\nARTICLE IX General Provisions…………………………………………………………….57<\/p>\n Section 9.1 Notices………………………………………………………..57
\n Section 9.2 Definitions…………………………………………………….58
\n Section 9.3 Counterparts……………………………………………………59
\n Section 9.4 Entire Agreement; Nonassignability; Parties in Interest……………..59
\n Section 9.5 Severability……………………………………………………59
\n Section 9.6 Remedies Cumulative……………………………………………..59
\n Section 9.7 Governing Law…………………………………………………..59
\n Section 9.8 Waiver of Jury Trial…………………………………………….59
\n Section 9.9 Rules of Construction……………………………………………60
\n Section 9.10 Third Party Beneficiaries………………………………………..60
\n<\/c><\/s><\/table>\n
iii<\/p>\n
Index of Defined Terms<\/p>\n
Defined Term Section
\n———— ——-<\/p>\n
Acquisition Proposal……………………………………………4.2(a)
\nAffiliate……………………………………………………..9.2(a)
\nAgent Certificate………………………………………………8.6(a)
\nAgreement……………………………………………………Preamble
\nAntitrust Law………………………………………………….5.7(b)
\nAverage Closing Price……………………………………….1.6(a)(ii)
\nCalifornia Law……………………………………………………1.1
\nCash Election……………………………………………….1.6(a)(1)
\nCash Election Number…………………………………………1.6(a)(1)
\nCash Election Share………………………………………….1.6(a)(1)
\nCash Merger Consideration……………………………………1.6(a)(ii)
\nCertificate of Merger……………………………………………..1.1
\nCertificates…………………………………………………..1.7(c)
\nClosing………………………………………………………….1.2
\nClosing Date……………………………………………………..1.2
\nCOBRA………………………………………………………..2.17(e)
\nCode………………………………………………………..Recitals
\nCompany……………………………………………………..Preamble
\nCompany Agreements………………………………………………..2.3
\nCompany Balance Sheet……………………………………………..2.7
\nCompany Balance Sheet Date…………………………………………2.6
\nCompany Capital Stock…………………………………………Recitals
\nCompany Common Stock………………………………………….Recitals
\nCompany Common Stock Outstanding………………………………1.6(a)(i)
\nCompany Disclosure Schedule…………………………………………II
\nCompany Employee Plans…………………………………………2.17(a)
\nCompany Indemnified Persons……………………………………..8.2(c)
\nCompany Intellectual Property…………………………………..2.10(b)
\nCompany Preferred Stock……………………………………….Recitals
\nCompany Products…………………………………………..2.10(b)(ii)
\nCompany Options………………………………………………..1.6(c)
\nCompany Shareholder…………………………………………….1.6(f)
\nCompany Stock Option Plan………………………………………….2.4
\nCompany Warrants……………………………………………….1.6(d)
\nConfidentiality Agreement………………………………………….5.5
\nContingent Payments……………………………………………1.12(b)
\nContingent Shares……………………………………………..5.15(a)
\nCopyrights……………………………………………….2.10(a)(iii)
\nDamages……………………………………………………….8.2(b)
\nDelaware Law……………………………………………………..1.1
\nDissenting Shareholder………………………………………….1.6(g)
\nDissenting Shares………………………………………………1.6(g)
\nEffective Time……………………………………………………1.2
\nElection……………………………………………………1.6(a)(2)
\nEnvironmental Laws………………………………………….2.15(a)(i)
\nERISA………………………………………………………..2.17(a)<\/p>\n
i<\/p>\n
ERISA Affiliate……………………………………………….2.17(a)
\nEscrow Agent…………………………………………………..8.1(a)
\nEscrow Agreement……………………………………………….6.2(f)
\nEscrow Cash……………………………………………………1.7(i)
\nEscrow Claim Certificate…………………………………………..8.4
\nEscrow Fund……………………………………………………8.1(a)
\nEscrow Shares………………………………………………….1.7(i)
\nExchange Act……………………………………………………..3.3
\nExchange Agent…………………………………………………1.7(a)
\nExchange Fund………………………………………………….1.7(b)
\nFDA………………………………………………………….1.12(a)
\nFDCA…………………………………………………………2.22(a)
\nFinancial Statements……………………………………………2.5(a)
\nFirst Contingent Payment……………………………………….1.12(a)
\nForm of Election…………………………………………….1.6(a)(4)
\nGAAP…………………………………………………………1.12(b)
\nGovernmental Entity……………………………………………….2.3
\nHazardous Materials………………………………………..2.15(a)(ii)
\nHIPAA………………………………………………………..2.17(e)
\nHolder……………………………………………………….5.15(a)
\nHolder Indemnitee……………………………………………..5.15(e)
\nHSR Act………………………………………………………….2.3
\nIND………………………………………………………….2.22(c)
\nIntellectual Property………………………………………….2.10(a)
\nInvestor Representation Statement…………………………………..5.3
\nIRS………………………………………………………….2.16(m)
\nIssued Patents……………………………………………..2.10(a)(i)
\nknowledge……………………………………………………..9.2(b)
\nLegal Provisions…………………………………………………2.21
\nLiens……………………………………………………………2.3
\nmaterial………………………………………………………9.2(c)
\nMaterial Adverse Effect…………………………………………9.2(d)
\nMerger………………………………………………………Recitals
\nMerger Consideration………………………………………..1.6(a)(ii)
\nMerger Sub…………………………………………………..Preamble
\nNASD…………………………………………………………….3.2
\nNDA………………………………………………………….1.12(a)
\nParent………………………………………………………Preamble
\nParent Common Stock…………………………………………….1.6(a)
\nParent Disclosure Schedule…………………………………………III
\nParent Financial Statements………………………………………..3.3
\nParent Indemnified Persons………………………………………8.2(b)
\nParent Indemnitee……………………………………………..5.15(f)
\nParent Rights…………………………………………………….3.4
\nParent Stock Plans………………………………………………..3.4
\nParent SEC Documents………………………………………………3.3
\nParent 10-K……………………………………………………8.2(a)
\nPatents…………………………………………………..2.10(a)(ii)
\nPatent Applications………………………………………..2.10(a)(ii)
\nPer Share Merger Consideration…………………………………..1.6(a)
\nPermits…………………………………………………………2.22<\/p>\n
ii<\/p>\n
Person………………………………………………………..9.2(e)
\nPharmaceutical Product…………………………………………2.22(a)
\nProceeding……………………………………………………….2.8
\nRegistrable Securities…………………………………………5.15(a)
\nRegistration Statement…………………………………………5.15(a)
\nRelease………………………………………………….2.15(a)(iii)
\nSEC……………………………………………………………..3.2
\nSecond Contingent Payment………………………………………1.12(b)
\nSecurities Act…………………………………………………1.6(h)
\nShareholders’ Agent…………………………………………….8.8(a)
\nSolicitation Statement………………………………………….5.1(a)
\nStock Election………………………………………………1.6(a)(2)
\nStock Election Number………………………………………..1.6(a)(2)
\nStock Election Share…………………………………………1.6(a)(2)
\nStock Exchange Ratio……………………………………….1.6(a)(iii)
\nStock Merger Consideration…………………………………..1.6(a)(ii)
\nSubsidiary…………………………………………………….9.2(f)
\nSurviving Corporation……………………………………………..1.1
\nTax(es)……………………………………………………2.16(a)(i)
\nTax Returns……………………………………………….2.16(a)(ii)
\nThird Party Intellectual Property……………………………….2.10(c)
\nTrademarks………………………………………………..2.10(a)(iv)
\nU.S. Person……………………………………………………6.2(h)
\nVoting Agreement……………………………………………..Recitals<\/p>\n
iii<\/p>\n
AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
This AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made and
\nentered into as of February 21, 2001 by and among Bio-Technology General Corp.,
\na Delaware corporation (“Parent”), MYLS Acquisition Corp., a Delaware
\ncorporation (“Merger Sub”) and wholly-owned subsidiary of Parent, and Myelos
\nCorporation, a California corporation (“Company”).<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of Company, Parent and Merger Sub believe it is
\nin the best interests of their respective companies and the shareholders of
\ntheir respective companies that Company and Merger Sub combine into a single
\ncompany through the statutory merger of Company with and into Merger Sub (the
\n“Merger”) and, in furtherance thereof, have approved the Merger.<\/p>\n
B. Pursuant to the Merger, among other things, the outstanding shares of
\nCompany Common Stock, no par value per share (“Company Common Stock”), shall be
\nconverted into the right to receive the Merger Consideration (assuming the
\nconversion of all outstanding shares of Company Preferred Stock, no par value
\nper share (“Company Preferred Stock” and, together with the Company Common
\nStock, the “Company Capital Stock”), into shares of Company Common Stock prior
\nto the Effective Time) upon the terms and subject to the conditions set forth
\nherein.<\/p>\n
C. Company, Parent and Merger Sub desire to make certain representations
\nand warranties and other agreements in connection with the Merger.<\/p>\n
D. The parties intend, by executing this Agreement, to adopt a plan of
\nreorganization within the meaning of the Internal Revenue Code of 1986, as
\namended (the “Code”), and to cause the Merger to qualify as a reorganization
\nunder the provisions of Section 368(a) of the Code.<\/p>\n
E. Concurrent with the execution of this Agreement and as an inducement to
\nParent to enter into this Agreement, certain of the affiliates of Company who
\nare shareholders, officers or directors have on the date hereof entered into an
\nagreement (the “Voting Agreement”) to vote the shares of Company Common Stock
\nowned by such Person to approve the Merger and against any competing proposals.<\/p>\n
NOW, THEREFORE, in consideration of the covenants and representations set
\nforth herein, and for other good and valuable, consideration, the parties agree
\nas follows:<\/p>\n
ARTICLE I
\n THE MERGER<\/p>\n
Section 1.1 The Merger. At the Effective Time and subject to and upon the
\nterms and conditions of this Agreement, the Certificate of Merger attached
\nhereto as Exhibit 1.1 (the “Certificate of Merger”), the applicable provisions
\nof the Delaware General Corporation Law (“Delaware Law”) and the applicable
\nprovisions of the California Corporations Code (“California Law”), the Company
\nshall be merged with and into Merger Sub, the separate corporate existence of
\nCompany shall cease and Merger Sub shall continue as the surviving corporation.
\nMerger Sub as the surviving corporation after the Merger is hereinafter
\nsometimes referred to as the “Surviving Corporation.”<\/p>\n
Section 1.2 Closing; Effective Time. The closing of the transactions
\ncontemplated hereby (the “Closing”) shall take place as soon as practicable, but
\nno later than two (2) business days, after the satisfaction or waiver (subject
\nto applicable law) of each of the conditions set forth in Article VI hereof<\/p>\n
1<\/p>\n
(other than those conditions that by their nature are to be satisfied at the
\nClosing, but subject to the satisfaction or waiver of those conditions), or at
\nsuch other time as the parties hereto agree (the “Closing Date”). The Closing
\nshall take place at the offices of Fulbright & Jaworski L.L.P., 666 Fifth
\nAvenue, New York, NY 10103, or at such other location as the parties hereto
\nagree. In connection with the Closing, the parties hereto shall cause the Merger
\nto be consummated by filing the Certificate of Merger with the Secretary of
\nState of the State of Delaware and the Secretary of State of the State of
\nCalifornia, in accordance with the relevant provisions of Delaware Law and
\nCalifornia Law (the time of such filing being the “Effective Time”).<\/p>\n
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
\nMerger shall be as provided in this Agreement, the Certificate of Merger and the
\napplicable provisions of Delaware Law and California Law. Without limiting the
\ngenerality of the foregoing, and subject thereto, at the Effective Time, all the
\nproperty, rights, privileges, powers and franchises of Company and Merger Sub
\nshall vest in the Surviving Corporation, and all debts, liabilities and duties
\nof Company and Merger Sub shall become the debts, liabilities and duties of the
\nSurviving Corporation.<\/p>\n
Section 1.4 Certificate of Incorporation; Bylaws.<\/p>\n
(a) The Certificate of Incorporation of Merger Sub in effect
\nimmediately prior to the Effective Time shall be the Certificate of
\nIncorporation of the Surviving Corporation until thereafter amended in
\naccordance with Delaware Law and such Certificate of Incorporation, except that
\nArticle FIRST thereof shall read as follows: “The name of the Corporation is
\nMyelos Corporation.”<\/p>\n
(b) The Bylaws of Merger Sub in effect immediately prior to the
\nEffective Time shall be the Bylaws of the Surviving Corporation until thereafter
\namended.<\/p>\n
Section 1.5 Directors and Officers. The directors and officers of Merger
\nSub immediately prior to the Effective Time shall be the directors and officers
\nof the Surviving Corporation, until the earlier of their resignation or removal
\nor their respective successors are duly elected or appointed and qualified, as
\nthe case may be.<\/p>\n
Section 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
\nthe Merger and without any action on the part of Merger Sub, Company or the
\nholders of any of Company’s securities:<\/p>\n
(a) Conversion of Company Capital Stock. Each share of Company
\n Common Stock issued and outstanding immediately prior to the Effective
\n Time (assuming the conversion of all Company Preferred Stock into Company
\n Common Stock and the exercise of all outstanding Company Options and
\n Company Warrants prior to the Effective Time) shall be converted and
\n exchanged into the right to receive an amount (the “Per Share Merger
\n Consideration”) determined by dividing the Merger Consideration by the
\n Company Common Stock Outstanding, payable in cash or shares of Parent’s
\n Common Stock, $0.01 par value per share (together with the associated
\n Parent Rights, the “Parent Common Stock”), as set forth in this Section
\n 1.6(a). For purposes of this Agreement:<\/p>\n
(i) “Company Common Stock Outstanding” means the total number
\n of shares of Company Common Stock issued and outstanding at the
\n Effective Time, assuming the conversion of Company Preferred Stock
\n into Company Common Stock and the exercise of all outstanding
\n Company Options and Company Warrants prior to the Effective Time;<\/p>\n
2<\/p>\n
(ii) “Merger Consideration” means $35,000,000, payable as
\n follows: (A) $14,000,000 shall be payable in aggregate in cash (the
\n “Cash Merger Consideration”), and (B) $21,000,000 shall be payable
\n through the issuance of 2,344,692 shares of Parent Common Stock (the
\n “Stock Merger Consideration”), with the number of shares of Parent
\n Common Stock to be issued in the Merger determined by dividing
\n $21,000,000 by $8.9564 (the “Average Closing Price”), representing
\n the average of the closing prices of Parent Common Stock as reported
\n on the Nasdaq National Market during the twenty trading days ending
\n one day prior to the date of this Agreement; and<\/p>\n
(iii) “Stock Exchange Ratio” means the ratio determined by
\n dividing the Per Share Merger Consideration by the Average Closing
\n Price.<\/p>\n
For purposes of clarity, each record holder of Company Common Stock shall
\n be entitled pursuant to this Section 1.6(a) to make a Cash Election, Stock
\n Election or any combination thereof, with respect to the Company Common
\n Stock owned by such record holder, provided that the sum of all Elections
\n made by such record holder equals 100% of such record holder’s Company
\n Common Stock and that each Election is for a whole number of shares of
\n Company Common Stock and not a fractional share.<\/p>\n
(1) Cash Election. Subject to the provisions of this Section
\n 1.6(a), each record holder of Company Common Stock Outstanding
\n immediately prior to the Effective Time shall be entitled to elect
\n to receive the Per Share Merger Consideration in cash (a “Cash
\n Election”) for all or any part of such holder’s Company Common Stock
\n (each, a “Cash Election Share”). Notwithstanding the foregoing, the
\n aggregate number of shares of Company Common Stock that may be
\n converted in the Merger into the right to receive Cash Merger
\n Consideration (rounded down to the nearest whole share, the “Cash
\n Election Number”) shall not exceed the number equal to (A) the
\n quotient determined by dividing the Cash Merger Consideration by the
\n Per Share Merger Consideration minus (B) the number of Dissenting
\n Shares.<\/p>\n
(2) Stock Election. Each record holder of Company Common Stock
\n immediately prior to the Effective Time shall be entitled to elect
\n to receive the Per Share Merger Consideration in shares of Parent
\n Common Stock (a “Stock Election” and, together with the Cash
\n Election, an “Election”) for all or any part of such holder’s
\n Company Common Stock (a “Stock Election Share”). The number of
\n shares of Parent Common Stock to be issued in respect of a Stock
\n Election is the product determined by multiplying the total number
\n of Stock Election Shares by the Stock Exchange Ratio.
\n Notwithstanding the foregoing, the aggregate number of shares of
\n Company Common Stock that may be converted in the Merger into the
\n right to receive Stock Merger Consideration shall not exceed the
\n Company Common Stock Outstanding less the Cash Election Number
\n (rounded down to the nearest whole share, the “Stock Election
\n Number”).<\/p>\n
(3) Proration of Company Common Stock. If the aggregate number
\n of shares of Company Common Stock in respect of which Cash Elections
\n have been made exceeds the Cash Election Number, each Cash Election
\n Share shall be converted into (A) the right to receive an amount in
\n cash, without interest, equal to the product of (1) the Per Share
\n Merger Consideration and (2) a fraction (the “Cash Fraction”), the
\n numerator of which shall be the Cash Election Number and the
\n denominator of which shall be the total number of Cash Election
\n Shares, and (B) a number of shares of Parent Common Stock equal to
\n the product of (1) the Stock Exchange Ratio and (2) a fraction equal
\n to one <\/p>\n
3<\/p>\n
minus the Cash Fraction. If the aggregate number of shares of
\n Company Common Stock in respect of which Stock Elections have been
\n made exceeds the Stock Election Number, each Stock Election Share
\n shall be converted into (A) the right to receive the number of
\n shares of Parent Common Stock equal to the product of (1) the Stock
\n Exchange Ratio and (2) a fraction (the “Stock Fraction”), the
\n numerator of which shall be the Stock Election Number and the
\n denominator of which shall be the total number of Stock Election
\n Shares, and (B) an amount in cash, without interest, equal to the
\n product of (1) the Per Share Merger Consideration and (2) a fraction
\n equal to one minus the Stock Fraction. Parent shall make all
\n computations contemplated by this Section 1.6(a)(3), and all such
\n computations shall be conclusive and binding on the holders of
\n Company Common Stock.<\/p>\n
(4) Form of Election. Elections shall be made on a form
\n designed for that purpose (a “Form of Election”). A holder of record
\n of Company Common Stock who holds such Company Common Stock as
\n nominee, trustee or in another representative capacity (a “Shares
\n Representative”) may submit multiple Forms of Election; provided
\n that such Shares Representative certifies that each such Form of
\n Election covers all the Company Common Stock held by such Shares
\n Representative for each particular beneficial owner whose Company
\n Common Stock is covered by such Form of Election. To be effective, a
\n Form of Election must be properly completed, signed and submitted to
\n Parent prior to the Effective Time, and if no Form of Election is
\n submitted to Parent by the Effective Time, such record holder shall
\n be allocated cash and shares of Parent Common Stock in Parent’s
\n discretion after giving effect to all Forms of Election received by
\n Parent. Parent shall have the discretion to determine whether Forms
\n of Election have been properly completed, signed and submitted or
\n revoked and to disregard immaterial defects in Forms of Election.
\n The decision of Parent in such matters shall be conclusive and
\n binding. Parent shall be under no obligation to notify any person of
\n any defect in a Form of Election submitted to it.<\/p>\n
(b) Cancellation of Company Capital Stock Owned by Parent. At the
\n Effective Time, each share of Company Common Stock and Company Preferred
\n Stock owned by Parent or any direct or indirect wholly owned subsidiary of
\n Parent immediately prior to the Effective Time shall be canceled and
\n extinguished without any conversion thereof.<\/p>\n
(c) Company Stock Options. At the Effective Time, all options to
\n purchase Company Common Stock then outstanding under the Company Stock
\n Option Plan (“Company Options”) shall be cancelled in accordance with
\n Section 5.9.<\/p>\n
(d) Company Warrants. At the Effective Time, all warrants to
\n purchase Company Preferred Stock or Company Common Stock then outstanding
\n (“Company Warrants”) shall be cancelled in accordance with Section 5.9.<\/p>\n
(e) Capital Stock of Merger Sub. Each share of common stock of
\n Merger Sub issued and outstanding immediately prior to the Effective Time
\n shall remain outstanding, unchanged by reason of the Merger, as one fully
\n paid and nonassessable share of common stock of the Surviving Corporation.
\n Each stock certificate of Merger Sub evidencing ownership of any such
\n shares shall continue to evidence ownership of such shares of capital
\n stock of the Surviving Corporation.<\/p>\n
(f) Fractional Shares. No fraction of a share of Parent Common Stock
\n will be issued, but in lieu thereof each holder of shares of Company
\n Common Stock (“Company <\/p>\n
4<\/p>\n
Shareholder”) who would otherwise be entitled to a fraction of a share of
\n Parent Common Stock (after aggregating all fractional shares of Parent
\n Common Stock to be received by such holder) shall receive from Parent an
\n amount of cash (rounded to the nearest whole cent) equal to the product of
\n (i) such fraction multiplied by (ii) the Average Closing Price. The
\n fractional share interests of each Company Shareholder shall be
\n aggregated, so that no Company Shareholder shall receive cash in respect
\n of fractional share interests in an amount greater than the value of one
\n full share of Parent Common Stock.<\/p>\n
(g) Dissenters’ Rights. Notwithstanding any provision of this
\n Agreement to the contrary, any shares of Company Capital Stock held by a
\n holder who has demanded and perfected such holder’s right for appraisal of
\n such shares in accordance with California Law and who, as of the Effective
\n Time, has not effectively withdrawn or lost such right to appraisal
\n (“Dissenting Shares”), if any, shall not be converted into the Merger
\n Consideration but shall instead be converted into the right to receive
\n such consideration as may be determined to be due with respect to such
\n Dissenting Shares pursuant to California Law. Company shall give Parent
\n prompt notice of any demand received by Company to require Company to
\n purchase shares of Company Capital Stock, and Parent shall have the right
\n to direct and participate in all negotiations and proceedings with respect
\n to such demand. Company agrees that, except with the prior written consent
\n of Parent, or as required under the California Law, it will not
\n voluntarily make any payment with respect to, or settle or offer to
\n settle, any such purchase demand. Each holder of Dissenting Shares
\n (“Dissenting Shareholder”) who, pursuant to the provisions of California
\n Law, becomes entitled to payment of the fair value for shares of Company
\n Capital Stock shall receive payment therefor (but only after the value
\n therefor shall have been agreed upon or finally determined pursuant to
\n such provisions). If, after the Effective Time, any Dissenting Shares
\n shall lose their status as Dissenting Shares, Parent shall issue and
\n deliver, upon surrender by such shareholder of a certificate or
\n certificates representing shares of Company Capital Stock, the portion of
\n the Merger Consideration to which such shareholder would otherwise be
\n entitled under this Section 1.6 less the portion of the Merger
\n Consideration allocable to such shareholder that has been deposited in the
\n Escrow Fund pursuant to Section 1.7(i) and Article VIII hereof.<\/p>\n
(h) Certificate Legends. The shares of Parent Common Stock to be
\n issued pursuant to this Article I shall not have been registered and shall
\n be characterized as “restricted securities” under the federal securities
\n laws, and under such laws such shares may be resold without registration
\n under the Securities Act of 1933, as amended (the “Securities Act”), only
\n in certain limited circumstances. Each certificate evidencing shares of
\n Parent Common Stock to be issued pursuant to this Article I shall bear the
\n following legend, in addition to any legends required by state securities
\n laws:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
\n INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
\n 1933. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
\n ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE
\n SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE
\n TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”<\/p>\n
Section 1.7 Surrender of Certificates.<\/p>\n
(a) Exchange Agent. American Stock Transfer & Trust Company shall
\nact as exchange agent (the “Exchange Agent”) in the Merger.<\/p>\n
5<\/p>\n
(b) Parent to Provide Parent Common Stock and Cash. Promptly after
\nthe Effective Time, Parent shall supply or cause to be supplied to the Exchange
\nAgent for exchange in accordance with this Article I through such reasonable
\nprocedures as Parent may adopt (i) certificates evidencing the shares of Parent
\nCommon Stock issuable pursuant to Section 1.6(a) in exchange for shares of
\nCompany Capital Stock outstanding immediately prior to the Effective Time, less
\nthe number of shares of Parent Common Stock to be deposited into the Escrow Fund
\npursuant to the requirements of Section 1.7(i) and Article VIII and (ii) cash in
\nan amount sufficient to permit payment of the Cash Merger Consideration and cash
\nin lieu of fractional shares pursuant to Section 1.6(f) (the “Cash Payment
\nFunds” and, together with the shares of Parent Common Stock deposited pursuant
\nto clause (i), the “Exchange Fund”). The Exchange Fund shall not be used for any
\npurpose except as expressly provided in this Agreement. The Cash Payment Funds
\nshall be invested by the Exchange Agent as directed by Parent or the Surviving
\nCorporation pending payment thereof by the Exchange Agent to the holders of
\nrecord of shares of Company Common Stock. Earnings from such investment shall be
\nthe sole and exclusive property of Parent and the Surviving Corporation, and no
\npart of such earnings shall accrue to the benefit of holders of record of shares
\nof Company Common Stock.<\/p>\n
(c) Exchange Procedures. Promptly after the Effective Time, the
\nSurviving Corporation shall cause to be mailed to each holder of record of a
\ncertificate or certificates (the “Certificates”) which immediately prior to the
\nEffective Time represented outstanding shares of Company Common Stock, whose
\nshares were converted into the right to receive the Merger Consideration
\npursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
\ndelivery shall be effected, and risk of loss and title to the Certificates shall
\npass, only upon receipt of the Certificates by the Exchange Agent, and shall be
\nin such form and have such other provisions as Parent may reasonably specify),
\n(ii) such other customary documents as may be required pursuant to such
\ninstructions, and (iii) instructions for use in effecting the surrender of the
\nCertificates in exchange for the Merger Consideration (without interest). Upon
\nsurrender of a Certificate for cancellation to the Exchange Agent or to such
\nother agent or agents as may be appointed by Parent, together with such letter
\nof transmittal and other documents, duly completed and validly executed in
\naccordance with the instructions thereto, the holder of such Certificate shall
\nbe entitled to receive in exchange therefor (A) the cash portion of the Merger
\nConsideration, less the pro rata portion of such cash to be deposited in the
\nEscrow Fund on such holder’s behalf pursuant to Section 1.7(i) and Article VIII
\n(without interest), (B) a certificate representing the number of whole shares of
\nParent Common Stock less the number of shares of Parent Common Stock to be
\ndeposited in the Escrow Fund on such holder’s behalf pursuant to Section 1.7(i)
\nand Article VIII hereof, (C) any dividends or other distributions to which such
\nholder is entitled pursuant to Section 1.7(d), and (D) cash (without interest)
\nin respect of fractional shares as provided in Section 1.6(f) and the
\nCertificate so surrendered shall forthwith be canceled. Until so surrendered,
\neach outstanding Certificate that, prior to the Effective Time, represented
\nshares of Company Capital Stock will be deemed from and after the Effective
\nTime, for all corporate purposes, other than the payment of dividends, to
\nevidence the ownership of the number of full shares of Parent Common Stock into
\nwhich such shares of Company Capital Stock shall have been so converted and the
\nright to receive the cash portion of the Merger Consideration (without interest)
\nand an amount in cash in lieu of the issuance of any fractional shares in
\naccordance with Section 1.6.<\/p>\n
(d) Distributions With Respect to Unexchanged Shares. No dividends
\nor other distributions with respect to Parent Common Stock with a record date
\nafter the Effective Time will be paid to the holder of any unsurrendered
\nCertificate with respect to the shares of Parent Common Stock represented
\nthereby until the holder of record of such Certificate shall surrender such
\nCertificate. Subject to applicable law, following surrender of any such
\nCertificate, there shall be paid to the record holder of the certificates
\nrepresenting whole shares of Parent Common Stock issued in exchange therefor,
\nwithout interest at the time of such surrender, the amount of any such dividends
\nor other distributions with a record date after the Effective Time theretofore
\npayable (but for the provisions of this Section 1.7(d)) with respect to such
\nshares of Parent Common Stock.<\/p>\n
6<\/p>\n
(e) Transfers of Ownership. At the Effective Time, the stock
\ntransfer books of the Company shall be closed and there shall be no further
\nregistration of transfers of Company Common Stock or Company Preferred Stock
\nthereafter on the records of the Company. If any certificate for shares of
\nParent Common Stock is to be issued in a name other than that in which the
\nCertificate surrendered in exchange therefor is registered, or any portion of
\nthe cash portion of the Merger Consideration is to be paid to Person other than
\nthe Person in whose name the Certificate surrendered in exchange therefor is
\nregistered, it will be a condition of the issuance thereof that the Certificate
\nso surrendered will be properly endorsed and otherwise in proper form for
\ntransfer and that the Person requesting such exchange will have paid to Parent
\nor any agent designated by it any transfer or other taxes required by reason of
\nthe issuance of a certificate for shares of Parent Common Stock in any name
\nother than that of the registered holder of the Certificate surrendered or
\npayment of any portion of the Cash Merger Consideration to any Person other than
\nthe registered holder of the Certificate surrendered, or established to the
\nsatisfaction of Parent or any agent designated by it that such tax has been paid
\nor is not payable.<\/p>\n
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
\nwhich remains undistributed to Company Shareholders six months after the
\nEffective Time shall be delivered to Parent, upon demand, and any Company
\nShareholders who have not previously complied with this Section 1.7 shall
\nthereafter look only to Parent for payment of their claim for the Merger
\nConsideration and any dividends or distributions with respect to Parent Common
\nStock.<\/p>\n
(g) No Liability. Notwithstanding anything to the contrary in this
\nSection 1.7, none of the Exchange Agent, Parent, the Surviving Corporation or
\nany party hereto shall be liable to any Person for any amount properly paid to a
\npublic official pursuant to any applicable abandoned property, escheat or
\nsimilar law.<\/p>\n
(h) Dissenting Shares. The provisions of this Section 1.7 shall also
\napply to Dissenting Shares that lose their status as such, except that the
\nobligations of Parent under this Section 1.7 shall commence on the date of loss
\nof such status and the holder of such shares shall be entitled to receive in
\nexchange for such shares the Merger Consideration to which such holder is
\nentitled pursuant to Section 1.6 hereof.<\/p>\n
(i) Escrow. As soon as practicable after the Effective Time, and
\nsubject to and in accordance with the provisions of Article VIII hereof, Parent
\nshall cause to be distributed to the Escrow Agent out of the Cash Merger
\nConsideration to be paid at Closing $500,000 in cash (the “Escrow Cash”) and a
\ncertificate or certificates representing 55,826 shares of Parent Common Stock to
\nbe issued at the Closing (the “Escrow Shares”) (which shall be registered in the
\nname of the Escrow Agent as nominee for the holders of Certificates canceled
\npursuant to this Section 1.7). Such cash and shares shall be beneficially owned
\nby such holders and such cash and shares shall be held in escrow and shall be
\navailable to compensate Parent for certain damages as provided in Article VIII.
\nTo the extent not used for such purposes, such cash and shares shall be
\nreleased, all as provided in Article VIII hereof. Each Company Stockholder shall
\ncontribute a pro rata share of the Escrow Cash and the Escrow Stock, based on
\nthe number of shares of Company Common Stock owned at the Effective Time,
\nregardless of the type of consideration such Company Stockholder elected to
\nreceive in the Merger pursuant to the Form of Election.<\/p>\n
Section 1.8 No Further Ownership Rights in Company Capital Stock. The
\nMerger Consideration delivered upon the surrender for exchange of shares of
\nCompany Capital Stock in accordance with the terms hereof (including any
\ndividends, distributions or cash paid in lieu of fractional shares) shall be
\ndeemed to have been issued in full satisfaction of all rights pertaining to such
\nshares of Company Capital Stock, and there shall be no further registration of
\ntransfers on the records of the Surviving Corporation of shares of Company
\nCapital Stock which were outstanding immediately prior to <\/p>\n
7<\/p>\n
the Effective Time. If, after the Effective Time, Certificates are presented to
\nthe Surviving Corporation for any reason, they shall be canceled and exchanged
\nas provided in this Article I.<\/p>\n
Section 1.9 Lost, Stolen or Destroyed Certificates. In the event any
\nCertificates shall have been lost, stolen or destroyed, the Exchange Agent shall
\nissue in exchange for such lost, stolen or destroyed Certificates, upon the
\nmaking of an affidavit of that fact by the holder thereof such Merger
\nConsideration (and dividends, distributions and cash in lieu of fractional
\nshares) as may be required pursuant to Section 1.6; provided, however, that
\nParent may, in its discretion and as a condition precedent to the issuance
\nthereof, require the owner of such lost, stolen or destroyed Certificates to
\ndeliver a bond in such sum as it may reasonably direct as indemnity against any
\nclaim that may be made against Parent, the Surviving Corporation or the Exchange
\nAgent with respect to the Certificates alleged to have been lost, stolen or
\ndestroyed.<\/p>\n
Section 1.10 Taking of Necessary Action; Further Action. Each of Parent,
\nMerger Sub and Company will take all such reasonable and lawful action as may be
\nnecessary or desirable in order to effectuate the Merger in accordance with this
\nAgreement as promptly as possible. If, at any time after the Effective Time, any
\nfurther action is necessary or desirable to carry out the purposes of this
\nAgreement and to vest the Surviving Corporation with full right, title and
\npossession to all assets, property, rights, privileges, powers and franchises of
\nCompany and Merger Sub, the officers and directors of Company and Merger Sub are
\nfully authorized in the name of their respective corporations or otherwise to
\ntake, and will take, all such lawful and necessary action, so long as such
\naction is not inconsistent with this Agreement.<\/p>\n
Section 1.11 Withholding Rights. Each of the Surviving Corporation and
\nParent shall be entitled, or shall be entitled to cause the Exchange Agent, to
\ndeduct and withhold from the Merger Consideration otherwise payable pursuant to
\nthis Agreement to any holder of shares of Company Common Stock such amounts as
\nit is required to deduct and withhold with respect to the making of such payment
\nunder the Code, and the rules and regulations promulgated thereunder, or any
\nprovision of state, local or foreign Tax law. To the extent that amounts are so
\nwithheld by the Surviving Corporation, Parent or the Exchange Agent, as the case
\nmay be, such amounts shall be treated for all purposes of this Agreement as
\nhaving been paid to the holder of the shares of Company Common Stock in respect
\nto which such deduction and withholding was made by the Surviving Corporation,
\nParent or the Exchange Agent, as the case may be.<\/p>\n
Section 1.12 Contingent Payments.<\/p>\n
(a) In the event that the (i) Parent publicly announces that it will
\nfile a New Drug Application (“NDA”) relating to the use of Prosaptide TX-14(A)
\nto treat neuropathic pain or neuropathy, (ii) the Surviving Corporation receives
\nUnited States Food and Drug Administration (“FDA”) minutes stating that the
\nclinical data possessed by the Surviving Corporation is sufficient for an NDA
\nfiling for the use of Prosaptide TX-14(A) to treat neuropathic pain or
\nneuropathy without requiring any further testing or (iii) the Surviving
\nCorporation initiates preparation of an NDA for Prosaptide TX-14(A) for the
\ntreatment of neuropathic pain or neuropathy (the date the earliest of the
\nforegoing occurs being the “Payment Trigger Date”) then Parent shall pay to each
\nPerson who was a holder of Company Common Stock Outstanding an amount per share
\nof Company Common Stock determined by dividing $30,000,000 (the “First
\nContingent Payment”) by the Company Common Stock Outstanding at the time such
\npayment is due. Subject to Section 1.13, at least forty percent (40%) of the
\nFirst Contingent Payment shall be paid in shares of Parent Common Stock, and the
\nremainder shall be paid in cash, shares of Parent Common Stock, or a combination
\nthereof, as determined by Parent in its sole discretion; provided, however, that
\nnotwithstanding the foregoing, Parent shall issue at least that number of shares
\nof Parent Common Stock such that, when combined with the Merger Consideration
\npaid at Closing, at least fifty percent (50%) of <\/p>\n
8<\/p>\n
the aggregate amount was paid in shares of Parent Common Stock (or the Parent
\nstock issuable pursuant to Section 1.13). The number of shares of Parent Common
\nStock to be issued in payment of the First Contingent Payment shall be equal to
\nthe quotient determined by dividing (i) the amount of the First Contingent
\nPayment to be paid through the issuance of shares of Parent Common Stock by (ii)
\nthe average of the closing prices of Parent Common Stock as reported on the
\nNasdaq National Market during the twenty trading days ending on the Payment
\nTrigger Date. Each Company Shareholder will receive a pro rata portion of the
\ncash and shares of Parent Common Stock in payment of the First Contingent
\nPayment based upon such Person’s beneficial ownership of Company Common Stock
\nOutstanding at the Effective Time, subject to the provisions of Section 1.6(h),
\nwhich payment shall be made promptly following the Payment Trigger Date. The
\nCompany acknowledges that Parent and the Surviving Corporation shall have the
\nright at any time to discontinue clinical trials with respect to Prosaptide
\nTX-14(A).<\/p>\n
(b) In the event that the FDA approves the sale of Prosaptide
\nTX-14(A) for the treatment of neuropathic pain or neuropathy, then Parent shall
\npay to each Person who was a holder of Company Common Stock Outstanding an
\namount per share of Company Common Stock (the “Second Contingent Payment” and,
\ntogether with the First Contingent Payment, the “Contingent Payments”)
\ndetermined by dividing the Product Net Sales by the Company Common Stock
\nOutstanding at the time such payment is due. Subject to Section 1.13, at least
\nfifty percent (50%) of the Second Contingent Payment shall be paid in shares of
\nParent Common Stock, and the remainder shall be paid in cash, shares of Parent
\nCommon Stock, or a combination thereof, as determined by Parent in its sole
\ndiscretion. The number of shares of Parent Common Stock to be issued in payment
\nof the Second Contingent Payment shall be equal to the quotient determined by
\ndividing (i) the amount of the Second Contingent Payment to be paid through the
\nissuance of shares of Parent Common Stock by (ii) the average of the closing
\nprices of Parent Common Stock as reported on the Nasdaq National Market during
\nthe twenty trading days ending one day prior to the payment date of the Second
\nContingent Payment. Each Company Shareholder will receive a pro rata portion of
\nthe cash and shares of Parent Common Stock in payment of the Second Contingent
\nPayment based upon such Person’s beneficial ownership of Company Common Stock
\nOutstanding at the Effective Time, subject to the provisions of Section 1.6(h).
\nFor purposes of determining the amount of the Second Contingent Payment, (i)
\n“Product Net Sales” shall mean fifteen percent (15%) of the Net Sales of
\nProsaptide TX-14(A) for the treatment of neuropathic pain or neuropathy for the
\nearlier to occur of (A) the period beginning on the first day of the
\ntwenty-fifth full month following the date that Prosaptide TX-14(A) was
\ncommercially introduced by Parent in the United States for the treatment of
\nneuropathic pain or neuropathy (the “Introduction Date”) and ending on the last
\nday of the thirty-sixth full month following the Introduction Date and (B) the
\nperiod beginning on the first day of the one hundred and ninth full month
\nfollowing the Closing Date and ending on the last day of the one hundred
\ntwentieth full month following the Closing Date (the earliest to occur of (A)
\nand (B) being the “Measurement Period”), and (ii) “Net Sales” shall mean all
\naccounts receivable arising from the worldwide sale of Prosaptide TX-14(A) for
\nthe treatment of neuropathic pain or neuropathy by the Surviving Corporation (or
\nby the Surviving Corporation’s distributors) to unaffiliated third parties such
\nas wholesalers, pharmacists and patients (but specifically excluding
\ndistributors, subdistributors, licensees, sublicensees or Persons performing
\nsimilar functions) after deducting (i) normal and customary trade, quantity and
\ncash discounts actually allowed, (ii) chargebacks, (iii) allowances for credits
\ngranted because of rejections, returns or price reductions, (iv) sales taxes and
\nother governmental charges imposed on sales, and (v) freight and insurance
\ncharges which are separately invoiced, all as determined in accordance with
\nUnited States generally accepted accounting principles (“GAAP”).<\/p>\n
The Surviving Corporation shall, as promptly as practicable after the end
\nof the Measurement Period, but in no event later than fifty-five (55) days
\nthereafter, calculate the amount of the Net Sales during the Measurement Period,
\nand shall deliver to the Shareholders’ Agent a written calculation of how the
\nNet Sales for the Measurement Period was determined. The Shareholders’ Agent
\nshall have twenty-<\/p>\n
9<\/p>\n
five (25) days after delivery to verify such calculation, and the Surviving
\nCorporation shall cooperate with the Shareholders’ Agent to the extent
\nreasonably practicable to support and document such calculation. In the event
\nthe Shareholders’ Agent does not object to such calculation within such 25-day
\nperiod, then such calculation shall become final and binding on the parties
\nhereto, and the Surviving Corporation shall pay the Second Contingent Payment,
\nin accordance with the preceding paragraph, within ten (10) days after the
\nearlier to occur of (i) the end of such 25-day period or (ii) Parent’s receipt
\nof a statement from Shareholders’ Agent that it has no objection to the
\nSurviving Corporation’s calculation. If the Shareholders’ Agent objects to any
\nsuch calculation, it shall notify the Surviving Corporation in writing (the
\n“Objection Statement”) prior to the end of such 25-day period, and Parent shall
\npay the Second Contingent Payment in the amount initially determined by the
\nSurviving Corporation, in accordance with the preceding paragraph, within ten
\n(10) days after the date it receives the Objection Statement. The Surviving
\nCorporation and the Shareholders’ Agent will attempt in good faith to resolve
\nsuch dispute, but if they are unable to do so, the parties will submit the
\nunresolved aspects to Parent’s independent accountants to resolve the dispute
\nand make a determination. The fees and expenses of such accounting firm shall be
\nshared one-half by the Shareholders together and one-half by the Surviving
\nCorporation. If the Shareholders’ Agent disagrees with the determination of
\nParent’s independent accountants, the Shareholders’ Agent may hire, at the
\nShareholders’ expense, another “Big Five” accounting firm to review the
\ndetermination of Parent’s independent accountants; provided, however, that the
\nSurviving Corporation will bear such expense if the final amount of Net Sales
\nfor the Measurement Period is seven and one-half percent (7.5%) or more higher
\nthan the Net Sales initially proposed by the Surviving Corporation. The
\nSurviving Corporation and the Shareholders’ Agent shall request that Parent’s
\nindependent accountants and such accounting firm attempt to agree upon the
\nproper calculation; if they agree, their determination will be binding; if they
\ndo not agree, the dispute will be submitted to arbitration in accordance with
\nthe procedures set forth in Section 8.7.<\/p>\n
(c) All payments of the Contingent Payments shall be made to the
\nShareholders’ Agent, who shall be responsible for distributing such payments to
\nCompany Shareholders.<\/p>\n
(d) Each Company Shareholder’s right to receive the First Contingent
\nPayment and the Second Contingent Payment, if any, is personal to such Company
\nShareholder and shall not be sold, transferred, assigned or pledged, in whole or
\nin part, by such Company Shareholder otherwise than upon death of such Company
\nShareholder by will or under applicable laws of descent and distribution.<\/p>\n
Section 1.13 Limitation on Number of Shares of Parent Common Stock Issued.
\nNotwithstanding anything herein to the contrary, in no event shall Parent be
\nobligated to issue pursuant to Sections 1.6(a), 1.12(a), 1.12(b) and 8.6 more
\nthan 10,962,000 shares of Parent Common Stock, and any amount of the Merger
\nConsideration, the First Contingent Payment and\/or the Second Contingent Payment
\nthat cannot be paid in shares of Parent Common Stock as a result of the
\noperation of this Section 1.13 shall instead be paid in shares of Parent’s
\nSeries B Preferred Stock (the “Series B Preferred Stock”) having the
\ndesignations, powers, preferences, rights, qualifications, limitations and
\nrestrictions set forth in Exhibit 1.13; provided, however, that (a) Parent will
\npay cash in lieu of the issuance of shares of Series B Preferred Stock to the
\nextent Parent determines in its sole discretion that (i) such payment in cash
\nwill not jeopardize the treatment of the Merger as a reorganization under
\nSection 368(a) of the Code and (ii) such use of cash will not adversely affect
\nthe Parent’s business, operations, financial condition or prospects and (b) if
\nParent is required to issue shares of Series B Preferred Stock in payment of the
\nFirst Contingent Payment, then Parent will issue shares of an additional series
\nof its preferred stock in payment of the Second Contingent Payment, which shares
\nshall be identical in all respects to the Series B Preferred Stock except that
\nthe average closing price will be based on the average closing price determined
\npursuant to Section 1.12(b) rather than Section 1.12(a) (the “Series C Preferred
\nStock”). The number of shares of Series B Preferred Stock to be issued shall be
\ndetermined by dividing that portion of the First Contingent Payment and\/or the
\nSecond Contingent Payment that cannot be paid in shares of Parent Common Stock<\/p>\n
10<\/p>\n
by the Series B Preferred Stock Value. The number of shares of Series C
\nPreferred Stock to be issued shall be determined by dividing that portion of the
\nSecond Contingent that cannot be paid in shares of Parent Common Stock or shares
\nof Series B Preferred Stock by the Series C Preferred Value. The “Series B
\nPreferred Stock Value” shall be the fair market value of the Series B Preferred
\nStock as agreed to by Parent and the Shareholders’ Agent or, if the Parent and
\nthe Shareholders’ Agent cannot reach agreement on the Series B Preferred Stock
\nValue, by an independent investment banking firm chosen by the Shareholders’
\nAgent from among three proposed by Parent. The “Series C Preferred Stock Value”
\nshall be the fair market value of the Series C Preferred Stock as agreed to by
\nParent and the Shareholders’ Agent or, if the Parent and the Shareholders’ Agent
\ncannot reach agreement on the Series C Preferred Stock Value, by an independent
\ninvestment banking firm chosen by the Shareholders’ Agent from among three
\nproposed by Parent. The determination of such investment banking firm shall be
\nfinal and binding on Parent and Company Shareholders. Parent and Company
\nShareholders as a group shall each pay one-half of the fees and expenses of such
\ninvestment banking firm.<\/p>\n
ARTICLE II
\n REPRESENTATIONS AND WARRANTIES OF COMPANY<\/p>\n
Company represents and warrants to Parent and Merger Sub that the
\nstatements contained in this Article II are true and correct, except as
\ndisclosed in a document of even date herewith and delivered by Company to Parent
\nreferring to the representations and warranties in this Agreement (the “Company
\nDisclosure Schedule”). The Company Disclosure Schedule will be arranged in
\nparagraphs corresponding to the numbered and lettered paragraphs contained in
\nthis Article II, and the disclosure in any such numbered and lettered section of
\nthe Company Disclosure Schedule shall qualify only the corresponding subsection
\nin this Article II (except to the extent disclosure in any numbered and lettered
\nsection of the Company Disclosure Schedule is specifically cross-referenced in
\nanother numbered and lettered section of the Company Disclosure Schedule).<\/p>\n
Section 2.1 Organization, Standing and Power. Company is a corporation
\nduly organized, validly existing and in good standing under the laws of its
\njurisdiction of organization. Company has the corporate power to own its
\nproperties and to carry on its business as now being conducted and as proposed
\nto be conducted and is duly qualified to do business and is in good standing in
\neach jurisdiction in which the nature of its business or the ownership, leasing
\nor operation of its properties makes such qualification or licensing necessary
\n(all of which jurisdictions are set forth in Section 2.1 of the Company
\nDisclosure Schedule), except where the failure to be so qualified and in good
\nstanding would not have a Material Adverse Effect on Company. Company has
\ndelivered to Parent a true and correct copy of the Articles of Incorporation and
\nBylaws of Company, each as amended to date. Company is not in violation of any
\nof the provisions of its Articles of Incorporation or Bylaws.<\/p>\n
Section 2.2 Subsidiaries and Other Interests. The Company does not have,
\nand has never had, any Subsidiaries other than Teklan Corporation, which is
\ninactive, has never conducted any business and has no material assets or
\nliabilities. Company does not directly or indirectly own any equity or similar
\ninterest in, or any interest convertible into or exchangeable or exercisable for
\nany equity or similar interest in, any corporation, partnership, joint venture
\nor other business association or entity.<\/p>\n
Section 2.3 Authority. Company has all requisite corporate power and
\nauthority to enter into this Agreement and to consummate the transactions
\ncontemplated hereby. The execution and delivery of this Agreement and the
\nconsummation of the transactions contemplated hereby have been duly authorized
\nby all necessary corporate action on the part of Company subject only to the
\napproval of the Merger by Company’s shareholders as contemplated by Section
\n6.1(a). The affirmative vote of the holders of a majority of the shares of
\nCompany’s Common Stock and two-thirds of Company Preferred Stock voting as
\nseparate classes outstanding on the record date established by Company to vote
\non the Merger is the <\/p>\n
11<\/p>\n
only vote of the holders of any of Company’s Capital Stock necessary under
\nCalifornia Law and the Articles of Incorporation to approve this Agreement and
\nthe transactions contemplated hereby. The Board of Directors of Company has
\nunanimously (i) approved this Agreement and the Merger, (ii) determined that the
\nMerger is in the best interests of the shareholders of Company and is on terms
\nthat are fair to such shareholders and (iii) recommended that the shareholders
\nof Company approve this Agreement and the Merger. This Agreement has been duly
\nexecuted and delivered by Company and constitutes the valid and binding
\nobligation of Company enforceable against Company in accordance with its terms,
\nexcept that such enforceability may be limited by bankruptcy, insolvency,
\nmoratorium or other similar laws affecting or relating to creditors’ rights
\ngenerally, and is subject to general principles of equity. The execution and
\ndelivery of this Agreement by Company does not, and the consummation of the
\ntransactions contemplated hereby will not, assuming compliance with the matters
\nreferred to in the next sentence, require any consent or other action by any
\nPerson under, or conflict with, or result in any violation of, or default under
\n(with or without notice or lapse of time, or both), or result in the triggering
\nof any payment or other obligation under, or give rise to a right of
\ntermination, cancellation or acceleration of any obligation or loss of any
\nbenefit under, or result in the creation of any pledge, claim, lien, charge,
\nencumbrance or security interest of any kind or nature whatsoever (collectively,
\n“Liens”) in or upon any of the properties or assets of Company under, (i) any
\nprovision of the Articles of Incorporation or Bylaws of Company or its
\nSubsidiary, as amended, or (ii) any mortgage, indenture, lease, contract or
\nother agreement, obligation, commitment, arrangement, understanding or
\ninstrument to which Company is a party or by which Company or any of its assets
\nis bound (collectively, “Company Agreements”), or any Legal Provision, Permit,
\nconcession, franchise, license, judgment, order or decree applicable to Company
\nor any of properties or assets. No consent, approval, order or authorization of,
\nor registration, declaration or filing with, any supranational, national, state,
\nmunicipal, local or foreign government, any instrumentality, subdivision, court,
\nadministrative agency or commission or other authority thereof, or any
\nquasi-governmental or private body exercising any regulatory, taxing, importing
\nor other governmental or quasi-governmental authority (each, a “Governmental
\nEntity”) is required by or with respect to Company or its Subsidiary in
\nconnection with the execution and delivery of this Agreement or the consummation
\nof the transactions contemplated hereby, except for (i) the filing of the
\nCertificate of Merger as provided in Section 1.2; (ii) filings required under
\nRegulation D of the Securities Act; (iii) such consents, approvals, orders,
\nauthorizations, registrations, declarations and filings as may be required under
\napplicable state securities laws and the securities laws of any foreign country;
\n(iv) such filings as may be required under the Hart-Scott-Rodino Antitrust
\nImprovements Act of 1976, as amended (the “HSR Act”); (v) those that may be
\nrequired solely by reason of Parent’s or Merger Sub’s (as opposed to any other
\nthird party’s) participation in the transactions contemplated by this Agreement;
\nand (vi) such other consents, authorizations, filings, approvals and
\nregistrations which, if not obtained or made, would not have a Material Adverse
\nEffect on Company and would not prevent, or materially alter or delay, any of
\nthe transactions contemplated by this Agreement.<\/p>\n
Section 2.4 Capital Structure. The authorized capital stock of Company
\nconsists of 50,000,000 shares of Company Common Stock and 13,312,256 shares of
\nCompany Preferred Stock, of which there are designated 3,070,000 shares of
\nSeries A Preferred Stock, 3,428,573 shares of Series B Preferred Stock,
\n5,313,683 shares of Series C Preferred Stock and 1,500,000 shares of Series D
\nPreferred Stock. As of the date hereof, there were issued and outstanding
\n2,643,974 shares of Company Common Stock, 3,070,000 shares of Series A Preferred
\nStock, convertible into 3,684,000 shares of Company Common Stock, 3,428,573
\nshares of Series B Preferred Stock, convertible into 4,114,285 shares of Company
\nCommon Stock, 5,313,683 shares of Series C Preferred Stock, convertible into
\n6,376,411 shares of Company Common Stock, and 1,412,500 shares of Series D
\nPreferred Stock, convertible into 1,695,000 shares of Company Common Stock. All
\nof the issued and outstanding shares of Company Capital Stock are owned, of
\nrecord and beneficially, by the persons in the amounts set forth in Section 2.4
\nof the Company Disclosure Schedule. Section 2.4 of the Company Disclosure
\nSchedule hereto sets forth a true and complete list as of the date hereof of all
\nholders of outstanding Company Options and <\/p>\n
12<\/p>\n
Company Warrants, including the number of shares of Company Common Stock subject
\nto each such option and warrant, the exercise or vesting schedule, the exercise
\nprice per share and the term of each such option and warrant. No Persons other
\nthan the Company Shareholders and holders of Company Options and Company
\nWarrants are or will be entitled to receive any payment with respect to the
\nCompany Capital Stock. The designations, powers, preferences, rights,
\nqualifications, limitations and restrictions in respect of each class and series
\nof authorized capital stock of Company are as set forth in its Articles of
\nIncorporation, and all such designations, powers, preferences, rights,
\nqualifications, limitations and restrictions are valid, binding and enforceable
\nand in accordance with all applicable corporate laws. All outstanding shares of
\nCompany Common Stock and Company Preferred Stock are duly authorized, validly
\nissued, fully paid and non-assessable and are free of any Liens other than any
\nthose created by or imposed upon the holders thereof, and are not subject to
\npreemptive rights or rights of first refusal created by statute, the Articles of
\nIncorporation or Bylaws of Company or any Company Agreement. As of the date
\nhereof, (i) Company Warrants to purchase 34,286 shares of Company Common Stock
\nwere outstanding, (ii) 129,346 shares of Common Stock were reserved for issuance
\nunder the 1995 Equity Incentive Plan (the “1995 Stock Option Plan”), all of
\nwhich were subject to outstanding options, and (iii) 1,581,828 shares of Common
\nStock were reserved for issuance under the 1997 Equity Incentive Plan (together
\nwith the 1995 Stock Option Plan, the “Company Stock Option Plan”), of which
\n1,214,100 shares were subject to outstanding options and 367,828 shares were
\nreserved for future option grants. Except for the rights created pursuant to
\nthis Agreement, pursuant to the Company Preferred Stock and the rights disclosed
\nin the preceding sentence, there are no other options, warrants, calls, rights,
\ncommitments or agreements of any character to which Company is a party or by
\nwhich it is bound obligating Company to issue, deliver, sell, repurchase or
\nredeem or cause to be issued, delivered, sold, repurchased or redeemed, any
\nshares of Company Capital Stock or obligating Company to grant, extend,
\naccelerate the vesting of, change the price of, or otherwise amend or enter into
\nany such option, warrant, call, right, commitment or agreement. All shares of
\nCompany Common Stock issuable upon conversion of Company Preferred Stock or upon
\nexercise of Company Options will be, when issued pursuant to the respective
\nterms of such Company Preferred Stock and Company Options, duly authorized,
\nvalidly issued, fully paid and non-assessable and free of any Liens other than
\nany those created by or imposed upon the holders thereof, and not subject to
\npreemptive rights or rights of first refusal created by statute, the Articles of
\nIncorporation or Bylaws of Company or any Company Agreement. There are no bonds,
\ndebentures, notes or other indebtedness of Company having the right to vote (or
\nconvertible into securities having the right to vote) on any matters on which
\nshareholders of Company may vote. There are no other contracts, commitments or
\nagreements relating to voting, purchase or sale of Company Capital Stock (i)
\nbetween or among Company and any of its shareholders and (ii) to Company’s
\nknowledge, between or among any of Company’s shareholders, except for the
\nshareholders delivering the Voting Agreements. All shares of outstanding Company
\nCommon Stock and Company Preferred Stock and rights to acquire Company Capital
\nStock were issued in compliance with all applicable federal and state securities
\nlaws.<\/p>\n
Section 2.5 Financial Statements. Company has delivered to Parent complete
\nand correct copies of the audited balance sheet and related statements of income
\nand cash flows of Company as of and for the years ended December 31, 1998, 1999
\nand 2000 (collectively, the “Financial Statements”). The Financial Statements
\nhave been derived from the books and records of Company. The Financial
\nStatements were prepared in accordance with GAAP, applied on a consistent basis
\nwith prior periods, are complete and correct in all material respects and fairly
\npresent the financial condition and results of operations of Company as of the
\ndates and for the periods indicated. During the period covered by such Financial
\nStatements Company has conducted no business other than its current business.
\nAll material liabilities and obligations of Company, whether absolute, accrued,
\ncontingent or otherwise, whether direct or indirect, and whether due or to
\nbecome due, which existed at the date of such Financial Statements have been
\ndisclosed in the balance sheets included in the Financial Statements or in notes
\nto the Financial Statements to the extent such liabilities were required, under
\nGAAP, to be so disclosed. Except as set forth in the notes to the Financial
\nStatements, the liabilities on the latest balance sheet of Company <\/p>\n
13<\/p>\n
included in the Financial Statements consist solely of accrued obligations and
\nliabilities incurred by Company in the ordinary course of business to Persons
\nwhich are not Affiliates of Company. The statements of operations included in
\nthe Financial Statements do not contain any material items of special or
\nnon-recurring income or other income not earned, or omit any material item of
\nexpense incurred, in each case in the ordinary course of business except as
\nexpressly specified therein. Company has records that accurately and validly
\nreflect its transactions and accounting controls sufficient to insure that such
\ntransactions are (i) in all material respects executed in accordance with its
\nmanagement’s general or specific authorization and (ii) recorded in conformity
\nwith GAAP. Company maintains and will continue to maintain a standard system of
\naccounting established and administered in accordance with GAAP.<\/p>\n
Section 2.6 Absence of Certain Changes. Since December 31, 2000 (the
\n“Company Balance Sheet Date”), Company has conducted its business in the
\nordinary course consistent with past practice, and there has not been:<\/p>\n
(a) any event, occurrence or development which, individually or in
\n the aggregate, has had or reasonably would be expected to have a Material
\n Adverse Effect on Company;<\/p>\n
(b) any declaration, setting aside or payment of any dividend or
\n other distribution with respect to any shares of Company Capital Stock, or
\n any repurchase, redemption or other acquisition by Company or Subsidiary
\n of any outstanding shares of Company Capital Stock or other equity
\n securities of, or other ownership interests in, Company;<\/p>\n
(c) any amendment of any term of any outstanding security of Company
\n that would materially increase the obligations of Company under such
\n security;<\/p>\n
(d) any (i) incurrence or assumption by Company of any indebtedness
\n for borrowed money other than under existing credit facilities (or any
\n renewals, replacements or extensions that do not increase the aggregate
\n commitments thereunder) in the ordinary course of business consistent with
\n past practice or (ii) guarantee, endorsement or other incurrence or
\n assumption of liability (whether directly, contingently or otherwise) by
\n Company for the obligations of any other Person, other than in the
\n ordinary course of business consistent with past practice;<\/p>\n
(e) any creation or assumption by Company of any Lien on any asset
\n of Company other than in the ordinary course of business consistent with
\n past practice;<\/p>\n
(f) any making of any loan, advance or capital contribution to or
\n investment in any Person by Company other than advances to employees of
\n Company made in the ordinary course of business consistent with past
\n practice;<\/p>\n
(g) any acquisition or disposition of any assets or business of
\n Company other than in the ordinary course of business consistent with past
\n practice;<\/p>\n
(h) any agreement, commitment or understanding entered into by
\n Company outside the ordinary course of business or providing for total
\n payments by Company in excess of $25,000 in any 12 month period with any
\n Person, or modified or amended in any material respect the terms of any
\n such existing agreement;<\/p>\n
(i) any revaluing in any material respect any of the assets of
\n Company, including without limitation writing down the value of any assets
\n or inventory or writing off notes or accounts receivable, other than in
\n the ordinary course of business consistent with past practice;<\/p>\n
14<\/p>\n
(j) any material change in any method of accounting or accounting
\n principles or practice by Company, except for any such change required by
\n reason of a change in GAAP;<\/p>\n
(k) any (i) grant of the right to receive any severance, retention
\n or termination pay to any current or former director, officer or employee
\n of Company, (ii) entering into of any employment, deferred compensation or
\n other similar agreement (or any amendment to any such existing agreement)
\n with any current or former director, officer or employee of Company, (iii)
\n increase or acceleration in vesting or benefits payable under any existing
\n severance or termination pay policies or employment agreements or (iv)
\n increase or acceleration in vesting or payment of compensation, bonus or
\n other benefits payable to current or former directors, officers or
\n employees of Company other than, in the case of clause (iv) only, normal
\n increases in compensation, bonus or other benefits payable to employees of
\n Company in the ordinary course of business consistent with past practice
\n or merit increases in salaries of employees at regularly scheduled times
\n in customary amounts consistent with past practice;<\/p>\n
(l) any material changes in the business policies (including
\n advertising, investment, marketing, pricing, purchasing, production,
\n personnel, sales or budgeting) or organization of Company;<\/p>\n
(m) any labor dispute, other than routine individual grievances, or
\n any activity or proceeding by a labor union or representative thereof to
\n organize any employees of the Company, which employees were not subject to
\n a collective bargaining agreement at December 31, 1999, or any lockouts,
\n strikes, slowdowns, work stoppages or threats thereof by or with respect
\n to such employees;<\/p>\n
(n) any loss or termination of, or any material adverse change in
\n relations with, any (a) customer that accounted for more than two percent
\n (2%) of Company revenues in the years ended December 31, 1999 or 2000, or
\n is expected to account for more than two percent (2%) of Company revenues
\n for the year ended December 31, 2001, or (b) supplier that, individually
\n or in the aggregate, had resulted or may result in a Material Adverse
\n Effect;<\/p>\n
(o) any delay or postponement in the payment of accounts payable and
\n other liabilities outside the ordinary course of business;<\/p>\n
(p) any action which, if it had been taken after the date hereof,
\n would have required the consent of Parent under Section 4.1 hereof; or<\/p>\n
(q) any agreement to take any actions specified in this Section 2.6,
\n except for this Agreement.<\/p>\n
Section 2.7 Absence of Undisclosed Liabilities. Company has no obligations
\nor liabilities (whether pursuant to contracts or otherwise) of any nature
\n(matured or unmatured, fixed or contingent) other than (i) those set forth or
\nadequately provided for in the Balance Sheet for the period ended December 31,
\n2000 (the “Company Balance Sheet”), (ii) those incurred in the ordinary course
\nof business and not required to be set forth in the Company Balance Sheet under
\nGAAP, (iii) those incurred in the ordinary course of business since the Company
\nBalance Sheet Date and consistent with past practice (none of which is liability
\nfor breach of contract, breach of warranty, tort, infringement claim or lawsuit
\nor a liability to repay or refund to any Person any amount previously received
\nby Company) and (iv) those incurred in connection with the execution of this
\nAgreement. To the knowledge of Company, there are no asserted claims for
\nindemnification by any Person against Company under any law or agreement or<\/p>\n
15<\/p>\n
pursuant to Company’s Articles of Incorporation or Bylaws, and Company is
\nunaware of any facts or circumstances that might give rise to the assertion of
\nsuch a claim against Company thereunder.<\/p>\n
Section 2.8 Litigation. There is no private or governmental action, suit,
\nproceeding, claim, arbitration or investigation (collectively, “Proceeding”)
\npending before any Governmental Entity, foreign or domestic, or, to the
\nknowledge of Company, threatened against or affecting Company or any of its
\nproperties or officers or directors (in their capacities as such). There is no
\njudgment, decree or order against Company or, to the knowledge of Company, any
\nof its directors or officers (in their capacities as such). All Proceedings to
\nwhich Company is a party (or, to the knowledge of Company, threatened to become
\na party) are disclosed in Section 2.8 of the Company Disclosure Schedule. No
\nGovernmental Entity has indicated in writing an intention to conduct any audit,
\ninvestigation or other review with respect to Company which investigation or
\nreview, if adversely determined, individually or in the aggregate, would have a
\nMaterial Adverse Effect on Company. All Proceedings have been timely reported to
\nall applicable insurance carriers and no reservation of rights or denial of
\ncoverage has been issued by any such carrier.<\/p>\n
Section 2.9 Restrictions on Business Activities. There is no agreement,
\njudgment, injunction, order or decree binding upon Company which has or could
\nreasonably be expected to have the effect of prohibiting or materially impairing
\nany current or future business practice of Company, any acquisition of property
\nby Company or the conduct of business by Company as currently conducted or as
\nproposed to be conducted by Company.<\/p>\n
Section 2.10 Intellectual Property.<\/p>\n
(a) For purposes of this Agreement, “Intellectual Property” means:<\/p>\n
(i) all issued patents, reissued or reexamined patents,
\n revivals of patents, utility models, certificates of invention,
\n registrations of patents and extensions thereof, regardless of
\n country or formal name (collectively, “Issued Patents”);<\/p>\n
(ii) all published or unpublished nonprovisional and
\n provisional patent applications, reexamination proceedings,
\n invention disclosures and records of invention (collectively “Patent
\n Applications” and, with the Issued Patents, the “Patents”);<\/p>\n
(iii) all copyrights and copyrightable works, including all
\n rights of authorship, use, publication, reproduction, distribution,
\n performance transformation, moral rights and rights of ownership of
\n copyrightable works, semiconductor topography works and mask works,
\n and all rights to register and obtain renewals and extensions of
\n registrations, together with all other interests accruing by reason
\n of international copyright conventions (collectively, “Copyrights”);<\/p>\n
(iv) trademarks, registered trademarks, applications for
\n registration of trademarks, service marks, registered service marks,
\n applications for registration of service marks, trade names,
\n registered trade names and applications for registrations of trade
\n names (collectively, “Trademarks”);<\/p>\n
(v) all technology, ideas, inventions, designs, proprietary
\n information, manufacturing and operating specifications, know-how,
\n formulae, trade secrets, technical data, computer programs,
\n hardware, software and processes; and<\/p>\n
16<\/p>\n
(vi) all other intangible assets, properties and rights
\n (whether or not appropriate steps have been taken to protect, under
\n applicable law, such other intangible assets, properties or rights).<\/p>\n
(b) With respect to each item of Intellectual Property incorporated
\ninto any product of Company or otherwise used in the business of Company (except
\n“off the shelf” or other software widely available through regular commercial
\ndistribution channels at a cost not exceeding $10,000 on standard terms and
\nconditions, as modified for Company’s operations) (“Company Intellectual
\nProperty”) Section 2.10 of the Company Disclosure Schedule lists:<\/p>\n
(i) all Issued Patents and Patent Applications, all registered
\n Trademarks and trademark applications and all registered Copyrights,
\n including the jurisdictions in which each such item of Intellectual
\n Property has been issued or registered or in which any such
\n application for such issuance and registration has been filed; and<\/p>\n
(ii) the following agreements relating to each of the products
\n of Company (the “Company Products”) or other Company Intellectual
\n Property: all (A) agreements granting any right to distribute or
\n sublicense a Company Product, (B) any licenses of Intellectual
\n Property to or from Company, (C) agreements pursuant to which the
\n amounts actually paid or payable under firm commitments to or by
\n Company are $25,000 or more, (D) joint development agreements, (E)
\n any agreement by which Company grants any ownership right to any
\n Company Intellectual Property owned by Company, (F) any order
\n relating to Company Intellectual Property and (G) any option
\n relating to any Company Intellectual Property.<\/p>\n
(c) Section 2.10 of the Company Disclosure Schedule contains an
\naccurate list of all licenses, sublicenses and other agreements to which Company
\nis a party and pursuant to which Company is authorized to use, or has acquired,
\nany Intellectual Property owned by any third party, excluding “off the shelf” or
\nother software at a cost not exceeding $10,000 and widely available through
\nregular commercial distribution channels on standard terms and conditions
\n(“Third Party Intellectual Property”).<\/p>\n
(d) Company owns or possesses adequate licensed or other rights to
\nuse all Intellectual Property necessary in all material respects for the
\noperation of the business of Company as presently conducted and as currently
\nproposed to be conducted, free and clear of all Liens other than, in the case of
\nlicensed Intellectual Property, as set forth in the license therefor.<\/p>\n
(e) There is no unauthorized use, disclosure, infringement or
\nmisappropriation of any Company Intellectual Property, including any Third Party
\nIntellectual Property, by any third party, including any employee or former
\nemployee of Company. The Company has not entered into any agreement to indemnify
\nany other Person against any charge of infringement of any Intellectual
\nProperty. There are no royalties, fees or other payments payable by Company to
\nany Person by reason of the ownership, use, sale or disposition of Intellectual
\nProperty.<\/p>\n
(f) Company is not in breach of any license, sublicense or other
\nagreement relating to the Company Intellectual Property or Third Party
\nIntellectual Property Rights. Neither the execution, delivery or performance of
\nthis Agreement or any ancillary agreement contemplated hereby nor the
\nconsummation of the Merger or any of the transactions contemplated by this
\nAgreement will contravene, conflict with or result in an infringement on
\nParent’s right to own or use any Company Intellectual Property, including any
\nThird Party Intellectual Property.<\/p>\n
17<\/p>\n
(g) All Patents, registered Trademarks, registered service marks and
\nregistered Copyrights held by Company are valid and subsisting. All maintenance
\nand annual fees have been fully paid and all fees paid during prosecution and
\nafter issuance of any patent comprising or relating to such item have been paid
\nin the correct entity status amounts. Company is not infringing,
\nmisappropriating or making unlawful use of, and has not received any notice or
\nother communication (in writing or otherwise) of any actual, alleged, possible
\nor potential infringement, misappropriation or unlawful use of, any proprietary
\nasset owned or used by any third party. There is no Proceeding pending or, to
\nthe knowledge of Company, threatened nor has any claim or demand been made,
\nwhich challenges the legality, validity, enforceability or ownership of any item
\nof Company Intellectual Property or Third Party Intellectual Property or alleges
\na claim of infringement of any Patents, Trademarks, service marks, Copyrights or
\nviolation of any trade secret or other proprietary right of any third party.
\nCompany has not brought a Proceeding alleging infringement of Company
\nIntellectual Property or breach of any license or agreement involving
\nIntellectual Property against any third party.<\/p>\n
(h) All current and former officers and employees of Company have
\nexecuted and delivered to Company an agreement (containing no exceptions or
\nexclusions from the scope of its coverage) regarding the protection of
\nproprietary information and the assignment to Company of any Intellectual
\nProperty arising from services performed for Company by such Persons, the form
\nof which has been supplied to Parent. All current and former consultants and
\nindependent contractors to Company involved in the development, modification,
\nmarketing and servicing of Company Products and\/or Company Intellectual Property
\nhave executed and delivered to Company an agreement in the form provided to
\nParent (containing no exceptions or exclusions from the scope of its coverage)
\nregarding the protection of proprietary information and the assignment to
\nCompany of any Intellectual Property arising from services performed for Company
\nby such Persons. To Company’s knowledge, no employee or independent contractor
\nof Company is in violation of any term of any patent disclosure agreement or
\nemployment contract or any other contract or agreement relating to the
\nrelationship of any such employee or independent contractor with Company. No
\ncurrent or former officer, director, shareholder, employee, consultant or
\nindependent contractor has any right, claim or interest in or with respect to
\nany Company Intellectual Property.<\/p>\n
(i) Company has taken all commercially reasonable and customary
\nmeasures and precautions necessary to protect and maintain the confidentiality
\nof all Company Intellectual Property (except such Company Intellectual Property
\nwhose value would be unimpaired by public disclosure) and otherwise to maintain
\nand protect the full value of all Intellectual Property it owns or uses. All
\nuse, disclosure or appropriation of Intellectual Property not otherwise
\nprotected by patents, patent applications or copyright (“Confidential
\nInformation”) owned by Company by or to a third party has been pursuant to the
\nterms of a written agreement between Company and such third party. All use,
\ndisclosure or appropriation of Confidential Information not owned by Company has
\nbeen pursuant to the terms of a written agreement between Company and the owner
\nof such Confidential Information, or is otherwise lawful.<\/p>\n
(j) No product liability claims have been communicated in writing to
\nor, to Company’s knowledge, threatened against Company.<\/p>\n
(k) Company is not subject to any Proceeding or outstanding decree,
\norder, judgment or stipulation restricting in any manner the use, transfer or
\nlicensing thereof by Company, or which may affect the validity, use or
\nenforceability of such Company Intellectual Property. Company is not subject to
\nany agreement which. restricts in any material respect the use, transfer or
\nlicensing by Company of the Company Intellectual Property or Company Products.<\/p>\n
18<\/p>\n
Section 2.11 Interested Party Transactions. Company is not indebted to any
\ndirector, officer, employee or agent of Company (except for amounts due as
\nnormal salaries and bonuses and in reimbursement of ordinary expenses), and no
\nsuch Person is indebted to Company. There have been no transactions since
\nDecember 31, 1998 which would require disclosure if Company were subject to
\ndisclosure under Item 404 of Regulation S-K under the Securities Act.<\/p>\n
Section 2.12 Minute Books. The minute books of Company and its Subsidiary
\nmade available to Parent contain a complete and accurate summary of all meetings
\nof directors and shareholders or actions by written consent since the time of
\nincorporation of Company and the Subsidiary, and reflect all transactions
\nreferred to in such minutes accurately in all material respects.<\/p>\n
Section 2.13 Material Contracts.<\/p>\n
(a) Section 2.13 of the Company Disclosure Schedule sets forth a
\ncomplete list of all currently effective written or oral:<\/p>\n
(i) employment contracts, arrangements or policies of Company
\n which may not be immediately terminated without penalty (or any
\n augmentation or acceleration of benefits);<\/p>\n
(ii) leases, sales contracts and other agreements with respect
\n to any property, real or personal, of Company, except for leases of
\n personal property involving, on an annual basis, less than $25,000
\n individually and $50,000 in the aggregate;<\/p>\n
(iii) contracts or commitments for capital expenditures or
\n acquisitions in excess of $25,000 on an annual basis for one project
\n or series of related projects;<\/p>\n
(iv) agreements, contracts, indentures or other instruments
\n relating to the borrowing of money, or the guarantee of any
\n obligation (third party or otherwise) for the borrowing of money
\n (excluding routine checking account overdraft agreements);<\/p>\n
(v) contracts or agreements providing for any covenant not to
\n compete by Company or otherwise restricting in any way Company’s
\n engaging in any business activity (including a description of the
\n businesses to which the covenant not to compete applies);<\/p>\n
(vi) contracts or agreements relating to consultancies,
\n professional retentions, agency, sales or distributorship
\n arrangements pertaining to Company or its products or activities
\n involving total payments within any 12 month period in excess of
\n $25,000 and which are not terminable on 30 days’ notice without
\n penalty;<\/p>\n
(vii) contracts, agreements or commitments requiring Company
\n to indemnify or hold harmless any Person;<\/p>\n
(viii) all contracts with any customer or supplier involving
\n total payments within any 12 month period in excess of $25,000 and
\n which are not terminable on 30 days’ notice without penalty;<\/p>\n
(ix) any written agreement (or group of related agreements)
\n for the acquisition of services, supplies, equipment, inventory,
\n fixtures or other property involving more than $50,000;<\/p>\n
19<\/p>\n
(x) any agreement providing for the purchase from a supplier
\n of all or substantially all of the requirements of Company of a
\n particular product or service;<\/p>\n
(xi) any agreement, contract, arrangement or understanding
\n with any Affiliate, licensee or Company Shareholder;<\/p>\n
(xii) any license or agreement granting or restricting the
\n right of Company to use any Intellectual Property; <\/p>\n
(xiii) any partnership, joint venture and similar agreements
\n involving a sharing of profits or expenses;<\/p>\n
(xiv) any guaranty or suretyship, indemnification or
\n contribution agreement or performance bond; and<\/p>\n
(xv) contracts, agreements, arrangements or commitments, other
\n than the foregoing, which could reasonably be considered material to
\n Company’s business<\/p>\n
True, correct and complete copies of each agreement listed in Sections
\n2.10(b)(ii) and 2.13 of the Company Disclosure Schedule have been delivered to
\nParent.<\/p>\n
(b) With respect to each Company Agreement (whether or not so
\nlisted): (i) the agreement is legal, valid, binding and enforceable and in full
\nforce and effect with respect to Company, and to Company’s knowledge is legal,
\nvalid, binding, enforceable and in full force and effect with respect to each
\nother party thereto, in either case subject to the effect of bankruptcy,
\ninsolvency, moratorium or other similar laws affecting the enforcement of
\ncreditors’ rights generally and except as the availability of equitable remedies
\nmay be limited by general principles of equity; (ii) the agreement will continue
\nto be legal, valid, binding and enforceable and in full force and effect
\nimmediately following the Closing in accordance with the terms thereof as in
\neffect prior to the Closing, subject to the effect of bankruptcy, insolvency,
\nmoratorium or other similar laws affecting the enforcement of creditors’ rights
\ngenerally and except as the availability of equitable remedies may be limited by
\ngeneral principles of equity; (iii) Company has performed all the obligations
\nrequired to be performed by it and is entitled to all benefits thereunder; and
\n(iv) neither Company nor, to Company’s knowledge, any other party is in breach
\nor default, and no event has occurred which with notice or lapse of time would
\nconstitute a breach or default by Company or, to Company’s knowledge, by any
\nsuch other party, or permit termination, modification or acceleration, under the
\nagreement. Company is not a party to any oral contract, agreement or other
\narrangement.<\/p>\n
Section 2.14 Title to Property. Company has good and marketable title to
\nall of its properties, interests in properties and assets, real and personal,
\nreflected in the Company Balance Sheet or acquired after the Company Balance
\nSheet Date (except properties, interests in properties and assets sold or
\notherwise disposed of since the Company Balance Sheet Date in the ordinary
\ncourse of business), or with respect to leased properties and assets, valid
\nleasehold interests therein, free and clear of all Liens, except (i) the Lien of
\ncurrent taxes not yet due and payable, (ii) such imperfections of title, Liens
\nand easements as do not and will not materially detract from or interfere with
\nthe use of the properties subject thereto or affected thereby, or otherwise
\nmaterially impair business operations involving such properties and (iii) Liens
\nsecuring debt which is reflected on the Company Balance Sheet. The plants,
\nproperty and equipment of Company that are used in the operation of its business
\nare in all material respects in good operating condition and repair, subject to
\nnormal wear and tear not caused by neglect. All properties used in the
\noperations of Company are reflected in the Company Balance Sheet to the extent
\nGAAP require the same to be reflected. All leases of real and personal property
\nto which Company is a party are in full<\/p>\n
20<\/p>\n
force and effect and are valid, binding and enforceable in accordance with their
\nrespective terms, except as such enforceability may be limited by bankruptcy
\nlaws and other similar laws affecting creditors’ rights generally and general
\nprinciples of equity, regardless of whether asserted in a proceeding in equity
\nor at law. True and correct copies of all such leases have been provided to
\nParent. Company owns no real property.<\/p>\n
Section 2.15 Environmental Matters.<\/p>\n
(a) For purposes of this Agreement:<\/p>\n
(i) “Environmental Laws” shall mean all applicable U.S.,
\n state, local and foreign laws, statutes, treaties, rules, codes,
\n ordinances, regulations, certificates, orders, directives,
\n interpretations, licenses, permits and other authorizations of any
\n Governmental Entity and judgments, decrees, injunctions, writs,
\n orders or like action of any court, arbitrator or other
\n administrative, judicial or quasi-judicial tribunal or agency of
\n competent jurisdiction, including any thereof of the European
\n Community or the European Union, having the force of law and being
\n applicable to Company, dealing with the protection of health,
\n welfare or the environment, including, without limitation, flood,
\n pollution or disaster laws and health and environmental protection
\n laws and regulations, and all other rules and regulations
\n promulgated thereunder and any provincial, municipal, water board or
\n other local statute, law, rule, regulation or ordinance relating to
\n public or employee health, safety or the environment, including all
\n laws relating to Releases into air, water, land or groundwater,
\n relating to the withdrawal or use of groundwater, and relating to
\n the use, handling, transportation, manufacturing, introduction into
\n the stream of commerce or disposal of Hazardous Materials,
\n including, without limitation, the federal Comprehensive
\n Environmental Response, Compensation and Liability Act of 1980, 42
\n U.S.C. Section 9601, et seq., as amended (“CERCLA”), and the federal
\n Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
\n seq., as amended (“RCRA”).<\/p>\n
(ii) “Hazardous Materials” shall mean any material, chemical,
\n liquid, gas compound, substance, mixture or by-product that is
\n identified, defined, designated, listed, restricted or otherwise
\n regulated under Environmental Laws as a “hazardous constituent,”
\n “hazardous substance,” “hazardous material,” “hazardous waste,”
\n “infectious waste,” “medical waste,” “biomedical waste,” “solid
\n waste”, “pollutant” “toxic pollutant” or “contaminant,” or any other
\n formulation or terminology intended to classify or identify
\n substances, constituents, materials, or wastes by reason of
\n properties that are deleterious to the environment, natural
\n resources, worker health and safety, or public health and safety,
\n including, without limitation, ignitability, corrosivity,
\n reactivity, carcinogenicity, toxicity and reproductive toxicity.<\/p>\n
(iii) “Release” shall mean the spilling, leaking, discharging,
\n injecting, emitting and\/or disposing and placement of a Hazardous
\n Material in any location that poses a threat thereof.<\/p>\n
(b) Company is and has been in compliance in all material respects
\nwith all Environmental Laws relating to the properties or facilities currently
\nor previously used, leased or occupied by Company at any time. During the period
\nof ownership or operation by the Company of any of its currently or previously
\nowned, leased or operated properties, and, to the Company’s knowledge, prior to
\nthe period of such ownership or operation, no Hazardous Material has been
\ntreated or disposed of, and there have been no Releases or threatened Releases
\nof Hazardous Material at, in, on, under or <\/p>\n
21<\/p>\n
affecting such properties or any contiguous site that may or will give rise to
\nliability of Company under Environmental Laws. To Company’s knowledge, no
\nCompany employee or other Person has claimed that Company is liable for alleged
\ninjury or illness resulting from an alleged exposure to a Hazardous Material. No
\ncivil, criminal or administrative Proceeding is pending or, to Company’s
\nknowledge, threatened against Company, with respect to Hazardous Materials or
\nEnvironmental Laws, and Company is not aware of any facts or circumstances which
\ncould form the basis for assertion of a claim against Company or which could
\nform the basis for liability of Company, regarding Hazardous Materials or
\nregarding actual or potential noncompliance with Environmental Laws. Company has
\nnot received any written notice of, or entered into or assumed by contract,
\njudicial or administrative settlement, or operation of law any indemnification
\nobligation, order, settlement or decree relating to: (i) any violation of any
\nEnvironmental Laws or the institution or pendency of any Proceeding by any
\nGovernmental Entity or any third party in connection with any alleged violation
\nof Environmental Laws or any Release of Hazardous Materials, (ii) the response
\nto or remediation of Hazardous Material at or arising from any of Company’s
\nactivities or properties or any other properties or (iii) payment for any
\nresponse action relating to or remediation of Hazardous Material at or arising
\nfrom any of Company’s properties, activities, or any other properties.<\/p>\n
Section 2.16 Taxes.<\/p>\n
(a) For purposes of in this Agreement:<\/p>\n
(i) “Tax” and “Taxes” includes any federal, state, local or
\n foreign income, gross receipts, capital, franchise, import, goods
\n and services, value added, sales and use, estimated, alternative
\n minimum, add-on minimum, sales, use, transfer, registration, excise,
\n natural resources, severance, stamp, occupation, premium, windfall
\n profit, environmental, customs, duties, real property, personal
\n property, capital stock, social security, unemployment, disability,
\n payroll, license, employee withholding or other tax of any kind
\n whatsoever, including any interest, penalties or additions to tax or
\n additional amounts in respect of the foregoing; the foregoing shall
\n include any transferee or secondary liability for a Tax and any
\n liability assumed by agreement or arising as a result of being (or
\n ceasing to be) a member of any Affiliated Group (as defined in
\n Section 1504 of the Code) or being included (or required to be
\n included) in any Tax Return relating thereto).<\/p>\n
(ii) “Tax Returns” means returns, declarations, reports,
\n claims for refund, information returns or other documents (including
\n any related or supporting schedules, statements or information)
\n filed or required to be filed in connection with the determination,
\n assessment or collection of any Taxes of any party or the
\n administration of any laws, regulations or administrative
\n requirements relating to any Taxes.<\/p>\n
(b) Company has properly prepared and timely filed all Tax Returns
\nrelating to any and all Taxes concerning or attributable to Company or its
\noperations for any period ending on or before the Closing Date and such Tax
\nReturns are true and correct in all material respects and have been completed in
\naccordance with applicable Legal Provisions. Company has made available to
\nParent copies of all Tax Returns filed for all periods since its inception.<\/p>\n
(c) Company has fully and timely paid all Taxes shown to be payable
\non such Tax Returns covered by Section 2.16(b).<\/p>\n
(d) Company has no liabilities for unpaid Taxes that have not been
\naccrued for or reserved on the latest balance sheet included in the Financial
\nStatements, whether asserted or unasserted, <\/p>\n
22<\/p>\n
contingent or otherwise, and Company has no knowledge of any basis for the
\nassertion of any such liability attributable to Company, its assets or
\noperations. The cash reserves or accruals for Taxes provided in the books and
\nrecords of Company with respect to any period for which Tax Returns have not yet
\nbeen filed or for which Taxes are not yet due and owing have been made in
\naccordance with GAAP and are, or prior to the Effective Time, will be,
\nsufficient for all unpaid Taxes of Company through and including the Effective
\nTime. Company has no liability for Taxes of any other Person as a transferee,
\nsuccessor, by contract or otherwise. Company has not executed any agreements or
\nwaivers extending any statute of limitations on or extending the period for the
\nassessment or collection of any Tax.<\/p>\n
(e) Company is not a party to any Tax-sharing agreement or similar
\narrangement with any other party, and Company has not assumed any Tax
\nobligations of, or with respect to any transaction relating to, any other Person
\nor agreed to indemnify any other Person with respect to any Tax.<\/p>\n
(f) Company’s Tax Returns have never been audited by a government or
\ntaxing authority, nor is any such audit in process or pending, and Company has
\nnot been notified of any request for such an audit or other examination. No
\nclaim has been made by a taxing authority in a jurisdiction where Company does
\nnot file Tax Returns such that it is or may be subject to taxation by that
\njurisdiction.<\/p>\n
(g) Company has never been a member of an affiliated group of
\ncorporations filing a consolidated federal income tax return.<\/p>\n
(h) Section 2.16 of the Company Disclosure Schedule sets forth (i)
\nany Tax exemption, Tax holiday or other Tax sparing arrangement that Company has
\nin any jurisdiction, including the nature, amount and length of such Tax
\nexemption, Tax holiday or other Tax-sparing arrangement and (ii) any expatriate
\nTax programs or policies affecting Company. Company is in compliance in all
\nmaterial respects with all terms and conditions required to maintain such Tax
\nexemption, Tax holiday or other Tax-sparing arrangement or order of any
\nGovernmental Entity and the consummation of the transactions contemplated hereby
\nwill not have any adverse effect on the continuing validity and effectiveness of
\nany such Tax exemption, Tax holiday or other Tax-sparing arrangement or order.<\/p>\n
(i) Company has not filed any consent agreement under Section 341(f)
\nof the Code or agreed to have Section 341(f)(4) apply to any disposition of
\nassets owned by Company.<\/p>\n
(j) Company has not been at any time a United States Real Property
\nHolding Corporation within the meaning of Section 897(c)(2) of the Code.<\/p>\n
(k) Company is not a party to any contract, agreement, plan or
\narrangement, including but not limited to the provisions of this Agreement,
\ncovering any employee or former employee of Company that, individually or
\ncollectively, could give rise to the payment of any amount that would not be
\ndeductible pursuant to Sections 280G, 464 or 162(m) of the Code by Company or
\nthe Surviving Corporation as an expense under applicable law.<\/p>\n
(l) Company has complied in all material respects with all
\napplicable laws, rules and regulations relating to the payment and withholding
\nof Taxes and have duly and timely withheld from employee salaries, wages and
\nother compensation and have paid over to the appropriate taxing authorities all
\namounts required to be so withheld and paid over for all periods under all
\napplicable laws.<\/p>\n
(m) Neither Company nor any other Person on behalf of and with
\nrespect to Company has (A) agreed to or is required to make any adjustments
\npursuant to Section 481(a) of the Code or any similar provision of state, local
\nor foreign law by reason of a change in accounting method initiated by Company
\nor has any knowledge that the Internal Revenue Service (“IRS”) has proposed any
\nsuch <\/p>\n
23<\/p>\n
adjustment or change in accounting method, or has any application pending with
\nany taxing authority requesting permission for any changes in accounting methods
\nthat relate to the business or operations of Company, (B) executed or entered
\ninto a closing agreement pursuant to Section 7121 of the Code or any predecessor
\nprovision thereof or any similar provision of state, local or foreign law with
\nrespect to Company, or (C) requested any extension of time within which to file
\nany Tax Return of Company, which Tax Return has since not been filed.<\/p>\n
(n) No property owned by Company is (A) property required to be
\ntreated as being owned by another Person pursuant to the provisions of Section
\n168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
\nimmediately prior to the enactment of the Tax Reform Act of 1986, (B)
\nconstitutes “tax-exempt use property” within the meaning of Section 168(h)(1) of
\nthe Code or (C) is “tax-exempt bond financed property” within the meaning of
\nSection 168(g) of the Code.<\/p>\n
(o) Company is not subject to any private letter ruling of the IRS
\nor comparable rulings of other taxing authorities.<\/p>\n
(p) Company does not own any interest in any entity that is treated
\nas a partnership for U.S. federal income Tax purposes or would be treated as a
\npass-through, transparent or disregarded entity for any Tax purpose.<\/p>\n
(q) Neither Company nor any of its Affiliates has taken or agreed to
\ntake any action or knows of any fact or circumstance that could prevent the
\nMerger from qualifying as a reorganization within the meaning of Section 368(a)
\nof the Code.<\/p>\n
Section 2.17 Employee Benefit Plans.<\/p>\n
(a) Section 2.17 of the Company Disclosure Schedule contains a
\ncomplete and accurate list of each plan, program, policy, practice, contract,
\nagreement or other arrangement providing for employment, compensation,
\nretirement, deferred compensation, loans, severance, separation, relocation,
\nrepatriation, expatriation, visas, work permits, termination pay, performance
\nawards, bonus, incentive, stock option, stock purchase, stock bonus, phantom
\nstock, stock appreciation right, supplemental retirement, fringe benefits,
\ncafeteria benefits or other benefits whether written or unwritten, including,
\nwithout limitation, each “employee benefit plan” within the meaning of Section
\n3(3) of the Employee Retirement Income Security Act of 1974, as amended
\n(“ERISA”), whether or not subject to ERISA, which is or has been sponsored,
\nmaintained, contributed to or required to be contributed to by Company or any
\ntrade or business (whether or not incorporated) which is or, at any relevant
\ntime, was treated as a single employer with Company within the meaning of
\nSection 414(b), (c), (m) or (o) of the Code (an “ERISA Affiliate”), for the
\nbenefit of any Person who performs or who has performed services for Company or
\nwith respect to which Company or any ERISA Affiliate has or may have any
\nliability (including, without limitation, contingent liability) or obligation
\n(collectively, the “Company Employee Plans”).<\/p>\n
(b) Documents. Company has furnished to Parent true and complete
\ncopies of documents embodying each of the Company Employee Plans and related
\nplan documents, including (without limitation) trust documents, group annuity
\ncontracts, plan amendments, insurance policies or contracts, participant
\nagreements, employee booklets, administrative service agreements, summary plan
\ndescriptions, compliance and nondiscrimination tests for the last three plan
\nyears, standard COBRA forms and related notices, registration statements and
\nprospectuses, and any material communications with employees or Governmental
\nEntities relating thereto. With respect to each Company Employee Plan which is
\nsubject to ERISA reporting requirements, Company has provided copies of the Form
\n5500 reports filed for the last two plan years. Company has furnished Parent
\nwith the most recent IRS<\/p>\n
24<\/p>\n
determination letter issued with respect to each such Company Employee Plan, and
\nnothing has occurred since the issuance of each such letter which could
\nreasonably be expected to cause the loss of the tax-qualified status of any
\nCompany Employee Plan subject to Code Section 401(a).<\/p>\n
(c) Compliance. (i) Each Company Employee Plan has been administered
\nin all material respects in accordance with its terms and in compliance with the
\nrequirements prescribed by any and all statutes, rules and regulations
\n(including ERISA and the Code), and Company and each ERISA Affiliate have
\nperformed all material obligations required to be performed by them under, are
\nnot in any material respect in default under or violation of and have no
\nknowledge of any material default or violation by any other party to, any of the
\nCompany Employee Plans; (ii) any Company Employee Plan intended to be qualified
\nunder Section 401(a) of the Code has since its inception been so qualified and
\nhas either obtained from the IRS a favorable determination letter as to its
\nqualified status under the Code, including all amendments to the Code which are
\ncurrently effective, or has time remaining to apply under applicable Treasury
\nRegulations or IRS pronouncements for a determination letter and to make any
\namendments necessary to obtain a favorable determination letter; (iii) none of
\nthe Company Employee Plans promises or provides retiree medical or other retiree
\nwelfare benefits to any Person; (iv) there has been no “prohibited transaction,”
\nas such term is defined in Section 406 of ERISA or Section 4975 of the Code,
\nwith respect to any Company Employee Plan; (v) none of Company or any ERISA
\nAffiliate is subject to any liability or penalty under Sections 4976 through
\n4980 of the Code or Title I of ERISA with respect to any Company Employee Plan;
\n(vi) all contributions required to be made by Company or any ERISA Affiliate to
\nany Company Employee Plan with respect to all periods prior to the Effective
\nTime have been fully paid or accrued on the Financial Statements; (vii) with
\nrespect to each Company Employee Plan, no “reportable event” within the meaning
\nof Section 4043 of ERISA (excluding any such event for which the thirty (30) day
\nnotice requirement has been waived under the regulations to Section 4043 of
\nERISA) nor any event described in Section 4062, 4063 or 4041 or ERISA has
\noccurred; (viii) each Company Employee Plan subject to ERISA has prepared in
\ngood faith and timely filed all requisite governmental reports (which were true
\nand correct in all material respects as of the date filed) and has properly and
\ntimely filed and distributed or posted all notices and reports to employees
\nrequired to be filed, distributed or posted with respect to each such Company
\nEmployee Plan; (ix) no Proceeding has been brought, or to the knowledge of
\nCompany is threatened, against or with respect to any such Company Employee
\nPlan, including any audit or inquiry by the IRS or United States Department of
\nLabor; and (x) there has been no amendment to, written interpretation or
\nannouncement by Company or any ERISA Affiliate which would materially increase
\nthe expense of maintaining any Company Employee Plan above the level of expense
\nincurred with respect to that Plan for the most recent fiscal year included in
\nthe Financial Statements.<\/p>\n
(d) No Title IV or Multiemployer Plan. None of Company or any ERISA
\nAffiliate has ever maintained, established, sponsored, participated in,
\ncontributed to, or is obligated to contribute to, or otherwise incurred any
\nobligation or liability (including, without limitation, any contingent
\nliability) under any (i) “multiemployer plan” (as defined in Section 3(37) of
\nERISA) or (ii) to any “pension plan” (as defined in Section 3(2) of ERISA)
\nsubject to Section 302 or Title IV of ERISA or Section 412 of the Code. Neither
\nCompany nor any ERISA Affiliate has any actual or potential withdrawal liability
\n(including, without limitation, any contingent liability) for any complete or
\npartial withdrawal (as defined in Sections 4203 and 4205 of ERISA) from any
\nmultiemployer plan.<\/p>\n
(e) COBRA. FMLA, HIPAA, Cancer Rights. With respect to each Company
\nEmployee Plan, Company has complied in all material respects with (i) the
\napplicable health care continuation and notice provisions of the Consolidated
\nOmnibus Budget Reconciliation Act of 1985 (“COBRA”) and the regulations
\nthereunder or any state law governing health care coverage extension or
\ncontinuation; (ii) the applicable requirements of the Family and Medical Leave
\nAct of 1993 and the regulations thereunder; (iii) the applicable requirements of
\nthe Health Insurance Portability and<\/p>\n
25<\/p>\n
Accountability Act of 1996 (“HIPAA”); and (iv) the applicable requirements of
\nthe Cancer Rights Act of 1998.<\/p>\n
(f) Effect of Transaction. The consummation of the transactions
\ncontemplated by this Agreement will not (i) entitle any current or former
\ndirector, officer, employee or other service provider of Company or any ERISA
\nAffiliate to severance benefits or any other payment (including, without
\nlimitation, unemployment compensation, golden parachute, bonus, retention or
\nbenefits under any Company Employee Plan), except as expressly provided in this
\nAgreement or (ii) accelerate the time of payment or vesting of any such benefits
\nor increase the amount of compensation due any such employee or service
\nprovider. No benefit payable or which may become payable by Company pursuant to
\nany Company Employee Plan or as a result of or arising under this Agreement
\nshall constitute an “excess parachute payment” (as defined in Section 280G(b)(1)
\nof the Code) which is subject to the imposition of an excise Tax under Section
\n4999 of the Code or the deduction for which would be disallowed by reason of
\nSection 280G of the Code. Each Company Employee Plan can be amended, terminated
\nor otherwise discontinued after the Effective Time in accordance with its terms,
\nwithout material liability to Parent or the Surviving Corporation (other than
\nordinary administration expenses typically incurred in a termination event).<\/p>\n
Section 2.18 Employee Matters. Section 2.18 of the Company Disclosure
\nSchedule contains a list of the names of all employees (including, without
\nlimitation part-time, temporary and inactive employees), leased employees,
\nindependent contractors and consultants of Company, their respective salaries or
\nwages, other compensation and dates of employment and positions. Company is in
\ncompliance in all material respects with all currently applicable Legal
\nProvisions respecting terms and conditions of employment including, without
\nlimitation, applicant and employee background checking, immigration laws,
\ndiscrimination laws, verification of employment eligibility, employee leave
\nlaws, classification of workers as employees and independent contractors, wage
\nand hour laws, and occupational safety and health laws. There are no Proceedings
\npending or, to Company’s knowledge, reasonably expected or threatened, between
\nCompany, on the one hand, and any or all of its current or former employees, on
\nthe other hand, including, but not limited to, any claims for actual or alleged
\nharassment or discrimination based on race, national origin, age, sex, sexual
\norientation, religion, disability, or similar tortuous conduct, breach of
\ncontract, wrongful termination, defamation, intentional or negligent infliction
\nof emotional distress, interference with contract or interference with actual or
\nprospective economic disadvantage. There are no claims pending, or, to Company’s
\nknowledge, reasonably expected or threatened, against Company under any workers’
\ncompensation or long term disability plan or policy. Company has no material
\nunsatisfied obligations to any employees, former employees or qualified
\nbeneficiaries pursuant to COBRA, HIPAA or any state law governing health care
\ncoverage extension or continuation. Company is not a party to any collective
\nbargaining agreement or other labor union contract, nor does Company know of any
\nactivities or proceedings of any labor union to organize its employees. There is
\nno labor strike, slowdown or work stoppage or lockout against Company. Company
\nhas provided all employees with all wages, benefits, relocation benefits, stock
\noptions, bonuses and incentives and all other compensation which became due and
\npayable through the date of this Agreement. Company has not instituted any
\n“freeze” of, or delayed or deferred the grant of, any cost-of-living or other
\nsalary adjustments for any of its employees.<\/p>\n
Section 2.19 Insurance. Company carries property, liability, workers’
\ncompensation and such other types of insurance pursuant to the insurance
\npolicies listed and briefly described in Section 2.19 of the Company Disclosure
\nSchedule (collectively, the “Insurance Policies” and each individually, an
\n“Insurance Policy”). The Insurance Policies cover such risks and contain such
\npolicy limits, types of coverage and deductibles as are, in Company’s judgment,
\nadequate to insure fully (subject to the deductibles and retention amounts
\ndescribed in Section 2.19 of the Company Disclosure Schedule) against risks to
\nwhich Company and its employees, business, properties and other assets may be
\nexposed <\/p>\n
26<\/p>\n
in the operation of the business as currently conducted. There is no material
\nclaim pending under any of such policies or bonds as to which coverage has been
\nquestioned, denied or disputed by the underwriters of such policies or bonds.
\nAll of the Insurance Policies are valid and enforceable policies, all premiums
\ndue and payable under all such policies and bonds have been paid and Company is
\notherwise in compliance in all material respects with the terms of such policies
\nand bonds. Company has no knowledge of any threatened termination of, or
\nmaterial premium increase with respect to, any of such policies. There are no
\noutstanding claims, settlements or premiums owed against any Insurance Policy,
\nor if there are, Company has given all notices or has presented all potential or
\nactual claims under any Insurance Policy in due and timely fashion. Section 2.19
\nof the Company Disclosure Schedule set forth a list of all claims under any
\nInsurance Policy in excess of $50,000 per occurrence filed by or on behalf of
\nCompany since January 1, 1998. The Insurance Policies are sufficient for
\ncompliance in all material respects with all requirements of Legal Provisions
\nand the terms of Company Agreements.<\/p>\n
Section 2.20 Licenses and Permits. Company has obtained each federal,
\nstate, county, local or foreign governmental consent, license, permit, grant or
\nother authorization of a Governmental Entity (i) pursuant to which Company
\ncurrently operates or holds any interest in any of its properties or (ii) that
\nis required for the operation of Company’s business or the holding of any such
\ninterest (collectively, “Permits”), all of which are listed (with expiration
\ndates, if applicable) on Schedule 2.20 of the Company Disclosure Schedule, and
\nall of such Permits are in full force and effect except where the failure to
\nobtain or have any such authorizations could not reasonably be expected to have
\na Material Adverse Effect on Company. No Permit is subject to revocation or
\nforfeiture by virtue of any existing circumstances, there is no Proceeding
\npending or, to the knowledge of Company, threatened to modify or revoke any
\nPermit, and no Permit is subject to any outstanding order, decree, judgment,
\nstipulation or, to the knowledge of Company, investigation that would reasonably
\nbe likely to materially adversely affect such Permit.<\/p>\n
Section 2.21 Compliance With Laws. Company has complied in all material
\nrespects with, is not in violation in any material respect of and has not
\nreceived any notices of violation with respect to, any federal state, local or
\nforeign statute, law, regulation, judgment, order or decree of any Government
\nEntity (collectively, “Legal Provisions”) with respect to the ownership or
\noperation of its business. No investigation or review by any Governmental Entity
\n(including without limitation any audit or similar review by any federal,
\nforeign, state or local taxing authority) with respect to Company is pending or,
\nto the knowledge of Company, threatened, nor has any Governmental Entity
\nindicated in writing to Company an intention to conduct the same.<\/p>\n
Section 2.22 Regulatory Compliance.<\/p>\n
(a) As to each Company Product subject to the jurisdiction of the
\nFDA under the Federal Food, Drug and Cosmetic Act and the regulations thereunder
\n(“FDCA”) (each such product, a “Pharmaceutical Product”) that is manufactured,
\ntested, distributed and\/or marketed by Company, such Pharmaceutical Product is
\nbeing manufactured, tested, distributed and\/or marketed in compliance in all
\nmaterial respects with all applicable requirements under the FDCA and similar
\nLegal Provisions, including those relating to investigational use, premarket
\napproval, good manufacturing practices, labeling, advertising, record keeping,
\nfiling of reports and security. Company has not received any notice or other
\ncommunication from the FDA or any other Governmental Entity (i) contesting the
\npremarket approval of, the uses of or the labeling and promotion of any
\nPharmaceutical Product or (ii) otherwise alleging any violation of any Legal
\nProvision by Company.<\/p>\n
(b) Section 2.22(b) of the Company Disclosure Schedule sets forth a
\nlist of each of Company’s pending and approved NDAs, Investigational New Drug
\napplications (“INDs”) and similar state or foreign regulatory filings. True and
\ncomplete copies of such NDAs and INDs, including all supplements, amendments and
\nannual reports, have heretofore been made available to Parent. Copies of<\/p>\n
27<\/p>\n
correspondence from the FDA, and similar state or foreign regulatory
\nauthorities, and Company’s responses have heretofore been made available to
\nParent.<\/p>\n
(c) As to each biological or drug of Company for which a biological
\nlicense application, NDA, IND or similar state or foreign regulatory application
\nhas been approved, Company is in compliance in all material respects with 21
\nU.S.C. sec. 355 or 21 C.F.R. Parts 312 or 314 et seq., respectively, and similar
\nLegal Provisions and all terms and conditions of such applications. As to each
\nsuch drug, Company, and the officers, employees or agents of Company, have
\nincluded in the application for such drug, where required, the certification
\ndescribed in 21 U.S.C. sec. 335a(k)(1) or any similar Legal Provision and the
\nlist described in 21 U.S.C. sec. 335a(k)(2) or any similar Legal Provision, and
\nsuch certification and such list was in each case true and accurate in all
\nmaterial respects when made and remained true and accurate in all material
\nrespects thereafter. In addition, Company is in compliance in all material
\nrespects with all applicable registration and listing requirements set forth in
\n21 U.S.C. sec. 360 and 21 C.F.R. Part 207 and all similar Legal Provisions.<\/p>\n
(d) Section 2.22(d) of the Company Disclosure Schedule sets forth a
\nlist of (i) Form 483s, (ii) Notices of Adverse Findings and (iii) warning
\nletters or other correspondence from the FDA or state or foreign regulatory
\nauthorities in which the FDA or any such authority asserted that the operations
\nof Company may not be in compliance with applicable Legal Provisions, orders,
\njudgments or decrees, in each case received by Company from the FDA or any such
\nauthority since January 1, 1997 and the response of Company to the FDA or any
\nsuch authority to such notices from the FDA or any such authority. True and
\ncomplete copies of such Form 483s, Notices of Adverse Findings, letters and
\nother correspondence and Company’s responses have heretofore been made available
\nto Parent. All manufacturing operations of Company have been and are being
\nconducted in compliance in all material respects with the good manufacturing
\npractice regulations set forth in 21 C.F.R. Parts 210 and 211 and similar state
\nor foreign regulations.<\/p>\n
(e) Section 3.23(g) of the Company Disclosure Schedule sets forth
\nAdverse Reaction Reports filed by the Company with the FDA or state or foreign
\nregulatory authorities during the period commencing January 1, 1997.<\/p>\n
(f) Neither Company, nor any officer, employee or agent of Company
\nhas made an untrue statement of a material fact or fraudulent statement to the
\nFDA or other Governmental Entity performing similar functions, failed to
\ndisclose a material fact required to be disclosed to the FDA or any other
\nGovernmental Entity performing similar functions, or committed an act, made a
\nstatement, or failed to make a statement that, at the time such disclosure was
\nmade, could reasonably be expected to provide a basis for the FDA or any other
\nGovernmental Entity performing similar functions to invoke its policy respecting
\n“Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”,
\nset forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy.
\nNeither Company nor any officer, employee or agent of Company has been convicted
\nof any crime or engaged in any conduct for which debarment is mandated by 21
\nU.S.C. sec. 335a(a) or any similar Legal Provision or authorized by 21 U.S.C.
\nsec. 335a(b) or any similar Legal Provision.<\/p>\n
Section 2.23 Certain Business Practices. Neither Company nor, to the
\nknowledge of Company, any director, officer, agent or employee of Company has
\n(i) used any funds for unlawful contributions, gifts, entertainment or other
\nunlawful expenses relating to political activity, (ii) made any unlawful payment
\nto foreign or domestic government officials or employees or to foreign or
\ndomestic political parties or campaigns or violated any provision of the Foreign
\nCorrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
\npayment.<\/p>\n
28<\/p>\n
Section 2.24 Brokers’ and Finders’ Fee. Except for Prudential Vector
\nHealthcare Group, a unit of Prudential Securities Incorporated (“PVHG”), no
\nbroker, finder or investment banker is entitled to brokerage or finders’ fees or
\nagents’ commissions or investment bankers’ fees or any similar charges in
\nconnection with the Merger, this Agreement or any transaction contemplated
\nhereby. Company has provided a complete and correct copy of Company’s agreement
\nwith PVHG to Parent.<\/p>\n
Section 2.25 Representations Complete. None of the representations or
\nwarranties made by Company herein or in any Schedule or Exhibit hereto,
\nincluding the Company Disclosure Schedule, or certificate furnished by Company
\npursuant to this Agreement or any written statement furnished to Parent pursuant
\nhereto or in connection with the transactions contemplated hereby, when all such
\ndocuments are read together in their entirety, contains, or will contain at the
\nEffective Time, any untrue statement of a material fact, or omits, or will omit
\nat the Effective Time, to state any material fact necessary in order to make the
\nstatements contained herein or therein, in the light of the circumstances under
\nwhich made, not misleading; provided, however, that it is understood that any
\nfinancial projections delivered by Company represent only Company’s best
\nestimate under the circumstances of what it reasonably believes (although it is
\nnot aware of any fact or information that would lead it to believe that such
\nprojections are misleading in any material respect) and are based upon
\nassumptions set forth in such projections that Company believes were reasonable
\nas of the time such projections were made. Company does not make any other
\nrepresentation or warranty regarding such projections other than as set forth in
\nthis Section 2.25. There is no fact (other than matters of a general economic or
\npolitical nature that do not affect Company uniquely) known to Company that has
\nnot been disclosed by Company to Parent that might reasonably be expected to
\nhave or result in a Material Adverse Effect on Company or adversely affect the
\nability of Company to conduct its business after the Closing as currently
\nconducted and as currently proposed to be conducted.<\/p>\n
ARTICLE III
\n REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB<\/p>\n
Parent and Merger Sub represent and warrant to Company that the statements
\ncontained in this Article III are true and correct, except as disclosed in a
\ndocument of even date herewith and delivered by Parent to Company on the date
\nhereof referring to the representations and warranties in this Agreement (the
\n“Parent Disclosure Schedule”). The Parent Disclosure Schedule will be arranged
\nin paragraphs corresponding to the lettered and numbered paragraphs contained in
\nthis Article III, and the disclosure in any such numbered and lettered section
\nof the Parent Disclosure Schedule shall qualify only the corresponding section
\nin this Article III (except to the extent disclosure in any numbered and
\nlettered section of the Parent Disclosure Schedule is specifically
\ncross-referenced in another numbered and lettered section of the Parent
\nDisclosure Schedule). <\/p>\n
Section 3.1 Organization, Standing and Power. Each of Parent and Merger
\nSub is a corporation duly organized, validly existing and in good standing under
\nthe laws of its jurisdiction of organization. Each of Parent and Merger Sub has
\nthe corporate power to own its properties and to carry on its business as now
\nbeing conducted and as proposed to be conducted and is duly qualified to do
\nbusiness and is in good standing in each jurisdiction in which the failure to be
\nso qualified and in good standing would have a Material Adverse Effect on
\nParent. Parent has delivered a true and correct copy of the Certificate of
\nIncorporation and Bylaws of Parent and Merger Sub, each as amended to date, to
\nCompany. Neither Parent nor Merger Sub is in violation of any of the provisions
\nof its Certificate of Incorporation or Bylaws.<\/p>\n
Section 3.2 Authority. Parent and Merger Sub have all requisite corporate
\npower and authority to enter into this Agreement and to consummate the
\ntransactions contemplated hereby. The execution and delivery of this Agreement
\nand the consummation of the transactions contemplated hereby have been duly
\nauthorized by all necessary corporate action on the part of Parent and Merger
\nSub. This <\/p>\n
29<\/p>\n
Agreement has been duly executed and delivered by Parent and Merger Sub and
\nconstitutes the valid and binding obligations of Parent and Merger Sub,
\nenforceable against each of Parent and Merger Sub in accordance with its terms,
\nexcept that such enforceability may be limited by bankruptcy, insolvency,
\nmoratorium or other similar laws affecting or relating to creditors’ rights
\ngenerally, and is subject to general principles of equity. The execution and
\ndelivery of this Agreement do not and the consummation of the transactions
\ncontemplated hereby will not, assuming compliance with the matters referred to
\nin the next sentence, require any consent or other action by any Person under,
\nor conflict with, or result in any violation of, or default under (with or
\nwithout notice or lapse of time, or both), or result in the triggering of any
\npayment or other obligation under, or give rise to a right of termination,
\ncancellation or acceleration of any obligation or loss of any benefit under, or
\nresult in the creation of any Lien in or upon any of the properties or assets of
\nParent or any of its Subsidiaries under, (i) any provision of the Certificate of
\nIncorporation or Bylaws of Parent or any of its Subsidiaries, as amended, or
\n(ii) any material mortgage, indenture, lease, contract or other agreement or
\ninstrument, permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to Parent or any of its
\nSubsidiaries or their properties or assets. No consent, approval, order or
\nauthorization of or registration, declaration or filing with any Governmental
\nEntity is required by or with respect to Parent or any of its Subsidiaries in
\nconnection with the execution and delivery of this Agreement by Parent and
\nMerger Sub or the consummation by Parent and Merger Sub of the transactions
\ncontemplated hereby, except for (i) the filing of the Certificate of Merger as
\nprovided in Section 1.2, (ii) filings required under Regulation D of the
\nSecurities Act, (iii) the filing of a Form 8-K with the Securities and Exchange
\nCommission (“SEC”) and National Association of Securities Dealers (“NASD”), (iv)
\nany filings as may be required under applicable state securities laws and the
\nsecurities laws of any foreign country, (v) such filings as may be required
\nunder the HSR Act, (vi) the filing with the Nasdaq National Market of a
\nNotification Form for Listing of Additional Shares with respect to the shares of
\nParent Common Stock issuable in the Merger and the Contingent Shares issuable
\npursuant to Section 1.12, (vii) filings required to perform its obligations
\nunder Section 5.15, (viii) the filing of a certificate of designations to create
\na series of preferred stock in accordance with Section 1.13, (ix) those that may
\nbe required solely by reason of Company’s (as opposed to any third party’s)
\nparticipation in the transactions contemplated by this Agreement, and (x) such
\nother consents, authorizations, filings, approvals and registrations which, if
\nnot obtained or made, would not have a Material Adverse Effect on Parent and
\nwould not prevent, materially alter or delay any of the transactions
\ncontemplated by this Agreement.<\/p>\n
Section 3.3 SEC Documents; Financial Statements. Parent has made available
\nto Company or its counsel through EDGAR a true and complete copy of each
\nstatement, report, registration statement (with the prospectus in the form filed
\npursuant to Rule 424(b) of the Securities Act), definitive proxy statement and
\nother filing filed with the SEC by Parent since January 1, 2000, and, prior to
\nthe Effective Time, Parent will have made available to Company or its counsel
\nthrough EDGAR true and complete copies of any additional documents filed with
\nthe SEC by Parent prior to the Effective Time (collectively, the “Parent SEC
\nDocuments”). In addition, Parent has made available to Company all exhibits to
\nthe Parent SEC Documents filed prior to the date hereof which are (i) requested
\nby Company and (ii) are not available in complete form through EDGAR (“Requested
\nConfidential Exhibits”) and will promptly make available to Company all
\nRequested Confidential Exhibits to any additional Parent SEC Documents filed
\nprior to the Effective Time. All documents required to be filed as exhibits to
\nthe Company SEC Documents have been so filed, and all material contracts so
\nfiled as exhibits are in full force and effect except those which have expired
\nin accordance with their terms, and neither Parent nor any of its Subsidiaries
\nis in default thereunder, except for any defaults which would not have a
\nMaterial Adverse Effect on Parent. As of their respective filing dates, the
\nParent SEC Documents complied in all material respects with the requirements of
\nthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
\nSecurities Act and none of the Parent SEC Documents contained any untrue
\nstatement of a material fact or omitted to state a material fact required to be
\nstated therein or necessary to make the statements made therein, in light of the
\ncircumstances in which they were made, not misleading, except to <\/p>\n
30<\/p>\n
the extent corrected by a subsequently filed Parent SEC Document prior to the
\ndate hereof. The financial statements of Parent, including the notes thereto,
\nincluded in the Parent SEC Documents (the “Parent Financial Statements”),
\ncomplied as to form in all material respects with applicable accounting
\nrequirements and with the published rules and regulations of the SEC with
\nrespect thereto as of their respective dates, and have been prepared in
\naccordance with GAAP applied on a basis consistent throughout the periods
\nindicated and consistent with each other (except as may be indicated in the
\nnotes thereto or, in the case of unaudited statements included in Quarterly
\nReports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Parent
\nFinancial Statements fairly present the consolidated financial condition and
\noperating results of Parent and its Subsidiaries at the dates and during the
\nperiods indicated therein (subject, in the case of unaudited statements, to
\nnormal, recurring year-end adjustments). There has been no change in Parent
\naccounting policies except as described in the notes to the Parent Financial
\nStatements and as required by Staff Accounting Bulletin 101.<\/p>\n
Section 3.4 Capital Structure. The authorized capital stock of Parent
\nconsists of 150,000,000 shares of common stock, $.01 par value, and 4,000,000
\nshares of Preferred Stock, $.01 par value. At the close of business on February
\n16, 2001, (i) 54,824,842 shares of Parent Common Stock were issued and
\noutstanding, (ii) no shares of Preferred Stock were issued or outstanding and
\n(iii) 150,000 shares of Parent Preferred Stock were designated Series A Junior
\nParticipating Cumulative Preferred Stock and were reserved for issuance in
\nconnection with the rights (the “Parent Rights”) issued pursuant to the Rights
\nAgreement, dated as of October 7, 1998, by and between Parent and American Stock
\nTransfer & Trust Company, as Rights Agent. There are no other outstanding shares
\nof capital stock or voting securities of Parent other than shares of Parent
\nCommon Stock issued after February 16, 2001 pursuant to, or upon the exercise of
\noptions issued under, the Parent stock plans described in the Parent SEC
\nDocuments (the “Parent Stock Plans”). The authorized capital stock of Merger Sub
\nconsists of 100 shares of Common Stock, all of which are issued and outstanding
\nand are held by Parent. All outstanding shares of Parent and Merger Sub have
\nbeen duly authorized, validly issued, fully paid and are nonassessable. As of
\nthe close of business on February 16, 2001, Parent has reserved 10,568,726
\nshares of Parent Common Stock for issuance to employees, directors and
\nindependent contractors pursuant to the Parent Stock Plans, of which 7,035,269
\nshares are subject to outstanding, unexercised options (other than “options”
\ndeemed granted under Parent’s employee stock purchase plan). Other than this
\nAgreement and the Parent Stock Plans, there are no other options, warrants,
\ncalls, rights, commitments or agreements of any character to which Parent or
\nMerger Sub is a party or by which either of them is bound obligating Parent or
\nMerger Sub to issue, deliver, sell, repurchase or redeem, or cause to be issued,
\ndelivered, sold, repurchased or redeemed, any shares of the capital stock of
\nParent or Merger Sub or obligating Parent or Merger Sub to grant, extend or
\nenter into any such option, warrant, call, right, commitment or agreement. The
\nshares of Parent Common Stock to be issued pursuant to the Merger and in payment
\nof the Contingent Payments will be duly authorized, validly issued, fully paid
\nand nonassessable.<\/p>\n
Section 3.5 Litigation. There is no Proceeding pending before any
\nGovernmental Entity, foreign or domestic, or, to the knowledge of Parent,
\nthreatened against Parent or any of its Subsidiaries or any of their respective
\nproperties or any of their respective officers or directors (in their capacities
\nas such) that, individually or in the aggregate, could reasonably be expected to
\nhave a Material Adverse Effect on Parent. There is no judgment, decree or order
\nagainst Parent or any of its Subsidiaries or, to the knowledge of Parent, any of
\ntheir respective directors or officers (in their capacities as such) that could
\nprevent, enjoin, or materially alter or delay any of the transactions
\ncontemplated by this Agreement, or that could reasonably be expected to have a
\nMaterial Adverse Effect on Parent.<\/p>\n
Section 3.6 Absence of Certain Changes. Since September 30, 2000, Parent
\nhas conducted its business in the ordinary course consistent with past practice,
\nand there has not been: (i) any event, occurrence or development which,
\nindividually or in the aggregate, has had or reasonably would be expected to
\nhave a Material Adverse Effect on Parent; (ii) any change in accounting methods
\nor practices <\/p>\n
31<\/p>\n
by Parent or any revaluation by Parent of any of its assets; (iii) any material
\ncontract entered into by Parent, other than in the ordinary course of business
\nand as provided to Company, or any material amendment or termination of, or
\ndefault under, any material contract to which Parent is a party or by which it
\nis bound; or (iv) any negotiation or agreement by Parent or any of its
\nSubsidiaries to do any of the things described in the preceding clauses (i)
\nthrough (iii) (other than negotiations with Company and its representatives
\nregarding the transactions contemplated by this Agreement).<\/p>\n
Section 3.7 Absence of Undisclosed Liabilities. Parent has no material
\nobligations or liabilities of any nature (matured or unmatured, fixed or
\ncontingent) other than (i) those set forth or adequately provided for in the
\nbalance sheet included in Parent’s Quarterly Report on Form 10-Q for the period
\nended September 30, 2000, (ii) those incurred in the ordinary course of business
\nand not required to be set forth in the Parent’s balance sheet under GAAP and
\n(iii) those incurred in the ordinary course of business since the September 30,
\n2000 and consistent with past practice.<\/p>\n
Section 3.8 Interim Operations of Merger Sub. Merger Sub was formed solely
\nfor the purpose of engaging in the transactions contemplated by this Agreement,
\nhas engaged in no other business activities and has conducted its operations
\nonly as contemplated by this Agreement.<\/p>\n
Section 3.9 Representations Complete. None of the representations or
\nwarranties made by Parent or Merger Sub herein or in any Schedule hereto,
\nincluding the Parent Disclosure Schedule, or certificate furnished by Parent or
\nMerger Sub pursuant to this Agreement, or the Parent SEC Documents, or any
\nwritten statement furnished to Company pursuant hereto or in connection with the
\ntransactions contemplated hereby, when all such documents are read together in
\ntheir entirety, contains, or will contain at the Effective Time, any untrue
\nstatement of a material fact or omits, or will omit at the Effective Time, to
\nstate any material fact necessary in order to make the statements contained
\nherein or therein, in the light of the circumstances under which made, not
\nmisleading; provided, however, that for purposes of this representation, any
\ndocument filed by Parent with the SEC after the date hereof that provides
\ninformation inconsistent with or in addition to any other written statement
\nfurnished to Company in connection with the transactions contemplated hereby,
\nshall be deemed to supersede any other document or written statement furnished
\nto Company with respect to such inconsistent or additional information; and
\nprovided further that it is understood that any financial projections delivered
\nby Parent represent only Parent’s best estimate under the circumstances of what
\nit reasonably believes (although it is not aware of any fact or information that
\nwould lead it to believe that such projections are misleading in any material
\nrespect) and are based upon assumptions set forth in such projections that
\nParent believes were reasonable as of the time such projections were made.
\nParent does not make any other representation or warranty regarding such
\nprojections other than as set forth in this Section 3.9.<\/p>\n
ARTICLE IV
\n CONDUCT PRIOR TO THE EFFECTIVE TIME<\/p>\n
Section 4.1 Conduct of Business of Company. During the period from the
\ndate of this Agreement and continuing until the earlier of the termination of
\nthis Agreement or the Effective Time, Company agrees (except to the extent
\nexpressly contemplated by this Agreement or as consented to in writing by
\nParent), to carry on its business in the usual regular and ordinary course in
\nsubstantially the same manner as heretofore conducted, and in compliance in all
\nmaterial respects with all applicable Legal Provisions, to pay or perform its
\nobligations when due and to use all reasonable efforts to preserve intact its
\npresent business organizations, keep available the services of its present
\nofficers and key employees and preserve its relationships with customers,
\nsuppliers, distributors, licensors, licensees and others having business
\ndealings with it to the end that its goodwill and ongoing businesses shall be
\nunimpaired at the Effective Time. Without limiting the foregoing, except as
\nexpressly contemplated by this Agreement <\/p>\n
32<\/p>\n
or the Company Disclosure Schedule, Company shall not do, cause or permit any of
\nthe following, without the prior written consent of Parent:<\/p>\n
(a) Charter Documents. Cause or permit any amendments to its
\n Articles of Incorporation or Bylaws;<\/p>\n
(b) Dividends; Changes in Capital Stock. (i) Declare or pay any
\n dividends on or make any other distributions (whether in cash, stock or
\n property) in respect of any of its capital stock, (ii) split, combine or
\n reclassify any of its capital stock, (iii) issue or authorize the issuance
\n of any other securities in respect of, in lieu of or in substitution for
\n shares of its capital stock, or repurchase or otherwise acquire, directly
\n or indirectly, any shares of its capital stock except from former
\n employees, directors and consultants in accordance with agreements
\n providing for the repurchase of shares in connection with any termination
\n of service to it or (iv) adopt a plan or agreement of complete or partial
\n liquidation, dissolution, merger, consolidation, restructuring,
\n recapitalization or other reorganization of Company;<\/p>\n
(c) Stock Option Plans, Etc. Accelerate, amend or change the period
\n of exercisability or vesting of options or other rights granted under its
\n stock plans or authorize cash payments in exchange for any options or
\n other rights granted under any of such plans;<\/p>\n
(d) Material Contracts. Enter into any contract or commitment, or
\n violate, amend or otherwise modify or waive any of the terms of any of its
\n contracts, other than in the ordinary course of business consistent with
\n past practice;<\/p>\n
(e) Issuance of Securities. Issue, deliver or sell, or authorize or
\n propose the issuance, delivery or sale of, or purchase or propose the
\n purchase of, any shares of its capital stock or securities convertible
\n into or exchangeable for, or subscriptions, rights, warrants or options to
\n acquire, or other agreements or commitments of any character obligating it
\n to issue any such shares or other convertible or exchangeable securities
\n other than the issuance of shares of Company Common Stock pursuant to the
\n exercise of stock options, warrants or other rights therefore outstanding
\n as of the date of this Agreement; provided, however, that Company may, in
\n the ordinary course of business consistent with past practice, grant
\n options for the purchase of Company Common Stock under the Company Stock
\n Option Plan;<\/p>\n
(f) Intellectual Property. Transfer to any Person any rights to its
\n Intellectual Property other than in the ordinary course of business
\n consistent with past practice;<\/p>\n
(g) Exclusive Rights. Enter into or amend any agreements pursuant to
\n which any other party is granted marketing or other rights of any type or
\n scope with respect to any of Company Products or Company Intellectual
\n Property;<\/p>\n
(h) Dispositions. Sell, lease, license or otherwise dispose of or
\n encumber any of its properties or assets except in the ordinary course of
\n business consistent with past practice;<\/p>\n
(i) Indebtedness. Incur any indebtedness for borrowed money or
\n guarantee any such indebtedness, issue or sell any debt securities or
\n warrants or other rights to acquire any debt securities of Company,
\n guarantee any debt securities of another Person, enter into any “keep
\n well” or other agreement to maintain any financial statement condition of
\n another Person or enter into any arrangement having the economic effect of
\n any of the foregoing;<\/p>\n
33<\/p>\n
(j) Agreements. Enter into, terminate or amend, in a manner which
\n will adversely affect the business of Company, (i) any agreement involving
\n an obligation to pay or the right to receive $10,000 or more, (ii) any
\n agreement relating to the license, transfer or other disposition or
\n acquisition of Intellectual Property rights or rights to market or sell
\n Company Products or (iii) any other agreement which is material to the
\n business or prospects of Company or would be required to be disclosed
\n pursuant to Section 2.13 hereunder;<\/p>\n
(k) Payment of Obligations. Pay, discharge or satisfy, in an amount
\n in excess of $25,000 in the aggregate, any claim, liability or obligation
\n (absolute, accrued, asserted or unasserted, contingent or otherwise)
\n arising other than in the ordinary course of business, other than the
\n payment, discharge or satisfaction of liabilities reflected or reserved
\n against in the Financial Statements;<\/p>\n
(l) Capital Expenditures. Make any capital expenditures, capital
\n additions or capital improvements other than as expressly set forth in
\n Company’s capital expenditure budget previously delivered to Parent;<\/p>\n
(m) Insurance. Materially reduce the amount of any insurance
\n coverage provided by existing insurance policies;<\/p>\n
(n) Termination or Waiver. Terminate or waive any right of
\n substantial value, other than in the ordinary course of business;<\/p>\n
(o) Employee Benefit Plans; New Hires; Pay Increase. Amend any
\n Company Employee Plan except to the extent required by applicable law,
\n adopt any plan, contract or arrangement that would constitute a Company
\n Employee Plan, take any action to fund or in any other way secure the
\n payment of compensation or benefits under any Company Employee Plan, hire
\n any new officer level employee, pay any special bonus, special
\n remuneration or special noncash benefit (except payments and benefits made
\n pursuant to written agreements outstanding on the date hereof), or
\n increase the benefits, salaries or wage rates of its employees except in
\n the ordinary course of business consistent with past practice;<\/p>\n
(p) Severance Arrangements. (i) Grant any severance or termination
\n pay or benefits (A) to any current or former director or officer or (B) to
\n any other employee except payments made pursuant to written agreements
\n outstanding on the date hereof and disclosed on the Company Disclosure
\n Schedule, or (ii) increase in any manner the severance or termination pay
\n of any current or former director, officer or employee;<\/p>\n
(q) Lawsuits. Commence a lawsuit other than (i) for the routine
\n collection of bills, (ii) in such cases where it in good faith determines
\n that failure to commence suit would result in the material impairment of a
\n valuable aspect of its business, provided that it consults with Parent
\n prior to the filing of such a suit, or (iii) for a breach of this
\n Agreement;<\/p>\n
(r) Acquisitions. Acquire or agree to acquire by merging or
\n consolidating with, or by purchasing a substantial portion of the assets
\n of, or by any other manner, any business or any corporation, partnership,
\n association or other business organization or division thereof, make any
\n investment in any other Person or otherwise acquire or agree to acquire
\n any assets which are material, individually or in the aggregate, to its
\n business;<\/p>\n
(s) Taxes. Make or change any election in respect of Taxes, adopt or
\n change any accounting method in respect of Taxes, file any amendment to a
\n Tax Return, enter into any <\/p>\n
34<\/p>\n
closing agreement, settle any claim or assessment in respect of Taxes, or
\n consent to any extension or waiver of the limitation period applicable to
\n any material claim or assessment in respect of Taxes;<\/p>\n
(t) Regulatory Matters. Except as required by a Governmental Entity,
\n make any material amendment to any NDA, Supplemental NDA or their foreign
\n equivalents, or except as reasonably required due to medical or regulatory
\n considerations, as required by a Governmental Entity, suspend, terminate
\n or otherwise discontinue any planned or ongoing research and development
\n activities, programs, clinical trials or other such activities;<\/p>\n
(u) Accounting Matters. Except as required by GAAP, (i) make any
\n change in accounting methods, practices or principles or (ii) accelerate
\n any income, postpone any expense or reverse any reserve, except on a basis
\n consistent with past practice;<\/p>\n
(v) Revaluation. Revalue any of its assets, including without
\n limitation writing down the value of inventory or writing off notes or
\n accounts receivable other than in the ordinary course of business; or<\/p>\n
(w) Other. Agree or commit to take any of the actions described in
\n Sections 4.1(a) through (v) above, or take or agree or commit to take any
\n action that would (i) make any representation and warranty of Company
\n hereunder inaccurate in any respect at, or as of any time prior to, the
\n Effective Time (or, in the case of representations and warranties that are
\n not qualified by reference to the term “Material Adverse Effect” and\/or
\n taken as a whole, or derivatives or variations of such terms, inaccurate
\n in any material respect at, or as of any time prior to, the Effective
\n Time) or (ii) that would reasonably be expected to prevent, impair or
\n materially delay the ability of Company or Parent to consummate the
\n transactions contemplated by this Agreement.<\/p>\n
Without limiting the generality of the foregoing, Company shall deliver to
\nParent a copy of any income or franchise Tax Return required to be filed by
\nCompany prior to the Effective Time no later than thirty (30) days prior to the
\ndue date for the filing thereof, which returns shall be prepared in a manner
\nconsistent with prior practice unless otherwise required by applicable Legal
\nProvisions. Parent shall be entitled to review and comment on any such Tax
\nReturns prior to the due date for filing, and Company shall make any changes to
\nsuch Tax Returns reasonably requested by Parent.<\/p>\n
Section 4.2 No Solicitation.<\/p>\n
(a) From and after the date of this Agreement until the Effective
\nTime, Company shall not, directly or indirectly through any officer, director,
\nemployee, representative or agent of Company or otherwise, (i) solicit, initiate
\nor encourage any inquiries or proposals that constitute, or could reasonably be
\nexpected to lead to, any offer or proposal for, or any indication of interest
\nin, (A) a merger or other business combination involving Company, (B) the
\nacquisition of any equity interest in, or a substantial portion of the assets
\nof, Company or (C) any similar transaction the effect of which would be
\nreasonably likely to prohibit, restrict or delay consummation of the Merger or
\nwhich would be reasonably be expected to materially dilute the benefits to
\nParent of the transactions contemplated hereby (any of the foregoing being
\nreferred to in this Agreement as an “Acquisition Proposal”), (ii) engage or
\nparticipate in negotiations or discussions concerning, or provide any non-public
\ninformation to any Person or entity relating to, any Acquisition Proposal, or
\n(iii) agree to, enter into, accept, approve or recommend any Acquisition
\nProposal. Company represents and warrants that it has the legal right to
\nterminate any pending discussions or negotiations relating to an Acquisition
\nProposal without payment of any fee or other penalty. Company will, and will
\ncause the other Persons listed in the first sentence of this Section <\/p>\n
35<\/p>\n
4.2 to, immediately cease and cause to be terminated all discussions and
\nnegotiations, if any, that have taken place prior to the date hereof with any
\nparties with respect to any Acquisition Proposal and, to the extent within its
\npower, to recover or cause to be destroyed all information concerning the
\nCompany in the possession of such Persons and their affiliates, representatives
\nand advisors. Without limiting the generality of the foregoing, the parties
\nhereto understand and agree that any violation of the restrictions of this
\nSection 4.2 by any officer, director, employee, investment banker, consultant or
\nother agent of the Company shall be deemed to be a breach of this Section 4.2 by
\nCompany.<\/p>\n
(b) Company shall notify Parent immediately (and no later than 24
\nhours) after receipt by Company (or its advisors) of any Acquisition Proposal or
\nany request for nonpublic information in connection with an Acquisition Proposal
\nor for access to the properties, books or records of Company by any Person or
\nentity that informs Company that it is considering making, or has made, an
\nAcquisition Proposal. Such notice shall be made orally and in writing and shall
\nindicate in reasonable detail the identity of the offeror and the terms and
\nconditions of such proposal, inquiry or contact.<\/p>\n
ARTICLE V
\n ADDITIONAL AGREEMENTS<\/p>\n
Section 5.1 Preparation of Solicitation Statement.<\/p>\n
(a) As soon as practicable after the execution of this Agreement,
\nCompany shall prepare, with the cooperation of Parent, a solicitation statement
\n(the “Solicitation Statement”) for the solicitation of approval of Company
\nShareholders describing this Agreement and the transactions contemplated hereby
\nand thereby. Parent shall provide such information about Parent as Company shall
\nreasonably request. The information supplied by Company for inclusion in the
\nSolicitation Statement to be sent to Company Shareholders shall not, on the date
\nthe Solicitation Statement is first mailed to Company Shareholders or at the
\nEffective Time, contain any untrue statement of a material fact, or omit to
\nstate any material fact necessary in order to make the statements made therein,
\nin light of the circumstances under which they are made, not false or
\nmisleading, or omit to state any material fact necessary to correct any
\nstatement in any earlier communication which has become false or misleading.
\nNotwithstanding the foregoing, Company makes no representation, warranty or
\ncovenant with respect to any information supplied by Parent or Merger Sub which
\nis contained in the Solicitation Statement. The information supplied by Parent
\nfor inclusion in the Solicitation Statement shall not, on the date the
\nSolicitation Statement is first mailed to Company Shareholders, nor at the
\nEffective Time, contain any untrue statement of a material fact, or omit to
\nstate any material fact necessary in order to make the statements therein, in
\nlight of the circumstances under which it is made, not false or misleading or
\nomit to state any material fact necessary to correct any statement in any
\nearlier communication which has become false or misleading. Notwithstanding the
\nforegoing, Parent and Merger Sub make no representation, warranty or covenant
\nwith respect to any information supplied by Company which is contained in the
\nSolicitation Statement. The Solicitation Statement shall comply in all material
\nrespects with the requirements of California Law.<\/p>\n
(b) The Solicitation Statement shall constitute a disclosure
\ndocument for the offer and issuance of shares of Parent Common Stock to be
\nreceived by the holders of Company Capital Stock in the Merger. Parent and
\nCompany shall each use reasonable commercial efforts to cause the Solicitation
\nStatement to comply with applicable federal and state securities laws
\nrequirements. Each of Parent and Company agrees to provide promptly to the other
\nsuch information concerning its business and financial statements and affairs
\nas, in the reasonable judgment of the providing party or its counsel, may be
\nrequired or appropriate for inclusion in the Solicitation Statement or in any
\namendments or supplements thereto, and to cause its counsel and auditors to
\ncooperate with the other’s counsel and auditors in the preparation of the
\nSolicitation Statement. Company will promptly advise Parent, and <\/p>\n
36<\/p>\n
Parent will promptly advise Company, in writing if at any time prior to the
\nEffective Time either Company or Parent shall obtain knowledge of any facts that
\nmight make it necessary or appropriate to amend or supplement the Solicitation
\nStatement in order to make the statements contained or incorporated by reference
\ntherein not misleading or to comply with applicable law. The Solicitation
\nStatement shall contain the recommendation of the Board of Directors of Company
\nthat the Company Shareholders approve the Merger and this Agreement and the
\nconclusion of the Board of Directors of Company that the terms and conditions of
\nthe Merger are fair to and in the best interests of Company Shareholders.
\nAnything to the contrary contained herein notwithstanding, Company shall not
\ninclude in the Solicitation Statement any information with respect to Parent or
\nits affiliates or associates, the form and content of which information shall
\nnot have been approved by Parent prior to such inclusion.<\/p>\n
Section 5.2 Approval of Company Shareholders. Company shall promptly after
\nthe date hereof take all action necessary in accordance with California Law and
\nits Articles of Incorporation and Bylaws to convene a meeting of Company
\nShareholders to obtain the written consent of Company Shareholders approving the
\nMerger as soon as practicable. Subject to Section 5.1, Company shall use its
\nreasonable best efforts to solicit from all Company Shareholders written
\nconsents in favor of the Merger and shall take all other action necessary or
\nadvisable to secure the vote or consent of Company Shareholders required to
\neffect the Merger.<\/p>\n
Section 5.3 Sale of Shares Pursuant to Regulation D. The parties hereto
\nacknowledge and agree that the shares of Parent Common Stock issuable to Company
\nShareholders pursuant to Sections 1.6, 1.12 and 1.13 hereof shall constitute
\n“restricted securities” under the Securities Act. The certificates of Parent
\nCommon Stock shall bear the legends set forth in Section 1.6(h). It is
\nacknowledged and understood that Parent is relying on certain written
\nrepresentations made by each Company Shareholder. Company will use its
\nreasonable best efforts to cause each Company Shareholder to execute and deliver
\nto Parent an Investor Representation Statement in the form attached hereto as
\nExhibit 5.3 (the “Investor Representation Statement”).<\/p>\n
Section 5.4 Access to Information.<\/p>\n
(a) Each party shall afford the other party and its accountants,
\ncounsel and other representatives, reasonable access during normal business
\nhours during the period prior to the Effective Time to (i) all of such party’s
\nproperties, contracts, commitments, books and records and (ii) all other
\ninformation concerning the business, properties and personnel of such party and
\nits Subsidiaries as the other party may reasonably request.<\/p>\n
(b) Subject to compliance with applicable law, from the date hereof
\nuntil the Effective Time, each of Parent and Company shall confer on a regular
\nand frequent basis with one or more representatives of the other party to report
\noperational matters of materiality and the general status of ongoing operations.<\/p>\n
(c) No information or knowledge obtained in any investigation
\npursuant to this Section 5.4 shall affect or be deemed to modify any
\nrepresentation or warranty contained herein or the conditions to the obligations
\nof the parties to consummate the Merger.<\/p>\n
Section 5.5 Confidentiality. The parties acknowledge that Parent and
\nCompany have previously executed a non-disclosure agreement dated September 28,
\n2000 (the “Confidentiality Agreement”), which Confidentiality Agreement is
\nhereby incorporated herein by reference and shall continue in full force and
\neffect in accordance with its terms.<\/p>\n
37<\/p>\n
Section 5.6 Public Disclosure. Unless otherwise permitted by this
\nAgreement, Parent and Company shall consult with each other before issuing any
\npress release or otherwise making any public statement (including any broadly
\nissued statement or announcement to Company employees) or making any other
\npublic (or non-confidential) disclosure (whether or not in response to an
\ninquiry) regarding the terms of this Agreement and the transactions contemplated
\nhereby, and neither shall issue any such press release or make any such
\nstatement or disclosure without the prior approval of the other (which approval
\nshall not be unreasonably withheld), except as may be required by Legal
\nProvisions or by obligations pursuant to any listing agreement with any national
\nsecurities exchange or with the NASD.<\/p>\n
Section 5.7 Reasonable Best Efforts.<\/p>\n
(a) Subject to the terms and conditions of this Agreement, each
\nparty will use its reasonable best efforts in good faith to take, or cause to be
\ntaken, all actions and to do, or cause to be done, and to assist and cooperate
\nwith the other parties in doing, all things necessary, proper or advisable under
\napplicable Legal Provisions to consummate the Merger and the other transactions
\ncontemplated by this Agreement, including using reasonable best efforts to
\naccomplish the following: (i) the taking of all reasonable acts necessary to
\ncause the conditions to Closing to be satisfied, (ii) the obtaining of all
\nnecessary actions or nonactions, waivers, consents and approvals from
\nGovernmental Entities and the making of all necessary registrations and filings
\n(including filings with Governmental Entities, if any) and the taking of all
\nreasonable steps as may be necessary to obtain an approval or waiver from, or to
\navoid an action or Proceeding by, any Governmental Entity, (iii) the obtaining
\nof all necessary consents, approvals or waivers from third parties (provided
\nthat if obtaining any such consent, approval or waiver would require any action
\nother than the payment of a nominal amount, such action shall be subject to the
\nconsent of Parent, not to be unreasonably withheld), (iv) the defending of any
\nProceedings, whether judicial or administrative, challenging this Agreement or
\nthe consummation of the transactions contemplated hereby, including seeking to
\nhave any stay or temporary restraining order entered by any court or other
\nGovernmental Entity vacated or reversed and (v) the execution and delivery of
\nany additional instruments necessary to consummate the transactions contemplated
\nby, and to fully carry out the purposes of, this Agreement. Company shall give
\nParent the opportunity to participate, on an advisory basis, in the defense of
\nany shareholder litigation against Company and\/or its directors relating to the
\ntransactions contemplated by this Agreement. Each party shall also refrain from
\ntaking, directly or indirectly, any action contrary or inconsistent with the
\nprovisions of this Agreement, including action that would impair such party’s
\nability to consummate the Merger and the other transactions contemplated hereby.<\/p>\n
(b) In furtherance and not in limitation of the foregoing, each
\nparty hereto agrees to make an appropriate filing of a Notification and Report
\nForm pursuant to the HSR Act and any other applicable Antitrust Law with respect
\nto the transactions contemplated hereby as promptly as practicable after the
\ndate hereof and to supply as promptly as practicable any additional information
\nand documentary material that may be requested pursuant to the HSR Act or any
\nother applicable Antitrust Law and to take all other actions reasonably
\nnecessary to cause the expiration or termination of the applicable waiting
\nperiods under the HSR Act and any other applicable Antitrust Law as soon as
\npracticable. For purposes of this Agreement, “Antitrust Law” means the Sherman
\nAct, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade
\nCommission Act, as amended, and all other federal, state and foreign, if any,
\nLegal Provisions that are designed or intended to prohibit, restrict or regulate
\nactions having the purpose or effect of monopolization or restraint of trade or
\nlessening of competition through merger or acquisition.<\/p>\n
(c) Each of Parent and Company shall, in connection with the efforts
\nreferenced in Section 5.7(b) to obtain all requisite approvals and
\nauthorizations for the transactions contemplated by this Agreement under the HSR
\nAct or any other applicable Antitrust Law, use its reasonable best efforts to
\n(i) cooperate in all respects with each other in connection with any filing or
\nsubmission and in <\/p>\n
38<\/p>\n
connection with any investigation or other inquiry, including any proceeding
\ninitiated by a private party; (ii) keep the other party informed in all material
\nrespects of any material communication received by such party from, or given by
\nsuch party to, the Federal Trade Commission (the “FTC”), the Antitrust Division
\nof the Department of Justice (the “DOJ”) or any other Governmental Entity and of
\nany material communication received or given in connection with any Proceeding
\nby a private party, in each case regarding any of the transactions contemplated
\nhereby; and (iii) unless prohibited by applicable law, permit the other party to
\nreview any material communication given by it to, and consult with each other in
\nadvance of any meeting or conference with, the FTC, the DOJ or any such other
\nGovernmental Entity or, in connection with any Proceeding by a private party,
\nwith any other Person, and to the extent permitted by the FTC, the DOJ or such
\nother applicable Governmental Entity or other Person, give the other party the
\nopportunity to attend and participate in such meetings and conferences.<\/p>\n
(d) Notwithstanding anything to the contrary contained in this
\nAgreement, Parent shall not have any obligation under this Agreement: (i) to
\ndispose or transfer, or cause any of its Subsidiaries to dispose of or transfer,
\nany assets, or to commit to cause Company to dispose of any assets; (ii) to
\ndiscontinue or to cause any of its Subsidiaries to discontinue offering any
\nproduct or service, or to commit to cause Company to discontinue offering any
\nproduct or service; (iii) to license or otherwise make available, or cause any
\nof its Subsidiaries to license or otherwise make available, to any Person, any
\ntechnology or other Intellectual Property, or to commit to cause Company to
\nlicense or otherwise make available to any Person any technology or other
\nIntellectual Property; (iv) to hold separate or cause any of its Subsidiaries to
\nhold separate any assets or operations (either before or after the Closing
\nDate), or to commit to cause Company to hold separate any assets or operations;
\nor (v) to make or cause any of its Subsidiaries to make any commitment (to any
\nGovernmental Entity or otherwise) regarding its future operations or the future
\noperations of Company.<\/p>\n
(e) Without limiting the generality of this Section 5.7, Parent and
\nCompany shall together, or pursuant to an allocation of responsibility to be
\nagreed between them, coordinate and cooperate (i) in connection with the
\npreparation of the Solicitation Statement, (ii) in determining whether any
\naction by or in respect of, or filing with, any Governmental Entity is required,
\nor any actions, consents, approvals or waivers are required to be obtained from
\nparties to any material contracts, in connection with the consummation of the
\ntransactions contemplated by this Agreement, and (iii) in seeking any such
\nactions, consents, approvals or waivers or making any such filings, furnishing
\ninformation required in connection therewith or with the Solicitation Statement
\nand seeking timely to obtain any such actions, consents, approvals or waivers.<\/p>\n
Section 5.8 Notice of Certain Events.<\/p>\n
(a) Company and Parent shall promptly notify each other of:<\/p>\n
(i) any notice or other communication from any Person alleging
\n that the consent of such Person is or may be required in connection
\n with the transactions contemplated by this Agreement;<\/p>\n
(ii) any notice or other communication from any Governmental
\n Entity in connection with the transactions contemplated by this
\n Agreement;<\/p>\n
(iii) any Proceedings commenced or, to its knowledge,
\n threatened against, relating to or involving or otherwise affecting
\n it which relate to the consummation of the transactions contemplated
\n by this Agreement;<\/p>\n
39<\/p>\n
(iv) any event or occurrence not in the ordinary course of
\n business of its business or which could reasonably be expected to
\n have a Material Adverse Effect;<\/p>\n
(v) its obtaining knowledge of the occurrence, or failure to
\n occur, of any event which occurrence or failure to occur will be
\n likely to cause (A) any representation or warranty made by it (and,
\n in the case of Parent, made by Merger Sub) contained in this
\n Agreement that is qualified as to materiality becoming untrue or
\n inaccurate in any respect or any such representation of warranty
\n that is not so qualified becoming untrue or inaccurate in any
\n material respect, (B) the failure of it (and, in the case of Parent,
\n by Merger Sub) to comply with or satisfy in any material respect any
\n covenant, condition or agreement to be complied with or satisfied by
\n it under this Agreement and (C) any fact or development which would
\n result in the failure of any condition hereto not to be satisfied;<\/p>\n
(vi) the failure by it to perform, or comply with, in any
\n material respect any of its obligations, covenants, or agreements
\n contained in this Agreement; or<\/p>\n
(vii) Company obtaining knowledge of a material breach by
\n Parent, or Parent obtaining knowledge of a material breach by
\n Company, of their respective representations, warranties or
\n covenants hereunder of which the breaching party has not already
\n given notice pursuant to clauses (v) or (vi) above.<\/p>\n
(b) Company shall promptly notify Parent of any notice of, or other
\ncommunications relating to, a default or event that, with notice or lapse of
\ntime or both, would become a default, received by it subsequent to the date of
\nthis Agreement, under any Company Agreement.<\/p>\n
(c) No notification under this Section 5.8 shall affect the
\nrepresentations, warranties or obligations of the parties or the conditions to
\nthe obligations of the parties hereunder, or limit or otherwise affect the
\nremedies available hereunder to the party receiving such notice.<\/p>\n
Section 5.9 Cancellation of Company Options and Warrants.<\/p>\n
(a) Company agrees to use its reasonable best efforts to obtain,
\nprior to the Closing Date, a binding written agreement, reasonably acceptable to
\nParent, from each holder of Company Options whereby such holder agrees that if
\nthe Company Option(s) held by such holder have not been exercised prior to the
\nClosing Date, then such Company Options shall not be exercised on or after the
\nClosing Date and shall be cancelled as of the Effective Time.<\/p>\n
(b) Company agrees to use its reasonable best efforts to obtain,
\nprior to the Closing Date, a binding written agreement, reasonably acceptable to
\nParent, from each holder of Company Warrants whereby such holder agrees that if
\nthe Company Warrant(s) held by such holder have not been exercised prior to the
\nClosing Date, then such Company Warrants shall not be exercised on or after the
\nClosing Date and shall be cancelled as of the Effective Time.<\/p>\n
Section 5.10 Blue Sky Laws. Parent shall take such steps as may be
\nnecessary to comply with the securities and blue sky laws of all jurisdictions
\nwhich are applicable to the issuance of the Parent Common Stock in connection
\nwith the Merger. Company shall use its commercially reasonable efforts to assist
\nParent as may be necessary to comply with the securities and blue sky laws of
\nall jurisdictions which are applicable in connection with the issuance of Parent
\nCommon Stock in connection with the Merger.<\/p>\n
40<\/p>\n
Section 5.11 Nonaccredited Shareholders. Prior to the Closing, Company
\nshall not take any action, including the granting of employee stock options,
\nthat would cause the number of Company Shareholders who are not “accredited
\ninvestors” pursuant to Regulation D promulgated under the Securities Act to
\nincrease to more than 35 during the term of this Agreement.<\/p>\n
Section 5.12 Listing of Additional Shares. Prior to the Effective Time,
\nParent shall file with the Nasdaq National Market a Notification Form for
\nListing of Additional Shares with respect to the shares of Parent Common Stock
\nissuable in the Merger.<\/p>\n
Section 5.13 Employees. Company will use reasonable commercial efforts in
\nconsultation with Parent to retain existing employees of Company through the
\nEffective Time and following the Merger. Company shall use its reasonable
\nefforts (i) to cause each of such employees set forth in Schedule 5.13(a) to
\nexecute an Offer Letter in the form attached hereto as Exhibit 5.13(a), and (ii)
\nto cause each Person set forth on Schedule 5.13(b) to execute a Non-Competition
\nand Non-Solicitation Agreement in the form set forth as Exhibit 5.13(b).<\/p>\n
Section 5.14 Expenses. Whether or not the Merger is consummated, all costs
\nand expenses incurred in connection with this Agreement and the transactions
\ncontemplated hereby shall be paid by the party incurring such expense, except
\nthat each of Parent and Company shall bear one-half of the filing fees under the
\nHSR Act; and provided further that any out-of-pocket expenses incurred by
\nCompany in excess of $800,000 in connection with the transactions contemplated
\nhereby, including without limitation fees and expenses of legal counsel,
\nfinancial advisors and accountants, if any, shall remain an obligation of
\nCompany’s Shareholders, except that the fees owed to Company’s financial advisor
\nin respect of the Contingent Payment, which fees are described in Section 5.14
\nof the Company Disclosure Schedule, shall be paid by the Surviving Corporation.
\nIf Parent or Company receives any invoices for amounts in excess of said
\namounts, it may pay such fees; provided, however, that such payment shall, if
\nnot promptly reimbursed by Company Shareholders at Parent’s request, constitute
\n“Damages” recoverable under the Escrow Agreement and such Damages shall not be
\nsubject to the escrow threshold set forth in Section 8.2(d) and, to the extent
\nnot otherwise recoverable under the Escrow Agreement, may be offset against any
\nContingent Payments.<\/p>\n
Section 5.15 Registration of Shares of Parent Common Stock Issued in the
\nMerger.<\/p>\n
(a) Parent shall use its reasonable commercial efforts to cause the
\nshares of Parent Common Stock issued in the Merger (including Escrow Shares) and
\nany shares of Parent Common Stock issued in payment of the Contingent Payments
\n(the “Contingent Shares” and, together with the shares of Parent Common Stock
\nissued in the Merger, the “Registrable Securities”) to be registered under the
\nSecurities Act so as to permit the resale thereof, and in connection therewith
\nshall use its reasonable commercial efforts to prepare and file a registration
\nstatement under the Securities Act (the “Registration Statement”) with the SEC
\nas soon as practicable after the Effective Time, in the case of the shares
\nissued in the Merger, and, in the case of Contingent Shares, as soon as
\npracticable after the issuance thereof, and shall use its reasonable commercial
\nefforts to cause the Registration Statement to become effective as soon as
\npossible after the filing thereof; provided, however, that each holder of
\nRegistrable Securities (“Holder”) shall provide all such information and
\nmaterials to Parent and take all such action as may be required in order to
\npermit Parent to comply with all applicable requirements of the SEC and to
\nobtain any desired acceleration of the effective date of such Registration
\nStatement. Such provision of information and materials is a condition precedent
\nto the obligations of Parent pursuant to this Section 5.15. The offering made
\npursuant to such registration shall not be underwritten.<\/p>\n
(b) Parent shall (i) prepare and file with the SEC the Registration
\nStatement in accordance with Section 5.15(a) hereof with respect to the shares
\nof Registrable Securities and shall use <\/p>\n
41<\/p>\n
all reasonable commercial efforts to cause the Registration Statement to remain
\neffective for a period ending on the first to occur of (A) the date all of the
\nshares registered thereunder and not previously sold by the Holders may be sold
\nunder Rule 144 in one three-month period (assuming compliance by the Holders
\nwith the provisions thereof) or (B) two (2) years after the Effective Time; (ii)
\nprepare and file with the SEC such amendments and supplements to the
\nRegistration Statement and the prospectus used in connection therewith as may be
\nnecessary to comply with the provisions of the Securities Act with respect to
\nthe sale or other disposition of all securities proposed to be registered in the
\nRegistration Statement until the termination of effectiveness of the
\nRegistration Statement; and (iii) furnish to each Holder such number of copies
\nof any prospectus (including any amended or supplemented prospectus) in
\nconformity with the requirements of the Securities Act, and such other
\ndocuments, as each Holder may reasonably request in order to effect the offering
\nand sale of the Registrable Securities to be offered and sold, but only while
\nParent shall be required under the provisions hereof to cause the Registration
\nStatement to remain current.<\/p>\n
(c) Notwithstanding any other provision of this Section 5.15, Parent
\nshall have the right at any time to require that all Holders suspend further
\nopen market offers and sales of Registrable Securities whenever, and for so long
\nas, in the reasonable judgment of Parent in good faith after consultation with
\ncounsel, there is in existence material undisclosed information or events with
\nrespect to Parent (the “Suspension Right”). In the event Parent exercises the
\nSuspension Right, such suspension will continue for the period of time
\nreasonably necessary for disclosure to occur at a time that is not materially
\ndetrimental to Parent or until such time as the information or event is no
\nlonger material, each as determined in good faith by Parent after consultation
\nwith counsel, but in no event shall any single suspension continue for more than
\n120 consecutive days. Parent will promptly give the Shareholders’ Agent notice,
\nin a writing signed by an executive officer of Parent of any such suspension
\n(the “Suspension Notice”). Parent agrees to notify the Shareholders’ Agent
\npromptly upon termination of the suspension (the “Resumption Notice”). Upon
\nreceipt of either a Suspension Notice or Resumption Notice, the Shareholders’
\nAgent shall immediately notify each Holder concerning the status of the
\nRegistration Statement. In addition, each Holder shall agree in the Investor
\nRepresentation Statement that if such Holder intends to sell Registrable
\nSecurities pursuant to the Registration Statement, such Holder will give at
\nleast three (3) business days’ prior written notice to Parent of any such
\nproposed sale of Registrable Securities pursuant to the Registration Statement
\n(which notice may cover sales to be made within a ten (10) business day period
\nfollowing the date of Parent’s response) and not to make such sale (i) unless
\nsuch three (3) business days elapse without response from Parent, or (ii) in the
\nevent Parent responds by stating that an amendment to the Registration Statement
\nor supplement to the prospectus must be filed in order to cause the prospectus
\nincluded in such Registration Statement, as then in effect, not to include an
\nuntrue statement of a material fact or omit to state a material fact required to
\nbe stated therein or necessary to make the statements therein not misleading in
\nthe light of the circumstances then existing, until Parent notifies the Holder
\nthat the Registration Statement has been amended or the prospectus supplemented
\nas required, which Parent shall do as soon as reasonably practicable subject to
\nthe first two sentences of this Section 5.15(c). Parent shall use commercially
\nreasonable efforts to respond to Holder as soon as reasonably practicable after
\nreceiving such notice of proposed sale. No prior notice of sale shall be
\nrequired to the extent such Holder is selling Registrable Securities other than
\npursuant to the Registration Statement. For purposes of this Section 5.15(c),
\n(i) the term “business day” means any day that the Nasdaq National Market is
\nopen for trading and (ii) in determining the three (3) business day prior notice
\nrequirement, such period shall commence on the business day the notice is
\nreceived by Parent if such notice is received by Parent by 12:00 noon New York
\nCity time or on the next business day if received by Parent after such time.<\/p>\n
(d) Parent shall pay all of the out-of-pocket expenses, other than
\nunderwriting discounts and commissions and fees and expenses of counsel for the
\nHolders, if any, incurred in connection with any registration of Registrable
\nSecurities pursuant to this Section 5.15, including, without <\/p>\n
42<\/p>\n
limitation, all registration and filing fees, printing expenses, transfer
\nagents’ and registrars’ fees and the fees and disbursements of Parent’s outside
\ncounsel and independent accountants.<\/p>\n
(e) To the fullest extent permitted by law, the Parent will
\nindemnify, defend, protect and hold harmless each selling Holder, each
\nunderwriter of Parent Common Stock being sold by such Holders pursuant to this
\nSection 5.15, each Person, if any, who controls any such Holder or underwriter
\nwithin the meaning of the Securities Act or the Exchange Act and their
\nrespective affiliates, officers, directors, partners, successors and assigns
\n(each a “Holder Indemnitee”) against all actions, claims, losses, damages,
\nliabilities and expenses to which they or any of them become subject under the
\nSecurities Act, the Exchange Act or under any other statute or at common law or
\notherwise and, except as hereinafter provided, will promptly reimburse each such
\nHolder Indemnitee for any legal or other expenses reasonably incurred by them or
\nany of them in connection with investigating or defending any actions, whether
\nor not resulting in any liability, insofar as such losses, claims, damages,
\nexpenses, liabilities or actions arise out of or are based upon any untrue
\nstatement or alleged untrue statement of material fact in any Registration
\nStatement and any prospectus filed pursuant to Section 5.15 or any
\npost-effective amendment thereto or arise out of or are based upon any omission
\nor alleged omission to state a material fact required to be stated therein or
\nnecessary to make the statements therein not misleading or any violation by the
\nParent of any rule or regulation promulgated under the Securities Act, the
\nExchange Act or any Legal Provision applicable to the Parent and relating to
\naction or inaction required of the Parent in connection with such registration;
\nprovided, however, that the Parent shall not be liable to any such Holder
\nIndemnitee in respect of any claims, losses, damages, liabilities and expenses
\nresulting from any untrue statement or alleged untrue statement, or omission or
\nalleged omission, made in reliance upon and in conformity with information
\nfurnished in writing to the Parent by such Holder Indemnitee specifically for
\nuse in connection with such registration statement and prospectus or
\npost-effective amendment.<\/p>\n
(f) To the fullest extent permitted by law, each selling Holder of
\nRegistrable Securities registered in accordance with Section 5.15 will indemnify
\nthe Parent, each Person, if any, who controls the Parent within the meaning of
\nthe Securities Act or the Exchange Act, each underwriter of Parent Common Stock
\nand their respective affiliates, officers, directors, partners, successors and
\nassigns (each a “Parent Indemnitee”) against any actions, claims, losses,
\ndamages, liabilities and expenses to which they or any of them may become
\nsubject under the Securities Act, the Exchange Act or under any other statute or
\nat common law or otherwise, and, except as hereinafter provided, will promptly
\nreimburse each Parent Indemnitee for any legal or other expenses reasonably
\nincurred by them or any of them in connection with investigating or defending
\nany actions, whether or not resulting in any liability, insofar as such losses,
\nclaims, damages, expenses, liabilities or actions arise out of or are based upon
\nany untrue statement or alleged untrue statement of a material fact in any
\nRegistration Statement and any prospectus filed pursuant to Section 5.15 or any
\npost-effective amendment thereto, or any omission or alleged omission to state a
\nmaterial fact required to be stated therein or necessary to make the statements
\ntherein not misleading, which untrue statement or alleged untrue statement or
\nomission or alleged omission was made in reliance upon and in conformity with
\ninformation furnished in writing to the Parent by such Holder specifically for
\nuse in connection with such registration statement, prospectus or post-effective
\namendment; provided, however, that the obligations of each such selling Holder
\nhereunder shall be limited to an amount equal to the proceeds to such Holder
\nfrom the sale of such Holder’s Registrable Securities as contemplated herein.<\/p>\n
(g) Each Person entitled to indemnification under this Section 5.15
\n(a “Registration Indemnified Person”) shall give notice to the party required to
\nprovide indemnification (the “Registration Indemnifying Person”) promptly after
\nsuch Registration Indemnified Person has actual knowledge of any claim as to
\nwhich indemnity may be sought and shall permit the Registration Indemnifying
\nPerson to assume the defense of any such claim and any litigation resulting
\ntherefrom, provided that counsel for the Registration Indemnifying Person who
\nconducts the defense of such claim or any litigation resulting<\/p>\n
43<\/p>\n
therefrom shall be approved by the Registration Indemnified Person (whose
\napproval shall not unreasonably be withheld), and the Registration Indemnified
\nPerson may participate in such defense at such party’s expense (unless the
\nRegistration Indemnified Person has reasonably concluded that there may be a
\nconflict of interest between the Registration Indemnifying Person and the
\nRegistration Indemnified Person in such action, in which case the fees and
\nexpenses of one counsel for such Registration Indemnified Person(s) shall be at
\nthe expense of the Registration Indemnifying Person), and provided further that
\nthe failure of any Registration Indemnified Person to give notice as provided
\nherein shall not relieve the Registration Indemnifying Person of its obligations
\nunder this Section 5.15 except to the extent the Registration Indemnifying
\nPerson is materially prejudiced thereby. No Registration Indemnifying Person, in
\nthe defense of any such claim or litigation, shall (except with the consent of
\neach Registration Indemnified Person) consent to entry of any judgment or enter
\ninto any settlement that does not include as an unconditional term thereof the
\ngiving by the claimant or plaintiff to such Registration Indemnified Person of a
\nrelease from all liability in respect to such claim or litigation. Each
\nRegistration Indemnified Person shall furnish such information regarding itself
\nor the claim in question as a Registration Indemnifying Person may reasonably
\nrequest in writing and as shall be reasonably required in connection with the
\ndefense of such claim and litigation resulting therefrom.<\/p>\n
(h) In order to provide for just and equitable contribution to joint
\nliability under the Securities Act in any case in which the Parent or any Holder
\nmakes a claim for indemnification pursuant to this Section 5.15 but it is
\njudicially determined (by the entry of a final judgment or decree by a court of
\ncompetent jurisdiction and the expiration of time to appeal or the denial of the
\nlast right of appeal) that such indemnification may not be enforced in such case
\nnotwithstanding that this Section 5.15 provides for indemnification, in such
\ncase, then the Parent and such Holder will contribute to the aggregate losses,
\nclaims, damages or liabilities to which they may be subject (after contribution
\nfrom others) in such proportion as is appropriate to reflect the relative fault
\nof the Parent on the one hand and of the Holder on the other in connection with
\nthe statements or omissions which resulted in such losses, claims, damages or
\nliabilities, as well as any other relevant equitable considerations or, if the
\nallocation provided herein is not permitted by applicable law, in such
\nproportion as shall be permitted by applicable law and reflect as nearly as
\npossible the allocation provided herein. The relative fault of the Parent on the
\none hand and of the Holder on the other shall be determined by reference to,
\namong other things, whether the untrue or alleged untrue statement of a material
\nfact or omission or alleged omission to state a material fact relates to
\ninformation supplied by the Parent on the one hand or by the Holder on the
\nother, and each party’s relative intent, knowledge, access to information and
\nopportunity to correct or prevent such statement or omission; provided, however,
\nthat in any such case (i) no Holder will be required to contribute any amount in
\nexcess of the proceeds received by such Holder from the sale of Registrable
\nSecurities pursuant to the Registration Statement; and (ii) no Person guilty of
\nfraudulent misrepresentation within the meaning of Section 11(f) of the
\nSecurities Act will be entitled to contribution from any Person or entity who
\nwas not guilty of such fraudulent misrepresentation.<\/p>\n
Section 5.16 Indemnification and Insurance.<\/p>\n
(a) The Company shall, and from and after the Effective Time, the
\nSurviving Corporation (the Company and the Surviving Corporation being referred
\nto in this Section 5.16 as the “Indemnifying Party”) shall, indemnify, defend
\nand hold harmless each Person who is now, or has been at any time prior to the
\ndate of this Agreement or who becomes prior to the Effective Time, an officer,
\ndirector or employee of Company (the “Indemnified Party”) against all losses,
\nclaims, damages, costs, expenses, liabilities or judgments or amounts that are
\npaid in settlement with the approval of the Indemnifying Party (which approval
\nshall not be unreasonably withheld) of or in connection with any Proceeding
\nbased in whole or in part on or arising in whole or in part out of the fact that
\nsuch Person is or was a director, officer or employee of Company, whether
\npertaining to any matter existing or occurring at or prior to the Effective Time
\nand whether asserted or claimed prior to, or at or after, the Effective Time,<\/p>\n
44<\/p>\n
including, without limitation, all losses, claims, damages, costs, expenses,
\nliabilities or judgments based in whole or in part on, or arising in whole or in
\npart out of, or pertaining to this Agreement or the transactions contemplated
\nhereby, in each case to the full extent a corporation is permitted under
\napplicable law to indemnify its own directors, officers and employees, as the
\ncase may be. Any Indemnified Party wishing to claim indemnification under this
\nSection 5.16(a) shall promptly notify the Indemnifying Party upon learning of
\nany such Proceeding, but the failure to so notify shall not relieve the
\nIndemnifying Party of any liability it may have to such Indemnified Party if
\nsuch failure does not materially prejudice the Indemnifying Party. The
\nIndemnifying Party may, at its own expense: (i) participate in the defense of
\nany Proceeding; or (ii) at any time during the course of any such Proceeding,
\nassume the defense thereof, unless the Indemnified Parties (or any of them)
\ndetermine in good faith (after consultation with legal counsel) that there is,
\nunder applicable standards of professional conduct, a conflict on any
\nsignificant issue between the positions of the Indemnifying Party and any of
\nsuch Indemnified Parties, provided that the Indemnifying Party’s counsel shall
\nbe reasonably satisfactory to the Indemnified Parties. If the Indemnifying Party
\nassumes such defense, the Indemnified Parties shall have the right (but not the
\nobligation) to participate in the defense thereof and to employ counsel, at
\ntheir own expense, separate from the counsel employed by the Indemnifying Party.
\nWhether or not the Indemnifying Party chooses to assume the defense of any such
\nclaim, suit, action or proceeding, the Indemnifying Party and Parent shall
\ncooperate in the defense thereof. If the Indemnifying Party fails to so assume
\nthe defense thereof, the Indemnified Parties may retain counsel reasonably
\nsatisfactory to the Indemnifying Party and the Indemnifying Party shall pay the
\nreasonable fees and expenses of such counsel promptly after statements therefor
\nare received; provided that the Indemnified Parties on whose behalf expenses are
\nadvanced provide any undertaking contemplated by Section 317(f) of the
\nCalifornia Law in the case of a claim prior to the Effective Time and by Section
\n145(e) of the Delaware Law in the case of a claim after the Effective Time.
\nNeither Parent nor the Surviving Corporation shall be liable for any settlement
\neffected without its written consent (which consent shall not be unreasonably
\nwithheld). The Indemnified Parties as a group may retain only one law firm (in
\naddition to local counsel) to represent them with respect to a single action
\nunless any Indemnified Party determines in good faith (after consultation with
\nlegal counsel) that there is, under applicable standards of professional
\nconduct, a conflict on any significant issue between the positions of any two or
\nmore Indemnified Parties.<\/p>\n
(b) From and after the Effective Time, the Surviving Corporation
\nwill fulfill, assume and honor in all respects the obligations of Company
\npursuant to Company’s Articles of Incorporation and any indemnification
\nagreement between Company and any of Company’s directors and officers existing
\nand in force as of the Effective Time.<\/p>\n
(c) The obligations of Parent and the Surviving Corporation under
\nthis Section 5.16 are subject to the conditions that each Indemnified Party
\nshall comply with the reasonable requests of the Indemnifying Party and Parent
\nin defending or settling any action hereunder and that any Indemnified Party
\nshall approve any proposed settlement of any such action if (i) such settlement
\ninvolves no finding or admission of any liability by any Indemnified Party and
\n(ii) the sole relief provided in connection with such settlement is monetary
\ndamages that are paid in full by the Indemnifying Party.<\/p>\n
(d) If the Surviving Corporation does not have sufficient capital to
\ncomply with its obligations under Section 5.16, Parent shall provide the
\nSurviving Corporation with such capital.<\/p>\n
(e) Notwithstanding anything herein to the contrary, no Indemnified
\nParty (including without limitation any Company Indemnified Person) shall be
\nentitled to make any claim for indemnification against Parent, the Surviving
\nCorporation or any of their respective Affiliates by reason of the fact that it,
\nhe or she was a shareholder, director, officer, employee or agent of any such
\nentity or was serving at the request of any such entity as a partner, trustee,
\ndirector, officer, employee or agent of another entity (whether such claim is
\nfor judgments, damages, penalties, fines, costs, amounts paid in <\/p>\n
45<\/p>\n
settlement, losses, expenses or otherwise and whether such claim is pursuant to
\nany statute, charter document, bylaw, agreement or otherwise) with respect to
\nany action, suit, proceeding, complaint, claim or demand brought by any Parent
\nIndemnified Person against such Indemnified Party (whether such action, suit,
\nproceeding, complaint, claim or demand is pursuant to this Agreement, applicable
\nlaw or otherwise).<\/p>\n
Section 5.17 Conversion of Company Preferred Stock. Company shall use its
\nreasonable best efforts to ensure that all outstanding Company Preferred Stock
\nshall have been converted into Company Common Stock in accordance with the
\nArticles of Incorporation of Company.<\/p>\n
ARTICLE VI
\n CONDITIONS TO THE MERGER<\/p>\n
Section 6.1 Conditions to Obligations of Each Party to Effect the Merger.
\nThe respective obligations of each party to this Agreement to consummate and
\neffect this Agreement and the transactions contemplated hereby shall be subject
\nto the satisfaction at or prior to the Effective Time of each of the following
\nconditions, any of which may be waived, in writing, by agreement of all the
\nparties hereto:<\/p>\n
(a) Shareholder Approval. This Agreement and the Merger shall be
\n approved and adopted by the Company Shareholders by the requisite vote
\n under California Law and the Company’s Articles of Incorporation.<\/p>\n
(b) No Injunctions or Restraints: Illegality. No temporary
\n restraining order, preliminary or permanent injunction or other order
\n issued by any court of competent jurisdiction or other legal or regulatory
\n restraint or prohibition preventing the consummation of the Merger shall
\n be and remain in effect, nor shall any Proceeding brought by an
\n administrative agency or commission or other Governmental Entity, domestic
\n or foreign, seeking any of the foregoing be pending, which would have a
\n Material Adverse Effect on either Parent or on Parent combined with the
\n Surviving Corporation after the Effective Time, nor shall there be any
\n action taken, or any statute, rule, regulation or order enacted, entered,
\n enforced or deemed applicable to the Merger, which makes the consummation
\n of the Merger illegal.<\/p>\n
(c) Governmental Approval. The waiting period (and any extension
\n thereof) applicable to the Merger under the HSR Act shall have been
\n terminated or shall have expired. Parent, Company and Merger Sub and their
\n respective Subsidiaries shall have timely obtained from each Governmental
\n Entity all other approvals, waivers and consents, if any, necessary for
\n consummation of or in connection with the Merger and the several
\n transactions contemplated hereby, including such approvals, waivers and
\n consents as may be required under the Securities Act and under state
\n securities or “blue sky” laws, other than filings and approvals relating
\n to the Merger or affecting Parent’s ownership of Company or any of its
\n properties if failure to obtain such approval, waiver or consent would not
\n have a Material Adverse Effect on Parent after the Effective Time.<\/p>\n
Section 6.2 Additional Conditions to the Obligations of Parent and Merger
\nSub. The obligations of Parent and Merger Sub to consummate and effect this
\nAgreement and the transactions contemplated hereby shall be subject to the
\nsatisfaction at or prior to the Effective Time of each of the following
\nconditions, any of which may be waived, in writing, by Parent:<\/p>\n
(a) Accuracy of Representations and Warranties. Each of the
\n representations and warranties of Company in this Agreement that is
\n expressly qualified by a reference to materiality shall be true and
\n correct in all respects as so qualified, and each of the representations
\n and <\/p>\n
46<\/p>\n
warranties of Company in this Agreement that is not so qualified shall be
\n true and correct in all material respects, each as of the date when made
\n and at and as of the Closing, except for such changes as are permitted by
\n this Agreement and except to the extent a representation or warranty
\n speaks only as of an earlier date, which shall be true and correct as of
\n such date.<\/p>\n
(b) Performance of Obligations. Company shall have performed and
\n complied in all material respects with all covenants, obligations and
\n conditions of this Agreement required to be performed and complied with by
\n it as of the Closing.<\/p>\n
(c) Certificate of Officers. Parent and Merger Sub shall have
\n received a certificate executed on behalf of Company by the chief
\n executive officer and chief financial officer of Company certifying that
\n the conditions set forth in Section 6.2(a), (b) and (g) have been
\n satisfied.<\/p>\n
(d) Third Party Consents. All consents or approvals of
\n non-Governmental Entities required to be obtained in connection with the
\n Merger and the other transactions contemplated by this Agreement shall
\n have been obtained and shall be in full force and effect, except where the
\n failure to obtain such consents or approvals individually or in the
\n aggregate would not have a Material Adverse Effect on Company.<\/p>\n
(e) No Governmental Litigation. There shall not be pending or
\n threatened any suit, action or proceeding by any Governmental Entity, and
\n neither Parent nor Company shall have received any communication from any
\n Governmental Entity in which such Governmental Entity indicates the
\n probability of commencing any Proceeding or taking any other action, (i)
\n challenging the acquisition by Parent or Merger Sub of any shares of
\n Company Common Stock, seeking to restrain or prohibit the consummation of
\n the Merger, or seeking to place limitations on the ownership of shares of
\n Company Common Stock (or shares of common stock of the Surviving
\n Corporation) by Parent or Merger Sub or seeking to obtain from Company,
\n Parent or Merger Sub any damages that are material in relation to Company,
\n (ii) seeking to prohibit or materially limit the ownership or operation by
\n Company, Parent or any of Parent’s Subsidiaries of any material portion of
\n any business or of any assets of Company, Parent or any of Parent’s
\n Subsidiaries, or to compel Company, Parent or any of Parent’s Subsidiaries
\n to divest or hold separate any material portion of any business or of any
\n assets of Company, Parent or any of Parent’s Subsidiaries, as a result of
\n the Merger or (iii) seeking to prohibit Parent or any of its Subsidiaries
\n from effectively controlling in any material respect the business or
\n operations of Company.<\/p>\n
(f) Escrow Agreement. Parent, Merger Sub, Company, Escrow Agent and
\n the Shareholders’ Agent shall have entered into the Escrow Agreement
\n contemplated by Article VIII in substantially the form attached hereto as
\n Exhibit 6.2(f) (the “Escrow Agreement”).<\/p>\n
(g) No Material Adverse Change. No event, occurrence or development
\n shall have occurred since the date of this Agreement and be continuing
\n which has had or would be reasonably likely to result in any change,
\n effect, event, occurrence or state of facts (or any development that has
\n had or is reasonably likely to have any change or effect) that,
\n individually or in the aggregate, has had or would have a Material Adverse
\n Effect on Company.<\/p>\n
(h) Investor Representation Statement; Number of Shareholders. Each
\n of the Company’s shareholders shall have delivered to Parent a signed
\n Investor Representation Statement and each such Statement shall be in full
\n force and effect, and there shall be no more than thirty-five (35) Company
\n Shareholders who are (i) U.S. persons as defined under Regulation <\/p>\n
47<\/p>\n
S under the Securities Act (“U.S. Person”) and (ii) not “accredited
\n investors” as defined in Rule 501 under the Securities Act.<\/p>\n
(i) Purchaser Representative. There shall be a Purchaser
\n Representative (as defined in Regulation D under the Securities Act),
\n reasonably satisfactory to Parent, representing each holder of Company
\n Capital Stock who is a U.S. Person and not an “accredited investor” as
\n defined in Rule 501 under the Securities Act, and such Purchaser
\n Representative shall have executed and delivered documentation reasonably
\n satisfactory to Parent.<\/p>\n
(j) Offer Letters and Non-Competition and Non-Solicitation
\n Agreements. The employees of Company set forth on Schedule 5.13(a) shall
\n have accepted employment with Merger Sub pursuant to the terms of an offer
\n letter substantially in the form attached hereto as Exhibit 5.13(a), and
\n shall have entered into Non-Competition and Non-Solicitation Agreements
\n substantially in the form attached as Exhibit 5.13(b).<\/p>\n
(k) Dissenters’ Rights. Not more than five percent (5%) of the
\n Company Capital Stock Outstanding immediately prior to the Effective Time
\n shall be eligible as Dissenters’ Shares.<\/p>\n
(l) Conversion of Preferred Stock. All shares of Company Preferred
\n Stock shall have converted into Company Common Stock in accordance with
\n Company’s Articles of Incorporation prior to the Effective Time.<\/p>\n
(m) Options and Warrants. All Company Options and Company Warrants
\n outstanding on the Closing Date shall be cancelled as provided in Section
\n 5.9.<\/p>\n
(n) Opinion. Counsel for Company shall have delivered to Parent an
\n opinion in substantially the form attached hereto as Exhibit 6.2(n).<\/p>\n
(o) Lockup Agreements. Each Company Shareholder who will receive
\n shares of Parent Common Stock at the Effective Time having a value (based
\n on the Average Closing Price) of $50,000 or more shall have entered into a
\n “lock-up” agreement in substantially the form attached hereto as Exhibit
\n 6.2(o).<\/p>\n
(p) Waiver of Severance Payment. Andrew Barnes shall have executed
\n such documentation as Parent may reasonably request to evidence the waiver
\n of payments in the nature of compensation as specified in Section 280G of
\n the Code and the proposed regulations thereunder (such as severance
\n payments, the acceleration of the vesting of options, the lapse of
\n repurchase rights with respect to shares of restricted stock and
\n forgiveness of promissory notes) to the extent the approval by Company
\n Shareholders necessary to exempt such payments and transactions from the
\n provisions of Section 280G of the Code is not obtained.<\/p>\n
Section 6.3 Additional Conditions to Obligations of Company. The
\nobligations of Company to consummate and effect this Agreement and the
\ntransactions contemplated hereby shall be subject to the satisfaction at or
\nprior to the Effective Time of each of the following conditions, any of which
\nmay be waived, in writing, by Company:<\/p>\n
(a) Accuracy of Representations and Warranties. Each of the
\n representations and warranties of Parent and Merger Sub in this Agreement
\n that is expressly qualified by a reference to materiality shall be true
\n and correct in all respects as so qualified, and each of the
\n representations and warranties of Parent and Merger Sub in this Agreement
\n that is not so qualified shall be true and correct in all material
\n respects, each as of the date when made and at <\/p>\n
48<\/p>\n
and as of the Closing, except for such changes as are permitted by this
\n Agreement and except to the extent a representation or warranty speaks
\n only as of an earlier date, which shall be true and correct as of such
\n date.<\/p>\n
(b) Performance of Obligations. Parent and Merger Sub shall have
\n performed and complied in all material respects with all covenants,
\n obligations and conditions of this Agreement required to be performed and
\n complied with by them as of the Closing.<\/p>\n
(c) Certificate of Officers. Company shall have received a
\n certificate executed on behalf of Parent and Merger Sub by the chief
\n executive officer and chief financial officer of Parent and Merger Sub,
\n respectively, certifying that the conditions set forth in Sections 6.3(a),
\n (b) and (d) have been satisfied.<\/p>\n
(d) No Material Adverse Change. No event, occurrence or development
\n shall have occurred since the date of this Agreement and be continuing
\n which has had or would be reasonably likely to result in any change,
\n effect, event, occurrence or state of facts (or any development that has
\n had or is reasonably likely to have any change or effect) that,
\n individually or in the aggregate, has had or would have a Material Adverse
\n Effect on Parent.<\/p>\n
(e) Nasdaq Listing. The Parent Common Stock to be issued in the
\n Merger shall have been authorized for listing on the Nasdaq National
\n Market upon official notice of issuance.<\/p>\n
(f) Opinion of Counsel. Counsel for Parent shall have delivered to
\n Company an opinion in substantially the form of Exhibit 6.3(f).<\/p>\n
ARTICLE VII
\n TERMINATION, AMENDMENT AND WAIVER<\/p>\n
Section 7.1 Termination. This Agreement may be terminated at any time
\nprior to the Effective Time, whether before or after approval of the matters
\npresented in connection with the Merger by the Company Shareholders (with
\nrespect to Sections 7.1(b), (c) and (d), by written notice by the terminating
\nparty to the other party):<\/p>\n
(a) by the mutual written consent of Parent and Company;<\/p>\n
(b) by either Parent or Company if the Merger shall not have been
\n consummated by March 31, 2001, provided, however, that the right to
\n terminate this Agreement under this Section 7.1(b) shall not be available
\n to any party whose failure to fulfill any obligation under this Agreement
\n has been the cause of or resulted in the failure of the Merger to occur on
\n or before such date;<\/p>\n
(c) by either Parent or Company if a court of competent jurisdiction
\n or other Governmental Entity shall have issued a nonappealable final
\n order, decree or ruling or taken any other action, in each case having the
\n effect of permanently restraining, enjoining or otherwise prohibiting the
\n Merger, except if the party relying on such order, decree or ruling or
\n other action has not complied with its obligations under this Agreement;<\/p>\n
(d) by either Parent or Company if they are not in material breach
\n of their obligations under this Agreement and if there has been a breach
\n of any representation, warranty, covenant or agreement on the part of the
\n other party set forth in this Agreement, which breach (i) causes the
\n conditions set forth in Section 6.1 or 6.2 (in the case of termination by
\n Parent) or Section 6.1 or<\/p>\n
49<\/p>\n
6.3 (in the case of termination by Company) not to be satisfied and (ii)
\n shall not have been cured within twenty (20) business days following
\n receipt by the breaching party of written notice of such breach from the
\n other party.<\/p>\n
Section 7.2 Effect of Termination. In the event of termination of this
\nAgreement as provided in Section 7.1, there shall be no liability or obligation
\non the part of Parent, Company, Merger Sub or their respective officers,
\ndirectors or stockholders, except to the extent that such termination results
\nfrom the breach by a party of any of its representations, warranties or
\ncovenants set forth in this Agreement; provided that the provisions of Section
\n7.1 shall remain in full force and effect and survive any termination of this
\nAgreement. Notwithstanding the foregoing, if (a) (i) Company or Parent shall
\nterminate this Agreement pursuant to Section 7.1(b) because the Company
\nShareholders do not approve the Merger or (ii) Parent terminates this Agreement
\npursuant to Section 7.1(d) hereof, and (b) in either such case a bona fide
\nAcquisition Proposal shall have been communicated to the Company’s Board of
\nDirectors or publicly disclosed or has been made directly to the Company’s
\nShareholders or any person has publicly announced or communicated to the
\nCompany’s Board of Directors an intention (whether or not conditional) to make a
\nbona fide Acquisition Proposal, then Company shall pay to Parent an amount equal
\nto $2,000,000 (the “Termination Fee”), payable by wire transfer of immediately
\navailable funds, such payment to be made immediately following termination of
\nthis Agreement. Simultaneously with the payment of the Termination Fee, Company
\nshall reimburse Parent for all of its documented out-of-pocket expenses incurred
\nin connection with this Agreement and the transactions contemplated hereby
\n(including documented fees and expenses of accountants, attorneys and financial
\nadvisors) up to an aggregate of $500,000 (the “Expenses”). Acceptance by Parent
\nof the Termination Fee and the Expenses shall constitute conclusive evidence
\nthat this Agreement has been validly terminated and upon payment of such amount
\nCompany shall be fully released and discharged from any liability or obligation
\nresulting from or under this Agreement. Company acknowledges that the agreements
\ncontained in this Section 7.2 are an integral part of the transactions
\ncontemplated by this Agreement, and that, without these agreements, Parent would
\nnot enter into this Agreement. If Parent shall successfully bring an action to
\nenforce its rights under this Section 7.2, Company shall reimburse Parent for
\nits reasonable fees and expenses in connection therewith and shall pay Parent
\ninterest on the Termination Fee and Expenses from the date the Termination Fee
\nbecomes payable to the date of payment at the prime rate in effect on the date
\nthe Termination Fee became payable as published in The Wall Street Journal.<\/p>\n
Section 7.3 Amendment. This Agreement may be amended by the parties
\nhereto, by action taken or authorized by their respective Boards of Directors,
\nat any time before or after approval of the matters presented in connection with
\nthe Merger to the Company Shareholders; provided, however, that after any such
\napproval, there shall be made no amendment that by law requires further approval
\nby the Company Shareholders without such approval. This Agreement may not be
\namended except by an instrument in writing signed on behalf of each of the
\nparties hereto.<\/p>\n
Section 7.4 Extension, Waiver. At any time prior to the Effective Time,
\nthe parties hereto, to the extent legally allowed, may (i) extend the time for
\nthe performance of any of the obligations or other acts of the other parties
\nhereto, (ii) waive any inaccuracies in the representations and warranties
\ncontained herein or in any document delivered pursuant hereto and (iii) waive,
\nto the extent permitted by applicable law, compliance with any of the agreements
\nor conditions contained herein. Any agreement on the part of a party hereto to
\nany such extension or waiver shay be valid only if set forth in a written
\ninstrument signed on behalf of such party.<\/p>\n
50<\/p>\n
ARTICLE VIII
\n ESCROW AND INDEMNIFICATION<\/p>\n
Section 8.1 Escrow Fund.<\/p>\n
(a) At the Closing, the Escrow Shares shall be registered in the
\nname of, and be deposited, together with the Escrow Cash, with U.S. Bank Trust
\nNational Association (or other institution selected by Parent with the
\nreasonable consent of Company) as escrow agent (the “Escrow Agent”), such
\ndeposit and any deposit pursuant to Section 8.1(b) to constitute the “Escrow
\nFund” and to be governed by the terms set forth herein and in the Escrow
\nAgreement. The Escrow Fund shall be available to compensate Parent pursuant to
\nthe indemnification obligations of the Company Shareholders.<\/p>\n
(b) Dividends, whether paid in cash, shares of Parent Common Stock
\nor other securities, and other distributions of any kind declared with respect
\nto the Escrow Shares shall be deposited with the Escrow Agent pursuant to
\nSection 8.1(a) hereof and shall be part of the Escrow Fund. Each Company
\nShareholder will have voting rights with respect to the Escrow Shares deposited
\nin the Escrow Fund with respect to such shareholder so long as such Escrow
\nShares are held in escrow, and Parent will take all reasonable steps necessary
\nto allow the exercise of such rights. While the Escrow Shares remain in the
\nEscrow Agent’s possession pursuant to this Agreement, the Company Shareholders
\nwill retain and will be able to exercise all other incidents of ownership of
\nsaid Escrow Shares which are not inconsistent with the terms and conditions of
\nthis Agreement.<\/p>\n
Section 8.2 Indemnification.<\/p>\n
(a) Survival of Representations and Warranties. All representations
\nand warranties made by Company, Parent or Merger Sub herein, or in any
\ncertificate, schedule or exhibit delivered pursuant hereto, shall survive the
\nClosing and continue in full force and effect until the second anniversary of
\nthe Closing Date; provided, however, that the representations and warranties
\ncontained in Sections 2.10, 2.16 and 2.17 shall survive until 30 days after the
\nexpiration of the applicable statute of limitations period and any extensions
\nthereof and the representations and warranties contained in Section 2.4 shall
\nsurvive indefinitely.<\/p>\n
(b) Indemnification by Company Shareholders. Subject to the
\nlimitations set forth in this Article VIII, the Company Shareholders will
\nindemnify and hold harmless Parent and the Surviving Corporation and its
\nrespective officers, directors, agents, attorneys and employees, and each
\nPerson, if any, who controls or may control Parent or the Surviving Corporation
\nwithin the meaning of the Securities Act (hereinafter “Parent Indemnified
\nPersons”) from and against any and all losses, costs, damages, liabilities and
\nexpenses arising from claims, demands, actions, causes of action, including,
\nwithout limitation, legal fees, (collectively, “Damages”) incurred or sustained
\nby Parent Indemnified Persons as a result of:<\/p>\n
(i) any inaccuracy or breach of, or any claim by a third party
\n alleging facts that, if true, would mean Company has breached, any
\n representation or warranty by Company contained herein or under any
\n other agreement executed and delivered by the parties in furtherance
\n of the transactions described herein (without regard to any
\n materiality qualifier contained in such representation or warranty);
\n or<\/p>\n
(ii) a breach by Company of any covenant or other agreement
\n contained herein or under any other agreement executed and delivered
\n by the parties in furtherance of the transactions described herein.<\/p>\n
51<\/p>\n
Except as provided in the next paragraph, the sole recourse of the Parent
\nIndemnified Persons shall be against the Escrow Fund and claims against the
\nEscrow Fund shall be the sole and exclusive remedy of Parent Indemnified Persons
\nfor any Damages hereunder.<\/p>\n
The Company, Parent and the Surviving Corporation acknowledge that
\nsuch Damages, if any, would relate to unresolved contingencies existing at the
\nEffective Time, which if resolved at the Effective Time would have led to a
\nreduction in the Merger Consideration. The total liability for Damages resulting
\nfrom breaches of representations and warranties contained in Sections 2.4, 2.7,
\n2.10, 2.16 and 2.17 shall be the total amount of the Merger Consideration and
\nthe Contingent Payments (if and when paid) and, to the extent the Escrow Fund is
\nnot sufficient to satisfy such indemnification obligation, Parent may, in
\naddition to any other remedies it may have, offset such obligation against any
\nContingent Payments due hereunder. Nothing in this Agreement shall limit the
\nliability in amount or otherwise (i) of Company for any breach of any
\nrepresentation, warranty or covenant if the Merger does not close, (ii) of any
\nCompany Shareholder in connection with any breach by such shareholder of any
\nrepresentation or covenant in the Investor Representation Statement or Voting
\nAgreement delivered pursuant hereto or (iii) of Company or any Company
\nShareholder with respect to fraud, criminal activity or intentional breach of
\nany covenant contained in this Agreement.<\/p>\n
(c) Indemnification by Parent and Merger Sub. Subject to the
\nlimitations set forth in this Article VIII, Parent hereby agrees to indemnify,
\ndefend and hold harmless the Company Shareholders and their respective officers,
\ndirectors, agents, attorneys and employees (hereinafter “Company Indemnified
\nPersons”) from and against any and all Damages incurred or sustained by Company
\nIndemnified Persons as a result of:<\/p>\n
(i) any inaccuracy or breach of, or any claim by a third party
\n alleging facts that, if true, would mean Parent or Merger Sub has
\n breached, any representation or warranty by it contained herein or
\n under any other agreement executed and delivered by the parties in
\n furtherance of the transactions described herein (without regard to
\n any materiality qualifier contained in such representation or
\n warranty); or<\/p>\n
(ii) a breach by Parent or Merger Sub of any covenant or other
\n agreement contained herein (other than the covenants and agreements
\n set forth in Section 5.15, which are specifically covered in Section
\n 5.15) or under any other agreement executed and delivered by the
\n parties in furtherance of the transactions described herein.<\/p>\n
The sole recourse of the Company Indemnified Persons from any Damages shall be
\nindemnification under this Article VIII. The aggregate indemnification
\nobligations of Parent and Merger Sub hereunder shall not exceed $1,000,000,
\nprovided however that there shall be no limitation on liability of Parent or
\nMerger Sub for (i) any breach of any representation, warranty or covenant if the
\nMerger does not close or (ii) fraud, criminal activity or intentional breach of
\nany covenant contained in this Agreement.<\/p>\n
(d) Threshold for Claims. No claim for Damages arising out of any
\nmisrepresentation or breach of the representations and warranties shall be made
\nunder Article VIII unless the aggregate of Damages exceeds $20,000 for which
\nclaims are made hereunder by the Company Indemnified Persons or Parent
\nIndemnified Persons, as the case may be, in which case the Company Indemnified
\nPerson or Parent Indemnified Person, as the case may be, shall be entitled to
\nseek compensation for all Damages without regard to the limitation set forth in
\nthis Section 8.2(d).<\/p>\n
52<\/p>\n
Section 8.3 Escrow Period: Release From Escrow.<\/p>\n
(a) As promptly as practicable after Parent files its Annual Report
\non Form 10-K with the SEC for the year ended December 31, 2001 (the “Parent
\n10-K”), the Escrow Agent shall release from escrow to the Company Shareholders
\ntheir pro rata portion of the Escrow Fund remaining; provided, however, that a
\nportion of the Escrow Fund which, in the reasonable judgment of Parent, subject
\nto the objection of the Shareholders’ Agent and the subsequent arbitration of
\nthe matter in the manner provided in Section 8.7 hereof, is necessary to satisfy
\nany unsatisfied claims specified in any Escrow Claim Certificate theretofore
\ndelivered to the Escrow Agent on or prior to the date the Parent 10-K is filed
\nwith the SEC with respect to facts and circumstances existing on or prior to
\nsuch date, shall remain in the Escrow Fund until such claims have been resolved.
\nAny portion of the Escrow Fund retained pursuant to the proviso in the first
\nsentence of this Section 8.3(a) shall be released to Company Shareholders or
\nreleased to Parent (as appropriate) promptly upon resolution of each specific
\nindemnification claim involved. Escrow Shares and Escrow Cash shall be released
\nto the respective Company Shareholders in proportion to their respective share
\nof the Merger Consideration. Parent will take such action as may be necessary to
\ncause such certificates to be issued in the names of the appropriate Persons.
\nCertificates representing Escrow Shares so issued that are subject to resale
\nrestrictions under applicable securities laws will bear a legend to that effect.
\nNo fractional shares shall be released and delivered from Escrow to the Company
\nShareholders. In lieu of any fraction of an Escrow Share to which a Company
\nShareholder would otherwise be entitled, such holder will receive from Parent an
\namount of cash (rounded to the nearest whole cent) equal to the product of such
\nfraction multiplied by the average of the closing prices of Parent Common Stock
\nas reported on the Nasdaq National Market during the twenty trading days ending
\none day prior to the date such shares are released from the Escrow Fund. <\/p>\n
(b) No Escrow Shares or any beneficial interest therein may be
\npledged, sold, assigned or transferred, including by operation of law, by any
\nCompany Shareholder or be taken or reached by any legal or equitable process in
\nsatisfaction of any debt or other liability of any such shareholder, prior to
\nthe delivery to such shareholder of his pro rata portion of the Escrow Shares by
\nthe Escrow Agent as provided herein.<\/p>\n
(c) The Escrow Agent is hereby granted the power to effect any
\ntransfer of Escrow Shares contemplated by this Agreement. Parent will cooperate
\nwith the Escrow Agent in promptly issuing stock certificates to effect such
\ntransfers.<\/p>\n
Section 8.4 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on
\nor before the date of filing of the Parent 10-K of a certificate signed by any
\nofficer of Parent (an “Escrow Claim Certificate”) stating that with respect to
\nthe indemnification obligations of the Company Shareholders set forth in Section
\n8.2, Damages exist and specifying in reasonable detail the individual items of
\nsuch Damages included in the amount so stated, the date each such item was paid,
\nproperly accrued or arose, and the nature of the misrepresentation, breach of
\nwarranty, covenant or claim to which such item is related, the Escrow Agent
\nshall, subject to the provisions of this Article VIII, deliver to Parent out of
\nthe Escrow Fund, as promptly as practicable, cash equal to the amount of such
\nDamages. Notwithstanding the foregoing, the Shareholders’ Agent may elect to pay
\nall or a portion of the Damages in shares of Parent Common Stock if Parent and
\nShareholders’ Agent agree that payment in shares of Parent Common Stock will not
\njeopardize the treatment of the Merger as a reorganization under Section 368(a)
\nof the Code, it being agreed that if Parent and Shareholders’ Agent cannot reach
\nagreement regarding the use of shares of Parent Common Stock to pay the Damages,
\nthen Parent’s determination shall be final and binding on the parties. In the
\nevent the amount of Damages exceeds the amount of Escrow Cash available for the
\npayment of Damages and Parent determines that payment of Damages in shares of
\nParent Common Stock will jeopardize the treatment of the Merger as a
\nreorganization under Section 368(a) of the Code, then Shareholders’ Agent shall
\narrange for the sale, on behalf of the Company Shareholders, of <\/p>\n
53<\/p>\n
such number of the Escrow Shares as is necessary to pay the Damages to Parent in
\ncash. For purposes of this Section 8.4, the Parent Common Stock delivered to
\nParent from the Escrow Fund shall be valued at the average of the closing prices
\nof Parent Common Stock as reported on the Nasdaq National Market during the
\ntwenty trading days ending one day prior to the date such shares of Parent
\nCommon Stock are delivered to Parent.<\/p>\n
Section 8.5 Objections to Claims.<\/p>\n
(a) At the time of delivery of any Escrow Claim Certificate to the
\nEscrow Agent, a duplicate copy of such Escrow Claim Certificate shall be
\ndelivered to the Shareholders’ Agent and for a period of thirty (30) days after
\nsuch delivery, the Escrow Agent shall make no delivery of Parent Common Stock
\nand\/or cash pursuant to Section 8.4 hereof unless the Escrow Agent shall have
\nreceived written authorization from the Shareholders’ Agent to make such
\ndelivery. After the expiration of such thirty (30) day period, the Escrow Agent
\nshall make delivery of the Parent Common Stock and\/or cash in accordance with
\nSection 8.4 hereof, provided that no such payment or delivery may be made if the
\nShareholders’ Agent shall object in a written statement to the claim made in the
\nEscrow Claim Certificate, and such statement shall have been delivered to the
\nEscrow Agent and to Parent prior to the expiration of such thirty (30) day
\nperiod; and provided further that if Shareholders’ Agent shall only object to a
\nportion of the claim, the Escrow Agent shall pay to Parent the uncontested
\nportion of the claim.<\/p>\n
(b) In case the Shareholders’ Agent shall so object in writing to
\nany claim or claims by Parent made in any Escrow Claim Certificate, which
\nobjection shall state in reasonable detail the basis for such objection, Parent
\nshall have thirty (30) days to respond in a written statement to the objection
\nof the Shareholders’ Agent. If after such thirty (30) day period there remains a
\ndispute as to any claims, the Shareholders’ Agent and Parent shall attempt in
\ngood faith for sixty (60) days to agree upon the rights of the respective
\nparties with respect to each of such claims. If the Shareholders’ Agent and
\nParent should so agree, a memorandum setting forth such agreement shall be
\nprepared and signed by both parties and shall be furnished to the Escrow Agent.
\nThe Escrow Agent shall be entitled to rely on any such memorandum and shall
\ndistribute the Parent Common Stock or other property from the Escrow Fund in
\naccordance with the terms thereof.<\/p>\n
Section 8.6 Claims by Company Indemnitees.<\/p>\n
(a) Subject to the provisions of this Article VIII, upon receipt by
\nParent of a certificate signed by the Shareholders’ Agent (an “Agent
\nCertificate”) that with respect to the indemnification obligations of Parent and
\nMerger Sub set forth in Section 8.2, Damages exist and specifying in reasonable
\ndetail the individual items of Damages included in the amount so stated, the
\ndate each item was paid or properly accrued or arose, and the nature of the
\nmisrepresentation, breach of warranty or covenant or other claim to which such
\nitem is related, the Parent shall, subject to the provisions of this Article
\nVIII, deliver to the Shareholders’ Agent as promptly as practicable cash, shares
\nof Parent Common Stock, or a combination thereof, equal to such Damages;
\nprovided that in the event Parent elects to issue shares of Parent Common Stock
\nit shall deliver an undertaking to Shareholders’ Agent to register such shares
\nfor resale under the Securities Act in accordance with Section 5.15 hereof; and
\nprovided further that Parent shall issue shares of Parent Common Stock (subject
\nto Section 1.13 hereof) to the extent Parent reasonably determines that the
\npayment in cash Stock will jeopardize the treatment of the Merger as a
\nreorganization under Section 368(a) of the Code.<\/p>\n
(b) Parent shall have thirty (30) days after delivery of an Agent
\nCertificate to object to any claim or claims made by such Agent Certificate in a
\nwritten statement delivered to Shareholders’ Agent, which objection shall state
\nin reasonable detail the basis for such objection. In case Parent shall so
\nobject in writing to any claim or claims made by the Shareholders’ Agent in the
\nAgent Certificate, the <\/p>\n
54<\/p>\n
Shareholders Agent shall have thirty (30) days to respond in a written statement
\nto the objection of Parent. If after such thirty (30) day period there remains a
\ndispute as to any claims, the Shareholders’ Agent and Parent shall attempt in
\ngood faith for sixty (60) days to agree upon the rights of the respective
\nparties with respect to each of such claims. If the Shareholders’ Agent and
\nParent should so agree, a memorandum setting forth such agreement shall be
\nprepared and signed by both parties. Parent shall, if agreed in such memorandum,
\nmake payment for claims or other disposition as agreed in such memorandum and
\nsuch performance shall satisfy all of Parent’s obligations as to such claim.<\/p>\n
Section 8.7 Resolution of Conflicts and Arbitration.<\/p>\n
(a) If no agreement can be reached after good faith negotiation
\nbetween the parties pursuant to Sections 8.5 or 8.6, either Parent or the
\nShareholders’ Agent may, by written notice to the other, demand arbitration of
\nthe matter unless the amount of the Damages is at issue in pending litigation
\nwith a third party, in which event arbitration shall not be commenced until such
\namount is ascertained or both parties agree to arbitration; and in either such
\nevent the matter shall be settled by arbitration conducted by one arbitrator.
\nParent and the Shareholders’ Agent shall agree on the arbitrator; provided,
\nhowever, that if Parent and the Shareholders’ Agent cannot agree on the
\narbitrator, either Parent or the Shareholders’ Agent can request that the
\nAmerican Arbitration Association select the arbitrator. The arbitrator shall set
\na limited time period and establish procedures designed to reduce the cost and
\ntime for discovery while allowing the parties an opportunity, adequate in the
\nsole judgment of the arbitrator, to discover relevant information from the
\nopposing parties about the subject matter of the dispute. The arbitrator shall
\nrule upon motions to compel or limit discovery and shall have the authority to
\nimpose sanctions, including attorneys’ fees and costs, to the same extent as a
\ncourt of law or equity, should the arbitrator determine that discovery was
\nsought without substantial justification or that discovery was refused or
\nobjected to without substantial justification. The decision of the arbitrator
\nshall be written, shall be in accordance with applicable law and with this
\nAgreement, and shall be supported by written findings of fact and conclusions of
\nlaw which shall set forth the basis for the decision of the arbitrator. The
\ndecision of the arbitrator as to the validity and amount of any claim in such
\nEscrow Claim Certificate or Agent Certificate shall be binding and conclusive
\nupon the parties to this Agreement, and notwithstanding anything in Article VIII
\nhereof, the Escrow Agent and the parties shall be entitled to act in accordance
\nwith such decision and the Escrow Agent shall be entitled to make or withhold
\npayments out of the Escrow Fund in accordance therewith.<\/p>\n
(b) Judgment upon any award rendered by the arbitrator may be
\nentered in any court having jurisdiction. Any such arbitration shall be held in
\nNew York, New York if commenced by the Shareholders’ Agent and in San Diego,
\nCalifornia if commenced by Parent, in each case under the commercial rules then
\nin effect of the American Arbitration Association. For purposes of this Section
\n8.7(b), in any arbitration hereunder in which any claim or the amount thereof
\nstated in the Escrow Claim Certificate or Agent Certificate, as the case may be,
\nis at issue, the party seeking indemnification shall be deemed to be the
\nnon-prevailing party unless the arbitrator awards the party seeking
\nindemnification more than one-half (1\/2) of the amount in dispute, in which case
\nthe Person against whom indemnification is sought shall be deemed to be the
\nnon-prevailing party. The non-prevailing party to an arbitration shall pay its
\nown expenses, the fees of the arbitrator and the expenses, including attorneys’
\nfees and costs, reasonably incurred by the other party to the arbitration.<\/p>\n
Section 8.8 Shareholders’ Agent.<\/p>\n
(a) Andrew Barnes shall be constituted and appointed as agent
\n(“Shareholders’ Agent”) for and on behalf of the Company Shareholders to give
\nand receive notices and communications, to authorize delivery to Parent of the
\nParent Common Stock and\/or cash from the Escrow Fund in satisfaction of claims
\nby Parent, to object to such deliveries, to make claims on behalf of the Company<\/p>\n
55<\/p>\n
Shareholders pursuant to Section 8.6, to agree to, negotiate, enter into
\nsettlements and compromises of, and demand arbitration and comply with orders of
\ncourts and awards of arbitrators with respect to, such claims, and to take all
\nactions necessary or appropriate in the judgment of the Shareholders’ Agent for
\nthe accomplishment of the foregoing. Such agency may be changed by the holders
\nof a majority in interest of the Escrow Fund from time to time upon not less
\nthan 10 days’ prior written notice to Parent. No bond shall be required of the
\nShareholders’ Agent, and the Shareholders’ Agent shall receive no compensation
\nfor his services. Notices or communications to or from the Shareholders’ Agent
\nshall constitute notice to or from each of the Company Shareholders.<\/p>\n
(b) The Shareholders’ Agent shall not be liable for any act done or
\nomitted hereunder as Shareholders’ Agent while acting in good faith and in the
\nexercise of reasonable judgment and any act done or omitted pursuant to the
\nadvice of counsel shall be conclusive evidence of such good faith. The Company
\nShareholders shall severally indemnify the Shareholders’ Agent and hold him
\nharmless against any loss, liability or expense incurred without gross
\nnegligence or bad faith on the part of the Shareholders’ Agent and arising out
\nof or in connection with the acceptance or administration of his duties
\nhereunder, as the same may be modified, amended or supplemented.<\/p>\n
(c) The Shareholders’ Agent may rely on and shall be protected in
\nrelying on or refraining from acting on any instrument reasonably believed to be
\ngenuine and to have been signed or presented by the proper party or parties. The
\nShareholders’ Agent shall not be liable for other parties’ forgeries, fraud or
\nfalse representations.<\/p>\n
(d) The Shareholders’ Agent shall have reasonable access to
\ninformation about Parent and the reasonable assistance of Parent’s officers and
\nemployees for purposes of performing his duties and exercising his rights
\nhereunder, provided that the Shareholders’ Agent shall treat confidentially and
\nnot disclose any nonpublic information from or about Parent and its Subsidiaries
\nto anyone (except on a need to know basis to individuals who agree to treat such
\ninformation confidentially).<\/p>\n
(e) At the Closing, the Company shall deposit $20,000 with the
\nEscrow Agent to pay the expenses incurred by the Shareholders’ Agent in
\nconnection with this Agreement. The Company Shareholders shall be responsible
\nfor any expenses of or incurred by Shareholders’ Agent in excess of $20,000.<\/p>\n
Section 8.9 Actions of the Shareholders’ Agent. A decision, act, consent
\nor instruction of the Shareholders’ Agent shall constitute a decision of all
\nCompany Shareholders and shall be final, binding and conclusive upon each such
\nCompany Shareholder, and the Escrow Agent and Parent may rely upon any decision,
\nact, consent or instruction of the Shareholders’ Agent as being the decision,
\nact, consent or instruction of each and every such Company Shareholder. The
\nEscrow Agent and Parent are hereby relieved from any liability to any Person for
\nany acts done by them in accordance with such decision, act, consent or
\ninstruction of the Shareholders’ Agent.<\/p>\n
Section 8.10 Third-Party Claims. In the event Parent becomes aware of a
\nthird-party claim which Parent believes may result in a demand against the
\nEscrow Fund, Parent shall notify the Shareholders’ Agent of such claim, and the
\nShareholders’ Agent and the Company Shareholders shall be entitled, at their
\nexpense, to participate in any defense of such claim with the consent of Parent,
\nwhich shall not be unreasonably withheld. Parent shall have the right in its
\nsole discretion to settle any such claim. In the event that the Shareholders’
\nAgent has consented to any such settlement, the Shareholders’ Agent shall have
\nno power or authority to object under Section 8.5 or any other provision of this
\nArticle VIII to the amount of any claim by Parent against the Escrow Fund for
\nindemnity with respect to such settlement.<\/p>\n
56<\/p>\n
ARTICLE IX
\n GENERAL PROVISIONS<\/p>\n
Section 9.1 Notices. All notices and other communications hereunder shall
\nbe in writing and shall be deemed duly delivered if delivered personally (upon
\nreceipt), or three (3) business days after being mailed by registered or
\ncertified mail, postage prepaid (return receipt requested), or one (1) business
\nday after it is sent by commercial overnight courier service, or upon
\ntransmission, if sent via facsimile (with confirmation of receipt) to the
\nparties at the following address (or at such other address for a party as shall
\nbe specified by like notice):<\/p>\n
(a) if to Parent or Merger Sub, to:<\/p>\n
Bio-Technology General Corp.
\n 70 Wood Avenue South
\n Iselin, New Jersey 08830
\n Attention: General Counsel
\n Fax: (732)-632-8800
\n Tel: (732) 632-8810<\/p>\n
with a copy to (which shall not constitute notice):<\/p>\n
Fulbright & Jaworski, L.L.P.
\n 666 Fifth Avenue
\n New York, N.Y. 10103
\n Attention: Carl E. Kaplan, Esq.
\n Fax: (212) 318-3400
\n Tel: (212) 318-3000<\/p>\n
(b) if to Company, to:<\/p>\n
Myelos Corporation
\n 4940 Carroll Canyon Road
\n San Diego, CA 92121
\n Attention: President
\n Fax: (858) 657-1038
\n Tel: (858) 657 1040<\/p>\n
with a copy to (which shall not constitute notice):<\/p>\n
Heller Ehrman White & McAuliffe LLP
\n 275 Middlefield Road
\n Menlo Park, CA 94025
\n Attention: Jeffrey Selman, Esq.
\n Fax: (650) 324-0638
\n Tel: (650) 324-7000<\/p>\n
57<\/p>\n
(c) if to Shareholders’ Agent, to:<\/p>\n
13306 Landfair Road
\n San Diego, CA 92130
\n Fax: (858) 481-0355
\n Tel: (858) 481-7917<\/p>\n
with a copy to (which shall not constitute notice):<\/p>\n
Heller Ehrman White & McAuliffe LLP
\n 275 Middlefield Road
\n Menlo Park, CA 94025
\n Attention: Jeffrey Selman, Esq.
\n Fax: (650) 324-0638
\n Tel: (650) 324-7000<\/p>\n
Section 9.2 Definitions. For purposes of this Agreement:<\/p>\n
(a) an “Affiliate” of any Person means another Person that directly
\n or indirectly, through one or more intermediaries, controls, is controlled
\n by, or is under common control with, such first Person;<\/p>\n
(b) any reference to a party’s “knowledge” means such party’s actual
\n knowledge after reasonable inquiry of officers, directors and other
\n employees of such party reasonably believed to have knowledge of such
\n matters;<\/p>\n
(c) any reference to any event, change, condition or effect being
\n “material” with respect to any entity or group of entities means any
\n material event, change, condition or effect related to the financial
\n condition, properties, assets (including intangible assets), liabilities,
\n business, operations or results of operations of such entity or group of
\n entities;<\/p>\n
(d) “Material Adverse Effect” means, with respect to any Person, any
\n change, effect, event, occurrence or state of facts (or any development
\n that has had or is reasonably likely to have any change or effect) that is
\n materially adverse to the business, financial condition, results of
\n operations or prospects of such Person and its Subsidiaries, taken as a
\n whole, or which would prevent or materially delay the consummation of the
\n transactions contemplated hereby; provided, however, none of the following
\n shall be deemed in themselves, either alone or in combination, to
\n constitute, and none of the following shall be taken into account in
\n determining whether there has been a Material Adverse Effect: (i) any
\n change in the market price or trading volume of the capital stock of such
\n Person after the date hereof, (ii) changes, events or occurrences in the
\n United States securities markets which are not specific to such Person,
\n (iii) any adverse change, event, development or effect arising from or
\n relating to general business or economic conditions which is not specific
\n to such Person and its Subsidiaries, (iv) any failure by such Person to
\n meet internal forecasts or projections or published revenue or earnings
\n predictions for any period ending (or for which revenues or earnings are
\n released) on or after the date of this Agreement, and (vi) any adverse
\n change, event, development or effect arising from or relating to any
\n change in GAAP;<\/p>\n
(e) “Person” means an individual, corporation, partnership, limited
\n liability company, joint venture, association, trust, unincorporated
\n organization or other entity; and<\/p>\n
58<\/p>\n
(f) “Subsidiary” of any Person means, with respect to such Person,
\n any corporation, partnership, joint venture or other legal entity of which
\n such Person (either alone or through or together with any other
\n subsidiary), owns, directly or indirectly, 50% or more of the stock or
\n other equity interests the holders of which are generally entitled to vote
\n for the election of the Board of Directors or other governing body of such
\n corporation or other legal entity.<\/p>\n
Section 9.3 Counterparts. This Agreement may be executed in one or more
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each of
\nthe parties and delivered to the other parties, it being understood that all
\nparties need not sign the same counterpart.<\/p>\n
Section 9.4 Entire Agreement; Nonassignability; Parties in Interest. This
\nAgreement and the documents and instruments and other agreements specifically
\nreferred to herein or delivered pursuant hereto, including the Exhibits, the
\nSchedules, including the Company Disclosure Schedule and the Parent Disclosure
\nSchedule, (a) constitute the entire agreement among the parties with respect to
\nthe subject matter hereof and supersede all prior agreements and understandings,
\nboth written and oral, among the parties with respect to the subject matter
\nhereof except for the Confidentiality Agreement, which shall continue in full
\nforce and effect, and shall survive any termination of this Agreement or the
\nClosing, in accordance with its terms, (b) except as set forth in Section 9.9,
\nare not intended to confer upon any other Person any rights or remedies
\nhereunder, and (c) shall not be assigned by operation of law or otherwise
\nwithout the written consent of the other party.<\/p>\n
Section 9.5 Severability. In the event that any provision of this
\nAgreement, or the application thereof becomes or is declared by a court of
\ncompetent jurisdiction to be illegal, void or unenforceable, the remainder of
\nthis Agreement will continue in full force and effect and the application of
\nsuch provision to other Persons or circumstances will be interpreted so as
\nreasonably to effect the intent of the parties hereto. The parties further agree
\nto replace such void or unenforceable provision of this Agreement with a valid
\nand enforceable provision that will achieve, to the extent possible, the
\neconomic, business and other purposes of such void or unenforceable provision.<\/p>\n
Section 9.6 Remedies Cumulative. Except as otherwise provided herein, any
\nand all remedies herein expressly conferred upon a party will be deemed
\ncumulative with and not exclusive of any other remedy conferred hereby, or by
\nlaw or equity upon such party, and the exercise by a party of any one remedy
\nwill not preclude the exercise of any other remedy.<\/p>\n
Section 9.7 Governing Law. This Agreement shall be governed by and
\nconstrued in accordance with the internal laws of the State of New York
\napplicable to parties residing in New York, without regard applicable principles
\nof conflicts of law.<\/p>\n
Section 9.8 Waiver of Jury Trial.<\/p>\n
(a) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
\nMAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
\nISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
\nIT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
\nINDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
\nCONTEMPLATED HEREBY OR THEREBY.<\/p>\n
(b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
\nREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
\nOR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF <\/p>\n
59<\/p>\n
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS
\nCONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER
\nVOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
\nOTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.8.<\/p>\n
Section 9.9 Rules of Construction. The captions in this Agreement,
\nincluding but not limited to specific section number references included in the
\nDisclosure Schedules, are for convenience of reference only and shall not limit
\nor otherwise affect any of the terms or provisions hereof. Any reference to any
\nfederal, state, local or foreign statute or law shall be deemed also to refer to
\nall rules and regulations promulgated thereunder, unless the context requires
\notherwise. The word “including” shall mean including without limitation. Any
\nreference in this Agreement to a “day” or number of “days” (without the explicit
\nqualification of “business”) shall be interpreted as a reference to a calendar
\nday or number of calendar days. If any action or notice is to be taken or given
\non or by a particular calendar day, and such calendar day is not a business day,
\nthen such action or notice shall be deferred until, or may be taken or given on,
\nthe next business day. References to the term “business day” shall mean any day
\nwhich is not a Saturday, Sunday or day on which banks in New York, New York are
\nauthorized or required by law to close. The disclosure of any matter in the
\nDisclosure Schedules hereto shall expressly not be deemed to constitute an
\nadmission by Company, Parent or Merger Sub, or to otherwise imply, that any such
\nmatter is material for the purposes of this Agreement. The mere listing (or
\ninclusion of a copy) of a document or other item shall not be deemed adequate to
\ndisclose an exception to a representation or warranty made herein (unless the
\nrepresentation or warranty has to do with the existence of the document or other
\nitem itself). The parties have participated jointly, and have been represented
\nby counsel, in the negotiation and drafting of this Agreement. In the event an
\nambiguity or question of intent or interpretation arises, this Agreement shall
\nbe construed as if drafted jointly by the parties and no presumption or burden
\nof proof shall arise favoring or disfavoring any party by virtue of the
\nauthorship of any of the provisions of this Agreement. The parties intend that
\neach representation, warranty and covenant contained herein shall have
\nindependent significance. If any party has breached any representation, warranty
\nor covenant contained herein in any respect, the fact that there exists another
\nrepresentation, warranty or covenant relating to the same subject matter
\n(regardless of the relative levels of specificity) which the party has not
\nbreached shall not detract from or mitigate the fact that the party is in breach
\nof the first representation, warranty or covenant.<\/p>\n
Section 9.10 Third Party Beneficiaries. The directors and officers of
\nCompany and Company Shareholders shall be third party beneficiaries as to
\nprovisions herein (Sections 1.12, 5.15 and 5.16, as applicable) intended to
\nbenefit them.<\/p>\n
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]<\/p>\n
60<\/p>\n
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
\nAgreement to be executed and delivered by each of them or their respective
\nofficers thereunto duly authorized, all as of the date first written above.<\/p>\n
MYELOS CORPORATION<\/p>\n
By: \/s\/ Andrew Barnes
\n —————————————–
\n Andrew Barnes
\n President and Chief Executive Officer<\/p>\n
BIO-TECHNOLOGY GENERAL CORP.<\/p>\n
By: \/s\/ Sim Fass
\n —————————————–
\n Sim Fass
\n Chairman and Chief Executive Officer<\/p>\n
MYLS ACQUISITION CORP.<\/p>\n
By: \/s\/ Sim Fass
\n —————————————–
\n Sim Fass
\n President<\/p>\n
61<\/p>\n
Exhibit 1.1<\/p>\n
CERTIFICATE OF MERGER<\/p>\n
Of<\/p>\n
MYELOS CORPORATION
\n (a California Corporation)<\/p>\n
Into<\/p>\n
MYLS ACQUISITION CORP.
\n (a Delaware corporation)<\/p>\n
Pursuant to Section 252 of the
\n State of Delaware General Corporation Law<\/p>\n
The undersigned, being the Surviving corporation, hereby sets forth as
\nfollows:<\/p>\n
FIRST: The name of the Surviving corporation is MYLS Acquisition
\nCorp.; its state of incorporation is Delaware.<\/p>\n
SECOND: The name of the Non-Surviving corporation is Myelos
\nCorporation; its state of incorporation is California.<\/p>\n
THIRD: An Agreement and Plan of Reorganization has been approved,
\nadopted, certified, executed and acknowledged by each constituent corporation in
\naccordance with Section 252 of the State of Delaware General Corporation Law.<\/p>\n
FOURTH: The Surviving Corporation shall be re-named Myelos
\nCorporation.<\/p>\n
FIFTH: The Certificate of Incorporation of MYLS Acquisition Corp.
\nshall be the Certificate of Incorporation of the Surviving corporation and is
\nhereby amended by replacing Article FIRST in its entirety with the following:<\/p>\n
“FIRST: The name of the Corporation is Myelos Corporation.”<\/p>\n
– 1 –<\/p>\n
SIXTH: The executed Agreement and Plan of Reorganization is on file
\nat the principal place of business of the Surviving corporation; the address of
\nsaid principal place of business is as follows: 70 Wood Avenue South, Iselin,
\nNew Jersey, 08830.<\/p>\n
SEVENTH: A copy of the Agreement and Plan of Reorganization will be
\nfurnished by the Surviving corporation, on request and without cost, to any
\nstockholder of any constituent corporation.<\/p>\n
EIGHTH: The Non-Surviving corporation is currently authorized to
\nissue 50,000,000 shares of common stock with no par value and 13,312,256 shares
\nof preferred stock no par value.<\/p>\n
NINTH: This Certificate of Merger shall be effective upon filing.<\/p>\n
IN WITNESS WHEREOF, this certificate is hereby executed the ___ day of
\n________, 2001.<\/p>\n
MYLS ACQUISITION CORP.<\/p>\n
By:___________________________
\n Name:
\n Title:<\/p>\n
– 2 –<\/p>\n
Exhibit 1.13<\/p>\n
CERTIFICATE OF DESIGNATIONS<\/p>\n
of<\/p>\n
SERIES B PREFERRED STOCK<\/p>\n
of<\/p>\n
BIO-TECHNOLOGY GENERAL CORP.<\/p>\n
(Pursuant to Section 151 of the
\n General Corporation Law of the State of Delaware)<\/p>\n
————<\/p>\n
Bio-Technology General Corp., a corporation organized and existing under
\nthe General Corporation Law of the State of Delaware (hereinafter called the
\n“Corporation”), DOES HEREBY CERTIFY:<\/p>\n
That pursuant to the authority vested in the Board of Directors in
\naccordance with the provisions of the Certificate of Incorporation of the said
\nCorporation, the said Board of Directors on __________, 200_ adopted the
\nfollowing resolution creating a series of _______ shares of Preferred Stock
\ndesignated as “Series B Preferred Stock”:<\/p>\n
RESOLVED, that pursuant to the authority vested in the Board of
\n Directors of this Corporation in accordance with the provisions of the
\n Certificate of Incorporation, a series of Preferred Stock, par value $.01
\n per share, of the Corporation be and hereby is created, and that the
\n designation and number of shares thereof and the voting and other powers,
\n preferences and relative, participating, optional or other rights of the
\n shares of such series and the qualifications, limitations and restrictions
\n thereof are as follows:<\/p>\n
Series B Preferred Stock:<\/p>\n
Section 1. Designation and Amount. The shares of such series shall be
\ndesignated as “Series B Preferred Stock” (the “Series B Preferred Stock”), and
\nthe number of shares initially constituting the Series B Preferred Stock shall
\nbe ________.<\/p>\n
Section 2. Dividends and Distributions. The holders of the outstanding
\nshares of Series B Preferred Stock shall be entitled to receive, pari passu with
\nthe holders of the Common Stock, par value $0.01 per share (the “Common Stock”),
\ndividends (whether in the form of cash, stock other than Common Stock, evidences
\nof indebtedness or other property) declared and paid on shares of the Common
\nStock, in an amount equal to the product determined by multiplying the amount of
\nsuch dividend by ________(1), subject to adjustment as provided in the next
\nsentence. In the event the Corporation shall at any time declare or pay any
\ndividend on the Common Stock payable in shares of Common Stock, or effect a<\/p>\n
———-
\n(1) Will represent the number determined by dividing $1,000 (the liquidation
\namount) by the average closing price as determined pursuant to the applicable
\nprovisions of Section 1.12 of the Merger Agreement.<\/p>\n
1<\/p>\n
subdivision or combination or consolidation of the outstanding shares of Common
\nStock (by reclassification or otherwise than by payment of a dividend in shares
\nof Common Stock) into a greater or lesser number of shares of Common Stock, then
\nin each such case the amount to which holders of shares of Series B Preferred
\nStock were entitled immediately prior to such event under the preceding sentence
\nshall be adjusted by multiplying such amount by a fraction, the numerator of
\nwhich is the number of shares of Common Stock outstanding immediately after such
\nevent and the denominator of which is the number of shares of Common Stock that
\nwere outstanding immediately prior to such event. So long as any shares of the
\nSeries B Preferred Stock are outstanding, no dividends or other distributions
\nshall be declared, paid or distributed, or set aside for payment or
\ndistribution, on the Common Stock unless, in each case, the dividend required by
\nthis Section 2 to be declared on the Series B Preferred Stock shall have been
\ndeclared. The holders of Series B Preferred Stock shall not be entitled to
\nreceive any dividends except as provided in the previous sentence.<\/p>\n
Section 3. Liquidation.<\/p>\n
(a) In the event of any voluntary or involuntary liquidation,
\nwinding up or dissolution of the Corporation, the holders of shares of Series B
\nPreferred Stock then outstanding shall be entitled to be paid, pari passu with
\nthe holders of the Common Stock, for each share held, out of the assets of the
\nCorporation legally available for distribution to its stockholders, an amount
\nequal to the lesser of (i) $1,000 per share plus an amount equal to all declared
\nbut unpaid dividends thereon to the date of payment (the “Liquidation Amount”),
\nor (ii) an amount equal to the product determined by multiplying the amount to
\nbe received in respect of each share of Common Stock by ________(2), subject to
\nadjustment as provided in the second sentence of Section 2 above. Except as
\nprovided in the preceding sentence, holders of the Series B Preferred Stock
\nshall not be entitled to any distribution in the event of any liquidation,
\nwinding up or dissolution of the Corporation.<\/p>\n
(b) For the purposes of this Section 3, any transaction or series of
\ntransactions (as a result of a tender offer, merger, consolidation or otherwise
\nin which all holders of Common Stock are given the opportunity to participate)
\nthat results in, or that is in connection with, (i) any person or “group”
\n(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
\nas amended (the “Exchange Act”)), acquiring “beneficial ownership” (as defined
\nin Rule 13d-3 under the Exchange Act), directly or indirectly, of 51% or more of
\nthe then issued and outstanding shares of Common Stock, without giving effect to
\nthe issuance of shares under any security convertible into, exchangeable for or
\nevidencing the right to purchase or otherwise receive any shares of Common
\nStock, or (ii) the sale, lease, exchange, conveyance, transfer or other
\ndisposition (for cash, shares of stock, securities or other consideration) of
\nall or substantially all of the property or assets of the Corporation to any
\nperson or “group” (within the meaning of Section 13(d)(3) of the Exchange Act),
\nshall be deemed to be a liquidation of the Corporation under Section 3(a).<\/p>\n
Section 4. Redemption. The Corporation shall redeem the shares of Series B
\nPreferred Stock on ______________, 2021(3) (the “Redemption Date”) in cash in an
\namount equal to the Liquidation Amount. If the funds of the Corporation legally
\navailable for redemption of shares of Series B Preferred Stock on the Redemption
\nDate are insufficient to redeem the total number of outstanding shares of Series
\nB Preferred Stock, the holders of shares of Series B Preferred Stock shall share
\nratably in any funds legally available for redemption of such shares according
\nto the respective amounts that would be payable with respect to the full number
\nof shares owned by them if all such outstanding shares were redeemed in <\/p>\n
———-
\n(2) Will represent the number determined by dividing $1,000 (the liquidation
\namount) by the average closing price as determined pursuant to the applicable
\nprovisions of Section 1.12 of the Merger Agreement.<\/p>\n
(3) Twenty years and one day from Closing Date.<\/p>\n
2<\/p>\n
full. At any time thereafter when additional funds of this corporation are
\nlegally available for the redemption of such shares of Series B Preferred Stock,
\nsuch funds will be used at the earliest permissible time to redeem the balance
\nof such shares, or such portion thereof for which funds are then legally
\navailable.<\/p>\n
Section 5. Voting Rights. The holders of Series B Preferred Stock shall
\nnot be entitled or permitted to vote on any matter required or permitted to be
\nvoted upon by the stockholders of the Corporation, except as otherwise required
\nby Delaware law.<\/p>\n
Section 6. Limitation on Transfer of Shares.<\/p>\n
(a) Shares of Series B Preferred Stock are not transferable, except
\n(i) in the case of an individual, (A) by will or the laws of descent and
\ndistribution or (B) to a trust solely for the benefit of such person or his
\nimmediate family, the estate or legal representatives of such person and any
\npartnership, corporation or other entity wholly-owned by such person, (ii) in
\nthe case of a partnership, upon its liquidation to any of its partners (limited
\nor general), the estates of such partners, any liquidating trust for the benefit
\nof the partners of such partnership and, if any partner is itself a partnership,
\nits partners (limited and general) upon its liquidation, and if any such partner
\nis itself a corporation or limited liability company, its stockholders or
\nmembers, respectively, upon its liquidation, and (iii) in the case of a limited
\nliability company, any of its members or economic owners upon its liquidation.<\/p>\n
(b) All certificates for shares of Series B Preferred Stock issued
\nby the Corporation shall conspicuously bear the following legend:<\/p>\n
“The Certificate of Designation (the “Certificate”) of the Series B
\n Preferred Stock of the Corporation prohibits the sale, transfer or other
\n disposition of the shares of Series B Preferred Stock represented by this
\n certificate except in certain limited circumstances set forth in the
\n Certificate. The Company reserves the right to refuse the transfer of such
\n securities except in the circumstances set forth in the Certificate. The
\n Corporation will furnish without charge to the holder of record of this
\n certificate a copy of the Certificate, containing the above-referenced
\n restrictions on transfer of stock, upon written request to the Corporation
\n at its principal place of business.”<\/p>\n
Section 7. Fractional Shares. The Series B Preferred Stock shall be
\nissuable in whole shares or in any fraction of a share that is one
\none-thousandths (1\/1000ths) of a share or any integral multiple of such fraction
\nwhich shall entitle the holder, in proportion to such holder’s fractional
\nshares, to receive dividends, participate in distributions and to have the
\nbenefit of all other rights of holders of Series B Preferred Stock.<\/p>\n
Section 8. Ranking. The Series B Preferred Stock shall rank, with respect
\nto the payment of dividends and the distribution of assets, junior to all series
\nof any other class of the Corporation’s Preferred Stock, unless the Board of
\nDirectors shall specifically determine otherwise in fixing the powers,
\npreferences and relative, participating, optional and other special rights of
\nthe shares of such series and the qualifications, limitations and restrictions
\nthereof.<\/p>\n
3<\/p>\n
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
\nof the Corporation by its President and attested by its Secretary this __ day of
\n________, 20__.<\/p>\n
BIO-TECHNOLOGY GENERAL CORP.<\/p>\n
By:
\n ———————————–
\n Name:
\n Title: President<\/p>\n
Attest:<\/p>\n
————————–
\nName:
\nTitle: Secretary<\/p>\n
4<\/p>\n
Exhibit 5.3<\/p>\n
INVESTOR REPRESENTATION STATEMENT<\/p>\n
Reference is made to Section 5.3 of the Agreement and Plan of
\nReorganization among Parent Corporation, a Delaware corporation (“Parent”),
\nMerger Sub, a Delaware corporation and a wholly-owned subsidiary of Parent
\n(“Merger Sub”), and Company, Inc., a California corporation (“Company”), dated
\nas of February 21, 2001 (the “Reorganization Agreement”). Capitalized terms used
\nherein that are not otherwise defined have the meanings assigned to them in the
\nReorganization Agreement.<\/p>\n
WHEREAS, the Reorganization Agreement provides for the acquisition of the
\nCompany by Parent for consideration consisting of cash and unregistered shares
\nof Parent Common Stock; and<\/p>\n
WHEREAS, it is a condition to Parent’s obligation to acquire the Company
\nthat each Company Shareholder execute and deliver an Investor Representation
\nStatement;<\/p>\n
NOW THEREFORE, in order to induce Parent to acquire the Company and in
\nconsideration of Parent’s acquisition of the Company, the undersigned
\nShareholder of Company hereby agrees as follows:<\/p>\n
1. Securities Act Matters. The undersigned Shareholder hereby represents
\nand warrants to Parent as follows:<\/p>\n
1.1 Shareholder acknowledges that its representations and warranties
\ncontained herein are being relied upon by Parent as a basis for the exemption of
\nthe issuance of the shares of Parent Common Stock (the “Shares”) to the
\nundersigned in the Merger from the registration requirements of the Securities
\nAct and any applicable state securities laws.<\/p>\n
1.2 Shareholder understands that (i) the Shares to be issued in the
\n Merger have not been registered, and as of the Effective Time will not be
\n registered, under the Securities Act or any state securities laws by
\n reason of their issuance in a transaction exempt from the registration
\n requirements of the Securities Act and applicable state securities laws
\n and (ii) the Shares must be held indefinitely unless a subsequent
\n disposition thereof is registered under the Securities Act and applicable
\n state securities laws or is exempt from such registration, and that only
\n Parent can take action to register such Shares.<\/p>\n
1.3 Shareholder is acquiring the Shares for its own account and not
\n with a view to, or for sale in connection with, directly or indirectly,
\n any distribution thereof that would require registration under the
\n Securities Act or applicable state securities laws or would otherwise
\n violate the Securities Act or such state securities laws.<\/p>\n
1.4 Shareholder has relied upon independent investigations made by
\n it or its representatives and is fully familiar with the business, results
\n of operations, financial condition, prospects and other affairs of Parent
\n and realizes that the Shares are a speculative investment involving a high
\n degree of risk for which there is no assurance of any return. It has such
\n knowledge and experience in financial and business affairs, including
\n investing in companies similar to Parent, and is capable of determining
\n the information necessary to make an informed investment decision, of
\n requesting such information from Parent, and of utilizing the information
\n that it has received from Parent to evaluate the merits and risks of its
\n investment in the Shares. It <\/p>\n
1<\/p>\n
is able to bear the economic risk of its investment in the Shares and
\n understands that it must do so for an indefinite period of time.<\/p>\n
1.5 Shareholder and its attorneys, accountants, investment and
\n financial advisors, if any, have had the opportunity to review the books
\n and records of Parent and have been provided access to such information as
\n it or its advisors, if any, have requested.<\/p>\n
1.6 Shareholder has received and carefully reviewed copies of (a)
\n the Reorganization Agreement, including all Exhibits and Schedules
\n attached thereto, and (b) the following documents filed by Parent with the
\n Securities and Exchange Commission: (i) Parent’s Annual Report on Form
\n 10-K for the year ended December 31, 1999, as amended; (ii) Parent’s
\n Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
\n 2000, June 30, 2000 and September 30, 2000; (iii) Parent’s proxy statement
\n dated August 4, 2000; and (iv) Parent’s Current Report on Form 8-K dated
\n February 21, 2001, announcing the Company’s financial results for the year
\n ended December 31, 2000, Parent’s execution of the Reorganization
\n Agreement. Shareholder acknowledges that in connection with the
\n transactions contemplated by the Reorganization Agreement, neither Parent
\n nor anyone acting on its behalf or any other person has made, and such
\n Shareholder is not relying upon, any representations, statements or
\n projections concerning Parent, its present or projected results of
\n operations, financial condition, prospects, present or future plans,
\n acquisition plans, products and services, or the value of the Parent
\n Common Stock or Parent’s business or any other matter in relation to
\n Parent’s business or affairs. Such Shareholder and its attorneys,
\n accountants, investment and financial advisors, if any, have had an
\n opportunity to discuss Parent’s business, management, financial affairs
\n and prospects with its management, to review Parent’s facilities, and to
\n obtain such additional information concerning such Shareholder’s
\n investment in the Shares in order for such Shareholder to evaluate its
\n merits and risks, and such Shareholder has determined that the Shares are
\n a suitable investment for such Shareholder and that at this time such
\n Shareholder could bear a complete loss of his or her investment.<\/p>\n
1.7 Shareholder is aware that no governmental authority has passed
\n upon or made any finding or determination concerning the fairness of the
\n transactions contemplated by the Reorganization Agreement or the adequacy
\n of the disclosure of the exhibits and schedules thereto and the Parent SEC
\n Documents, and that it must forego the security, if any, that such a
\n review would provide.<\/p>\n
1.8 Shareholder understands and acknowledges that neither the United
\n States Internal Revenue Service nor any other governmental authority has
\n been asked to rule on the Tax consequences of the transactions
\n contemplated by the Reorganization Agreement and, accordingly, in making
\n its decision to approve the transactions contemplated by the
\n Reorganization Agreement, it has relied upon the investigations of its own
\n Tax and business advisers in addition to its own independent
\n investigations as to, and that it and its advisors have fully considered,
\n all of the Tax consequences of the transactions contemplated by the
\n Reorganization Agreement.<\/p>\n
1.9 Shareholder has been advised or is aware of the provisions of
\n Rule 144 promulgated under the Securities Act, which permits limited
\n resale of securities purchased in a private placement subject to the
\n satisfaction of certain conditions, including, among other things: the
\n availability of certain current public information about Parent, and
\n compliance with applicable requirements regarding the holding period and
\n the amount of securities to be sold and the manner of sale, and that such
\n rule may not be available for resale of the Shares.<\/p>\n
2<\/p>\n
1.10 In making its decision to approve the transactions contemplated
\n by the Reorganization Agreement, Shareholder and its professional tax and
\n business advisors have been given the opportunity to discuss the Company’s
\n business, management, financial affairs and prospects with the Company’s
\n management, and they have had the opportunity to review the Company’s
\n facilities, to examine all relevant documents and to ask questions of, and
\n to receive answers from, the Company or any person(s) acting on the
\n Company’s behalf concerning the terms and conditions of the transactions
\n contemplated by the Reorganization Agreement or any other matter set forth
\n in the Reorganization Agreement and the schedules and exhibits thereto,
\n and to obtain any additional information necessary to verify the accuracy
\n of the information set forth therein, and to evaluate the Company and its
\n investment in Company Common Stock. Shareholder desires no further
\n information for such evaluation.<\/p>\n
1.11 Shareholder is either an “accredited investor” pursuant to Rule
\n 501 under the Securities Act, as indicated in Appendix A hereto, or has
\n engaged a “Purchaser Representative” (as such term is defined in Rule 501
\n under the Securities Act) to advise it in connection with the transactions
\n contemplated by the Reorganization Agreement, as indicated on the
\n signature page hereto.<\/p>\n
1.12 Shareholder understands that the Shares will bear the following
\n legend (or a substantially similar legend):<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
\n FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
\n OF 1933. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
\n ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE
\n SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE
\n TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”<\/p>\n
2. Registration of Shares.<\/p>\n
2.1 The undersigned acknowledges that Parent has agreed to register
\nthe Shares for resale under the Securities Act as set forth in Section 5.15 of
\nthe Reorganization Agreement. In connection therewith, the undersigned agrees to
\nprovide Parent with such information as Parent may reasonably request in order
\nto facilitate the registration of the Shares.<\/p>\n
2.2 In consideration of Parent’s agreement to register the Shares,
\nthe undersigned agrees that it will suspend further open market offers and sales
\nof Shares whenever the undersigned receives a Suspension Notice from Parent, and
\nwill not resume such open market offers and sales until it receives a Resumption
\nNotice.<\/p>\n
2.3 The undersigned hereby agrees that if it intends to sell Shares
\npursuant to the Registration Statement, it will give at least three (3) business
\ndays’ prior written notice to Parent of any such proposed sale of Shares
\npursuant to the Registration Statement (which notice may cover sales to be made
\nwithin a ten (10) business day period from the date of Parent’s response) and
\nnot to make such sale (i) unless such three (3) business days elapse without
\nresponse from Parent, (ii) unless Parent responds within three (3) business days
\nafter receiving notice that such sale is not prohibited because the Registration
\nStatement is current or (iii) in the event Parent responds by stating that an
\namendment to the Registration Statement or supplement to the prospectus must be
\nfiled in order to cause the prospectus <\/p>\n
3<\/p>\n
included in such Registration Statement, as then in effect, not to include an
\nuntrue statement of a material fact or omit to state a material fact required to
\nbe stated therein or necessary to make the statements therein not misleading in
\nthe light of the circumstances then existing, until Parent notifies the
\nundersigned that the Registration Statement has been amended or the prospectus
\nsupplemented as required, which Parent has agreed to do as soon as reasonably
\npracticable subject to the first two sentences of Section 5.15(c) of the
\nReorganization Agreement. Parent has agreed in the Reorganization Agreement to
\nuse commercially reasonable efforts to respond to any notice of proposed sale as
\nsoon as reasonably practicable after receiving such notice of proposed sale. No
\nprior notice of sale shall be required to the extent the undersigned is selling
\nShares other than pursuant to the Registration Statement. Any notice hereunder
\nmay be given by facsimile to Parent at (732)-632-8810, to the attention of the
\nGeneral Counsel, with receipt confirmed by telephone (732) 632-8800. For
\npurposes hereof, (i) the term “business day” means any day that the Nasdaq
\nNational Market is open for trading and (ii) in determining the three (3)
\nbusiness day prior notice requirement, such period shall commence on the
\nbusiness day the notice is received by Parent if such notice is received by
\nParent by 12:00 noon New York City time or on the next business day if received
\nby Parent after such time.<\/p>\n
2.4 In consideration of Parent’s agreement to indemnify the
\nundersigned in connection with the registration of the Shares, as more fully set
\nforth in Section 5.15(e) of the Reorganization Agreement, the undersigned agrees
\nas follows:<\/p>\n
(a) To the fullest extent permitted by law, the undersigned
\n will indemnify the Parent, each Person, if any, who controls the Parent
\n within the meaning of the Securities Act or the Exchange Act, each
\n underwriter of Parent Common Stock and their respective affiliates,
\n officers, directors, partners, successors and assigns (each a “Parent
\n Indemnitee”) against any actions, claims, losses, damages, liabilities and
\n expenses to which they or any of them may become subject under the
\n Securities Act, the Exchange Act or under any other statute or at common
\n law or otherwise, and, except as hereinafter provided, will promptly
\n reimburse each Parent Indemnitee for any legal or other expenses
\n reasonably incurred by them or any of them in connection with
\n investigating or defending any actions, whether or not resulting in any
\n liability, insofar as such losses, claims, damages, expenses, liabilities
\n or actions arise out of or are based upon any untrue statement or alleged
\n untrue statement of a material fact in any Registration Statement and any
\n prospectus filed pursuant to Section 5.15 of the Reorganization Agreement
\n or any post-effective amendment thereto, or any omission or alleged
\n omission to state a material fact required to be stated therein or
\n necessary to make the statements therein not misleading, which untrue
\n statement or alleged untrue statement or omission or alleged omission was
\n made in reliance upon and in conformity with information furnished in
\n writing to the Parent by the undersigned specifically for use in
\n connection with such registration statement, prospectus or post-effective
\n amendment; provided, however, that the obligations of the undersigned
\n hereunder shall be limited to an amount equal to the proceeds to the
\n undersigned from the sale of the undersigned’s Shares.<\/p>\n
(b) The undersigned will comply with the indemnification
\n procedures set forth in Section 5.15(g) of the Reorganization Agreement.<\/p>\n
(c) In order to provide for just and equitable contribution to
\n joint liability under the Securities Act in any case in which the Parent
\n makes a claim for indemnification pursuant to Section 5.15(f) of the
\n Reorganization Agreement and Section 2.4(a) hereof but it is judicially
\n determined (by the entry of a final judgment or decree by a court of
\n competent jurisdiction and the expiration of time to appeal or the denial
\n of the last right of appeal) that such indemnification may not be enforced
\n in such case notwithstanding that Section 5.15(f) of the Reorganization
\n Agreement and Section 2.4(a) hereof provides for indemnification, in such
\n case, then the <\/p>\n
4<\/p>\n
undersigned will contribute to the aggregate losses, claims, damages or
\n liabilities to which it may be subject (after contribution from others) in
\n such proportion as is appropriate to reflect the relative fault of the
\n Parent on the one hand and the undersigned on the other in connection with
\n the statements or omissions which resulted in such losses, claims, damages
\n or liabilities, as well as any other relevant equitable considerations or,
\n if the allocation provided herein is not permitted by applicable law, in
\n such proportion as shall be permitted by applicable law and reflect as
\n nearly as possible the allocation provided herein. The relative fault of
\n the Parent on the one hand and of the undersigned on the other shall be
\n determined by reference to, among other things, whether the untrue or
\n alleged untrue statement of a material fact or omission or alleged
\n omission to state a material fact relates to information supplied by the
\n Parent on the one hand or by the undersigned on the other, and each
\n party’s relative intent, knowledge, access to information and opportunity
\n to correct or prevent such statement or omission; provided, however, that
\n in any such case (i) the undersigned will not be required to contribute
\n any amount in excess of the proceeds received by the undersigned from the
\n sale of Shares pursuant to the Registration Statement; and (ii) no Person
\n guilty of fraudulent misrepresentation within the meaning of Section 11(f)
\n of the Securities Act will be entitled to contribution from any Person or
\n entity who was not guilty of such fraudulent misrepresentation.<\/p>\n
3. Escrow Matters. The undersigned shall, jointly and severally with
\nParent and the other Company Shareholders, indemnify, defend and save harmless
\nthe Escrow Agent and its directors, officers, agents and employees (the
\n“indemnitees”) from all loss, liability or expense (including the fees and
\nexpenses of in house or outside counsel) arising out of or in connection with
\n(i) the Escrow Agent’s execution and performance of the Escrow Agreement, except
\nin the case of any indemnitee to the extent that such loss, liability or expense
\nis due to the negligence or willful misconduct of such indemnitee, or (ii) its
\nfollowing any instructions or other directions from the Parent or the
\nShareholders’ Agent, except to the extent that its following any such
\ninstruction or direction is expressly forbidden by the terms of the Escrow
\nAgreement. The undersigned hereto acknowledges that the foregoing indemnities
\nshall survive the resignation or removal of the Escrow Agent or the termination
\nof the Escrow Agreement.<\/p>\n
4. Shareholders’ Agent.<\/p>\n
4.1 The undersigned hereby constitutes and appoints Andrew Barnes as
\nagent (“Shareholders’ Agent”) for and on behalf of the undersigned to give and
\nreceive notices and communications, to authorize delivery to Parent of the
\nParent Common Stock and\/or cash from the Escrow Fund in satisfaction of claims
\nby Parent, to object to such deliveries, to make claims on behalf of the Company
\nShareholders pursuant to Section 8.6 of the Reorganization Agreement, to agree
\nto, negotiate, enter into settlements and compromises of, and demand arbitration
\nand comply with orders of courts and awards of arbitrators with respect to, such
\nclaims, and to take all actions necessary or appropriate in the judgment of the
\nShareholders’ Agent for the accomplishment of the foregoing. Such agency may be
\nchanged by the holders of a majority-in-interest of the Escrow Fund from time to
\ntime upon not less than 10 days’ prior written notice to Parent. No bond shall
\nbe required of the Shareholders’ Agent, and the Shareholders’ Agent shall
\nreceive no compensation for his services. Notices or communications to or from
\nthe Shareholders’ Agent shall constitute notice to or from the undersigned.<\/p>\n
4.2 The Shareholders’ Agent shall not be liable for any act done or
\nomitted hereunder as Shareholders’ Agent while acting in good faith and in the
\nexercise of reasonable judgment and any act done or omitted pursuant to the
\nadvice of counsel shall be conclusive evidence of such good faith. The
\nundersigned shall indemnify the Shareholders’ Agent and hold him harmless
\nagainst any loss, liability or expense incurred without gross negligence or bad
\nfaith on the part of the Shareholders’ Agent and arising out of or in connection
\nwith the acceptance or administration of his duties under the Reorganization
\nAgreement, as the same may be modified, amended or supplemented.<\/p>\n
5<\/p>\n
4.3 The Shareholders’ Agent may rely on and shall be protected in
\nrelying on or refraining from acting on any instrument reasonably believed to be
\ngenuine and to have been signed or presented by the proper party or parties. The
\nShareholders’ Agent shall not be liable for other parties’ forgeries, fraud or
\nfalse representations.<\/p>\n
4.4 Shareholder hereby agrees to reimburse Shareholders’ Agent the
\nundersigned’s pro-rata share of any out-of-pocket fees and expenses incurred by
\nthe Shareholders’ Agent which exceed the Expense Fund (as defined in the Escrow
\nAgreement).<\/p>\n
5. TINs. Shareholder represents that its correct Taxpayer Identification
\nNumber (“TIN”) assigned by the Internal Revenue Service or any other taxing
\nauthority is set forth below its signature. Shareholder understands that all
\ninterest or other income earned under the Escrow Agreement in respect of the
\nEscrow Fund shall be allocated and\/or paid to the Company Shareholders in
\naccordance with their percentage interests and reported by the recipient to the
\nInternal Revenue Service or any other taxing authority. The Escrow Agent shall
\nreport and, as required, withhold any taxes it determines may be required by any
\nlaw or regulation in effect at the time of the distribution and remit such taxes
\nto the appropriate authorities.<\/p>\n
6<\/p>\n
IN WITNESS WHEREOF, the undersigned Shareholder has executed this
\nAgreement as of the ___ day of ____________, 2001.<\/p>\n
SHAREHOLDER<\/p>\n
________________________________<\/p>\n
Address: __________________________________
\n __________________________________
\n __________________________________<\/p>\n
TIN __________________________________<\/p>\n
Name, Address and Affiliation of Purchaser Representative: _____________________
\n _____________________
\n _____________________
\n _____________________
\n _____________________<\/p>\n
7<\/p>\n
Appendix A<\/p>\n
Definition of Accredited Investor<\/p>\n
An “accredited investor” is a person that falls within one or more of the
\nfollowing categories:<\/p>\n
|_| A bank, as defined in Section 3(a)(2) of the Securities Act of
\n 1933, as amended (the “Act”), whether acting in its individual or
\n fiduciary capacity;<\/p>\n
|_| A savings and loan association or other institution as defined
\n in Section 3(a)(5)(A) of the Act, whether acting in its individual or
\n fiduciary capacity;<\/p>\n
|_| A broker or dealer registered pursuant to Section 15 of the
\n Securities Exchange Act of 1934;<\/p>\n
|_| An insurance company as defined in Section 2(13) of the Act;<\/p>\n
|_| An investment company registered under the Investment Company
\n Act of 1940;<\/p>\n
|_| A business development company as defined in Section 2(a)(48) of
\n the Investment Company Act of 1940;<\/p>\n
|_| A small business investment company licensed by the U.S. Small
\n Business Administration under Section 301(c) or (d) of the Small Business
\n Investment Act of 1958;<\/p>\n
|_| A plan established and maintained by a state, its political
\n subdivision or any agency or instrumentality of a state or its political
\n subdivisions, for the benefit of its employees, with assets in excess of
\n $5,000,000;<\/p>\n
|_| An employee benefit plan within the meaning of the Employee
\n Retirement Income Security Act of 1974 in which the investment decision is
\n made by a plan fiduciary, as defined in Section 3(21) of such Act, which
\n is either a bank, savings and loan association, insurance company or
\n registered investment advisor, or an employee benefit plan with total
\n assets in excess of $5,000,000 or, if a self-directed plan, the investment
\n decisions are made solely by persons who are accredited investors;<\/p>\n
|_| A private business development company as defined in Section
\n 202(a)(22) or the Investment Advisors Act of 1940;<\/p>\n
|_| An organization described in Section 501(c)(3) of the Internal
\n Revenue Code, a corporation, a Massachusetts or similar business trust, or
\n a partnership, not formed for the specific purpose of acquiring the
\n Shares, with total assets in excess of $5,000,000;<\/p>\n
|_| A director or executive officer of Parent;<\/p>\n
|_| A natural person whose individual net worth, or joint net worth
\n with that person’s spouse, at the time of this purchase exceeds
\n $1,000,000;<\/p>\n
|_| A natural person who had an individual income in excess of
\n $200,000 in each of the two most recent years or joint income with that
\n person’s spouse in excess of $300,000 in each of those years and has a
\n reasonable expectation of reaching the same income level in the current
\n year;<\/p>\n
|_| A trust, with total assets in excess of $5,000,000, not formed
\n for the specific purpose of acquiring the securities offered, whose
\n purchase is directed by a sophisticated person as described in SEC Rule
\n 506(b)(2)(ii); or<\/p>\n
|_| An entity in which all of the equity owners are accredited
\n investors.<\/p>\n
8<\/p>\n
Exhibit 5.13(a)<\/p>\n
Date<\/p>\n
Name
\nAddress
\nCity, State, Zip<\/p>\n
Dear :<\/p>\n
As we contemplate the merger of Myelos and BTGC, we at BTGC are enormously
\nexcited about the opportunity that Myelos represents. Clearly, you will be a key
\nmember of the team that advances Prosaptide through clinical development and
\nultimately to the market.<\/p>\n
I am very pleased to offer you the position of “Title” at Bio-Technology General
\nCorp. This offer is, of course, contingent upon and will become effective as of
\nthe date of, BTGC’s acquisition of Myelos. In your position, you will report
\ndirectly to “Name”, “Title”. You will be located at the current Myelos site.<\/p>\n
Your compensation package will consist of a base salary of $XXX per year,
\npayable twice monthly. You will be granted an option to purchase XXX shares of
\nBTGC common stock at an exercise price equal to the closing market price on the
\neffective date of the acquisition. The right to exercise the option will vest in
\nannual increments of 25% of the total shares on each anniversary of the grant
\ndate, and thus will be fully vested on the fourth anniversary of the grant. The
\nterm of the option is ten years. You will also be eligible for an additional
\nstock option grant in 2001, as well as other grants in the future.<\/p>\n
(BTGC may elect to grant bonuses to certain employees and has done so in
\nprevious years. As “Title” , you will be eligible to participate in any
\nperformance-related bonuses granted. The target percentage at your level is
\napproximately XX%. The actual award will depend on your individual performance
\nagainst objectives to be agreed between you and your supervisor and also on
\nBTGC’s financial performance. )<\/p>\n
Other benefits to which you will be entitled are medical, dental and vision
\ncoverage, as well as life insurance and long-term disability. You may also elect
\nto participate in BTGC’s 401K Plan and Employee Stock Purchase Plan (ESPP). The
\nESPP allows employees to purchase BTGC stock at a minimum discount to market of
\n15%. If you elect to participate in the ESPP, your participation will begin with
\nthe next three-month period.<\/p>\n
In addition, you will receive three weeks (15 days) paid vacation, three paid
\npersonal days, two paid floating holidays, and eight paid sick days, if needed,
\nper calendar year under BTGC’s Paid Time Off policy. With respect to any
\nvacation you have accrued while an employee of Myelos, you may use one week of<\/p>\n
accrued vacation during 2001 and BTGC will compensate you for the balance, if
\nany, at your new base compensation.<\/p>\n
I trust that you are pleased with the terms of our offer and that you are
\nexcited at the prospect of being an important contributor to the success of our
\nnew joint venture. If you accept our offer, please so indicate by signing,
\ndating and returning one original of this letter to me by __________, 2001.<\/p>\n
Sincerely,<\/p>\n
Sim Fass
\nChairman and Chief Executive Officer<\/p>\n
I hereby accept the terms of the above offer of employment.<\/p>\n
————————- ———————
\nName Date<\/p>\n
Exhibit 6.2(f)<\/p>\n
ESCROW AGREEMENT<\/p>\n
This Escrow Agreement is made as of this __ day of _______, 2001, by and
\namong U. S. Bank Trust National Association (“Escrow Agent”), Bio-Technology
\nGeneral Corp., a Delaware corporation (“Parent”), and Andrew Barnes, as agent
\n(“Shareholders’ Agent”) of the former shareholders of Myelos Corporation, a
\nCalifornia corporation (“Company”). Terms not otherwise defined herein shall
\nhave the meaning set forth in the Reorganization Agreement (as defined below).<\/p>\n
WITNESSETH<\/p>\n
WHEREAS, Parent, MYLS Acquisition Corp, a Delaware corporation and a
\nwholly-owned subsidiary of Parent (“Merger Sub”), and Company have entered into
\nan Agreement and Plan of Reorganization (the “Reorganization Agreement”), dated
\nas of February 21, 2001, providing for the merger of Company with and into
\nMerger Sub (the “Merger”); and<\/p>\n
WHEREAS, pursuant to Article VIII of the Reorganization Agreement, a copy
\nof which is attached hereto as Annex A (“Article VIII”), an escrow fund (the
\n“Escrow Fund”) will be established to compensate Parent for certain Damages (as
\ndefined in Article VIII) arising out of any misrepresentation or breach or
\ndefault in connection with any of the representations, warranties, covenants and
\nagreements given or made by Company in the Reorganization Agreement, the Company
\nDisclosure Schedule or any exhibit or schedule to the Reorganization Agreement;
\nand<\/p>\n
WHEREAS, the Shareholders’ Agent has been constituted as agent for and on
\nbehalf of the former shareholders of Company (individually a “Shareholder” and
\ncollectively the “Shareholders”) to undertake certain obligations specified in
\nArticle VIII; and<\/p>\n
WHEREAS, the Shareholders, as set forth on Annex B hereto, are the record
\nand beneficial owners of the Company Common Stock and each Shareholder will
\nreceive Cash Merger Consideration and Stock Merger Consideration as set forth in
\nthe Reorganization Agreement; and<\/p>\n
WHEREAS, Article VIII provides for an Escrow Fund of 55,826 shares of
\nParent Common Stock issued in the Merger and $500,000 in cash, such Escrow Fund
\nto be held by the Escrow Agent; and<\/p>\n
WHEREAS, the parties hereto desire to set forth further terms and
\nconditions in addition to those set forth in the Reorganization Agreement
\nrelating to the operation of the Escrow Fund.<\/p>\n
NOW, THEREFORE, the parties hereto, in consideration of the mutual
\ncovenants contained herein, and intending to be legally bound, hereby agree as
\nfollows:<\/p>\n
1 Escrow and Escrow Fund. Pursuant to the Reorganization Agreement, Parent
\nshall, through its stock transfer agent (initially, American Stock Transfer & Trust Company), deposit in escrow with the Escrow Agent, as escrow agent, within
\nfive (5) business days after the Effective Time (as defined in the
\nReorganization Agreement) of the Merger (a) a stock certificate or certificates
\nrepresenting 55,826 shares of Parent Common Stock (the “Escrow Shares”) which
\nshall be registered in the name of the Escrow Agent as nominee for the
\nbeneficial owners of such shares, (b) cash in the amount of $500,000 (the
\n“Escrow Cash”) and (c) cash in the amount of $20,000 (the “Expense Fund”). The
\nEscrow Shares and <\/p>\n
Escrow Cash shall be held and distributed by the Escrow Agent in accordance with
\nthe terms and conditions set forth in Article VIII and this Agreement, and the
\nExpense Fund shall be held and distributed by the Escrow Agent in accordance
\nwith the terms and conditions of this Agreement. The number of Escrow Shares and
\namount of Escrow Cash beneficially owned by each Shareholder, the address of
\neach Shareholder and the taxpayer identification number of each Shareholder are
\nset forth on Annex B attached hereto.<\/p>\n
2 Rights and Obligations of the Parties. The Escrow Agent shall be
\nentitled to such rights and shall perform such duties of the escrow agent as set
\nforth herein and in Article VIII (collectively, the “Duties”), in accordance
\nwith the terms and conditions of this Agreement and Article VIII. Parent,
\nCompany and the Shareholders’ Agent shall be entitled to their respective rights
\nand shall perform their respective duties and obligations as set forth herein
\nand in Article VIII, in accordance with the terms hereof and thereof. In the
\nevent that the terms of this Agreement conflict in any way with the provisions
\nof Article VIII, Article VIII shall control.<\/p>\n
3 Escrow Period. Subject to Section 4(c), the escrow period shall
\nterminate with respect to the Escrow Shares and the Escrow Cash on the date (the
\n“Escrow Termination Date”) Parent’s Annual Report on Form 10-K for the year
\nended December 31, 2001 is filed with the Securities and Exchange Commission.<\/p>\n
4 Duties of Escrow Agent. In addition to the Duties set forth in Article
\nVIII, the Duties of the Escrow Agent shall include the following:<\/p>\n
(a) The Escrow Agent shall hold and safeguard the Escrow Shares,
\n Escrow Cash and Expense Fund during the Escrow Period, shall treat such
\n Escrow Fund and Expense Fund as a trust fund in accordance with the terms
\n of this Agreement and Article VIII and not as the property of Parent, and
\n shall hold and dispose of the Escrow Shares, Escrow Cash and Expense Fund
\n only in accordance with the terms hereof.<\/p>\n
(b) The Escrow Shares shall be voted by the Escrow Agent on behalf
\n of the Shareholders in accordance with the instructions received by the
\n Escrow Agent from the Shareholders’ Agent. In the absence of such
\n instructions, the Escrow Agent need not vote such shares.<\/p>\n
(c) Promptly following the Escrow Termination Date, but not later
\n than five (5) business days following termination, the Escrow Agent shall
\n deliver to (i) each Shareholder that amount of Escrow Cash not required,
\n when combined with the Escrow Shares retained pursuant to clause (ii), to
\n satisfy any unsatisfied claims specified in any Officer’s Certificate
\n theretofore delivered to the Escrow Agent prior to the Escrow Termination
\n Date with respect to facts and circumstances existing prior to the Escrow
\n Termination Date, and (ii) the Parent’s stock transfer agent (initially
\n American Stock Transfer & Trust Company), for delivery to the
\n Shareholders, the proper number of Escrow Shares not required, when
\n combined with the cash retained pursuant to clause (i), to satisfy any
\n unsatisfied claims specified in any Officer’s Certificate theretofore
\n delivered to the Escrow Agent prior to the Escrow Termination Date with
\n respect to facts and circumstances existing prior to the Escrow
\n Termination Date. As soon as all such claims for which Escrow Cash and
\n Escrow Shares have been retained at the Escrow Termination Date have been
\n resolved, the Escrow Agent shall deliver to such Shareholders all of the
\n Escrow Cash and Escrow Shares in the Escrow Fund and not required to
\n satisfy such claims and expenses. Each Shareholder shall receive a pro
\n rata amount of the Escrow Cash and Escrow Shares available for
\n distribution based on the applicable percentage set forth opposite the
\n name of each such Shareholder on Annex B, as calculated by the
\n Shareholders’ Agent.<\/p>\n
2<\/p>\n
(d) Promptly following the Escrow Termination Date, but not later
\n than five (5) business days following termination, the Escrow Agent shall
\n deliver to the Parent any portion of the Expense Fund remaining.<\/p>\n
(e) The Escrow Agent shall invest and reinvest the Escrow Cash and
\n Expense Fund in the triple “A” rated First American Prime Obligations
\n Money Fund (Class A). Each of Parent and Shareholders’ Agent, on behalf of
\n the Shareholders, hereby confirms receipt of the First American Funds
\n prospectus, and acknowledges that the fund investment advisor and
\n custodian are subsidiaries of U.S. Bancorp, and investment in the fund
\n includes approval of the fund’s fees and expenses as detailed in the
\n prospectus, including advisory and custodial fees and shareholder service
\n expenses (which may be so called 12b-1 shareholder service fees), which
\n fees and expenses are paid to the Escrow Agent, U.S. Bank National
\n Association or subsidiaries of U.S. Bancorp. The shares of the funds are
\n not deposits or obligations of, or guaranteed by, any bank, including U.S.
\n Bank National Association, U.S. Bank Trust National Association or any of
\n their affiliates, nor are they insured by the Federal Deposit Insurance
\n Commission, the Federal Reserve Board or any other agency. The investment
\n in the fund involves investment risk, including possible loss of
\n principal. A statement of citizenship will be provided if requested by
\n Escrow Agent. The Escrow Agent shall not be liable for losses, penalties
\n or charges incurred upon any sale or purchase of any such investment.<\/p>\n
(f) Earnings on the Escrow Cash shall become part of the Escrow Cash
\n and Escrow Fund. All income earned on the Escrow Fund shall be allocable
\n to the Shareholders in accordance with the applicable percentage set forth
\n opposite their names on Annex B. For tax purposes, the Escrow Cash shall
\n be deemed property of the Shareholders and all earnings shall be the
\n income of the Shareholders. Parent and the Shareholders shall file Tax
\n Returns and the Escrow Agent shall file a Form 1099 consistent with such
\n treatment.<\/p>\n
(g) Earnings on the Expense Fund shall not become part of the
\n Expense Fund, and shall be distributed to Parent when received by Escrow
\n Agent. For tax purposes, all earnings shall be the income of Parent.
\n Parent shall file Tax Returns and the Escrow Agent shall file a Form 1099
\n consistent with such treatment.<\/p>\n
5 Distribution by Parent. Any cash dividends, dividends payable in
\nsecurities or other distributions of any kind in respect of the Escrow Shares
\n(but excluding any shares of Parent capital stock received upon a stock split or
\nstock dividend) shall be promptly distributed by the Escrow Agent to the
\nbeneficial holder of the Escrow Shares to which such distribution relates. Any
\nshares of Parent Common Stock received by the Escrow Agent upon a stock split
\nmade in respect of any securities in the Escrow Fund shall be added to the
\nEscrow Fund and become a part thereof. Any provision hereof or of Article VIII
\nshall be adjusted to appropriately reflect any stock split or reverse stock
\nsplit.<\/p>\n
6 Taxpayer Identification Numbers. Payment of any interest earned on the
\nEscrow Cash and the Expense Fund invested in this escrow, or the distribution of
\nany other amounts under this escrow, will be subject to backup withholding
\npenalties unless a properly completed Internal Revenue Service Form W-8 or W-9
\ncertification is submitted to the Escrow Agent by the Stockholder entitled to
\nreceive such payment and Parent. Any Form W-8 or W-9 certification shall be
\nsubmitted to the Escrow Agent on or before the date hereof.<\/p>\n
7 Exculpatory Provisions.<\/p>\n
7.1 The Escrow Agent shall be obligated only for the performance of such
\nDuties as are specifically set forth herein and in Article VIII and may rely and
\nshall be protected in relying or refraining <\/p>\n
3<\/p>\n
from acting on any instrument reasonably believed to be genuine and to have been
\nsigned or presented by the proper party or parties. The Escrow Agent shall not
\nbe liable for forgeries or false personations. The Escrow Agent shall not be
\nliable for any act done or omitted hereunder as escrow agent except for gross
\nnegligence or willful misconduct. The Escrow Agent shall in no case or event be
\nliable for any representations or warranties of Company or Parent. Any act done
\nor omitted pursuant to the advice or opinion of counsel shall be conclusive
\nevidence of the good faith of the Escrow Agent.<\/p>\n
7.2 The Escrow Agent is hereby expressly authorized to disregard any and
\nall warnings given by any of the parties hereto or by any other person,
\nexcepting only orders or process of courts of law or arbitrations as provided in
\nSection 8.7 of the Reorganization Agreement, and is hereby expressly authorized
\nto comply with and obey orders, judgments or decrees of any court or rulings of
\nany arbitrators. In case the Escrow Agent obeys or complies with any such order,
\njudgment or decree of any court or such ruling of any arbitrator, the Escrow
\nAgent shall not be liable to any of the parties hereto or to any other person by
\nreason of such compliance, notwithstanding any such order, judgment, decree or
\narbitrators’ ruling being subsequently reversed, modified, annulled, set aside,
\nvacated or found to have been entered without jurisdiction.<\/p>\n
7.3 The Escrow Agent shall not be liable in any respect on account of the
\nidentity, authority or rights of the parties executing or delivering or
\npurporting to execute or deliver the Agreement or any documents or papers
\ndeposited or called for thereunder.<\/p>\n
7.4 The Escrow Agent shall not be liable for the outlawing of any rights
\nunder any statute of limitations with respect to the Agreement or any documents
\ndeposited with the Escrow Agent.<\/p>\n
8 Alteration of Duties. The Duties may be altered, amended, modified or
\nrevoked only by a writing signed by all of the parties hereto.<\/p>\n
9 Resignation and Removal of the Escrow Agent. The Escrow Agent may resign
\nas Escrow Agent at any time with or without cause by giving at least thirty (30)
\ndays’ prior written notice to each of Parent and the Shareholders’ Agent, such
\nresignation to be effective thirty (30) days following the date such notice is
\ngiven. In addition, Parent and the Shareholders’ Agent may jointly remove the
\nEscrow Agent as escrow agent at any time with or without cause, by an instrument
\n(which may be executed in counterparts) given to the Escrow Agent, which
\ninstrument shall designate the effective date of such removal. In the event of
\nany such resignation or removal, a successor escrow agent which shall be a bank
\nor trust company organized under the laws of the United States of America or of
\nthe State of California having (or if such bank or trust company is a member of
\na bank holding company, its bank holding company has) a combined capital and
\nsurplus of not less than $50,000,000, shall be appointed by the Shareholders’
\nAgent with the approval of Parent, which approval shall not be unreasonably
\nwithheld. Any such successor escrow agent shall deliver to Parent and the
\nShareholders’ Agent a written instrument accepting such appointment, and
\nthereupon it shall succeed to all the rights and duties of the escrow agent
\nhereunder and shall be entitled to receive the Escrow Fund.<\/p>\n
10 Further Instruments. If the Escrow Agent reasonably requires other or
\nfurther instruments in connection with performance of the Duties, the necessary
\nparties hereto shall join in furnishing such instruments.<\/p>\n
11 Disputes. It is understood and agreed that should any dispute arise
\nwith respect to the delivery and\/or ownership or right of possession of the
\nEscrow Fund held by the Escrow Agent hereunder, the Escrow Agent is authorized
\nand directed to act in accordance with, and in reliance upon, the terms hereof
\nand of Article VIII.<\/p>\n
4<\/p>\n
12 Escrow Fees and Expenses.<\/p>\n
12.1 Parent shall pay the Escrow Agent such fees as are established by the
\nFee Schedule attached hereto as Annex C, and to the extent of unpaid fees and
\nexpenses, may be deducted from the Escrow Fund.<\/p>\n
12.2 Any out-of-pocket fees and expenses incurred by the Shareholders’
\nAgent shall be paid out of the Expense Fund; provided, however, that if the
\nout-of-pocket fees and expenses of the Shareholders’ Agent exceed the Expense
\nFund, such fees and expenses shall be paid by the Shareholders, and not by the
\nParent or out of the Escrow Fund.<\/p>\n
13 Indemnification. In consideration of the Escrow Agent’s acceptance of
\nthis appointment, the other parties hereto, jointly and severally, agree to
\nindemnify and hold the Escrow Agent harmless as to any liability incurred by it
\nto any person, firm or corporation by reason of its having accepted such
\nappointment or in carrying out the terms hereof and the Reorganization
\nAgreement, and to reimburse the Escrow Agent for all its costs and expenses,
\nincluding, among other things, counsel fees and expenses, reasonably incurred by
\nreason of any matter as to which an indemnity is paid; provided, however, that
\nno indemnity need be paid in case of the Escrow Agent’s negligence, willful
\nmisconduct or breach of this Agreement.<\/p>\n
14 Waiver of Offset Rights. The Escrow Agent hereby waives any and all
\nrights to offset that it may have against the Escrow Fund or the Expense Fund
\nincluding, without limitation, claims arising as a result of any claims,
\namounts, losses, liabilities, costs or expenses (collectively “Escrow Agent
\nClaims”) that the Escrow Agent may be otherwise entitled to collect from any
\nparty to this Agreement, other than Escrow Agent Claims arising under this
\nAgreement.<\/p>\n
15 General.<\/p>\n
15.1 Any notice given hereunder shall be in writing and shall be deemed
\neffective upon the earlier of personal delivery or the third day after mailing
\nby certified or registered mail, postage prepaid as follows:<\/p>\n
To Parent: Bio-Technology General Corp.
\n 70 Wood Avenue South
\n Iselin, New Jersey 08830
\n Attention: General Counsel<\/p>\n
With a copy to (which shall not constitute notice):<\/p>\n
Fulbright & Jaworski L.L.P.
\n 666 Fifth Avenue
\n New York, New York 10103
\n Attention: Carl E. Kaplan, Esq.<\/p>\n
5<\/p>\n
To Shareholders’ Agent: Mr. Andrew Barnes
\n 13306 Landfair Road
\n San Diego, CA 92130<\/p>\n
With a copy to (which shall not constitute notice):<\/p>\n
Heller Ehrman White & McAuliffe LLP
\n 275 Middlefield Road Menlo Park, CA
\n 94025-3506 Attention:<\/p>\n
To the Escrow Agent: U.S. Bank Trust National Association
\n 1420 5th Ave. 7th Floor
\n Seattle, WA 98101
\n Attention: Shirley Young<\/p>\n
or to such other address as any party may have furnished in writing to the other
\nparties in the manner provided above.<\/p>\n
15.2 The Officer’s Certificate as defined in Article VIII may be signed by
\nthe President, any Senior Vice President or the Chief Financial Officer of
\nParent.<\/p>\n
15.3 The captions in this Escrow Agreement are for convenience only and
\nshall not be considered a part of or affect the construction or interpretation
\nof any provision of this Escrow Agreement.<\/p>\n
15.4 This Escrow Agreement may be executed in any number of counterparts,
\neach of which when so executed shall constitute an original copy hereof, but all
\nof which together shall constitute one agreement.<\/p>\n
15.5 No party may, without the prior express written consent of each other
\nparty, assign this Escrow Agreement in whole or in part. This Escrow Agreement
\nshall be binding upon and inure to the benefit of the respective successors and
\nassigns of the parties hereto.<\/p>\n
15.6 This Escrow Agreement shall be governed by and construed in
\naccordance with the laws of the State of New York as applied to contracts made
\nand to be performed entirely within the State of New York.<\/p>\n
15.7 The parties to this Escrow Agreement hereby agree to submit to
\npersonal jurisdiction in the State of New York.<\/p>\n
[Remainder of Page Intentionally Left Blank]<\/p>\n
6<\/p>\n
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
\nthe date first above written.<\/p>\n
BIO-TECHNOLOGY GENERAL CORP.<\/p>\n
By:__________________________________
\n Name:
\n Title:<\/p>\n
_____________________________________
\n Andrew Barnes<\/p>\n
U.S. BANK TRUST NATIONAL ASSOCIATION<\/p>\n
By:__________________________________
\n Name:
\n Title:<\/p>\n
7<\/p>\n
ANNEX A<\/p>\n
ARTICLE VIII OF THE
\n AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
Section 8.1 Escrow Fund.<\/p>\n
(a) At the Closing, the Escrow Shares shall be registered in the name of,
\nand be deposited, together with the Escrow Cash, with U.S. Bank Trust National
\nAssociation (or other institution selected by Parent with the reasonable consent
\nof Company) as escrow agent (the “Escrow Agent”), such deposit and any deposit
\npursuant to Section 8.1(b) to constitute the “Escrow Fund” and to be governed by
\nthe terms set forth herein and in the Escrow Agreement. The Escrow Fund shall be
\navailable to compensate Parent pursuant to the indemnification obligations of
\nthe Company Shareholders.<\/p>\n
(b) Dividends, whether paid in cash, shares of Parent Common Stock or
\nother securities, and other distributions of any kind declared with respect to
\nthe Escrow Shares shall be deposited with the Escrow Agent pursuant to Section
\n8.1(a) hereof and shall be part of the Escrow Fund. Each Company Shareholder
\nwill have voting rights with respect to the Escrow Shares deposited in the
\nEscrow Fund with respect to such shareholder so long as such Escrow Shares are
\nheld in escrow, and Parent will take all reasonable steps necessary to allow the
\nexercise of such rights. While the Escrow Shares remain in the Escrow Agent’s
\npossession pursuant to this Agreement, the Company Shareholders will retain and
\nwill be able to exercise all other incidents of ownership of said Escrow Shares
\nwhich are not inconsistent with the terms and conditions of this Agreement.<\/p>\n
Section 8.2 Indemnification.<\/p>\n
(a) Survival of Representations and Warranties. All representations and
\nwarranties made by Company, Parent or Merger Sub herein, or in any certificate,
\nschedule or exhibit delivered pursuant hereto, shall survive the Closing and
\ncontinue in full force and effect until the second anniversary of the Closing
\nDate; provided, however, that the representations and warranties contained in
\nSections 2.10, 2.16 and 2.17 shall survive until 30 days after the expiration of
\nthe applicable statute of limitations period and any extensions thereof and the
\nrepresentations and warranties contained in Section 2.4 shall survive
\nindefinitely.<\/p>\n
(b) Indemnification by Company Shareholders. Subject to the limitations
\nset forth in this Article VIII, the Company Shareholders will indemnify and hold
\nharmless Parent and the Surviving Corporation and its respective officers,
\ndirectors, agents, attorneys and employees, and each Person, if any, who
\ncontrols or may control Parent or the Surviving Corporation within the meaning
\nof the Securities Act (hereinafter “Parent Indemnified Persons”) from and
\nagainst any and all losses, costs, damages, liabilities and expenses arising
\nfrom claims, demands, actions, causes of action, including, without limitation,
\nlegal fees, (collectively, “Damages”) incurred or sustained by Parent
\nIndemnified Persons as a result of:<\/p>\n
(i) any inaccuracy or breach of, or any claim by a third party
\n alleging facts that, if true, would mean Company has breached, any
\n representation or warranty by Company contained herein or under any other
\n agreement executed and delivered by the parties in furtherance of the
\n transactions described herein (without regard to any materiality qualifier
\n contained in such representation or warranty); or<\/p>\n
A-1<\/p>\n
(ii) a breach by Company of any covenant or other agreement
\n contained herein or under any other agreement executed and delivered by
\n the parties in furtherance of the transactions described herein.<\/p>\n
Except as provided in the next paragraph, the sole recourse of the Parent
\nIndemnified Persons shall be against the Escrow Fund and claims against the
\nEscrow Fund shall be the sole and exclusive remedy of Parent Indemnified Persons
\nfor any Damages hereunder.<\/p>\n
The Company, Parent and the Surviving Corporation acknowledge that
\nsuch Damages, if any, would relate to unresolved contingencies existing at the
\nEffective Time, which if resolved at the Effective Time would have led to a
\nreduction in the Merger Consideration. The total liability for Damages resulting
\nfrom breaches of representations and warranties contained in Sections 2.4, 2.7,
\n2.10, 2.16 and 2.17 shall be the total amount of the Merger Consideration and
\nthe Contingent Payments (if and when paid) and, to the extent the Escrow Fund is
\nnot sufficient to satisfy such indemnification obligation, Parent may, in
\naddition to any other remedies it may have, offset such obligation against any
\nContingent Payments due hereunder. Nothing in this Agreement shall limit the
\nliability in amount or otherwise (i) of Company for any breach of any
\nrepresentation, warranty or covenant if the Merger does not close, (ii) of any
\nCompany Shareholder in connection with any breach by such shareholder of any
\nrepresentation or covenant in the Investor Representation Statement or Voting
\nAgreement delivered pursuant hereto or (iii) of Company or any Company
\nShareholder with respect to fraud, criminal activity or intentional breach of
\nany covenant contained in this Agreement.<\/p>\n
(c) Indemnification by Parent and Merger Sub. Subject to the limitations
\nset forth in this Article VIII, Parent hereby agrees to indemnify, defend and
\nhold harmless the Company Shareholders and their respective officers, directors,
\nagents, attorneys and employees (hereinafter “Company Indemnified Persons”) from
\nand against any and all Damages incurred or sustained by Company Indemnified
\nPersons as a result of:<\/p>\n
(i) any inaccuracy or breach of, or any claim by a third party
\n alleging facts that, if true, would mean Parent or Merger Sub has
\n breached, any representation or warranty by it contained herein or under
\n any other agreement executed and delivered by the parties in furtherance
\n of the transactions described herein (without regard to any materiality
\n qualifier contained in such representation or warranty); or<\/p>\n
(ii) a breach by Parent or Merger Sub of any covenant or other
\n agreement contained herein (other than the covenants and agreements set
\n forth in Section 5.15, which are specifically covered in Section 5.15) or
\n under any other agreement executed and delivered by the parties in
\n furtherance of the transactions described herein.<\/p>\n
The sole recourse of the Company Indemnified Persons from any Damages shall be
\nindemnification under this Article VIII. The aggregate indemnification
\nobligations of Parent and Merger Sub hereunder shall not exceed $1,000,000,
\nprovided however that there shall be no limitation on liability of Parent or
\nMerger Sub for (i) any breach of any representation, warranty or covenant if the
\nMerger does not close or (ii) fraud, criminal activity or intentional breach of
\nany covenant contained in this Agreement.<\/p>\n
(d) Threshold for Claims. No claim for Damages arising out of any
\nmisrepresentation or breach of the representations and warranties shall be made
\nunder Article VIII unless the aggregate of Damages exceeds $20,000 for which
\nclaims are made hereunder by the Company Indemnified Persons or Parent
\nIndemnified Persons, as the case may be, in which case the Company Indemnified
\nPerson or Parent Indemnified Person, as the case may be, shall be entitled to
\nseek compensation for all Damages without regard to the limitation set forth in
\nthis Section 8.2(d).<\/p>\n
A-2<\/p>\n
Section 8.3 Escrow Period: Release From Escrow.<\/p>\n
(a) As promptly as practicable after Parent files its Annual Report on
\nForm 10-K with the SEC for the year ended December 31, 2001 (the “Parent 10-K”),
\nthe Escrow Agent shall release from escrow to the Company Shareholders their pro
\nrata portion of the Escrow Fund remaining; provided, however, that a portion of
\nthe Escrow Fund which, in the reasonable judgment of Parent, subject to the
\nobjection of the Shareholders’ Agent and the subsequent arbitration of the
\nmatter in the manner provided in Section 8.7 hereof, is necessary to satisfy any
\nunsatisfied claims specified in any Escrow Claim Certificate theretofore
\ndelivered to the Escrow Agent on or prior to the date the Parent 10-K is filed
\nwith the SEC with respect to facts and circumstances existing on or prior to
\nsuch date, shall remain in the Escrow Fund until such claims have been resolved.
\nAny portion of the Escrow Fund retained pursuant to the proviso in the first
\nsentence of this Section 8.3(a) shall be released to Company Shareholders or
\nreleased to Parent (as appropriate) promptly upon resolution of each specific
\nindemnification claim involved. Escrow Shares and Escrow Cash shall be released
\nto the respective Company Shareholders in proportion to their respective share
\nof the Merger Consideration. Parent will take such action as may be necessary to
\ncause such certificates to be issued in the names of the appropriate Persons.
\nCertificates representing Escrow Shares so issued that are subject to resale
\nrestrictions under applicable securities laws will bear a legend to that effect.
\nNo fractional shares shall be released and delivered from Escrow to the Company
\nShareholders. In lieu of any fraction of an Escrow Share to which a Company
\nShareholder would otherwise be entitled, such holder will receive from Parent an
\namount of cash (rounded to the nearest whole cent) equal to the product of such
\nfraction multiplied by the average of the closing prices of Parent Common Stock
\nas reported on the Nasdaq National Market during the twenty trading days ending
\none day prior to the date such shares are released from the Escrow Fund.<\/p>\n
(b) No Escrow Shares or any beneficial interest therein may be pledged,
\nsold, assigned or transferred, including by operation of law, by any Company
\nShareholder or be taken or reached by any legal or equitable process in
\nsatisfaction of any debt or other liability of any such shareholder, prior to
\nthe delivery to such shareholder of his pro rata portion of the Escrow Shares by
\nthe Escrow Agent as provided herein.<\/p>\n
(c) The Escrow Agent is hereby granted the power to effect any transfer of
\nEscrow Shares contemplated by this Agreement. Parent will cooperate with the
\nEscrow Agent in promptly issuing stock certificates to effect such transfers.<\/p>\n
Section 8.4 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on
\nor before the date of filing of the Parent 10-K of a certificate signed by any
\nofficer of Parent (an “Escrow Claim Certificate”) stating that with respect to
\nthe indemnification obligations of the Company Shareholders set forth in Section
\n8.2, Damages exist and specifying in reasonable detail the individual items of
\nsuch Damages included in the amount so stated, the date each such item was paid,
\nproperly accrued or arose, and the nature of the misrepresentation, breach of
\nwarranty, covenant or claim to which such item is related, the Escrow Agent
\nshall, subject to the provisions of this Article VIII, deliver to Parent out of
\nthe Escrow Fund, as promptly as practicable, cash equal to the amount of such
\nDamages. Notwithstanding the foregoing, the Shareholders’ Agent may elect to pay
\nall or a portion of the Damages in shares of Parent Common Stock if Parent and
\nShareholders’ Agent agree that payment in shares of Parent Common Stock will not
\njeopardize the treatment of the Merger as a reorganization under Section 368(a)
\nof the Code, it being agreed that if Parent and Shareholders’ Agent cannot reach
\nagreement regarding the use of shares of Parent Common Stock to pay the Damages,
\nthen Parent’s determination shall be final and binding on the parties. In the
\nevent the amount of Damages exceeds the amount of Escrow Cash available for the
\npayment of Damages and Parent determines that payment of Damages in shares of
\nParent Common Stock will jeopardize the treatment of the Merger as a
\nreorganization under Section 368(a) of the Code, then Shareholders’ Agent shall
\narrange for the sale , on behalf of the Company Shareholders, of <\/p>\n
A-3<\/p>\n
such number of the Escrow Shares as is necessary to pay the Damages to Parent in
\ncash. For purposes of this Section 8.4, the Parent Common Stock delivered to
\nParent from the Escrow Fund shall be valued at the average of the closing prices
\nof Parent Common Stock as reported on the Nasdaq National Market during the
\ntwenty trading days ending one day prior to the date such shares of Parent
\nCommon Stock are delivered to Parent.<\/p>\n
Section 8.5 Objections to Claims.<\/p>\n
(a) At the time of delivery of any Escrow Claim Certificate to the Escrow
\nAgent, a duplicate copy of such Escrow Claim Certificate shall be delivered to
\nthe Shareholders’ Agent and for a period of thirty (30) days after such
\ndelivery, the Escrow Agent shall make no delivery of Parent Common Stock and\/or
\ncash pursuant to Section 8.4 hereof unless the Escrow Agent shall have received
\nwritten authorization from the Shareholders’ Agent to make such delivery. After
\nthe expiration of such thirty (30) day period, the Escrow Agent shall make
\ndelivery of the Parent Common Stock and\/or cash in accordance with Section 8.4
\nhereof, provided that no such payment or delivery may be made if the
\nShareholders’ Agent shall object in a written statement to the claim made in the
\nEscrow Claim Certificate, and such statement shall have been delivered to the
\nEscrow Agent and to Parent prior to the expiration of such thirty (30) day
\nperiod; and provided further that if Shareholders’ Agent shall only object to a
\nportion of the claim, the Escrow Agent shall pay to Parent the uncontested
\nportion of the claim.<\/p>\n
(b) In case the Shareholders’ Agent shall so object in writing to any
\nclaim or claims by Parent made in any Escrow Claim Certificate, which objection
\nshall state in reasonable detail the basis for such objection, Parent shall have
\nthirty (30) days to respond in a written statement to the objection of the
\nShareholders’ Agent. If after such thirty (30) day period there remains a
\ndispute as to any claims, the Shareholders’ Agent and Parent shall attempt in
\ngood faith for sixty (60) days to agree upon the rights of the respective
\nparties with respect to each of such claims. If the Shareholders’ Agent and
\nParent should so agree, a memorandum setting forth such agreement shall be
\nprepared and signed by both parties and shall be furnished to the Escrow Agent.
\nThe Escrow Agent shall be entitled to rely on any such memorandum and shall
\ndistribute the Parent Common Stock or other property from the Escrow Fund in
\naccordance with the terms thereof.<\/p>\n
Section 8.6 Claims by Company Indemnitees.<\/p>\n
(a) Subject to the provisions of this Article VIII, upon receipt by Parent
\nof a certificate signed by the Shareholders’ Agent (an “Agent Certificate”) that
\nwith respect to the indemnification obligations of Parent and Merger Sub set
\nforth in Section 8.2, Damages exist and specifying in reasonable detail the
\nindividual items of Damages included in the amount so stated, the date each item
\nwas paid or properly accrued or arose, and the nature of the misrepresentation,
\nbreach of warranty or covenant or other claim to which such item is related, the
\nParent shall, subject to the provisions of this Article VIII, deliver to the
\nShareholders’ Agent as promptly as practicable cash, shares of Parent Common
\nStock, or a combination thereof, equal to such Damages; provided that in the
\nevent Parent elects to issue shares of Parent Common Stock it shall deliver an
\nundertaking to Shareholders’ Agent to register such shares for resale under the
\nSecurities Act in accordance with Section 5.15 hereof; and provided further that
\nParent shall issue shares of Parent Common Stock (subject to Section 1.13
\nhereof) to the extent Parent reasonably determines that the payment in cash
\nStock will jeopardize the treatment of the Merger as a reorganization under
\nSection 368(a) of the Code.<\/p>\n
(b) Parent shall have thirty (30) days after delivery of an Agent
\nCertificate to object to any claim or claims made by such Agent Certificate in a
\nwritten statement delivered to Shareholders’ Agent, which objection shall state
\nin reasonable detail the basis for such objection. In case Parent shall so
\nobject in writing to any claim or claims made by the Shareholders’ Agent in the
\nAgent Certificate, the Shareholders<\/p>\n
A-4<\/p>\n
Agent shall have thirty (30) days to respond in a written statement to the
\nobjection of Parent. If after such thirty (30) day period there remains a
\ndispute as to any claims, the Shareholders’ Agent and Parent shall attempt in
\ngood faith for sixty (60) days to agree upon the rights of the respective
\nparties with respect to each of such claims. If the Shareholders’ Agent and
\nParent should so agree, a memorandum setting forth such agreement shall be
\nprepared and signed by both parties. Parent shall, if agreed in such memorandum,
\nmake payment for claims or other disposition as agreed in such memorandum and
\nsuch performance shall satisfy all of Parent’s obligations as to such claim.<\/p>\n
Section 8.7 Resolution of Conflicts and Arbitration.<\/p>\n
(a) If no agreement can be reached after good faith negotiation between
\nthe parties pursuant to Sections 8.5 or 8.6, either Parent or the Shareholders’
\nAgent may, by written notice to the other, demand arbitration of the matter
\nunless the amount of the Damages is at issue in pending litigation with a third
\nparty, in which event arbitration shall not be commenced until such amount is
\nascertained or both parties agree to arbitration; and in either such event the
\nmatter shall be settled by arbitration conducted by one arbitrator. Parent and
\nthe Shareholders’ Agent shall agree on the arbitrator; provided, however, that
\nif Parent and the Shareholders’ Agent cannot agree on the arbitrator, either
\nParent or the Shareholders’ Agent can request that the American Arbitration
\nAssociation select the arbitrator. The arbitrator shall set a limited time
\nperiod and establish procedures designed to reduce the cost and time for
\ndiscovery while allowing the parties an opportunity, adequate in the sole
\njudgment of the arbitrator, to discover relevant information from the opposing
\nparties about the subject matter of the dispute. The arbitrator shall rule upon
\nmotions to compel or limit discovery and shall have the authority to impose
\nsanctions, including attorneys’ fees and costs, to the same extent as a court of
\nlaw or equity, should the arbitrator determine that discovery was sought without
\nsubstantial justification or that discovery was refused or objected to without
\nsubstantial justification. The decision of the arbitrator shall be written,
\nshall be in accordance with applicable law and with this Agreement, and shall be
\nsupported by written findings of fact and conclusions of law which shall set
\nforth the basis for the decision of the arbitrator. The decision of the
\narbitrator as to the validity and amount of any claim in such Escrow Claim
\nCertificate or Agent Certificate shall be binding and conclusive upon the
\nparties to this Agreement, and notwithstanding anything in Article VIII hereof,
\nthe Escrow Agent and the parties shall be entitled to act in accordance with
\nsuch decision and the Escrow Agent shall be entitled to make or withhold
\npayments out of the Escrow Fund in accordance therewith.<\/p>\n
(b) Judgment upon any award rendered by the arbitrator may be entered in
\nany court having jurisdiction. Any such arbitration shall be held in New York,
\nNew York if commenced by the Shareholders’ Agent and in San Diego, California if
\ncommenced by Parent, in each case under the commercial rules then in effect of
\nthe American Arbitration Association. For purposes of this Section 8.7(b), in
\nany arbitration hereunder in which any claim or the amount thereof stated in the
\nEscrow Claim Certificate or Agent Certificate, as the case may be, is at issue,
\nthe party seeking indemnification shall be deemed to be the non-prevailing party
\nunless the arbitrator awards the party seeking indemnification more than
\none-half (1\/2) of the amount in dispute, in which case the Person against whom
\nindemnification is sought shall be deemed to be the non-prevailing party. The
\nnon-prevailing party to an arbitration shall pay its own expenses, the fees of
\nthe arbitrator and the expenses, including attorneys’ fees and costs, reasonably
\nincurred by the other party to the arbitration.<\/p>\n
Section 8.8 Shareholders’ Agent.<\/p>\n
(a) Andrew Barnes shall be constituted and appointed as agent
\n(“Shareholders’ Agent”) for and on behalf of the Company Shareholders to give
\nand receive notices and communications, to authorize delivery to Parent of the
\nParent Common Stock and\/or cash from the Escrow Fund in satisfaction of claims
\nby Parent, to object to such deliveries, to make claims on behalf of the Company
\nShareholders<\/p>\n
A-5<\/p>\n
pursuant to Section 8.6, to agree to, negotiate, enter into settlements and
\ncompromises of, and demand arbitration and comply with orders of courts and
\nawards of arbitrators with respect to, such claims, and to take all actions
\nnecessary or appropriate in the judgment of the Shareholders’ Agent for the
\naccomplishment of the foregoing. Such agency may be changed by the holders of a
\nmajority in interest of the Escrow Fund from time to time upon not less than 10
\ndays’ prior written notice to Parent. No bond shall be required of the
\nShareholders’ Agent, and the Shareholders’ Agent shall receive no compensation
\nfor his services. Notices or communications to or from the Shareholders’ Agent
\nshall constitute notice to or from each of the Company Shareholders.<\/p>\n
(b) The Shareholders’ Agent shall not be liable for any act done or
\nomitted hereunder as Shareholder’ Agent while acting in good faith and in the
\nexercise of reasonable judgment and any act done or omitted pursuant to the
\nadvice of counsel shall be conclusive evidence of such good faith. The Company
\nShareholders shall severally indemnify the Shareholders’ Agent and hold him
\nharmless against any loss, liability or expense incurred without gross
\nnegligence or bad faith on the part of the Shareholders’ Agent and arising out
\nof or in connection with the acceptance or administration of his duties
\nhereunder, as the same may be modified, amended or supplemented.<\/p>\n
(c) The Shareholders’ Agent may rely on and shall be protected in relying
\non or refraining from acting on any instrument reasonably believed to be genuine
\nand to have been signed or presented by the proper party or parties. The
\nShareholders’ Agent shall not be liable for other parties’ forgeries, fraud or
\nfalse representations.<\/p>\n
(d) The Shareholders’ Agent shall have reasonable access to information
\nabout Parent and the reasonable assistance of Parent’s officers and employees
\nfor purposes of performing his duties and exercising his rights hereunder,
\nprovided that the Shareholders’ Agent shall treat confidentially and not
\ndisclose any nonpublic information from or about Parent and its Subsidiaries to
\nanyone (except on a need to know basis to individuals who agree to treat such
\ninformation confidentially).<\/p>\n
(e) At the Closing, the Company shall deposit $20,000 with the Escrow
\nAgent to pay the expenses incurred by the Shareholders’ Agent in connection with
\nthis Agreement. The Company Shareholders shall be responsible for any expenses
\nof or incurred by Shareholders’ Agent in excess of $20,000.<\/p>\n
Section 8.9 Actions of the Shareholders’ Agent. A decision, act, consent
\nor instruction of the Shareholders’ Agent shall constitute a decision of all
\nCompany Shareholders and shall be final, binding and conclusive upon each such
\nCompany Shareholder, and the Escrow Agent and Parent may rely upon any decision,
\nact, consent or instruction of the Shareholders’ Agent as being the decision,
\nact, consent or instruction of each and every such Company Shareholder. The
\nEscrow Agent and Parent are hereby relieved from any liability to any Person for
\nany acts done by them in accordance with such decision, act, consent or
\ninstruction of the Shareholders’ Agent.<\/p>\n
A-6<\/p>\n
ANNEX B<\/p>\n
SHAREHOLDERS<\/p>\n
——————————————————————————–
\n Percentage Interest Taxpayer
\nName and Address in Escrow Fund ID Number
\n——————————————————————————–<\/p>\n
——————————————————————————–<\/p>\n
——————————————————————————–<\/p>\n
——————————————————————————–<\/p>\n
B-1<\/p>\n
ANNEX C<\/p>\n
ESCROW AGENT FEE SCHEDULE<\/p>\n
ESCROW AGENT FEE SCHEDULE<\/p>\n
ACCEPTANCE FEE
\n The acceptance fee includes the review of all documents, Waived
\n initial set-up of the account, and other reasonably required
\n services up to and including the closing. This is a one-time
\n fee, payable at closing.<\/p>\n
U.S. Bank Trust National Association reserves the right to
\n refer any or all escrow documents for legal review prior to
\n execution. Legal fees (billed on an hourly basis) and expenses
\n for this service will be to, and paid by, the customer. Where
\n appropriate and when requested by the customer, U.S. Bank
\n Trust National Association will provide advance estimates of
\n these legal fees.<\/p>\n
ADMINISTRATION\/AGENT FEES
\n Annual account administration fee covers the normal duties of $500
\n associated with the management of the account. Administration
\n fees are payable in advance and will not be prorated.<\/p>\n
DIRECT OUT OF POCKET
\n Reimbursement of direct expenses associated with the At Cost
\n performance of our duties, including but not limited to
\n publications, legal, and travel expenses, and filing fees.<\/p>\n
INDIRECT OUT OF POCKET
\n Charge for miscellaneous expenses such as fax, messenger
\n service, overnight mail, stationery, and postage (excluding
\n large mailings).<\/p>\n
This charge is applied against your total Administration\/Agent 0%
\n Fees, charged in advance, and will not be prorated.<\/p>\n
EXTRAORDINARY SERVICES
\n Charge for duties or responsibilities of an unusual nature not
\n provided for in the indenture or otherwise set forth in this
\n schedule. A reasonable charge will be made based on the nature
\n of the service and the responsibility involved. These charges
\n will be billed as a flat fee or our hourly rate then in
\n effect, at our option.<\/p>\n
Final account acceptance is subject to review of documents. Fees are based on
\nour understanding of the transaction and are subject to revision if the
\nstructure is changed. In the event this transaction does not close, any related
\nout-of-pocket expenses will be billed to you at cost. Fees for any services not
\nspecifically covered will be based on appraisal of services rendered.<\/p>\n
With general reference to all of our charges, it should be understood that they
\nare subject to adjustment from time to time, upon written notification.<\/p>\n
The fees in this schedule are the terms under which you agree to do business.
\nClosing the transaction constitutes agreement to this fee schedule, as does
\npayment of the invoice received after subsequent fee adjustment notification.<\/p>\n
All fees are subject to Washington State sales tax (currently 8.6%).<\/p>\n
Absent your instructions to sweep or otherwise invest balances, no interest,
\nearnings, or other compensation for uninvested balances will be paid to you.<\/p>\n
C-1<\/p>\n
Exhibit 6.2(o)<\/p>\n
Bio-Technology General Corp.
\n70 Wood Avenue South
\nIselin, New Jersey 08830<\/p>\n
Gentlemen:<\/p>\n
Reference is made to that certain Agreement and Plan of Reorganization,
\ndated as of February 21, 2001 (the “Reorganization Agreement”), by and among
\nBio-Technology General Corp. (“Parent”), MYLS Acquisition Corp., a Delaware
\ncorporation and a wholly-owned subsidiary of Parent (“Merger Sub”), and Myelos
\nCorporation, a California corporation (the “Company”). Pursuant to the
\ntransaction contemplated by the Reorganization Agreement, Merger Sub will be
\nmerged with and into Company (the “Merger”) and the undersigned will receive
\ncash and shares of common stock, par value $.01 per share, of Parent (“Parent
\nCommon Stock”) in the Merger (the shares of Parent Common Stock to be received
\nby the undersigned in the Merger being hereinafter referred to as the “Merger
\nStock”, it being agreed that Merger Stock shall not include shares of Parent
\nCommon Stock received pursuant to Section 1.12 of the Reorganization Agreement).
\nIn order to induce Parent to acquire the Company, the undersigned, during the
\nperiod commencing on the Effective Time (as such term is defined in the
\nReorganization Agreement) and ending on the second anniversary of the Effective
\nTime:<\/p>\n
(a) agrees not to, without the prior written consent of Parent, (i)
\n offer, pledge, sell, contract to sell, sell any option or contract to
\n purchase, purchase any option or contract to sell, grant any option, right
\n or warrant to purchase, or otherwise transfer or dispose of, directly or
\n indirectly, any shares of Merger Stock or any securities convertible into
\n or exercisable or exchangeable for Merger Stock (including, without
\n limitation, shares of Merger Stock or securities convertible into or
\n exercisable or exchangeable for Merger Stock which may be deemed to be
\n beneficially owned by the undersigned in accordance with the rules and
\n regulations of the Securities and Exchange Commission) or (ii) enter into
\n any swap or other arrangement that transfers all or a portion of the
\n economic consequences associated with the ownership of any Merger Stock
\n (regardless of whether any of the transactions described in clause (i) or
\n (ii) is to be settled by the delivery of Merger Stock, or such other
\n securities, in cash or otherwise), otherwise than (1) as a bona fide gift
\n or gifts, or as a transfer or transfers for estate planning purposes,
\n provided the donee or donees, or transferee or transferees thereof agree
\n in writing to be bound by the terms of this agreement, (2) as a
\n distribution to partners or stockholders of the undersigned, provided that
\n the distributees thereof agree in writing to be bound by the terms of this
\n agreement or (3) sales in any three (3) month period of not more than the
\n greater of 6,000 shares or ten percent (10%) of the aggregate number of
\n shares of Merger Stock received by the undersigned in the Merger; and<\/p>\n
(b) authorizes Parent to cause the transfer agent to decline to
\n transfer and\/or to note stop transfer restrictions on the transfer books
\n and records of Parent with respect to any shares of Merger Stock for which
\n the undersigned is the record holder and, in the case of any such shares
\n or securities for which the undersigned is the beneficial but not the
\n record holder, agrees to cause the record holder to cause the transfer
\n agent to decline to transfer and\/or to note stop transfer restrictions on
\n such books and records with respect to such shares or securities.<\/p>\n
The undersigned hereby represents and warrants that (i) the undersigned has full
\npower and authority to enter into the agreements set forth herein, and that,
\nupon request, the undersigned will execute any additional documents necessary or
\ndesirable in connection with the enforcement hereof and (ii) since <\/p>\n
December 1, 2000 the undersigned has not sold a call option, or purchased a put
\noption, in each case relating to Parent Common Stock, or otherwise entered into
\nany swap or other arrangement that has the effect of transferring all or a
\nportion of the economic consequences associated with the ownership of any Merger
\nStock (regardless of whether any such arrangement is to be settled by the
\ndelivery of Merger Stock, or such other securities, in cash or otherwise). All
\nauthority herein conferred or agreed to be conferred shall survive the death or
\nincapacity of the undersigned and any obligations of the undersigned shall be
\nbinding upon the heirs, personal representatives, successors, and assigns of the
\nundersigned.<\/p>\n
________________________________<\/p>\n
Dated: __________, 2001<\/p>\n
Name and Address (Please Print)<\/p>\n
_______________________________
\n_______________________________
\n_______________________________
\n_______________________________<\/p>\n
Social Security or Taxpayer Identification Number<\/p>\n
_______________________________<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6900],"corporate_contracts_industries":[9406],"corporate_contracts_types":[9622,9626],"class_list":["post-43174","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-bio-technology-general-corp","corporate_contracts_industries-drugs__botanical","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43174","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43174"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43174"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43174"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43174"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}