax purposes. Further, the opinion of PricewaterhouseCoopers LLP
delivered pursuant to this section shall not have been withdrawn or
modified in any material respect on or prior to the Effective Time.
(d) Absence of Parent Material Adverse Effect. There shall not have
occurred since the date of this Agreement any Material Adverse Effect on
Parent.
(e) U.K. Good Standing. Parent shall deliver a certificate certifying
that from the documents on the file of Parent in the custody of the
Registrar of Companies, Parent has been in continuous and unbroken
existence since the date of its incorporation; no action is being taken by
the Registrar of Companies for striking Parent off the register and
dissolving it as defunct and Parent is not in liquidation or subject to an
administrative order and no receiver or manager of Parent's properties has
been appointed.
(f) Secretary's Certificate. Parent shall have delivered a certificate
of the Secretary of Parent dated as of the Closing Date, certifying as to
(i) the incumbency of officers of Parent executing documents executed and
delivered in connection herewith, (ii) a copy of the memorandum and
articles of association of Parent as in effect immediately prior to the
Closing Date; (iii) a copy of the resolutions of the Board of Directors of
Parent authorizing and approving the applicable matters contemplated
hereunder and (iv) a copy of the resolutions of the holders of Parent
Ordinary Shares authorizing and approving the applicable matters
contemplated hereunder.
(g) Consents. Parent shall have received all written consents,
assignments, waivers, authorizations or other certificates contemplated by
this Agreement or the Parent Disclosure Schedule or reasonably deemed
necessary by the Company's legal counsel to provide for the continuation in
full force and effect of all Parent Material Contracts and Parent Leases
and for the Company to consummate the transactions contemplated hereby,
each in form and substance satisfactory to the Company, except where the
failure to obtain such consents, assignments, waivers, authorizations or
other certificate would not have a Material Adverse Effect on Parent.
(h) Dividends. During the period from the date of this Agreement until
the Effective Time, Parent shall not have directly or indirectly (i) split,
combined or reclassified any shares of its capital stock or declared, set
aside or paid any dividend or distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock other than
dividends and distributions by a Parent Subsidiary to Parent or to any
other Parent Subsidiary all of the capital stock of which is owned directly
or indirectly by Parent, or (ii) redeemed, purchased or otherwise acquired
or offered or agreed to redeem, purchase or otherwise acquire any capital
stock of Parent or any Parent Subsidiary.
(i) Resignation of Officer of Parent. The Company shall have received
a letter of resignation of David Gration as Executive Chairman of Parent
and accepting the position of Non-Executive Deputy Chairman.
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ARTICLE IX.
TERMINATION AND AMENDMENT
9.1. TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company or
the shareholders of Parent:
(a) By mutual written consent of Parent and the Company;
(b) By either the Company or Parent if the Merger shall not have been
consummated by December 20, 1999 (the "Outside Date"); provided, however,
that the right to terminate this Agreement under this Section 9.1(b) shall
not be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Merger to occur on or before such date;
(c) By either the Company or Parent if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties shall have used their
reasonable efforts to resist, resolve or lift, as applicable, subject to
the provisions of Section 6.3) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable; provided, however, that the provisions of this Section
9.1(c) shall not be available to any party whose failure to fulfill its
obligations pursuant to Section 6.3 shall have been the cause of, or shall
have resulted in, such order or injunction;
(d) By either Parent or the Company if the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
adopting this Agreement and approving the consummation of the transactions
contemplated hereby shall not have been obtained at the Company
Stockholders Meeting or at any adjournment thereof (by reason of the
failure to obtain the required vote) at a duly held meeting of stockholders
or at any adjournment thereof;
(e) By either Parent or the Company if (A) ordinary resolutions of
Parent to (i) approve this Agreement and the Merger, (ii) increase the
authorized share capital of Parent and (iii) authorize the Board of
Directors of Parent pursuant to Section 80 of the Companies Act to allot
Parent Ordinary Shares pursuant to this Agreement and pursuant to the
Financing and (B) a special resolution of Parent disapplying the statutory
pre-emption rights of Section 89 of the Companies Act in respect of Parent
Ordinary Shares to be allotted pursuant to the Financing shall not have
passed at the Parent Shareholders Meeting or at any adjournment thereof (by
reason of the failure to obtain the required vote) at a duly held meeting
of shareholders or at any adjournment thereof;
(f) By Parent if (i) the Board of Directors of the Company shall have
withdrawn or adversely modified its recommendation that stockholders adopt
this Agreement or approve the consummation of the transactions contemplated
hereby; (ii) the Board of Directors of the Company shall have failed to
recommend that the Company's stockholders adopt this Agreement and approve
the consummation of the transactions contemplated hereby or shall have
recommended to the stockholders of the Company that they approve a Company
Acquisition Proposal other than the Merger; (iii) a tender offer or
exchange offer that, if successful, would result in any Person or "group"
becoming a "beneficial owner" (such terms having the meanings ascribed to
them under Regulation 13D under the Exchange Act) of 15% or more of the
outstanding shares of Company Common Stock is commenced (other than by
Parent or an affiliate of Parent) and the Board of Directors of the Company
does not oppose such tender or exchange offer or recommends that the
stockholders of the Company tender their shares in such tender or exchange
offer; or (iv) for any reason the Company fails to call and hold the
Company Stockholders Meeting by the Outside Date (provided that (i) the
Form F-4 shall have been declared effective by the SEC or shall have failed
to be declared effective by the SEC solely as a result of the Company's
failure to provide information concerning the Company required by the SEC
to be set forth in the Form F-4 and
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(ii) Parent's right to terminate this Agreement under this clause (iv)
shall not be available if at such time the Company would be entitled to
terminate this Agreement under Section 9.1(i));
(g) By the Company if the Board of Directors of the Company determines
to accept a Company Superior Proposal; provided, however, that no
termination pursuant to this Section 9.1(g) shall be effective unless that
Company shall make the payment required by Section 9.3(b) within two
Business Days following the acceptance of such Company Superior Proposal;
(h) By Parent, upon a material breach of any covenant or agreement on
the part of the Company set forth in this Agreement, or if (i) any
representation or warranty of the Company that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty
of the Company that is not so qualified shall have become untrue in any
material respect, in each case such that the conditions set forth in
Section 8.2(a) or Section 8.2(b) would not be satisfied (a "Terminating
Company Breach"); provided, however, that, if such Terminating Company
Breach is capable of being cured by the Company prior to the Effective
Time, Parent shall promptly give notice of such Terminating Company Breach
to the Company and if such Terminating Company Breach is cured within 10
days after giving notice to the Company of such breach, Parent may not
terminate this Agreement under this Section 9.1(h);
(i) By the Company, upon a material breach of any covenant or
agreement on the part of Parent or Merger Sub set forth in this Agreement,
or if (i) any representation or warranty of Parent or Merger Sub that is
qualified as to materiality shall have become untrue or (ii) any
representation or warranty of Parent or Merger Sub that is not so qualified
shall have become untrue in any material respect, in each case such that
the conditions set forth in Section 8.3(a) or Section 8.3(b) would not be
satisfied (a "Terminating Parent Breach"); provided, however, that, if such
Terminating Parent Breach is capable of being cured by Parent prior to the
Effective Time, the Company shall promptly give notice of such Terminating
Parent Breach to Parent and if such Terminating Parent Breach is cured
within 10 days after giving written notice to Parent of such breach, the
Company may not terminate this Agreement under this Section 9.1(i);
(j) By the Company if (i) the Board of Directors of Parent shall have
withdrawn or adversely modified its recommendation that shareholders adopt
this Agreement or approve the consummation of the transactions contemplated
hereby or (ii) the Directors of Parent shall have failed to recommend that
Parent's shareholders adopt this Agreement and approve the consummation of
the transactions contemplated hereby or shall have recommended to the
shareholders of Parent that they approve a Parent Acquisition Proposal
other than the transactions contemplated by this Agreement, (iii) a tender
offer or exchange offer that, if successful, would result in any Person or
"group" becoming a "beneficial owner" (such terms having the meanings
ascribed to them under Regulation 13D under the Exchange Act) of 15% or
more of the outstanding Parent Ordinary Shares is commenced and the Board
of Directors of Parent does not oppose such tender or exchange offer or
recommends that the shareholders of Parent tender their shares in such
tender or exchange offer; or (iv) for any reason Parent fails to call and
hold the Parent Shareholder Meeting by the Outside Date (provided that the
Parent Disclosure Circular shall have been approved for issue by the LSE or
shall have failed to be so approved solely as a result of Parent's failure
to provide information concerning Parent required to be set forth in the
Parent Disclosure Circular and (ii) the Company's right to terminate this
Agreement under this clause (iv) shall not be available if at such time
Parent would be entitled to terminate this Agreement under Section 9.1(h));
or
(k) By Parent if the Board of Directors of Parent determines to accept
a Parent Superior Proposal; provided, however, that no termination pursuant
to this Section 9.1(k) shall be effective unless Parent shall make the
payment required by Section 9.3(f) within two Business Days following the
acceptance of such Parent Superior Proposal.
9.2. EFFECT OF TERMINATION. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 9.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Parent or the Company or their respective officers or directors except (i)
with respect to Section 7.6, this Section 9.2, Section 9.3 and Article X and
(ii) subject to the provisions of Section 9.3 (if those provisions shall have
become effective as provided in Section 9.3(a)), with respect to any liabilities
or
A-55
<PAGE> 56
damages incurred or suffered by a party as a result of the breach by the other
party of any of its covenants or other agreements set forth in this Agreement.
9.3. CERTAIN PAYMENTS IN THE EVENT OF TERMINATION.
(a) The provisions of this Section 9.3 shall be effective if and only
if (i) the Company stockholder approval described in Section 8.1(a) shall
have been obtained and (ii) Parent's shareholders shall have passed the
ordinary resolutions and special resolution described in Section 8.1(a).
(b) In the event of termination of this Agreement pursuant to Section
9.1(f) or 9.1(g), then the Company shall pay the Parent a cash fee of
$1,900,000 (the "Break-Up Fee"), which amount shall be payable by wire
transfer of immediately available funds no later than two Business Days
after such termination. The Company acknowledges that the agreements
contained in this Section 9.3(b) are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Parent
and Merger Sub would not enter into this Agreement.
(c) In the event of termination of this Agreement by Parent pursuant
to Section 9.1(d) or 9.1(h), then the Company shall pay Parent a cash fee
of $1,500,000 as liquidated damages, which amount shall be payable by wire
transfer of same day funds within three Business Days after termination.
(d) In the event of termination of this Agreement by the Company
pursuant to Section 9.1(e) or 9.1(i), then Parent shall pay the Company a
cash fee of $900,000 as liquidated damages, which amount shall be payable
by wire transfer of same day funds within three Business Days after
termination.
(e) If, during the 12 month period commencing on the date on which
this Agreement is terminated pursuant to Section 9.1(d) or (h), the Company
shall have entered into a binding agreement with respect to a Company
Acquisition Proposal with any third party with whom the Company had any
discussions concerning a Company Acquisition Proposal within 6 months of
the date on which this Agreement is terminated, upon consummation of the
transaction contemplated by such Company Acquisition Proposal (whether or
not such consummation shall occur with such 12 month period), the Company
agrees to pay to Parent the Break-Up Fee less the amount, if any,
theretofore paid by the Company to Parent pursuant to Section 9.3(c), in
immediately available funds, promptly, but in no event later than two
business days, after the date of such consummation.
(f) In the event of termination of this Agreement pursuant to Section
9.1(j) or (k), then Parent shall pay the Company the Break-Up Fee, which
amount shall be payable by wire transfer of immediately available funds no
later than two Business Days after such termination. Parent acknowledges
that the agreements contained in this Section 9.3(f) are an integral part
of the transactions contemplated in this Agreement, and that, without these
agreements, the Company would not enter into this Agreement.
(g) If, during the 12 month period commencing on the date on which
this Agreement is terminated pursuant to Section 9.1(e) or (i), Parent
shall have entered into a binding agreement with respect to a Parent
Acquisition Proposal with any third party with whom Parent had any
discussions concerning a Parent Acquisition Proposal within 6 months of the
date on which this Agreement is terminated, upon consummation of the
transaction contemplated by such Parent Acquisition Proposal (whether or
not such consummation shall occur with such 12 month period), Parent agrees
to pay to the Company the Break-Up Fee less the amount, if any, theretofore
paid by the Company to Parent pursuant to Section 9.3(d), in immediately
available funds, promptly, but in no event later than two business days,
after the date of such consummation.
(h) If any party shall be entitled to receive the Break-Up Fee
pursuant to Section 9.3(b) or 9.3(f) hereof, that party shall not also be
entitled to receive any payment pursuant to Section 9.3(c) or 9.3(d).
(i) THE PARTIES TO THIS AGREEMENT ACKNOWLEDGE THAT THE PARTIES' ACTUAL
DAMAGES OR ADVERSE CONSEQUENCES TO THE PARTIES IN THE EVENT OF A
TERMINATION OF THIS AGREEMENT FOR THE REASONS SPECIFIED IN THIS SECTION 9.3
WOULD BE EXTREMELY DIFFICULT, COSTLY, INCONVENIENT AND IMPRACTICABLE TO
DETERMINE AND PROVE. THEREFORE, THE PARTIES
A-56
<PAGE> 57
ACKNOWLEDGE THAT THE PAYMENTS SPECIFIED IN THIS SECTION 9.3 SHALL BE DEEMED
FOR ALL PURPOSES TO HAVE BEEN AGREED UPON, AFTER NEGOTIATION, AS THE
PARTIES' REASONABLE ESTIMATE OF DAMAGES OR ADVERSE CONSEQUENCES IN THE
EVENT OF A TERMINATION OF THIS AGREEMENT FOR THE REASONS SPECIFIED IN THIS
SECTION 9.3. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT THE PAYMENTS
SPECIFIED IN THIS SECTION 9.3 ARE REASONABLE SUMS CONSIDERING ALL THE
CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, INCLUDING THE
RELATIONSHIP OF THE AMOUNT OF THE PAYMENTS SPECIFIED IN THIS SECTION 9.3 TO
THE RANGE OF POSSIBLE HARM TO THE PARTIES. EACH PARTY TO THIS AGREEMENT
ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THIS PROVISION COVERING
LIQUIDATED DAMAGES AND THAT IT SHALL HAVE NO RECOURSE AGAINST ANY PERSON IN
THE EVENT OF A TERMINATION OF THIS AGREEMENT FOR THE REASONS SPECIFIED IN
THIS SECTION 9.3 PROVIDED THAT IT HAS RECEIVED THE PAYMENT TO WHICH IT IS
ENTITLED UNDER THIS SECTION 9.3. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
THAT IN CONNECTION WITH THE TRANSACTIONS PROVIDED FOR IN THIS AGREEMENT IT
HAS BEEN REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THE
PROVISIONS IN THIS SECTION 9.3(i) AT THE TIME THIS AGREEMENT WAS EXECUTED.
IN PLACING THEIR INITIALS BELOW EACH PARTY SPECIFICALLY CONFIRMS THE
ACCURACY OF THE STATEMENTS MADE ABOVE AND IRREVOCABLY AND CONCLUSIVELY
AGREES THAT IT MAY NOT CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THE
PROVISIONS OF THIS SECTION 9.3(i) (INCLUDING, WITHOUT LIMITATION, THE
METHODOLOGY BY WHICH THE AMOUNTS OF THE PAYMENTS SPECIFIED IN THIS SECTION
9.3 WERE DETERMINED).
Parent Initial /s/ BMR Merger Sub Initial /s/ BMR Company Initial
/s/ AJH
9.4. AMENDMENT. This Agreement may not be amended except by an instrument
signed by each of the parties hereto; provided, however, that after adoption of
this Agreement by the stockholders of the Company, without the further approval
of the stockholders of the Company, no amendment may be made that (a) alters or
changes the amount or kind of consideration to be received as provided in
Section 2.1 or (b) alters or changes any of the terms and conditions of this
Agreement if such alteration or change would materially adversely affect the
stockholders of the Company.
9.5. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. No delay on
the part of any party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party hereto of any right, power or privilege hereunder operate as a waiver
of any other right, power or privilege hereunder, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. Unless otherwise provided, the rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
the parties hereto may otherwise have at law or in equity. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
A-57
<PAGE> 58
ARTICLE X.
GENERAL PROVISIONS
10.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER
REPRESENTATIONS AND WARRANTIES. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained herein
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article X. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement, none
of the Company, Parent or Merger Sub makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement, the documents and the instruments referred to
herein, or the transactions contemplated hereby or thereby, notwithstanding the
delivery or disclosure to the other party or the other party's representatives
of any documentation or other information with respect to any one or more of the
foregoing.
10.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service, (c) on the tenth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Parent or Merger Sub, to Beechfield House, Lyme Green
Business Park, Macclesfield, Cheshire, SK11 0JL, attn: Barry Riley,
(facsimile no. +44(0) 1625 500666), with copies to Dick Tyler, Cameron
McKenna, 160 Aldersgate Street, London EC1A 4DD (facsimile no. +44(0) 171
367 2000) and Jeff Pero, Latham & Watkins, 505 Montgomery Street, Suite
1900, San Francisco, California 94111-2562 (facsimile no. (415) 395-8095).
(b) if to the Company, to 1207 17th Avenue South, Suite 103, Nashville
Tennessee, 37212, attn: Andrew Heath, (facsimile no. (615) 320-1212), with
copies to Hunter Rost, Waller Lansden Dortch & Davis, PLLC, Nashville City
Center, 511 Union Street, Suite 2100, Nashville, Tennessee 37219-8966
(facsimile no. (615) 244-6804) and Philip Broke, Ashurst Morris Crisp,
Broadwalk House, 5 Appold Street, London EC2A 2HA (facsimile no. +44(0) 171
972 7990).
10.3. INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden or proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statue or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the content requires otherwise.
10.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
A-58
<PAGE> 59
10.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement (including the Schedules and Exhibits) constitutes
the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof, other than the Mutual Secrecy Agreement, which
shall survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 7.7 (which is intended to be for the benefit
of the Persons covered thereby and may be enforced by such Persons).
10.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might be applicable under conflicts of laws principles.
10.7. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. Any provision of this Agreement held invalid or
unenforceable only in part, degree or certain jurisdictions will remain in full
force and effect to the extent not held invalid or unenforceable. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
10.8. ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
10.9. ENFORCEMENT; OTHER REMEDIES.
(a) The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the
parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or
in equity.
(b) Except as otherwise provided herein, any and all remedies
expressly conferred herein upon a party will be deemed cumulative with and
not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any
other.
10.10. DEFINITIONS. As used in this Agreement:
(a) "Affiliate" of a Person means any Person which directly or
indirectly controls, is controlled by, or is under common control with,
such Person. The term "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise.
(b) "Board of Directors" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
(c) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
A-59
<PAGE> 60
(d) "Company Stock Option Plans" means the Company's 1997 Stock Option
Plan and 1990 Stock Incentive Plan.
(e) "Material Adverse Effect" means, with respect to any entity, any
adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, is or
is reasonably likely to be materially adverse to the business, operations,
assets, liabilities, financial condition or results of operations of such
entity and its subsidiaries taken as a whole or would materially and
adversely affect the ability of the Company or Parent (as the case may be)
to perform its obligations under this Agreement or consummate the
transactions contemplated hereby.
(f) "organizational documents" means, with respect to any entity, the
certificate of incorporation, bylaws or other governing documents of such
entity.
(g) "Person" means an individual, corporation, partnership, limited
liability company association, trust, unincorporated organization, entity
or group (as defined in the Exchange Act).
(h) "subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any subsidiary of such party do not have a majority
of the voting and economic interests in such partnership) or (ii) at least
a majority of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its subsidiaries, or by such party and one
or more of its subsidiaries.
(i) "the other party" means, with respect to the Company, Parent and
means, with respect to Parent, the Company.
A-60
<PAGE> 61
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of May 20, 1999.
PROTEUS INTERNATIONAL PLC,
a public company incorporated under
the laws of England and Wales
By: /s/ BARRY RILEY
------------------------------------
Name: Barrington M. Riley
Title: Finance Director
PI MERGER SUB, INC.,
a Delaware corporation
By: /s/ BARRY RILEY
------------------------------------
Name: Barrington M. Riley
Title: Finance Director
THERAPEUTIC ANTIBODIES INC.,
a Delaware corporation
By: /s/ ANDREW HEATH
------------------------------------
Name: Andrew J. Heath
Title: Chief Executive Officer
A-61
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THERAPEUTIC ANTIBODIES INC. FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 846,900
<SECURITIES> 0
<RECEIVABLES> 863,166
<ALLOWANCES> 0
<INVENTORY> 291,542
<CURRENT-ASSETS> 1,728,264
<PP&E> 17,732,294
<DEPRECIATION> 7,254,287
<TOTAL-ASSETS> 12,976,967
<CURRENT-LIABILITIES> 2,872,872
<BONDS> 4,707,257
0
0
<COMMON> 52,057
<OTHER-SE> 4,868,936
<TOTAL-LIABILITY-AND-EQUITY> 12,976,967
<SALES> 361,798
<TOTAL-REVENUES> 391,319
<CGS> 85,206
<TOTAL-COSTS> 307,675
<OTHER-EXPENSES> 6,681,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 247,964
<INCOME-PRETAX> 0
<INCOME-TAX> (6,759,034)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,759,034)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
