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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SUMMIT TECHNOLOGY, INC.,
ALPINE ACQUISITION CORP.,
AND
AUTONOMOUS TECHNOLOGIES CORPORATION
DATED AS OF OCTOBER 1, 1998
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TABLE OF CONTENTS
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ARTICLE I........................................................................................................................1
THE MERGER......................................................................................................................1
SECTION 1.1 The Merger.......................................................................................................1
SECTION 1.2 Effective Time...................................................................................................2
SECTION 1.3 Effect of the Merger.............................................................................................2
SECTION 1.4 Certificate of Incorporation, By-Laws............................................................................2
SECTION 1.5 Directors and Officers...........................................................................................2
SECTION 1.6 Effect on Capital Stock..........................................................................................3
SECTION 1.7 Exchange of Certificates.........................................................................................5
SECTION 1.8 Stock Transfer Books.............................................................................................7
SECTION 1.9 No Further Ownership Rights in Company Common Stock..............................................................7
SECTION 1.10 Lost, Stolen or Destroyed Certificates...........................................................................7
SECTION 1.11 Tax Consequences.................................................................................................7
SECTION 1.12 Taking of Necessary Action; Further Action.......................................................................7
SECTION 1.13 Material Adverse Effect..........................................................................................8
SECTION 1.14 Restructuring of the Merger......................................................................................8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...,...............................................................................9
SECTION 2.1 Organization and Qualification; Subsidiaries.....................................................................9
SECTION 2.2 Articles of Incorporation and By-Laws...........................................................................10
SECTION 2.3 Capitalization..................................................................................................10
SECTION 2.4 Authority Relative to this Agreement............................................................................11
SECTION 2.5 No Conflict; Required Filings and Consents......................................................................11
SECTION 2.6 Compliance......................................................................................................13
SECTION 2.7 SEC Filings; Financial Statements...............................................................................13
SECTION 2.8 Absence of Certain Changes or Events............................................................................13
SECTION 2.9 No Undisclosed Liabilities......................................................................................14
SECTION 2.10 Absence of Litigation...........................................................................................14
SECTION 2.11 Employee Benefit Plans, Employment Agreements...................................................................14
SECTION 2.12 Labor Matters...................................................................................................16
SECTION 2.13 Registration Statement, Joint Proxy Statement/Prospectus........................................................16
SECTION 2.14 Title to Property...............................................................................................17
SECTION 2.15 Taxes...........................................................................................................17
SECTION 2.16 Environmental Matters...........................................................................................18
SECTION 2.17 Intellectual Property...........................................................................................18
SECTION 2.18 Regulatory Matters..............................................................................................20
SECTION 2.19 Interested Party Transactions...................................................................................21
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SECTION 2.20 Insurance......................................................................21
SECTION 2.21 Opinion of Financial Advisor...................................................21
SECTION 2.22 Brokers........................................................................21
SECTION 2.23 Control Payments...............................................................21
SECTION 2.24 Expenses.......................................................................21
SECTION 2.25 No Existing Discussions........................................................21
SECTION 2.26 Sections 607.0901 and 607.0902 of the FBCA Not Applicable......................22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................................22
SECTION 3.1 Organization and Qualification; Subsidiaries...................................22
SECTION 3.2 Charter and By-Laws............................................................22
SECTION 3.3 Capitalization.................................................................23
SECTION 3.4 Authority Relative to this Agreement...........................................23
SECTION 3.5 No Conflict, Required Filings and Consents.....................................24
SECTION 3.6 Compliance.....................................................................25
SECTION 3.7 SEC Filings; Financial Statements..............................................25
SECTION 3.8 Absence of Certain Changes or Events...........................................26
SECTION 3.9 No Undisclosed Liabilities.....................................................26
SECTION 3.10 Absence of Litigation..........................................................26
SECTION 3.11 Employee Benefit Plans; Employment Agreements..................................26
SECTION 3.12 Labor Matters..................................................................28
SECTION 3.13 Registration Statement; Joint Proxy Statement/Prospectus.......................28
SECTION 3.14 Title to Property..............................................................28
SECTION 3.15 Taxes..........................................................................29
SECTION 3.16 Environmental Matters..........................................................29
SECTION 3.17 Intellectual Property..........................................................29
SECTION 3.18 Regulatory Matters.............................................................30
SECTION 3.19 Interested Party Transactions..................................................31
SECTION 3.20 Financial Capacity.............................................................31
SECTION 3.21 Opinion of Financial Advisor...................................................31
SECTION 3.22 Brokers........................................................................31
SECTION 3.23 Ownership of Merger Sub; No Prior Activities...................................31
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.........................................................32
SECTION 4.1 Conduct of Business by the Company Pending the Merger..........................32
SECTION 4.2 No Solicitation................................................................34
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ARTICLE V
ADDITIONAL AGREEMENTS.................................................................35
SECTION 5.1 HSR Act.................................................................35
SECTION 5.2 Joint Proxy Statement Prospectus; Registration Statement................35
SECTION 5.3 Stockholders Meetings...................................................36
SECTION 5.4 Access to Information; Confidentiality..................................36
SECTION 5.5 Consents; Approvals.....................................................36
SECTION 5.6 Agreements with Respect to Affiliates...................................37
SECTION 5.7 Indemnification and Insurance...........................................37
SECTION 5.8 Notification of Certain Matters.........................................38
SECTION 5.9 Further Action/Tax Treatment............................................38
SECTION 5.10 Public Announcements...................................................39
SECTION 5.11 Accountants' Letters...................................................39
SECTION 5.12 Board Representation...................................................39
SECTION 5.13 Nasdaq Listing.........................................................40
SECTION 5.14 Listing of Parent Shares...............................................40
SECTION 5.15 Joint Shareholder Communications Efforts...............................40
SECTION 5.16 Dismissal of Civil Actions.............................................40
SECTION 5.17 Issuance of CIBA Shares................................................40
ARTICLE VI
CONDITIONS TO THE MERGER..............................................................40
SECTION 6.1 Conditions to Obligation of Each Party to Effect the Merger.............40
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger Sub...........41
SECTION 6.3 Additional Conditions to Obligation of the Company......................42
ARTICLE VII
TERMINATION...........................................................................43
SECTION 7.1 Termination.............................................................43
SECTION 7.2 Effect of Termination...................................................45
SECTION 7.3 Fees and Expenses.......................................................45
ARTICLE VIII
GENERAL PROVISIONS....................................................................46
SECTION 8.1 Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc......................................................................46
SECTION 8.2 Notices.................................................................46
SECTION 8.3 Certain Definitions.....................................................47
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SECTION 8.4 Amendment.....................................................48
SECTION 8.5 Waiver........................................................48
SECTION 8.6 Headings......................................................48
SECTION 8.7 Severability..................................................48
SECTION 8.8 Entire Agreement..............................................49
SECTION 8.9 Assignment; Guarantee of Merger Sub...........................49
SECTION 8.10 Parties in Interest...........................................49
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative.........49
SECTION 8.12 Governing Law.................................................49
SECTION 8.13 Counterparts..................................................49
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LOCATION OF DEFINED TERMS IN AGREEMENT AND PLAN OF MERGER
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DEFINED TERMS SECTION OF MERGER AGREEMENT
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1998 Company Balance Sheet 2.9
1998 Parent Balance Sheet 3.9
Acquisition Proposal 4.2(a)
Affiliates 8.3
Affiliate Agreement 5.6
Affiliate Letter 5.6
Agreement Preamble
Alternative Transaction 7.1
Approvals 2.1
Average Closing Price 1.6(a)
Beneficial Owner 8.3
Blue Sky Laws 2.5(d)
Business Day 8.3
Cash Consideration 1.6(a)
Certificates 1.6(f)
Certificates of Merger 1.2
Closing 1.1(b)
Code Preamble
Company Preamble
Company Common Stock Preamble
Company Disclosure Schedule Article II Preamble
Company Employee Plans 2.11(a)
Company ERISA Affiliate 2.11(a)
Company Fee 7.3(b)
Company Intellectual Property Rights 2.17(a)
Company Liens 2.3
Company Permits 2.6(b)
Company Products 2.18(a)
Company SEC Reports 2.7(a)
Company Stockholders Meeting 2.13
Company Stock Option Plan 1.6(c)(i)
Company Stock Purchase Plan 1.6(c)(v)
Confidentiality Letter 5.4
Control 8.3
DGCL Preamble
Diluted Company Common Stock 1.6(a)
Effective Time 1.2
Environmental Laws 2.16
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ERISA 2.11(a)
Exchange Act 2.5(a)
Exchange Agent 1.7(a)
FBCA Preamble
FDA 2.18(a)
Generally accepted accounting principles 8.3
HSR Act 2.5(d)
Indemnified Parties 5.7(b)
IRS 2.11(b)
ISO 2.11(c)
Joint Proxy Statement/Prospectus 2.13
Laws 2.5(c)
Licenses 2.18(b)
Liens 2.3
Material Adverse Effect 1.13
Merger Preamble
Merger Consideration 1.7(b)
Merger Sub Preamble
Parent Preamble
Parent Common Stock 1.6(a)
Parent Disclosure Schedule Article III Preamble
Parent Employee Plans 3.11(a)
Parent ERISA Affiliate 3.11(a)
Parent Fee 7.3(c)
Parent Intellectual Property Rights 3.17(a)
Parent Liens 3.3
Parent Material Adverse Effect 1.13
Parent Permits 3.6(b)
Parent Products 3.18(a)
Parent SEC Reports 3.7(a)
Parent Shares 1.6(a)
Parent Stockholders Meeting 2.13
PBGC 2.11(b)
Per Share Cash Consideration 1.6(a)
Per Share Stock Consideration 1.6(a)
Outstanding Company Common Stock 1.6(a)
Rule 145 5.6
SEC 2.5(a)
Securities Act 1.6(c)(iv)
Series I Preferred Stock 1.6(a)
Share Preamble
Stock Consideration 1.6(a)
Stock Options 1.6(c)(i)
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Stockholders Agreements 2.26
Stockholders Meeting 2.13
Subsidiary Documents 2.2
Tax/Taxes 2.15
Tax Returns 2.15
Terminating Breach 7.1(f)
Third Party 7.1(h)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 1, 1998 (this "AGREEMENT"),
among Summit Technology, Inc., a Massachusetts corporation ("PARENT"), Alpine
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("MERGER SUB"), and Autonomous Technologies Corporation, a Florida
corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders for Parent to enter into a business combination with the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "MERGER")
of the Company with and into Merger Sub or, if the Merger is restructured as
provided herein, of Merger Sub with an into the Company, in accordance with the
applicable provisions of the Florida Business Corporation Act (the "FBCA") and
the Delaware General Corporation Law (the "DGCL"), and upon the terms and
subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, unless the Merger shall
have been restructured as provided herein, by approving resolutions authorizing
this Agreement, to adopt this Agreement as a plan of reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"CODE"), and the regulations promulgated thereunder; and
WHEREAS, pursuant to the Merger, each outstanding share (a "SHARE") of the
Company's common stock, $.01 par value per share (the "COMPANY COMMON STOCK"),
shall be converted into the right to receive the Merger Consideration (as
defined in Section 1.7(b)), upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in Section 1.2), and
subject to and upon the terms and conditions of this Agreement, the FBCA and the
DGCL, the Company shall be merged with and into Merger Sub, the separate
corporate existence of the Company shall cease, and Merger
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Sub shall continue as the surviving corporation. Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"SURVIVING CORPORATION."
(b) Closing. Unless this Agreement shall have been terminated pursuant to
Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the Merger (the "CLOSING") will take
place as promptly as practicable (and in any event within two business days)
after satisfaction or waiver of the conditions set forth in Article VI, at the
offices of Ropes & Gray, One International Place, Boston, Massachusetts, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing certificates of merger
as contemplated by the FBCA and the DGCL (the "CERTIFICATES OF MERGER"),
together with any required related certificates, with the Secretary of State of
the State of Florida and the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with the relevant
provisions of, the FBCA and the DGCL (the time of the later of such filings
being the "EFFECTIVE TIME").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificates of Merger and
the applicable provisions of the FBCA and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.4 Certificate of Incorporation, By-Laws.
(a) Certificate of Incorporation. Unless otherwise determined by Parent
prior to the Effective Time, at the Effective Time the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with the DGCL and such Certificate of
Incorporation.
(b) By-Laws. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the By-Laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
SECTION 1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
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SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the Parent, Merger Sub, the
Company or any of their respective stockholders:
(a) Conversion of Securities. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.6(b)) shall be converted, subject to Section 1.6(f), into the right to
receive (i) the quotient of 11,650,400 shares (the "STOCK CONSIDERATION") of
validly issued, fully paid and nonassessable shares ("PARENT SHARES") of the
Common Stock, $0.01 par value per share, of Parent ("PARENT COMMON STOCK")
divided by the Diluted Company Common Stock (the "PER SHARE STOCK
CONSIDERATION") and (ii) the quotient of $50,000,000 in cash less (A) one-half
of any amounts advanced to the Company by Parent after the date hereof and (B)
unless the holders of the Series I Preferred Stock shall have converted such
Series I Preferred Stock prior to the Effective Time, any amounts that would be
payable upon redemption of all shares of the Company's Convertible Preferred
Stock, Series I, $.01 par value per share (the "SERIES I PREFERRED STOCK"), that
are issued or issuable as of the date hereof, assuming redemption is made on the
date on which the Effective Time occurs in accordance with the provisions of the
Company's Articles of Incorporation or pursuant to any agreement with the
holders of Series I Preferred Stock prior to the Effective Time (the "CASH
CONSIDERATION") divided by the Diluted Company Common Stock (the "PER SHARE CASH
CONSIDERATION"). If the average closing price of Parent Common Stock on The
Nasdaq National Market for the five trading days ending on the day before the
date on which the Effective Time occurs (the "AVERAGE CLOSING PRICE") is less
than $4.2917, then the $50,000,000 in the previous sentence shall be reduced to
11,650,400 multiplied by the Average Closing Price.
"Diluted Company Common Stock" means the number of shares of Company Common
Stock outstanding at the Effective Time (the "Outstanding Company Common
Stock"), plus all shares of Company Common Stock issuable upon the exercise or
conversion of all options, warrants, convertible securities or other rights,
agreements, arrangements or other commitments of any character pursuant to which
the Company is obligated, contingently or otherwise, to issue or sell shares of
Company Common Stock (excluding the Series I Preferred Stock and all rights to
acquire the Series I Preferred Stock) calculated by applying the treasury stock
method to options, warrants and convertible securities.
(b) Cancellation. Each Share held in the treasury of the Company and each
Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
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(c) Stock Options and Stock Purchase Plan.
(i) At the Effective Time, Parent will assume each then outstanding
option to purchase Shares (the "STOCK OPTIONS") under the Company's 1995
Stock Option Plan (the "COMPANY STOCK OPTION PLAN") as to which the holder
has waived the acceleration of vesting under Section 14 of the Company Stock
Option Plan, and each such Stock Option shall thereafter constitute an option
to acquire, on substantially the same terms and subject to substantially the
same conditions as were applicable under such Stock Option, including without
limitation term, vesting, exercisability, status as an "incentive stock
option" under Section 422 of the Code and termination provisions, the number
of shares of Parent Common Stock, rounded down to the nearest whole share,
equal to the sum of (i) the product of the number of Shares subject to such
Stock Option immediately prior to the Effective Time multiplied by the Per
Share Stock Consideration plus (ii) the product of the number of Shares
subject to such Stock Option immediately prior to the Effective Time
multiplied by a fraction the numerator of which is the Per Share Cash
Consideration and the denominator of which is the Average Closing Price. The
exercise price per share of Parent Common Stock (increased to the nearest
whole cent) shall be equal to the aggregate exercise price of the Stock
Option divided by the number of Shares of Parent Common Stock into which such
Stock Option will become exercisable at the Effective Time; provided,
however, that in the case of any Stock Option to which Section 421 of the
Code applies by reason of its qualification as an incentive stock option
under Section 422 of the Code, the conversion formula shall be adjusted if
necessary to comply with Section 424(a) of the Code.
(ii) The Company shall use its best efforts to obtain all necessary
waivers, consents or releases from holders of Stock Options under the Company
Stock Option Plan and take any such other action as may be reasonably
necessary to give effect to the transactions contemplated by this Section
1.6(c).
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of Parent Shares for delivery pursuant to the
terms set forth in this Section 1.6(c).
(iv) Subject to any applicable limitations under the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "SECURITIES
ACT"), Parent shall either (A) file a Registration Statement on Form S-8 (or
any successor form), effective as of the Effective Time, with respect to the
shares of Parent Common Stock issuable upon exercise of the Stock Options, or
(B) file any necessary amendments to the Company's previously-filed
Registration Statement(s) on Form S-8 in order that the Parent will be deemed
a "successor registrant" thereunder, and, in either event the Parent shall
use all reasonable efforts to maintain the effectiveness of such registration
statement(s) (and maintain the current status of the prospectus or
prospectuses relating thereto) for so long as such Stock Options shall remain
outstanding.
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(v) The Company will promptly cause written notice of the execution of
this Agreement to be given to persons holding options or other rights to
purchase Company Common Stock under the Company's 1996 Employee Stock
Purchase Plan (the "COMPANY STOCK PURCHASE PLAN"). The Company will
terminate the Company Stock Purchase Plan at the end of the current purchase
period.
(d) Capital Stock of Merger Sub. Each share of common stock, $.01 par value,
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall remain outstanding.
(e) Adjustments to Stock Consideration. The Stock Consideration shall be
adjusted to fully reflect the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock occurring after the date hereof and prior to the
Effective Time.
(f) Fractional Shares. Unless Parent otherwise elects, no certificates or
scrip representing less than one Parent Share shall be issued upon the surrender
for exchange of a certificate or certificates which immediately prior to the
Effective Time represented outstanding Shares (the "CERTIFICATES"). If Parent so
elects, in lieu of any such fractional share, each holder of Shares who would
otherwise have been entitled to a fraction of a Parent Share upon surrender of
Certificates for exchange shall be paid upon such surrender cash equal to the
product of (i) such fraction, multiplied by (ii) the Average Closing Price.
SECTION 1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be supplied, to or
for the account of BankBoston, N.A., or such other bank or trust company as
shall be designated by Parent (the "EXCHANGE AGENT"), in trust for the benefit
of the holders of Company Common Stock, for exchange in accordance with this
Section 1.7, through the Exchange Agent, certificates evidencing the Parent
Shares issuable pursuant to Section 1.6 in exchange for outstanding Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of Certificates (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 proper 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 to effect the surrender of the Certificates in
exchange for the certificates evidencing Parent Shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates evidencing that number
of whole Parent Shares which such holder has the right to receive pursuant to
Section 1.6(a) in respect of the Shares formerly evidenced by such Certificate,
(b) the per Share Cash Consideration, (C) any dividends or other distributions
to which
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such holder is entitled pursuant to Section 1.7(c), and (D) cash in respect of
fractional shares as provided in Section 1.6(f) (the Stock Consideration, the
Cash Consideration, dividends, distributions and cash being, collectively, the
"MERGER CONSIDERATION"), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company as of the Effective Time, the
Merger Consideration may be issued and paid in accordance with this Article I to
a transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 1.7(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented Shares
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends and subject to Section 1.6(f), to evidence
the ownership of the number of whole Parent Shares that represent the Stock
Consideration with respect to such Shares.
(c) Distributions With Respect to Unexchanged Parent Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Shares they
are entitled to receive until the holder of such Certificate shall surrender
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole Parent Shares issued in exchange therefor, without interest,
at the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole Parent Shares.
(d) Transfers of Ownership. If any certificate for Parent Shares is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition to the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for Parent Shares in any
name other than that of the registered holder of the certificate surrendered, or
have established to the satisfaction of Parent or any agent designated by it
that such tax has been paid or is not payable.
(e) No Liability. At any time following one year after the Effective Time,
Parent shall be entitled to require the Exchange Agent to deliver to Parent any
Merger Consideration which had been made available to the Exchange Agent by or
on behalf of Parent and which has not been disbursed to holders of Certificates,
and thereafter such holders shall be entitled to look to Parent only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates. Notwithstanding the foregoing, neither Parent,
Merger Sub nor the Company shall be liable to any holder of Company Common Stock
for any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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(f) Withholding Rights. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Company Common Stock such amounts as Parent or
the Exchange Agent 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. To the extent that amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such deduction
and withholding was made by Parent or the Exchange Agent.
SECTION 1.8 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Common Stock thereafter on the records of the Company.
SECTION 1.9 No Further Ownership Rights in Company Common Stock. The Merger
Consideration delivered upon the surrender of Certificates in exchange for the
Shares represented thereby, in accordance with the terms hereof, shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
Shares, and there shall be no further registration of transfers on the records
of the Surviving Corporation of Shares which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
SECTION 1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such Parent Shares as
may be required pursuant to Section 1.6; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
SECTION 1.11 Tax Consequences. Unless the Merger is restructured as the
Alternative Taxable Merger, it is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368 of the Code.
The parties hereto hereby adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations.
SECTION 1.12 Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company, Parent and Merger Sub immediately prior to the Effective
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Time are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
SECTION 1.13 Material Adverse Effect. When used in connection with the
Company or any of its subsidiaries, or Parent or any of its subsidiaries, as the
case may be, the term "MATERIAL ADVERSE EFFECT" means any change, effect or
circumstance that, individually or when taken together with all other such
similar or related changes, effects or circumstances that have occurred prior to
the date of determination of the occurrence of the Material Adverse Effect, (a)
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the Company and its subsidiaries
or Parent and its subsidiaries, as the case may be, in each case taken as a
whole (other than changes that are the effect of economic factors affecting the
economy as a whole), or (b) is reasonably likely to materially delay or prevent
the consummation of the transactions contemplated hereby.
SECTION 1.14 Restructuring of the Merger.
(a) Notwithstanding any provision of this Agreement, in the event that
either:
(i) the product of the Average Closing Price and the number of shares of
Parent Common Stock issuable in the Merger in respect of Outstanding Company
Common Stock shall be less than 82% of the sum of (A) the product of the Per
Share Cash Consideration and the Outstanding Company Common Stock plus (B) the
amounts described in Section 1.6(a)(ii)(B), or
(ii) the product of the average of the high and low sale prices of the
Parent Common Stock on the Nasdaq National Market on the last trading date prior
to the Closing Date and the number of shares of Parent Common Stock issuable in
the Merger in respect of Outstanding Company Common Stock adjusted to reflect
the effect of any trading restrictions, shall be less than the sum of (A) the
product of the Per Share Cash Consideration and the Outstanding Company Common
Stock plus (B) the amounts described in Section 1.6(a)(ii)(B),
then as promptly as practicable, the Merger shall be restructured as provided
in this Section 1.14 (the "Alternative Taxable Merger").
(b) The following provisions shall apply to the Alternative Taxable Merger:
(i) Section 1.1(a) of this Agreement shall be deemed to read, in its
entirety, as follows:
"(a) Effective Time. At the Effective Time (as defined in Section 1.2), and
subject to and upon the terms and conditions of this Agreement, the FBCA and the
DGCL, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "SURVIVING CORPORATION."
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(ii) Sections 1.4(a) and (b) of this Agreement shall be deemed to read,
in their entirety, as follows:
"(a) Articles of Incorporation. Unless otherwise determined by Parent prior
to the Effective Time, at the Effective Time the Articles of Incorporation of
the Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with the FBCA and such Articles of Incorporation."
"(b) By-Laws. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the FBCA, the Articles of
Incorporation of the Surviving Corporation and such By-Laws."
(iii) Section 1.5(d) of this Agreement shall be deemed to read, in its
entirety, as follows:
"(d) Capital Stock of Merger Sub. Each share of common stock, $.01 par value,
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value per share, of the Surviving
Corporation."
(iv) The condition set forth in Section 6.2(d) of this Agreement shall not be
applicable to the Alternative Merger.
(v) All references in this Agreement to the Surviving Corporation shall be
deemed references to the Company as the Surviving Corporation in the Alternative
Merger.
(vi) All references in this Agreement to the Merger shall be deemed
references to the Alternative Merger, as provided for in this Section 1.14.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule delivered on or prior to
the date hereof by the Company to Parent that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II (the "COMPANY DISCLOSURE SCHEDULE"):
SECTION 2.1 Organization and Qualification; Subsidiaries. Each of the Company
and each of its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("APPROVALS") necessary to own, lease and
operate the properties
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it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and Approvals would not
reasonably be expected to have a Company Material Adverse Effect. Each of the
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have a Company Material Adverse Effect. A true and
complete list as of the date hereof of all of the Company's subsidiaries,
together with the jurisdiction of incorporation of each subsidiary, the
authorized capitalization of each subsidiary, and the percentage of each
subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 2.1 of the Company Disclosure Schedule. The
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity, with respect to which interest the Company has
invested or is required to invest $200,000 or more, excluding securities in any
publicly traded company held for investment by the Company and comprising less
than five percent of the outstanding stock of such company.
SECTION 2.2 Articles of Incorporation and By-Laws. The Company has heretofore
furnished to Parent a complete and correct copy of its Articles of Incorporation
and By-Laws as most recently restated and subsequently amended to the date
hereof, and has furnished or made available to Parent the Articles of
Incorporation and By-Laws (or equivalent organizational documents) of each of
its subsidiaries (the "SUBSIDIARY DOCUMENTS"). Such Articles of Incorporation,
By-Laws and Subsidiary Documents are in full force and effect and neither the
Company nor any of its subsidiaries is in violation of any of the provisions of
its Articles of Incorporation or By-Laws or Subsidiary Documents, except where
the failure to be in full force and effect or where such violation would not
have a Company Material Adverse Effect.
SECTION 2.3 Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Company Common Stock and (ii) 1,000,000
shares of preferred stock, $0.01 par value per share. As of October 1, 1998, (i)
11,524,467 shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable, and no shares were held
in treasury, (ii) 1,000 shares of preferred stock had been designated as Series
I Preferred Stock of which 436 shares are validly issued, fully paid and
nonassessable and of which 400 shares are subject to an option for their
purchase, (iii) no shares of Company Common Stock were held by subsidiaries of
the Company, (iv) 2,263,197 shares of Company Common Stock were reserved for
issuance upon the conversion of the Series I Preferred Stock, of which a maximum
of 1,750,000 shares are issuable upon the conversion of the initial 500 shares
of Series I Preferred Stock and of which the remaining 513,197 shares become
issuable upon the purchase of an additional 400 shares of Series I Preferred
Stock pursuant to an option for such purchase, such that the total of 2,263,197
shares of Company Common Stock are issuable upon the conversion of the total 900
shares of Series I Preferred Stock, (v) 922,350 shares of Company Common Stock
were reserved for issuance upon the exercise of outstanding warrants, (vi)
1,690,926 shares of Company Common Stock were
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reserved for future issuance pursuant to outstanding stock options granted under
the Company Stock Option Plan, (vii) 171,713 of Company Common Stock are
reserved for future issuance pursuant to the Strategic Alliance Agreement and
(viii) 380,000 of Company Common Stock are reserved for issuance pursuant to
stock purchase warrants which may become outstanding upon the exercise of an
option to purchase Series I Preferred Stock referred to in clause (iv) of this
sentence. No material change in such capitalization has occurred between
September 30, 1998 and the date hereof other than the issuance of shares of
Company Common Stock under the Company Stock Option Plans and under the Company
Stock Purchase Plan. All options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company or a
subsidiary or, to the Company's knowledge, any other person is a party relating
to the issued or unissued capital stock of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue or
sell any shares of capital stock of, or other equity interests in, the Company
or any of its subsidiaries are described in Section 2.3 of the Company
Disclosure Schedule. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of any subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution, guaranty or otherwise)
in any such subsidiary or any other entity. All of the outstanding shares of
capital stock of each of the Company's subsidiaries are duly authorized, validly
issued, fully paid and nonassessable, and all such shares are owned by the
Company or another subsidiary of the Company, free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the Company's
voting rights, charges or other encumbrances of any nature whatsoever
(collectively, "COMPANY LIENS").
SECTION 2.4 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
adoption of this Agreement by the holders of at least a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the FBCA and the Company's Articles of Incorporation and By-Laws). As of the
date of this Agreement, the Board of Directors of the Company has determined
that it is advisable and in the best interest of the Company's stockholders for
the Company to enter into a business combination with Parent upon the terms and
subject to the conditions of this Agreement, and has unanimously recommended
that the Company's stockholders approve and adopt this Agreement and the Merger.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Parent and Merger
Sub, as applicable, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
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SECTION 2.5 No Conflict; Required Filings and Consents.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list of (i)
all contracts, agreements, commitments or other understandings or arrangements
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties or assets are bound or affected, but
excluding (A) contracts, agreements, commitments or other understandings or
arrangements entered into in the ordinary course of business and involving, in
each case, payments by the Company or any of its subsidiaries of less than
$100,000 in any single instance, and (B) employment agreements and stock option
agreements and (ii) all agreements which, as of the date hereof, the Company is
required to file as "material contracts" with the Securities and Exchange
Commission ("SEC") pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, and the SEC's rules and regulations thereunder (the
"EXCHANGE ACT").
(b) (i) Neither the Company nor any of its subsidiaries has breached, is in
default under, or has received written notice of any breach of or default under,
any of the agreements, contracts or other instruments required to be disclosed
in Section 2.5(a) of the Company Disclosure Schedule, (ii) to the best knowledge
of the Company, no other party to any of the agreements, contracts or other
instrument required to be disclosed in Section 2.5(a) of the Company Disclosure
Schedule has breached or is in default of any of its obligations thereunder, and
(iii) each of the agreements, contracts and other instruments required to be
disclosed in Section 2.5(a) of the Company Disclosure Schedule is in full force
and effect, except in any such case for breaches, defaults or failures to be in
full force and effect that is not currently having or would not reasonably be
expected to have a Company Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company does not, and
the performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws of the Company, (ii) conflict with or
violate any federal, foreign, state or provincial law, rule, regulation, order,
judgment or decree (collectively, "LAWS") applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair the Company's or any of its subsidiaries' rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Company Lien on any of the properties or assets of the Company or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties is bound or affected, except in any such case for any such conflicts,
violations, breaches, defaults or other occurrences that would not reasonably be
expected to have a Company Material Adverse Effect.
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(d) The execution and delivery of this Agreement by the Company does not, and
the performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
federal, foreign, state or provincial governmental or regulatory authority
except (i) for applicable requirements, if any, of the Securities Act, the
Exchange Act, state securities laws ("BLUE SKY LAWS"), the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), and the filing and recordation of appropriate
merger or other documents as required by the DGCL, and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would be reasonably expected to have a Company
Material Adverse Effect.
SECTION 2.6 Compliance. Neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of, (i) any Law or Approval applicable
to the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 2.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to be
filed by it with the SEC since January 1, 1997 (collectively, the "COMPANY SEC
REPORTS"). The Company SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) 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 therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and each fairly presents in all material respects the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows and
stockholders equity for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
SECTION 2.8 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date hereof, since June 30, 1998, the
Company has conducted its
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business in the ordinary course and there has not occurred: (a) any Company
Material Adverse Effect; (b) any amendments or changes in the Articles of
Incorporation or By-laws of the Company; (c) any damage to, destruction or loss
of any asset of the Company (whether or not covered by insurance) that would
reasonably be expected to have a Company Material Adverse Effect; (d) any
material change by the Company in its accounting methods, principles or
practices; (e) any material revaluation by the Company of any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of business;
(f) any other action or event that would have required the consent of Parent
pursuant to Section 4.1 had such action or event occurred after the date of this
Agreement; or (g) any sale of a material amount of property of the Company or
any of its subsidiaries taken as a whole, except in the ordinary course of
business.
SECTION 2.9 No Undisclosed Liabilities. Except as disclosed in the Company
SEC Reports filed prior to the date hereof and except for the severance
obligation disclosed in Schedule 2.9 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) in the aggregate adequately
provided for or disclosed in the Company's balance sheet (including any related
notes thereto) as of June 30, 1998 (the "1998 COMPANY BALANCE SHEET"), (b)
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected on the 1998 Company Balance
Sheet, (c) incurred since June 30, 1998 in the ordinary course of business
consistent with past practice, (d) incurred in connection with this Agreement,
or (e) which would not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 2.10 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any federal, foreign,
state or provincial court, arbitrator or administrative, governmental or
regulatory authority or body that would reasonably be expected to have a Company
Material Adverse Effect.
SECTION 2.11 Employee Benefit Plans, Employment Agreements.
(a) Section 2.11 (a) of the Company Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all material employee welfare plans
(as defined in Section 3(1) of ERISA), and all other material bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, written or otherwise, for the benefit of, or relating
to, any current or former employees of or consultants to the Company, any trade
or business (whether or not incorporated) which is a member of a controlled
group including the Company or which is under common control with the Company (a
"COMPANY ERISA AFFILIATE") within the meaning of Section 414 of the Code, or any
subsidiary of the Company, as well as each plan with respect to which the
Company or a Company ERISA Affiliate would incur liability under Section 4069
(if such plan has been or were terminated) or Section 4212(c) of ERISA (all such
plans, practices and programs are referred to as the "COMPANY
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EMPLOYEE PLANS"). To the extent requested by Parent, there have been made
available to Parent copies of (i) each such written Company Employee Plan (other
than those referred to in Section 4(b)(4) of ERISA), (ii) the most recent annual
report on Form 5500 series, with accompanying schedules and attachments, filed
with respect to each Company Employee Plan required to make such a filing, and
(iii) the most recent actuarial valuation for each Company Employee Plan subject
to Title IV of ERISA. For purposes of this Section 2.11 (a), the term
"material," used with respect to any Company Employee Plan, shall mean that the
Company or a Company ERISA Affiliate has incurred or may reasonably be expected
to incur obligations in an annual amount exceeding $100,000 with respect to such
Company Employee Plan.
(b) (i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person, and none of the Company
Employee Plans is a "multiemployer plan" as such term is defined in Section
3(37) of ERISA; (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Company Employee Plan, which could result in any material liability of the
Company or any of its subsidiaries; (iii) all Company Employee Plans are in
compliance in all material respects with the requirements prescribed by any and
all Laws (including ERISA and the Code), currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, Pension Benefit Guaranty Corporation (the "PBGC"),
Internal Revenue Service (the "IRS") or Secretary of the Treasury), and the
Company and each of its subsidiaries have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any default or violation
by any other party to, any of the Company Employee Plans; (iv) each Company
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code is the subject of a
favorable determination letter from the IRS, and nothing has occurred which may
reasonably be expected to impair such determination; (v) all contributions
required to be made to any Company Employee Plan pursuant to Section 412 of the
Code, or the terms of the Company Employee Plan or any collective bargaining
agreement, have been made on or before their due dates; (vi) with respect to
each Company Employee Plan, no "reportable event" within the meaning of Section
4043 of ERISA (excluding any such event for which the 30 day notice requirement
has been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) neither
the Company nor any Company ERISA Affiliate has incurred, nor reasonably expects
to incur, any liability under Title IV of ERISA (other than liability for
premium payments to the PBGC arising in the ordinary course), except where the
failure of any of the foregoing to be true would not have a Company Material
Adverse Effect.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list as of the date hereof of each current or former employee, officer
or director of the Company or any of its subsidiaries who holds (i) any option
to purchase Company Common Stock as of the date hereof, together with the number
of shares of Company Common Stock subject to such option, the option price of
such option (to the extent determined as of the date hereof), whether such
option is intended to qualify as an ISO, and the expiration date of such option;
(ii) any other right, directly or
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indirectly, to acquire Company Common Stock, together with the number of shares
of Company Common Stock subject to such right. Section 2.11(c) of the Company
Disclosure Schedule also sets forth the total number of such ISOs, such
nonqualified options and such other rights outstanding on the date hereof.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth a true and
complete list of: (i) all employment agreements with officers or employees of
the Company or any of its subsidiaries that provide for annual base salaries in
excess of $150,000; (ii) all agreements with consultants who are individuals
obligating the Company or any of its subsidiaries to make annual cash payments
in an amount exceeding $150,000; (iii) all severance agreements, programs and
policies of the Company or any of its subsidiaries with or relating to its
employees, in each case with outstanding commitments exceeding $150,000,
excluding programs and policies required to be maintained by law; and (iv) all
plans, programs, agreements and other arrangements of the Company or any of its
subsidiaries with or relating to its employees which contain change-in-control
provisions.
SECTION 2.12 Labor Matters. (a) There are no claims or proceedings pending
or, to the knowledge of the Company or any of its subsidiaries, threatened,
between the Company or any of its subsidiaries and any of their respective
employees, asserting that the Company has committed an unfair labor practice
which claims or proceedings are currently having or would reasonably be expected
to have a Company Material Adverse Effect; (b) neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or its
subsidiaries; and (c) neither the Company nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Company or any of its
subsidiaries, in each case which would reasonably be expected to have a Company
Material Adverse Effect.
SECTION 2.13 Registration Statement, Joint Proxy Statement/Prospectus. The
information supplied by the Company for inclusion or incorporation by reference
in the Registration Statement (as defined in Section 3.13) shall not at the time
the Registration Statement is declared effective by the SEC 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 information
supplied by the Company for inclusion or incorporation by reference in the joint
proxy statement/prospectus to be sent to the stockholders of the Company in
connection with the meeting of the stockholders of the Company to consider the
Merger (the "COMPANY STOCKHOLDERS MEETING") and to be sent to the stockholders
of Parent in connection with the meeting of the stockholders of Parent to
consider the Merger (the "PARENT STOCKHOLDERS MEETING," and together with the
Company Stockholder Meeting, the "STOCKHOLDERS MEETINGS") (such joint proxy
statement/prospectus as amended or supplemented is referred to herein as the
"JOINT PROXY STATEMENT/PROSPECTUS"), will not, on the date the Joint Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to stockholders, at the time of the Stockholders Meetings, or at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false
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or misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not false
or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meetings which has become false or misleading. If
at any time prior to the Effective Time any event relating to the Company or any
of its respective affiliates, officers or directors should be discovered by the
Company which should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement/Prospectus, the Company shall
promptly inform Parent and Merger Sub. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained in or furnished in
connection with the preparation of the Registration Statement or the Joint Proxy
Statement/Prospectus.
SECTION 2.14 Title to Property. Neither the Company nor any of its
subsidiaries owns any real property.
SECTION 2.15 Taxes.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean taxes, fees,
levies, duties, tariffs, imposts, and governmental impositions or charges of any
kind in the nature of (or similar to) taxes, payable to any federal, state,
local or foreign taxing authority, including (without limitation) (i) income,
franchise, profits, gross receipts, ad valorem, net worth, value added, sales,
use, service, real or personal property, special assessments, capital stock,
license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
(ii) interest, penalties, additional taxes and additions to tax imposed with
respect thereto; and "TAX RETURNS" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the IRS or any other
federal, foreign, state or provincial taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
(b) (i) The Company and its subsidiaries have filed all Tax Returns required
to be filed by them, (ii) the Company and its subsidiaries have paid and
discharged all Taxes due in connection with or with respect to the periods or
transactions covered by such Tax Returns and have paid all other Taxes as are
due, except such as are being contested in good faith by appropriate proceedings
(to the extent that any such proceedings are required) and with respect to which
the Company is maintaining adequate reserves, and (iii) there are no other Taxes
that would be due if asserted by a taxing authority, except with respect to
which the Company is maintaining reserves to the extent currently required,
unless in the case of clauses (i), (ii) and (iii) above the failure to do so
would not reasonably be expected to have a Company Material Adverse Effect.
Except as does not involve or would not result in liability that would
reasonably be expected to have a Company Material Adverse Effect: (i) there are
no tax liens on any assets of the Company or any subsidiary thereof; and (ii)
neither the Company nor any of its subsidiaries has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. Neither the Company nor any of its subsidiaries has made
any payments, is obligated to make any payments, or is a party
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to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code Section 280G. None of the
Company and its subsidiaries (i) has been a member of an affiliated group filing
a consolidated federal income Tax Return (other than a group the common parent
of which was the Company) or (ii) has any liability for the Taxes of any other
person or entity (other than the Company and its subsidiaries) under Treas. Reg.
(S)1.1502-6 (or any similar provision of state, local or foreign law), as
transferee or successor, by contract or otherwise. Neither the Company nor any
subsidiary has consented at any time under Section 341(f)(1) of the Code to have
the provisions of Section 341(f)(2) of the Code apply to any disposition of the
assets of the Company or any subsidiary. The accruals and reserves for Taxes
(including deferred taxes) reflected in the 1998 Company Balance Sheet are in
all material respects adequate to cover all Taxes required to be accrued through
the date thereof (including interest and penalties, if any, thereon and Taxes
being contested) in accordance with generally accepted accounting principles.
(c) Neither the Company nor any of its subsidiaries is, or has been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. To the best knowledge of the Company, neither the Company nor any of its
subsidiaries owns any property of a character, the indirect transfer of which,
pursuant to this Agreement, would give rise to any material documentary, stamp
or other transfer tax.
SECTION 2.16 Environmental Matters. Except in all cases as, in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect, the Company and each of its subsidiaries: (i) have obtained all
Approvals which are required to be obtained under all applicable federal, state,
foreign or local laws or any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by the Company or its subsidiaries or their respective agents ("ENVIRONMENTAL
LAWS"); (ii) are in compliance with all terms and conditions of such required
Approvals, and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; (iii) have not received
notice of any past or present violations of Environmental Laws or any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, against the Company or
any of its subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable Environmental Laws to register any products
or materials required to be registered by the Company or its subsidiaries (or
any of their respective agents) thereunder.
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SECTION 2.17 Intellectual Property.
(a) The Company, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are material to the business of the
Company and its subsidiaries, taken as a whole, as currently conducted or as
proposed to be conducted (the "COMPANY INTELLECTUAL PROPERTY RIGHTS"), except
where the failure to do so would not have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company or any of its subsidiaries to be in violation or default in any material
respect under any license, sublicense or agreement with respect to the Company
Intellectual Property Rights, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, except where such violation, default, termination or modification
would not reasonably be expected to have a Company Material Adverse Effect. No
claims have been asserted or, to the knowledge of the Company, are threatened by
any person nor are there any valid grounds, to the knowledge of the Company, for
any bona fide claims (i) against the use by the Company or any of its
subsidiaries of the Company Intellectual Property Rights, or (ii) challenging
the ownership by the Company or any of its subsidiaries, or the validity or
effectiveness of any of the Company Intellectual Property Rights, except for
such claims that would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(c) Neither the Company nor any of its subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and there has never been any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company or one of its Subsidiaries must license or refrain from using any
Intellectual Property rights of any third party).
(d) Section 2.17(d) of the Disclosure Schedule identifies each patent or
registration which has been issued to the Company or any of its subsidiaries
with respect to the Company Intellectual Property Rights, identifies each
pending patent application or application for registration which has been made
with respect to the Company Intellectual Property Rights, and identifies each
license, agreement, or other permission which the Company or any of its
subsidiaries have granted to any third party with respect to any of the Company
Intellectual Property Rights (together with any exceptions). The Company has
delivered to Parent correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and has made available to Parent correct and complete copies of all
other written documentation evidencing ownership and prosecution (if applicable)
of each such item. The Company disclosed all relevant prior art in its patent
applications, and it has no reason to believe that any of its patents is invalid
or
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unenforceable. With respect to each item of Intellectual Property required to be
identified in (S) 2.17(d) of the Company Disclosure Schedule:
(i) the Company and its subsidiaries possess all right, title, and
interest in and to the item, free and clear of any Lien, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of the Company,
is threatened, which challenges the legality, validity, enforceability, use,
or ownership of the item; and
(iv) neither the Company nor any of its subsidiaries has agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
SECTION 2.18 Regulatory Matters.
(a) Since January 1, 1996 through the date hereof (i) there have been no
written notices, citations or decisions by any governmental or regulatory body
that any product produced, manufactured, marketed or distributed at any time by
the Company or any Company subsidiary (the "COMPANY PRODUCTS") is defective or
fails to meet any applicable standards promulgated by any such governmental or
regulatory body, or any other governmental or regulatory body, agency or office
of any other jurisdiction to which the Company or any of its subsidiaries is
subject, (ii) there have been no recalls, field notifications or seizures
ordered or threatened by the United States Food and Drug Administration (the
"FDA") or any other comparable governmental or regulatory body with respect to
any of the Company Products and (iii) none of the Company or the Company
subsidiaries have received any warning letter, Section 305 notices from the FDA
or so-called Section 483 notices of adverse observations (or comparable notices
from such other governmental or regulatory bodies).
(b) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, with respect to each Company Product: (i) the Company
and its subsidiaries have obtained all applicable approvals, clearances,
authorizations, licenses (including site licensures) and registrations required
by United States or foreign governments or government agencies to permit the
manufacturing, distribution, sale (including reimbursement and pricing),
marketing, export, import or human research (including clinical and non-clinical
trials) of such Product (collectively, "LICENSES"); and (ii) the Company and its
subsidiaries are in full compliance with all terms and conditions of each
License in each country in which such Company Product is marketed, and with all
requirements pertaining to the manufacturing (including current good
manufacturing practices), marketing, export, import or human research (including
good laboratory practices and clinical and non-clinical trials) of such Company
Product which is not required to be the subject of a License.
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(c) There are no impediments to issuance of any Company FDA premarket
approval application ("PMA") as to which the Company has received an approvable
letter from the FDA other than those set forth in the so-called Section 483
Notices described in the Company Disclosure Schedule, and the Company is not
aware of any reason why it will be unable to address to the FDA's satisfaction
all observations contained in such Notices. The information in such PMAs is true
and correct in all material respects and the Company is not aware of any basis
upon which the FDA could fail to approve any material aspect of such
applications that have not yet received FDA approval.
SECTION 2.19 Interested Party Transactions. Except for transactions described
in the Company SEC Reports filed prior to the date hereof, no event has occurred
that would be required to be reported as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 2.20 Insurance. All material fire and casualty, general liability,
business interruption, product liability, professional liability and sprinkler
and water damage insurance policies maintained by the Company or any of its
subsidiaries are with reputable insurance carriers, provide adequate coverage
for all normal risks incident to the business of the Company and its
subsidiaries, taken as a whole, and their properties and assets, and are in
character and amount customary for persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 2.21 Opinion of Financial Advisor. The Company has been advised by
its financial advisor, EVEREN Securities, Inc. that in its opinion, as of the
date hereof, the Merger Consideration to be received by the holders of Shares in
the Merger is fair to the holders of Shares from a financial point of view.
SECTION 2.22 Brokers. No broker, finder or investment banker (other than
EVEREN Securities, Inc., the fees and expenses of whom will be paid by the
Company) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or its subsidiaries or
affiliates. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and EVEREN Securities, Inc.
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated hereunder.
SECTION 2.23 Change in Control Payments. Neither the Company nor any of its
subsidiaries have any plans, programs or agreements to which they are parties,
or to which they are subject, pursuant to which payments may be required or
acceleration of benefits may be required upon a change of control of the
Company.
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SECTION 2.24 Expenses. The Company has provided to Parent a good faith
estimate and description of the expenses of the Company and its subsidiaries
which the Company expects to incur, or has incurred, in connection with the
transactions contemplated by this Agreement.
SECTION 2.25 No Existing Discussions. As of the date hereof, the Company is
not engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal (as defined in Section 4.2).
SECTION 2.26 Sections 607.0901 and 607.0902 of the FBCA Not Applicable. The
Board of Directors of the Company has taken all actions so that the restrictions
contained in Section 607.0901 of the FBCA applicable to an "affiliated
transaction" (as defined in Section 607.0901) and the restrictions contained in
Section 607.0902 will not apply to the execution, delivery or performance of
this Agreement or the respective Stockholder Agreements dated as of the date
hereof between Parent and certain stockholders of the Company (collectively, the
"STOCKHOLDERS AGREEMENTS") or the consummation of the Merger or the other
transactions contemplated by this Agreement or by the Stockholders Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant to
the Company that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by Parent to the Company that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III (the "PARENT DISCLOSURE SCHEDULE") or disclosed in
the Parent SEC Reports filed prior to the date hereof:
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of Parent and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority and is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority and Approvals would not reasonably be expected to have a Parent
Material Adverse Effect. Each of Parent and its subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not reasonably be expected to have a
Parent Material Adverse Effect. A true and complete list as of the date hereof
of all of Parent's subsidiaries, together with the jurisdiction of incorporation
of each subsidiary and the percentage of each subsidiary's outstanding capital
stock owned by Parent or another subsidiary, is set forth in Section 3.1 of the
Parent Disclosure Schedule. Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for,
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any equity or similar interest in, any corporation, partnership, joint venture
or other business association or entity, with respect to which Parent has
invested or is required to invest $200,000 or more, excluding securities in any
publicly traded company held for investment by Parent and comprising less than
five percent of the outstanding capital stock of such company.
SECTION 3.2 Charter and By-Laws. Parent has heretofore furnished to the
Company a complete and correct copy of its Articles of Organization and By-Laws,
as most recently restated and subsequently amended to the date hereof. Such
Articles of Organization and By-Laws are in full force and effect and neither
Parent nor Merger Sub is in violation of any of the provisions of its Articles
of Incorporation or By-Laws, except where the failure to be in full force and
effect or where such violation would not have a Parent Material Adverse Effect.
SECTION 3.3 Capitalization. As of September 29, 1998, the authorized capital
stock of Parent consisted of (i) 60,000,000 shares of Parent Common Stock, of
which 31,153,765 shares were issued and outstanding, all of which are validly
issued, fully paid and non-assessable, 169,115 shares were held in treasury,
2,484,097 shares were reserved for future issuance under Parent's stock option
and employee stock purchase plans and (ii) 5,000,000 shares of preferred stock,
$.01 par value per share, none of which was issued and outstanding and none of
which was held in treasury. No material change in such capitalization has
occurred between September __, 1998 and the date hereof, except for issuance of
Parent Common Stock pursuant to Parent stock plans. All options, warrants or
other rights, agreements, arrangements or commitments of any character to which
Parent or a subsidiary or, to Parent's knowledge, any other person is a party
relating to the issued or unissued capital stock of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue or sell
any shares of capital stock of, or other equity interests in, Parent or any of
its subsidiaries are described in Section 3.3 of the Parent Disclosure Schedule.
There are no obligations, contingent or otherwise, of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or the capital stock of any subsidiary or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any such subsidiary other than guarantees of bank obligations of subsidiaries
entered into in the ordinary course of business. All of the outstanding shares
of capital stock of each of Parent's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and all such shares are owned by Parent or
another subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Parent's voting rights, charges or
other encumbrances of any nature whatsoever (collectively, "PARENT LIENS").
SECTION 3.4 Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated thereby
(other than the approval of the issuance of the Parent Common
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Stock by holders of a majority of the outstanding Parent Common Stock present or
represented by proxy and entitled to vote at the Parent Stockholders Meeting).
As of the date hereof, the Board of Directors of Parent has determined that it
is advisable and in the best interest of Parent's stockholders for Parent to
enter into a business combination with the Company upon the terms and subject to
the conditions of this Agreement and has unanimously recommended that the
stockholders of Parent approve the issuance of Parent Common Stock in the Merger
pursuant to this Agreement. This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against each of them in
accordance with its terms.
SECTION 3.5 No Conflict, Required Filings and Consents.
(a) Section 3.5(a) of the Parent Disclosure Schedule includes a list as of
the date hereof of: (i) all contracts, agreements, commitments or other
understandings or arrangements to which Parent or any of its subsidiaries is a
party or by which any of them or any of their respective property or assets are
bound or affected, but excluding (A) contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of business
and involving, in each case, payments by Parent or any of its subsidiaries of
less than $500,000, and sales contracts entered into in the ordinary course of
business, and (B) employment agreements and stock option agreements; and (ii)
all agreements which, as of the date hereof, Parent is required to file with the
SEC pursuant to the requirements of the Exchange Act as "material contracts."
(b) (i) neither the Parent nor any of its subsidiaries has breached, is in
default under, or has received written notice of any breach of or default under,
any of the agreements, contracts or other instruments required to be disclosed
in Section 3.5(a) of the Parent Disclosure Schedule (ii) to the best knowledge
of Parent, no other party to any of the agreements, contracts or other
instrument required to be disclosed in Section 3.5(a) of the Parent Disclosure
Schedule has breached or is in default of any of its obligations thereunder, and
(iii) to the best knowledge of Parent, each of the agreements, contracts and
other instruments required to be disclosed in Section 3.5(a) of the Parent
Disclosure Schedule is in full force and effect, except in any such case for
breaches, defaults or failures to be in full force and effect that would not
reasonably be expected to have a Parent Material Adverse Effect.
(c) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub will
not, and the consummation of the transactions contemplated hereby will not, (i)
conflict with or violate the Articles of Organization (or Certificate of
Incorporation) or By-Laws of Parent or Merger Sub, (ii) conflict with or violate
any Laws applicable to Parent or any of its subsidiaries or by which its or
their respective properties are bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or impair Parent's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Parent
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Lien on any of the properties or assets of Parent or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
any of its subsidiaries is a party or by which Parent or any of its subsidiaries
or its or any of their respective properties are bound or affected, except in
any such case for any such conflicts, violations, breaches, defaults or other
occurrences that would not reasonably be expected to have a Parent Material
Adverse Effect.
(d) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any federal, foreign, state or provincial governmental or
regulatory authority, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, the Blue Sky Laws, the pre-merger notification
requirements of the HSR Act, and the filing and recordation of appropriate
merger or other documents as required by the FBCA and the DGCL, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 3.6 Compliance. Neither Parent nor any of its subsidiaries is in
conflict with, or in default or violation of, (i) any Law or Approval applicable
to Parent or any of its subsidiaries or by which its or any of their respective
properties is bound or affected or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
is bound or affected, except for any such conflicts, defaults or violations
which would not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be filed
with the SEC since January 1, 1997 (collectively, the "PARENT SEC REPORTS"). The
Parent SEC Reports (i) were prepared in all material respects in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
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
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any forms, reports
or other documents with the SEC. The redacted sections of Parent's June 1998
Settlement Agreement with VISX, Inc. (which, as redacted, is filed with the
Parent SEC Reports) contain no provisions that purport to limit, as between
Parent and the Company, the operation of any non-redacted sections addressing
the applicability of cross-licenses to third parties which acquire or are
acquired by Parent.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been prepared
in accordance with generally
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accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and each
fairly presents in all material respects the consolidated financial position of
Parent and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows and stockholders' equity
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount.
SECTION 3.8 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports filed prior to the date hereof, since June 30, 1998, Parent
has conducted its business in the ordinary course and other than as disclosed in
the Parent SEC Reports filed prior to the date hereof there has not occurred:
(i) any Parent Material Adverse Effect; (ii) any amendments or changes in the
Articles of Organization or By-Laws of Parent; (iii) any damage to, destruction
or loss of any assets of the Parent (whether or not covered by insurance) that
would reasonably be expected to have a Parent Material Adverse Effect; (iv) any
material change by Parent in its accounting methods, principles or practices;
(v) any material revaluation by Parent of any of its assets, including without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any other action
or event that would have required the consent of the Company pursuant to Section
4.3 had such action or event occurred after the date of this Agreement; or (vii)
any sale of a material amount of assets of Parent or any of its subsidiaries
except in the ordinary course of business.
SECTION 3.9 No Undisclosed Liabilities. Except as disclosed in the Parent SEC
Reports filed prior to the date hereof, neither Parent nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (a) in the aggregate adequately provided for or disclosed in
Parent's balance sheet (including any related notes thereto) as of June 30, 1998
included in the Parent's Quarterly Report on 10-Q for the period ended June 30,
1998 (the "1998 PARENT BALANCE SHEET"), (b) incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected on the 1997 Parent Balance Sheet, (c) incurred since June 30, 1998 in
the ordinary course of business and consistent with past practice, (d) incurred
in connection with this Agreement, or (e) which would not reasonably be expected
to have a Parent Material Adverse Effect.
SECTION 3.10 Absence of Litigation. Except as disclosed in the Parent SEC
Reports filed prior to the date hereof, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Parent,
threatened against the Parent or any of its subsidiaries, or any properties or
rights of the Parent or any of its subsidiaries, before any federal, foreign,
state or provincial court, arbitrator or administrative, governmental or
regulatory authority or body that would reasonably be expected to have a Parent
Material Adverse Effect.
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SECTION 3.11 Employee Benefit Plans; Employment Agreements.
(a) Section 3.11(a) of the Parent Disclosure Schedule lists as of the date
hereof all employee pension plans (as defined in Section 3(2) of ERISA), all
material employee welfare plans, (as defined in Section 3(1) of ERISA) and all
other material bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements, written or otherwise, for the
benefit of, or relating to, any current or former employees of or consultants to
Parent, any trade or business (whether or not incorporated) which is a member of
a controlled group including Parent or which is under common control with Parent
(a "PARENT ERISA AFFILIATE") within the meaning of Section 414 of the Code, or
any subsidiary of Parent, as well as each plan with respect to which Parent or a
Parent ERISA Affiliate would incur liability under Section 4069 (if such plan
has been or were terminated) or Section 4212(c) of ERISA (all such plans,
practices, and programs are referred to herein as the "PARENT EMPLOYEE PLANS").
To the extent requested by the Company, there have been made available to the
Company copies of (i) each such written Parent Employee Plan (other than those
referred to in Section 4(b)(4) of ERISA), (ii) the most recent annual report on
form 5500 series, with accompanying schedules and attachments, filed with
respect to each Parent Employee Plan required to make such a filing, and (iii)
the most recent actuarial valuation for each Parent Employee Plan subject to
Title IV of ERISA. For purposes of this Section 3.11 (a) the term material,
used with respect to any Parent Employee Plan, shall mean that Parent or a
Parent ERISA Affiliate has incurred or may reasonably be expected to incur
obligations in an annual amount exceeding $400,000 with respect to such Parent
Employee Plan.
(b) (i) None of the Parent Employee Plans promises or provides retiree
medical or other welfare benefits to any person, and none of the Parent Employee
Plans is a "multiemployer plan" as such term is defined in Section 3(37) of
ERISA; (ii) there has been no "prohibited transaction," as such term is defined
in Section 406 of ERISA and Section 4975 of the Code, with respect to any Parent
Employee Plan, which would result in any material liability of Parent or any of
its subsidiaries; (iii) all Parent Employee Plans are in compliance in all
material respects with the requirements prescribed by any and all Laws
(including ERISA and the Code), currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, IRS, PBGC or Secretary of the Treasury), and Parent and
each of its subsidiaries have performed all material obligations required to be
performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any default or violation by any other
party to, any of the Parent Employee Plans; (iv) each Parent Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is the subject of a favorable
determination letter from the IRS, and nothing has occurred which may reasonably
be expected to impair such determination; (v) all contributions required to be
made to any Parent Employee Plan pursuant to Section 412 of the Code, or the
terms of the Parent Employee Plan or any collective bargaining agreement, have
been made on or before their due dates; (vi) with respect to each Parent
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the 30 day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event
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described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) neither
Parent nor any Parent ERISA Affiliate has incurred, nor reasonably expects to
incur, any liability under Title IV of ERISA (other than liability for premium
payments to the PBGC arising in the ordinary course), except where the failure
of any of the foregoing to be true would not have a Parent Material Adverse
Effect.
(c) Section 3.11(c) of the Parent Disclosure Schedule sets forth a true and
complete list of: (i) all employment agreements with officers or employees of
Parent or any of its subsidiaries that provide for annual base salaries in
excess of $250,000; (ii) all severance agreements, programs and policies of
Parent with or relating to its employees in each case with outstanding
commitments exceeding $250,000, excluding programs and policies required to be
maintained by law; and (iii) all plans, programs, agreements and other
arrangements of Parent with or relating to its employees which contain change-
in-control provisions.
SECTION 3.12 Labor Matters. There are no claims or proceedings pending or,
to the knowledge of Parent or any of its subsidiaries, threatened, between
Parent or any of its subsidiaries and any of their respective employees,
asserting that the Company has committed an unfair labor practice which claims
or proceedings have or would reasonably be expected to have a Parent Material
Adverse Effect; (ii) neither Parent nor any of its subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by Parent or its subsidiaries; and (iii) neither Parent nor any
of its subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of Parent or
any of its subsidiaries, in each case which would reasonably be expected to have
a Parent Material Adverse Effect.
SECTION 3.13 Registration Statement; Joint Proxy Statement/Prospectus.
Subject to the accuracy of the representations of the Company in Section 2.13,
the registration statement (the "REGISTRATION STATEMENT") pursuant to which the
Parent Common Stock to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein, in light of the circumstances
under which they were made, not misleading. The information supplied by Parent
for inclusion or incorporation in the Joint Proxy Statement/Prospectus will not,
on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders, at the time of the Stockholders Meetings and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or will omit to state any material fact necessary in order
to make the statements therein not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meetings which
has become false or misleading. If at any time prior to the Effective Time any
event relating to Parent, Merger Sub or any of their respective affiliates,
officers or directors should be discovered by Parent or Merger Sub which should
be set forth in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement/Prospectus, Parent or Merger Sub will promptly inform
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the Company. Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents. Notwithstanding
the foregoing, Parent makes no representation or warranty with respect to any
information supplied by the Company which is contained in, or furnished in
connection with the preparation of, the Registration Statement or the Joint
Proxy Statement/Prospectus.
SECTION 3.14 Title to Property. Neither the Parent nor any of its
subsidiaries owns any real property.
SECTION 3.15 Taxes. Parent and its subsidiaries have filed all United States
federal income Tax Returns and all other material Tax Returns required to be
filed by them, and Parent and its subsidiaries have paid and discharged all
Taxes due in connection with or with respect to the periods or transactions
covered by such Tax Returns and have paid all other Taxes as are due, except
such as are being contested in good faith by appropriate proceedings (to the
extent that any such proceedings are required) and there are no other Taxes that
would be due if asserted by a taxing authority, except with respect to which
Parent is maintaining reserves to the extent currently required unless the
failure to do so would not reasonably be expected to have a Parent Material
Adverse Effect. Except as does not involve or would not result in liability to
Parent that would reasonably be expected to have a Parent Material Adverse
Effect: (i) there are no tax liens on any assets of Parent or any subsidiary
thereof; and (ii) neither Parent nor any of its subsidiaries has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. The accruals and reserves for Taxes
(including deferred taxes) reflected in the 1998 Parent Balance Sheet are in all
material respects adequate to cover all Taxes required to be accrued through the
date thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles.
SECTION 3.16 Environmental Matters. Except in all cases as, in the
aggregate, have not had and would not reasonably be expected to have a Parent
Material Adverse Effect, Parent and each of its subsidiaries to the best of
Parent's knowledge: (i) have obtained all Approvals which are required to be
obtained under all applicable Environmental Laws by Parent or its subsidiaries
(or their respective agents); (ii) are in compliance with all terms and
conditions of such required Approvals, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in applicable Environmental
Laws; (iii) have not received notice of any past or present violations of
Environmental Laws, or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with or which would give rise to any common law or
statutory liability, or otherwise form the basis of any claim, action, suit or
proceeding, against Parent or any of its subsidiaries based on or resulting from
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste; and (iv) have taken all actions necessary under applicable Environmental
Laws to register any products or
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materials required to be registered by Parent or its subsidiaries (or any of
their respective agents) thereunder.
SECTION 3.17 Intellectual Property.
(a) Parent, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all trademarks, trade names,
service marks, copyrights, and any applications therefor, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or material that are material to the business of the Company and its
subsidiaries, taken as a whole, as currently conducted or as proposed to be
conducted (the "PARENT INTELLECTUAL PROPERTY RIGHTS"), except where the failure
to do so would not have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent, and the
consummation of the transactions contemplated hereby, will neither cause Parent
or any of its subsidiaries to be in violation or default in any material respect
under any license, sublicense or agreement with respect to the Parent
Intellectual Property Rights, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, except where such violation, default, termination or modification
would not reasonably be expected to have a Parent Material Adverse Effect. No
claims have been asserted or, to the knowledge of Parent, are threatened by any
person nor are there any valid grounds, to the knowledge of Parent, for any bona
fide claims (i) against the use by Parent or any of its subsidiaries of Parent
Intellectual Property Rights, or (ii) challenging the ownership by Parent or any
of its subsidiaries, or the validity or effectiveness of any of Parent
Intellectual Property Rights, except for such claims that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(c) Except as disclosed in the Parent SEC Reports filed prior to the date
hereof, neither the Parent nor any of its subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and there has never been any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Parent or
one of its Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party).
SECTION 3.18 Regulatory Matters.
(a) Since January 1, 1996 through the date hereof (i) there have been no
written notices, citations or decisions by any governmental or regulatory body
that any product produced, manufactured, marketed or distributed at any time by
the Company or any Company subsidiary (the "PARENT PRODUCTS") is defective or
fails to meet any applicable standards promulgated by any such governmental or
regulatory body, or any other governmental or regulatory body, agency or office
of any other jurisdiction to which the Company or any of its subsidiaries is
subject, (ii) there have been no recalls, field notifications or seizures
ordered or threatened by the FDA or any other comparable governmental or
regulatory body with respect to any of the Parent Production and (iii) none of
the
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Parent or the Parent subsidiaries have received any warning letter, Section
305 notices from the FDA or so-called Section 483 notices of adverse
observations (or comparable notices from such other governmental or regulatory
bodies).
(b) Except as would not, individually or in the aggregate, have a Parent
Material Adverse Effect, with respect to each Parent Product: (i) the Parent and
its subsidiaries have obtained all applicable Licenses to permit the
manufacturing, distribution, sale (including reimbursement and pricing),
marketing, export, import or human research (including clinical and non-clinical
trials) of such Product and (ii) Parent and its subsidiaries are in full
compliance with all terms and conditions of each License in each country in
which such Parent Product is marketed, and with all requirements pertaining to
the manufacturing (including current good manufacturing practices), marketing,
export, import or human research (including good laboratory practices and
clinical and non-clinical trials) of such Parent Product which is not required
to be the subject of a License.
(c) There are no impediments to issuance of any Parent FDA premarket
approval application ("PMA") as to which Parent has received an approvable
letter from the FDA other than those set forth in any so-called Section 483
Notices described in the Parent Disclosure Schedule, and Parent is not aware of
any reason why it will be unable to address to the FDA's satisfaction all
observations contained in such Notices.
SECTION 3.19 Interested Party Transactions. Since the date of Parent's 1998
proxy statement, other than as described therein, no event has occurred that
would be required to be reported as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.20 Financial Capacity. Parent has available sufficient funds to
satisfy its obligations to pay the Cash Consideration for all the Shares.
SECTION 3.21 Opinion of Financial Advisor. Parent has received the opinion
of its financial advisor, Hambrecht & Quist, LLC, that, as of the date hereof,
the Merger Consideration is fair to Parent from a financial point of view.
SECTION 3.22 Brokers. No broker, finder or investment banker (other than
Hambrecht & Quist, LLC, the fees and expenses of which will be paid by Parent)
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Merger Sub.
SECTION 3.23 Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
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(b) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by this Agreement, Merger
Sub has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Parent shall otherwise agree in writing and except
as otherwise contemplated by this Agreement, the Company shall conduct its
b