Agreement and Plan of Merger - CytoTherapeutics Inc. and StemCells Inc.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CytoTherapeutics, Inc.
and
CTI Acquisition, Corp.
and
StemCells, Inc.
Dated as of August 13, 1997
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TABLE OF CONTENTS
ARTICLE I
THE MERGER.................................................................... 2
SECTION 1.1 The Merger.............................................. 2
SECTION 1.2 Effective Time.......................................... 3
SECTION 1.3 Effect of the Merger.................................... 4
SECTION 1.4 Articles of Incorporation, By-Laws...................... 4
SECTION 1.5 Directors and Officers.................................. 4
SECTION 1.6 Effect on Capital Stock................................. 4
SECTION 1.7 Exchange of Certificates................................ 8
SECTION 1.8 Stock Transfer Books.................................... 10
SECTION 1.9 No Further Ownership Rights in Company Stock............ 10
SECTION 1.10 Lost, Stolen or Destroyed Certificates................. 10
SECTION 1.11 Tax Consequences....................................... 10
SECTION 1.12 Taking of Necessary Action; Further Action............. 11
SECTION 1.13 Material Adverse Effect................................ 11
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY......................... 11
SECTION 2.1 Organization and Qualification; Subsidiaries........... 11
SECTION 2.2 Articles of Incorporation and By-Laws.................. 12
SECTION 2.3 Capitalization......................................... 12
SECTION 2.4 Authority Relative to this Agreement................... 12
SECTION 2.5 No Conflict; Required Filings and Consents............. 12
SECTION 2.6 Permits................................................. 13
SECTION 2.7 Financial Statements................................... 14
SECTION 2.8 Absence of Certain Changes or Events................... 14
SECTION 2.9 No Undisclosed Liabilities............................. 15
SECTION 2.10 Absence of Litigation................................. 15
SECTION 2.11 Employee Benefit Plans, Employment Agreements......... 15
SECTION 2.12 Intentionally Deleted................................. 15
SECTION 2.13 Restrictions on Business Activities................... 16
SECTION 2.14 Title to Property..................................... 16
SECTION 2.15 Taxes................................................. 16
SECTION 2.16 Environmental Matters................................. 16
SECTION 2.17 Intellectual Property................................. 17
SECTION 2.18 Interested Party Transactions......................... 19
SECTION 2.19 Insurance............................................. 19
SECTION 2.20 Accounts Receivable; Inventories...................... 19
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SECTION 2.21 Equipment............................................. 19
SECTION 2.22 Brokers............................................... 20
SECTION 2.23 Change in Control Payments............................ 20
SECTION 2.24 Expenses.............................................. 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....................... 20
SECTION 4.1 Organization and Qualification; Subsidiaries............ 20
SECTION 4.2 Charter and By-Laws..................................... 21
SECTION 4.3 Capitalization.......................................... 21
SECTION 4.4 Authority Relative to this Agreement.................... 21
SECTION 4.5 No Conflict, Required Filings and Consents.............. 21
SECTION 4.6 SEC Filings; Financial Statements....................... 22
SECTION 4.7 Ownership of Merger Sub; No Prior Activities............ 23
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER........................................ 23
SECTION 5.1 Conduct of Business by the Company Pending the Merger... 23
SECTION 5.2 No Solicitation......................................... 25
ARTICLE VI
ADDITIONAL AGREEMENTS......................................................... 26
SECTION 6.1 Stockholder Meeting..................................... 26
SECTION 6.2 Access to Information; Confidentiality.................. 26
SECTION 6.3 Consents; Approvals..................................... 26
SECTION 6.4 Notification of Certain Matters......................... 27
SECTION 6.5 Further Action/Tax Treatment............................ 27
SECTION 6.6 Public Announcements. .................................. 27
SECTION 6.7 Conveyance Taxes........................................ 27
ARTICLE VII
CONDITIONS TO THE MERGER...................................................... 28
SECTION 7.1 Conditions to Obligation of Each Party to Effect
the Merger.............................................. 28
SECTION 7.2 Additional Conditions to Obligations of Parent and
Merger Sub.............................................. 28
SECTION 7.3 Additional Conditions to Obligation of the Company...... 30
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ARTICLE VIII
TERMINATION................................................................... 31
SECTION 8.1 Termination............................................. 31
SECTION 8.2 Effect of Termination................................... 33
SECTION 8.3 Fees and Expenses....................................... 33
ARTICLE IX
GENERAL PROVISIONS............................................................ 33
SECTION 9.1 Indemnification......................................... 33
SECTION 9.2 Notices................................................. 37
SECTION 9.3 Certain Definitions..................................... 38
SECTION 9.4 Amendment............................................... 39
SECTION 9.5 Waiver.................................................. 39
SECTION 9.6 Headings................................................ 39
SECTION 9.7 Severability............................................ 39
SECTION 9.8 Entire Agreement........................................ 40
SECTION 9.9 Assignment; Guarantee of Merger Sub Obligations........ 40
SECTION 9.10 Parties in Interest.................................... 40
SECTION 9.11 Failure or Indulgence Not Waiver; Remedies Cumulative.. 40
SECTION 9.12 Governing Law.......................................... 40
SECTION 9.13 Waiver of Jury Trial................................... 40
SECTION 9.14 Counterparts; Miscellaneous............................ 41
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 13, 1997 (this
"Agreement"), among CytoTherapeutics, Inc., a Delaware corporation ("Parent"),
CTI Acquisition, Corp., a California corporation and a wholly owned subsidiary
of Parent ("Merger Sub") and StemCells, Inc., a California corporation (the
"Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders for Parent to enter into a business combination with the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent and Merger Sub have each approved the merger of Merger Sub with and into
the Company (the "Merger") in accordance with the applicable provisions of the
California Corporation Code (the "CCC") upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder;
and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of the
Company's capital stock, including the Company's common stock, $.001 par value
(the "Company Common Stock") and the Company's Class B common stock, $.001 par
value (the "Class B Common Stock"), shall be converted into the right to receive
shares of Parent's common stock, $.01 par value ("Parent Common Stock" and
together with the Company Common Stock, "Company Stock"), upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in Section 1.2),
and subject to and upon the terms and conditions of this Agreement and the CCC,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the consummation of the Merger (the "Closing") will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VII, at the
offices of Ropes & Gray, One International Place, Boston, Massachusetts, unless
another date, time or place is agreed to in writing by the parties hereto.
(c) Escrow. At the Effective Time, Parent shall deliver to State Street
Bank & Trust Company (or such other escrow agent as the parties may agree), or
any successor or other escrow agent (the "Escrow Agent") appointed pursuant to
the Escrow Agreement (as hereinafter defined) the number of shares of Parent
Common Stock as set forth on Schedule 1 to the Escrow Agreement, such shares to
be held and applied in accordance with the Escrow Agreement (the "Escrow
Shares").
(d) Stockholders Representative. The Principal Stockholders, by virtue of
their approval of the Agreement, will be deemed to have irrevocably constituted
and appointed, effective as of the Effective Time, Richard M. Rose (together
with his permitted successors, the "Stockholder Representative"), as their true
and lawful agent and attorney-in-fact to enter into any agreement in connection
with the transactions contemplated by this Agreement and any transactions
contemplated by the Escrow Agreement, to exercise all or any of the powers,
authority and discretion conferred on him under any such agreement, to waive any
terms and conditions of any such agreement (other than the Merger
Consideration), to give and receive notices on their behalf and to be their
exclusive representative with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by any such
agreement, including, without limitation, the defense, settlement or compromise
of any claim, action or proceeding for which the Parent or the Merger Sub may be
entitled to indemnification and the Stockholder Representative agrees to act as,
and to undertake the duties and responsibilities of, such agent and
attorney-in-fact. This power of attorney is coupled with an interest and is
irrevocable. The Stockholder Representative shall not be liable
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for any action taken or not taken by him in connection with his obligations
under this Agreement (i) with the consent of Principal Stockholders who, as of
the date of this Agreement, owned a majority in number of the outstanding shares
of Company Common Stock owned by the Principal Stockholders or (ii) in the
absence of his own gross negligence or wilful misconduct. If the Stockholder
Representative shall be unable or unwilling to serve in such capacity, his
successor shall be named by Principal Stockholders holding a majority of the
shares of Company Common Stock owned by the Principal Stockholders at the
Effective Time who shall serve and exercise the powers of Stockholder
Representative hereunder. For purposes of this Agreement, the "Principal
Stockholders" shall be those natural persons identified in the Escrow Agreement
as being parties to the Escrow Agreement.
(e) Closing Certificate; Exchange Ratio. At the Closing, the Company shall
deliver to Parent a certificate, in form and substance satisfactory to Parent
and signed by its Chief Executive Officer and Chief Financial Officer (the
"Company Closing Certificate"), certifying (i) the number of outstanding shares
of Company Common Stock and Class B Common Stock, as of the date of the Closing,
(ii) the maximum number of shares of Company Common Stock and Class B Common
Stock issuable upon the conversion or exercise of all options, warrants, and
other securities of the Company convertible into or exercisable for shares of
Company Common Stock that are outstanding on the Closing Date (whether or not
such securities are then exercisable in full), and (iii) the Excess Company
Expenses (as defined in Section 8.3). The aggregate number of shares of Parent
Common Stock to be issued in the Merger in exchange for each share of Company
Common Stock shall be the result of dividing (i) the result of $7,900,000 less
the Excess Company Expenses (as defined in Section 8.3) divided by $5.00, by
(ii) the number of shares of Company Common Stock and shares of Class B Common
Stock outstanding on the date of the Closing, plus the maximum number of shares
of Company Common Stock or Class B Common Stock issuable upon the conversion or
exercise of all options, warrants, preferred stock and other securities of the
Company convertible into or exercisable for shares of Company Common Stock
(other than outstanding shares of Class B Common Stock) or Class B Common Stock
that are outstanding on the Closing Date (whether or not such securities are
then exercisable in full) (such result, expressed as a ratio of the number of
shares of Parent Common Stock to be issued in the Merger for each then
outstanding share of Company Common Stock, is hereinafter referred to as the
"Exchange Ratio"). The number of shares of Common Stock issuable upon
conversion of the Convertible Promissory Notes and the Stock Purchase Warratns
(each as defined in Section 2.3 below) shall be deemed to be 18,503.
SECTION 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing a duly executed and
delivered Agreement of Merger in a form reasonably acceptable to the Company and
Parent and as contemplated by the CCC (the "Merger Agreement"), with the
Secretary of State of the State of California, in such form as required by, and
executed in accordance with the relevant provisions of, the CCC (the time of
such filing being the "Effective Time").
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SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Merger Agreement and the
applicable provisions of the CCC. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.4 Articles of Incorporation, By-Laws.
(a) Articles of Incorporation. Unless otherwise determined by Parent
prior to the Effective Time, at the Effective Time the Articles of Incorporation
of the Surviving Corporation, as in effect immediately prior to the Effective
Time, shall be amended and restated to read as did the Articles of Incorporation
of the Merger Sub immediately prior to the Effective Time, except that the name
of the Surviving Corporation will remain unchanged.
(b) By-Laws. Unless otherwise determined by Parent prior to the Effective
Time, the By-Laws of the Surviving Corporation, as in effect immediately prior
to the Effective Time, shall be amended and restated to read as did the By-Laws
of the Merger Sub immediately prior to the Effective Time, except that the name
of the Surviving Corporation shall remain unchanged.
SECTION 1.5 Directors and Officers. The initial directors and officers of
the Surviving Corporation shall be as follows, each to hold office in accordance
with the Articles of Incorporation and By-Laws of the Surviving Corporation:
Irving Weissman, M.D. - Director, Fred Gage, M.D. - Director, Seth A. Rudnick,
M.D. - Director, John McBride - Director and Treasurer, Ivor Elrifi - Director
and Secretary and Richard Rose - President.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Securities.
(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and each share of Class B Common
Stock issued and outstanding immediately prior to the Effective Time
(excluding any shares of Company Common Stock or Class B Common Stock to be
canceled pursuant to Section 1.6(b) and Company Dissenting Shares (as
defined in Section 1.6(c)) shall be converted, subject to Section 1.6(i),
into the right to receive validly issued, fully paid and nonassessable
shares ("Parent Shares") of Parent Common Stock equal to the Exchange
Ratio.
(ii) Each of the Convertible Promissory Notes (as defined in Section
2.3 below) outstanding immediately prior to the Effective Time shall, in
full satisfaction thereof, be converted into the right to receive the
number of shares of Company Common Stock
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equal to the outstanding principal balance of each such Convertible
Promissory Note divided by $11.40. The resultant number of shares of
Company Common Stock shall be converted into the right to receive shares of
Parent Common Stock as provided in Section 1.6(a)(i) above.
(b) Cancellation. Each share of Company Common Stock and each share of
Class B Common Stock held in the treasury of the Company and each share of
Company Common Stock and each share of Class B Common Stock owned by Parent,
Merger Sub or any direct or indirect wholly owned subsidiary of the Company or
Parent immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, cease to be
outstanding, be canceled and retired without payment of any consideration
therefor and cease to exist.
(c) Shares of Dissenting Holders. (a) Notwithstanding anything to the
contrary contained in this Agreement, any holder of Company Common Stock or
Class B Common Stock with respect to which dissenters' rights, if any, are
granted by reason of the Merger under the CCC and who does not vote in favor of
the Merger and who otherwise complies with Chapter 13 of the CCC shall be
entitled to receive with respect to such shares (the "Company Dissenting
Shares") the payment provided for by Chapter 13 of the CCC and only such
payment, and shall not be entitled to receive shares of Parent Common Stock
pursuant to Section 1.6(a) hereof. If any such holder fails to perfect,
effectively withdraws or loses his or her dissenters' rights under the CCC, his
or her Company Dissenting Shares shall thereupon be deemed to have been
converted, as of the Effective Time, into the right to receive shares of Parent
Common Stock pursuant to Section 1.6(a).
(d) Payments on Company Dissenting Shares. Any payments relating to the
Company Dissenting Shares shall be made solely by the Surviving Corporation and
no funds or other property have been or will be provided by Merger Sub or any of
Parent's other direct or indirect subsidiaries for such payment.
(e) Stock Options under the 1996 Stock Option Plan.
(i) At the Effective Time, each outstanding option to purchase
Company Common Stock granted under the Company's 1996 Stock Option Plan
(the "Company Stock Option Plan" and each such option a "Stock Option"),
whether vested or unvested, shall be deemed assumed by Parent and deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable to such Stock Option under the Company Stock Option Plan and any
other agreement to which such Stock Option is subject prior to the
Effective Time, the number (rounded down to the nearest whole number) of
shares of Parent Common Stock as the holder of such Stock Option would have
been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (not taking
into account whether or not such option was in fact exercisable), at a
price per share equal to (x) the aggregate
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exercise price for Company Common Stock otherwise purchasable pursuant to
such Stock Option divided by (y) the result obtained by multiplying the
number of shares of Company Common Stock otherwise purchasable pursuant to
such Stock Option by the Exchange Ratio (provided that in no event shall
the per share exercise price under such option be less than $.01).
(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and such Stock Option
shall continue in effect on the same terms and conditions.
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
pursuant to the terms set forth in this Section 1.6(e).
(iv) Subject to any applicable limitations under the Securities Act
of 1933, as amended, and the rules and regulations thereunder (the
"Securities Act"), Parent shall file a Registration Statement on Form S-8
(or any successor form), effective promptly following the Effective Time,
with respect to the shares of Parent Common Stock issuable upon exercise of
the Stock Options, and the Parent shall use all reasonable efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses relating thereto) for so
long as such options shall remain outstanding.
(f) Other Stock Options.
(i) At the Effective Time, each outstanding option to purchase
Company Common Stock other than the Stock Options (each a "Licensor Stock
Option"), whether vested or unvested, shall be deemed assumed by Parent and
deemed to constitute an option to acquire, on the same terms and conditions
as were applicable to the Licensor Stock Option prior to the Effective
Time, the number (rounded down to the nearest whole number) of shares of
Parent Common Stock as the holder of such Licensor Stock Option would have
been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (not taking
into account whether or not such option was in fact exercisable), at a
price per share equal to (x) the aggregate exercise price for Company
Common Stock otherwise purchasable pursuant to such Licensor Stock Option
divided by (y) the result obtained by multiplying the number of shares of
Company Common Stock otherwise purchasable pursuant to such Licensor Stock
Option by the Exchange Ratio (provided that in no event shall the per share
exercise price of such option be less than $.01).
(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Licensor Stock Option an
appropriate notice setting forth
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such holder's rights pursuant thereto, and such Licensor Stock Option shall
continue in effect on the same terms and conditions.
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
pursuant to the terms set forth in this Section 1.6(f).
(g) Stock Purchase Warrants.
(i) The holders of the Stock Purchase Warrants (as defined in Section
2.3 below), by virtue of their approval of the Agreement, will be deemed to
have agreed to the changes to and conversion of the Stock Purchase Warrants
as follows: at the Effective Time, each outstanding Stock Purchase Warrant
(as defined in Section 2.3 below) shall be deemed exercisable in full and
deemed assumed by Parent and deemed to constitute a warrant to acquire, on
the same terms and conditions as were applicable such Stock Purchase
Warrants prior to the Effective Time, the number (rounded down to the
nearest whole number) of shares of Parent Common Stock as the holder of
such Stock Purchase Warrant would have been entitled to receive pursuant to
the Merger had such holder exercised such Warrant option in full
immediately prior to the Effective Time (not taking into account whether or
not such Warrant option was in fact exercisable), at a price per share
equal to (x) the aggregate exercise price for Company Common Stock
otherwise purchasable pursuant to such Stock Purchase Warrant divided by
(y) the result obtained by multiplying the number of shares of Company
Common Stock otherwise purchasable pursuant to such Stock Purchase Warrant
(assuming the Exercise Price (as defined in the Stock Purchase Warrants)
is $11.40 divided by the Exchange Ratio (provided that in no event shall
the per share exercise price of such option be less than $.01). Each of
the Stock Purchase Warrants shall be deemed to be exercisable for the
number of shares of Company Common Stock equal to the initial dollar amount
set forth in Section 1 of each such Stock Purchase Warrant divided by
$11.40 (rounded down to the nearest whole share). The Exercise Period (as
defined in the Stock Purchase Warrants) shall be deemed to be from the date
of the Effective Time through an including the date five years from the
date of such Stock Purchase Warrant.
(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Stock Purchase Warrant an
appropriate notice setting forth such holder's rights pursuant thereto, and
such Stock Purchase Warrants shall continue in effect on the same terms and
conditions.
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
pursuant to the terms set forth in this Section 1.6(g).
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(h) Capital Stock of Merger Sub. Each share of common stock, $.001 par
value, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, $.001 par value, of the Surviving
Corporation.
(i) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, reclassification,
stock dividend (including any dividend or distribution of securities convertible
into Parent Common Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock occurring after the date hereof and prior to
the Effective Time.
(j) Fractional Shares. No certificates or scrip representing less than
one share of Parent Common Stock shall be issued upon the surrender for exchange
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"). In lieu of any such
fractional share, each holder of Shares who would otherwise have been entitled
to a fraction of a share of Parent Common Stock upon surrender of Certificates
for exchange shall be paid upon such surrender cash (without interest)
determined by multiplying (i) $5.00 by (ii) the fractional interest of Parent
Common Stock to which such holder would otherwise be entitled. As soon as
practicable after determining the amount of cash, if any, to be paid to former
holders of Company Common Stock with respect to any fractional shares of Parent
Common Stock, the Parent shall promptly pay such amounts to such holders in
accordance with Article I.
SECTION 1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be supplied,
to or for the account of Boston Equiserve, or such other bank or trust company
as shall be designated by Parent (the "Exchange Agent"), in trust for the
benefit of the holders of Company Stock, for exchange in accordance with this
Section 1.7, certificates evidencing the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of the Company's
capital stock. All of the shares of Parent Common Stock issued in the Merger
shall be issued as of and be deemed to be outstanding as of the Effective Time.
Parent shall cause all such shares of Parent Common Stock to be issued in
connection with the Merger to be duly authorized, validly issued, fully paid and
nonassessable.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify that are not inconsistent with the terms of this Agreement), and (ii)
instructions to effect the surrender of the Certificates in exchange for the
certificates evidencing the shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter
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of transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates evidencing that number
of whole of shares of Parent Common Stock which such holder has the right to
receive in accordance with the Exchange Ratio in respect of the Shares formerly
evidenced by such Certificate, (B) any dividends or other distributions to which
such holder is entitled pursuant to Section 1.7(c), and (C) cash in respect of
fractional shares as provided in Section 1.6(h) (the shares of Parent Common
Stock, dividends, distributions and cash being, collectively, the "Merger
Consideration"), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company as of the Effective Time, the Merger
Consideration may be issued and paid in accordance with this Article I to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 1.7(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented Shares of
Company Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends and subject to Section
1.6(g), to evidence the ownership of the number of full shares of Parent Common
Stock into which such shares of Company Stock shall have been so converted.
(c) Distributions With Respect to Unexchanged Parent Common Stock. No
dividends or other distributions declared or made after the Effective Time with
respect to shares of Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock they are entitled to receive until the
holder of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock.
(d) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition to the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
certificate surrendered, or have established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(e) No Liability. Neither Parent, Merger Sub nor the Company shall be
liable to any holder of Company Stock for any Merger Consideration delivered to
a public official pursuant to
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any applicable abandoned property, escheat or similar law following the passage
of time specified therein.
(f) Withholding Rights. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Company Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made by Parent or the Exchange Agent.
SECTION 1.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Company Stock thereafter on the records of the
Company.
SECTION 1.9 No Further Ownership Rights in Company Stock. The Merger
Consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 1.6 as well as the other
Merger Consideration as provided in this Article; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver an
agreement of indemnification in form satisfactory to Parent, or a bond in such
sum as Parent may reasonably direct as indemnity against any claim that may be
made against Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
SECTION 1.11 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
SECTION 1.12 Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as
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possible. If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub immediately prior
to the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
SECTION 1.13 Material Adverse Effect. When used in connection with the
Company or Parent or any of its subsidiaries, as the case may be, the term
"Material Adverse Effect" means any change, effect or circumstance that,
individually or when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, (a) is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
prospects, financial condition or results of operations of the Company or Parent
and its subsidiaries, as the case may be, in each case taken as a whole, or (b)
is or is reasonably likely to delay or prevent the consummation of the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule delivered on or prior to
the date hereof by the Company to Parent that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II (the "Company Disclosure Schedule"), the statements contained in this Article
II are true and correct as of the date of this Agreement and, unless a date is
specified in such representation or warranty, will be true and correct as of the
date of Closing (as though made on and as of the date of Closing unless such
representations is as of a specific date, then only as of that date).
Disclosure in any paragraph of the Disclosure Schedule shall qualify only the
corresponding paragraph in this Article II:
SECTION 2.1 Organization and Qualification; Subsidiaries. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of California and has the requisite corporate power and authority necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority could not reasonably be expected to have a Material Adverse
Effect. The Company is not required to be qualified or licensed as a foreign
corporation in any state to do business, because the character of its properties
owned, leased or operated and the nature of its activities makes such
qualification or licensing unnecessary. The Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
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SECTION 2.2 Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws as amended to date. Such Articles of Incorporation
and By-Laws are in full force and effect. The Company is not in violation of
any of the provisions of its Articles of Incorporation or By-Laws.
SECTION 2.3 Capitalization. The authorized capital stock of the
Company consists of (i) 5,000,000 shares of Company Common Stock and (ii)
80,000 shares of Class B Common Stock. As of the date hereof, (a) 491,217
shares of Company Common Stock and 80,000 shares of Class B Common Stock,
respectively, were issued and outstanding, all of which are validly issued,
fully paid and nonassessable, and no such shares were held in treasury, (b)
no shares of Company Common Stock were held by subsidiaries of the Company,
(c) 28,000 shares of Company Common Stock were reserved for future issuance
pursuant to outstanding stock options granted under the Company Stock Option
Plan, (d) 75,500 shares of Company Common Stock were reserved for future
issuance pursuant to outstanding Licenser Stock Options and (e) 80,000
shares of Company Common Stock were reserved for issuance pursuant to the
conversion of the shares of Class B Common Stock. Upon the conversion of the
shares of Class B Common Stock outstanding on the date hereof, there will be
outstanding an additional 80,000 shares of Company Common Stock. Section 2.3
of the Company Disclosure Schedule sets forth a list of all convertible
promissory notes (the "Convertible Promissory Notes"), options and warrants
(the "Stock Purchase Warrants") issued by the Company. Except as set forth
in Section 2.3 or Section 2.11 of the Company Disclosure Schedule, there are
no options, warrants or other rights, agreements, arrangements or commitments
of any character relating to the issued or unissued capital stock of the
Company or obligating the Company to issue or sell any shares of capital
stock of, or other equity interests in, the Company. All shares of the
capital stock of the Company subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which
they are issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in Section 2.3 of the Company Disclosure
Schedule, there are no obligations, contingent or otherwise, of the Company
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company to provide funds to or make any investment (in the form of a loan,
capital contribution, guaranty or otherwise) in any entity.
SECTION 2.4 Authority Relative to this Agreement. (a) The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and the Merger Agreement and to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Merger
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or the Merger Agreement or to consummate the transactions so
contemplated (other than the Requisite Approvals as hereinafter defined).
The Board of Directors of the Company has determined that it is advisable and
in the best interest of the
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Company's stockholders for the Company to enter into a business combination
with Parent upon the terms and subject to the conditions of this Agreement,
and has unanimously recommended that the Company's stockholders approve and
adopt this Agreement, the Merger Agreement and the Merger. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and Merger Sub, as
applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
(b) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock and the Class B Common Stock (on
an as converted basis), voting as a single class, and the affirmative vote of
the holders of a majority of the outstanding shares of Class B Common Stock
voting as its own class is necessary to approve this Agreement, the Merger
Agreement and the Merger (the "Requisite Approvals").
SECTION 2.5 No Conflict; Required Filings and Consents.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list
of (i) all loan agreements, notes, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit, equipment
leases or lease purchase agreements to which the Company is a party or by
which it is bound; and (ii) all contracts, agreements, licenses, material
transfer agreements, sponsored research agreements, commitments or other
understandings or arrangements to which the Company is a party or by which it
or any of its properties or assets is bound or affected, but excluding
contracts, agreements, research agreements, licenses, equipment leases,
equipment obligations, commitments or other understandings or arrangements
entered into in the ordinary course of business and involving, in the case of
each of (i) and (ii) above, payments (or obligations to make payments) or
receipts by the Company of less than $5,000 in any single instance but not
more than $20,000 in the aggregate.
(b) Except as disclosed in Section 2.5(b) of the Company Disclosure
Schedule, (i) the Company has not breached, is not in default under, and has
not received written notice of any breach of or default under, any of the
agreements, contracts, licenses or other instruments referred to in clauses
(i) or (ii) of Section 2.5(a), (ii) to the best knowledge of the Company, no
other party to any of the agreements, contracts, licenses or other
instruments referred to in clauses (i) or (ii) of Section 2.5(a) has breached
or is in default of any of its obligations thereunder and (iii) each of the
agreements, contracts, licenses and other instruments referred to in clauses
(i) or (ii) of Section 2.5(a) is in full force and effect and no event has
occurred and no circumstances exist which would permit a licensor under any
of the licenses referred to in clause (ii) of Section 2.5(a) to cause the
license granted to the Company pursuant to such license to be made
non-exclusive.
(c) Except as set forth in Section 2.5(c) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does
not, and the performance of this
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Agreement by the Company and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the Articles of
Incorporation or By-Laws of the Company, (ii) conflict with or violate any
federal, foreign, state or provincial law, rule, regulation, order, judgment
or decree (collectively, "Laws") applicable to the Company or by which its
properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default under), or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien (as defined in Section 2.14) on any of the properties or
assets of the Company or pursuant to, any note, bond, mortgage, indenture,
contract, agreement, research agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company is a party or by which
the Company or any of its properties is bound.
(d) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any federal, foreign, state or provincial governmental or
regulatory authority except (i) for applicable requirements, if any, of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, state securities laws ("Blue Sky Laws"), any required foreign
anti-trust or similar filings and the filing and recordation of appropriate
merger or other documents as required by the CCC, and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not prevent or delay consummation of the
Merger, or otherwise prevent or delay the Company from performing its
obligations under this Agreement.
SECTION 2.6 Permits.
Except as disclosed in Section 2.6 of the Company Disclosure Schedule,
the Company holds all permits, licenses, easements, variances, exemptions,
consents, certificates, orders and approvals from governmental authorities
which are material to the operation of the business of the Company as it is
now being conducted (collectively, the "Company Permits"). The Company and
its subsidiaries are in compliance with the terms of the Company Permits,
except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect.
SECTION 2.7 Financial Statements.
(a) Attached to the Company Disclosure Schedule is the unaudited
consolidated balance sheet of the Company as of July 31, 1997, to (the
"Financial Statements").
(b) The Financial Statements (including, in each case, any related
notes thereto) fairly presents the financial position of the Company as at
the date thereof.
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(c) The Company's accounts payables as of the date hereof are set forth
in Section 2.7(c) to the Company Disclosure Schedule.
SECTION 2.8 Absence of Certain Changes or Events. Except as set forth
in Section 2.8 of the Company Disclosure Schedule, since [Date of Balance
Sheet), the Company has conducted its business in the ordinary course and
there has not occurred: (a) any Material Adverse Effect; (b) any damage to,
destruction or loss of any asset of the Company (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse
Effect; (c) any material revaluation by the Company of any of its assets,
including, without limitation, writing off notes or accounts receivable other
than in the ordinary course of business; (f) any other action or event that
would have required the consent of Parent pursuant to Section 5.1 had such
action or event occurred after the date of this Agreement; or (g) any sale or
license of the property or assets of the Company.
SECTION 2.9 No Undisclosed Liabilities. Except as is disclosed in
Section 2.9 of the Company Disclosure Schedule, the Company has no
liabilities (absolute, accrued, contingent or otherwise), except liabilities
(a) in the aggregate adequately provided for on the face of the Company's
balance sheet included in the Financial Statements, (b) incurred in
connection with this Agreement, or (c) incurred in the ordinary course of
business.
SECTION 2.10 Absence of Litigation. Except as set forth in Section
2.10 of the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, or any properties or rights of the Company,
before any federal, foreign, state or provincial court, arbitrator or
administrative, governmental or regulatory authority or body, nor, to the
knowledge of the Company, is there any basis therefor.
SECTION 2.11 Employee Benefit Plans, Employment Agreements.
(a) Except for the Company Stock Option Plan, the Company has no, and
has never had any (i) employee pension plans (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
(ii) employee welfare plans (as defined in Section 3(1) of ERISA), (iii)
other bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee
benefit plans, programs or arrangements, written or otherwise, for the
benefit of, or relating to, any present or former employee (including any
beneficiary of any such employee) of, or any present or former consultant
(including any beneficiary of any such consultant) to the Company.
(b) Section 2.11(b) of the Company Disclosure Schedule sets forth a
true and complete list of: (i) all employment agreements with officers of
the Company; (ii) all agreements with consultants who are individuals
obligating the Company to make annual cash payments in an amount exceeding
$30,000 (iii) all employees of, or consultants to, the Company who have
executed a non-competition agreement with the Company; (iv) all severance
agreements,
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programs and policies of the Company with or relating to its employees, in
each case with outstanding commitments exceeding $30,000, excluding programs
and policies required to be maintained by law; and (v) all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change in control provisions.
SECTION 2.12 Intentionally Deleted.
SECTION 2.13 Restrictions on Business Activities. Except for this
Agreement, to the best of the Company's knowledge, there is no agreement,
judgement, injunction, order or decree binding upon the Company which has or
could reasonably be expected to have the effect of prohibiting or impairing
any business practice of the Company, any acquisition of property by the
Company or any of its subsidiaries or the conduct of business by the Company
as currently conducted or as proposed to be conducted by the Company, except
for any prohibition or impairment as could not reasonably be expected to have
a Material Adverse Effect.
SECTION 2.14 Title to Property. Except as set forth in Section 2.14 of
the Company Disclosure Schedule, the Company has good and defensible title to
all of its tangible properties and assets, free and clear of all security
liens, claims, pledges, agreements, charges and other encumbrances
(collectively, "Liens"), except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of the property
affected thereby. The Company does not own or lease any real property and
the Company is not party to or bound by any lease with respect to personal
property.
SECTION 2.15 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
fees, levies, duties, tariffs, imposts, and governmental impositions or
charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including (without
limitation) (i) income, franchise, profits, gross receipts, ad valorem, net
worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security (or similar), workers' compensation, unemployment compensation,
disability, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, environmental (including taxes under Code Section
59A), customs duties, registration, alternative and add-on minimum,
estimated, transfer and gains taxes, or other tax of any kind whatsoever and
(ii) in all cases, including interest, penalties, additional taxes and
additions to tax imposed with respect thereto whether disputed or not; and
"Tax Returns" shall mean returns, reports, declarations, forms and
information returns or statements relating to Taxes including any schedule or
attachment thereto required to be filed with the IRS or any other federal,
foreign, state, local or provincial taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
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(b) Other than as disclosed in Section 2.15(b) of the Company
Disclosure Schedule, (i) the Company has filed all Tax Returns required to be
filed by it and all such Tax Returns were correct and complete in all
material respects, (ii) the Company has paid and discharged all Taxes due in
connection with or with respect to the periods or transactions covered by
such Tax Returns and have paid all other Taxes as are due, except such as are
being contested in good faith by appropriate proceedings (to the extent that
any such proceedings are required) and with respect to which the Company is
maintaining adequate reserves, (iii) no Tax Return referred to in clause (i)
has been the subject of examination by the Internal Revenue Service ("IRS")
or the appropriate state, local or foreign taxing authority of which written
notice was received; (vii) no deficiencies have been asserted or assessments
made as a result of any examinations of the Tax Returns referred to in clause
(i) by the IRS or the appropriate state, local or foreign taxing authority;
(iv) no action, suit, proceeding, audit, claim, deficiency or assessment has
been claimed or raised or is pending with respect to any Taxes of the
Company; (v) the Company has withheld from its employees, customers,
consultants and other payees (and timely paid to the appropriate governmental
authority) all amounts required by the Tax withholding provisions of
applicable federal, state, local, and foreign laws (including, without
limitation, income, social security, and employment Tax withholding for all
types of compensation, and withholding on payments to non-United States
persons) for all periods; (vi) there has not been filed a consent under Code
section 341(f) concerning collapsible corporations with respect to the
Company; (vii) the Company has not made any payment, is not obligated to make
any payment, and is not a party to any agreement that could obligate it to
make any payments that will not be deductible under Code section 280G or be
subject to the excise tax of Code section 4999 and (viii) no claim has ever
been made by any authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to tax by that jurisdiction. There
are no tax liens on or security interests in any assets of the Company; and
neither the Company nor any of its subsidiaries has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves for Taxes (including
deferred taxes) reflected in the Financial Statements are in all material
respects adequate to cover all Taxes required to be accrued through the date
thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles.
SECTION 2.16 Environmental Matters. Except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect, the Company is and always has been in compliance
with all applicable federal, state, foreign or local laws or any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants or hazardous or toxic materials or wastes by the Company or its
respective agents ("Environmental Laws").
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SECTION 2.17 Intellectual Property.
(a) All of the proprietary intellectual property which the Company,
directly or indirectly, owns, or is licensed or otherwise possesses legally
enforceable rights to use, including, without limitation, all inventions,
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, compositions of matter, cells, techniques, technology,
trade secrets, know-how, research and development, know-how, technical data,
proprietary computer software programs or applications, and other tangible or
intangible proprietary information or material (collectively, the "Company
Intellectual Property Rights") are described in Section 2.17(a) of the
Company Disclosure Schedule. Such Section sets forth a complete list of all
patents, trademarks, registered copyrights, trade names and service marks,
and any applications therefor, included in the Company Intellectual Property
Rights, and specifies, where applicable, the jurisdictions in which each such
Company Intellectual Property Right has been issued or registered or in which
an application for such issuance and registration has been filed, including
the respective registration or application numbers, the names of all
registered owners and, in the case of any application, the status of such
application.
(b) Section 2.17(b) of the Company Disclosure Schedule sets forth a
complete list of all licenses, sublicenses and other agreements as to which
the Company is a party and pursuant to which the Company or any other person
is authorized to use any Company Intellectual Property Right or other trade
secret material to the Company, and includes the identity of all parties
thereto. The Company is not in violation of any license, sublicense or
agreement described on such list and the Company has neither taken any action
nor failed to take any action that with the passage of time would result in
violation of any such license, sublicense or agreement described on such
list. The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company to be in violation or default under any such license, sublicense or
agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement,
except as set forth on Section 2.17(c) of the Company Disclosure Schedule.
(c) Except as set forth in Section 2.17(c) of the Company Disclosure
Schedule the Company is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any Liens or other
encumbrances) the Company Intellectual Property Rights, and has sole and
exclusive rights (and is not contractually obligated to pay any compensation
to any third party in respect thereof) to the use thereof or the material
covered thereby in connection with the services or products in respect of
which the Company Intellectual Property Rights are being used. Except as
disclosed in Section 2.17(c) of the Company Disclosure Schedule, to the
Company's knowledge, the Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any intellectual
property rights of third parties, and the Company has never received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company must license or refrain from using any intellectual property rights
of any third party). To the knowledge of the Company, no third party has
interfered with,
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infringed upon, misappropriated, or otherwise come into conflict with any
Company Intellectual Property Rights. With respect to all registered
patents, trademarks, service marks and copyrights included in the Company
Intellectual Property Rights, the Company has not received any notice, claim
or demand alleging that any of such patents, trademarks, service marks or
copyrights are invalid. No Company Intellectual Property Right of the
Company is subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the licensing thereof by the Company. The Company
has not entered into any agreement under which the Company is restricted from
selling, licensing or otherwise distributing any of its products to any class
of customers, in any geographic area, during any period of time or in any
segment of the market. All of the employees, consultants and independent
contractors of the Company developed any of the Company Intellectual Property
have entered into agreements assigning all right, title and interest in the
Company Intellectual Property to the Company. The Company has a policy
requiring each employee, consultant and independent contractor to execute a
confidentiality agreement substantially in the form previously delivered to
Parent.
SECTION 2.18 Interested Party Transactions. Except as set forth in
Section 2.18 of the Company Disclosure Schedule, since December 31, 1996, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC assuming the monetary threshold for reporting such
relationships and transactions under such Item was $20,000.
SECTION 2.19 Insurance. The Company maintains no insurance policies.
SECTION 2.20 Accounts Receivable; Inventories.
(a) The Company has no accounts or notes receivable. The Company has
no inventory of raw materials and supplies, manufactured, goods in process,
or finished goods.
SECTION 2.21 Equipment. All of the tangible personal property of the
Company other than inventory (the "Equipment") is in good working order,
operating condition and state of repair, ordinary wear and tear excepted.
SECTION 2.22 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or its subsidiaries or affiliates.
SECTION 2.23 Change in Control Payments. Except as set forth on
Section 2.11(d) or Section 2.23 of the Company Disclosure Schedule, the
Company does not have any plans, programs or agreements to which it is a
party, or to which it is subject, pursuant to which payments may be required
or acceleration of benefits may be required upon a change of control of the
Company.
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SECTION 2.24 Expenses. Section 2.24 of the Company Disclosure Schedule
attached hereto sets forth a description of the estimated expenses of the
Company and its subsidiaries which the Company expects to incur, or has
incurred, in connection with the transactions contemplated by this Agreement.
ARTICLE III
[Intentionally Deleted]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that, except as set forth in the written disclosure
schedule delivered on or prior to the date hereof by Parent to the Company
that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article III (the "Parent Disclosure Schedule"):
SECTION 4.1 Organization and Qualification; Subsidiaries. Each of
Parent and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority necessary to own, lease
and operate the properties it purports to own, operate or lease and to carry
on its business as it is now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power, authority
could not reasonably be expected to have a Material Adverse Effect. Each of
Parent and each of its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and
in good standing that could not reasonably be expected to have a Material
Adverse Effect.
SECTION 4.2 Charter and By-Laws. Parent has heretofore furnished to
the Company a complete and correct copy of its Certificate of Incorporation
and By-Laws, as amended to date and the Articles of Incorporation and By-laws
of Merger Sub, as amended to date. Such Certificate of Incorporation,
Articles of Incorporation and By-Laws are in full force and effect. Neither
Parent nor Merger Sub is in violation of any of the provisions of its charter
or By-Laws.
SECTION 4.3 Capitalization. As of July 31, 1997, the authorized
capital stock of Parent consisted of (i) 45,000,000 shares of Parent Common
Stock of which 16,536,172 shares were issued and outstanding, all of which
are validly issued, fully paid and non-assessable, none of which were held in
treasury, 2,914,415 shares were reserved for future issuance under Parent's
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equity incentive plan, directors option plan and employee stock purchase plan
and (ii) 1,000,000 shares of preferred stock, $.01 par value per share, none
of which was issued and outstanding and none of which was held in treasury.
No material change in such capitalization has occurred between June 30, 1997
and the date hereof. The authorized capital stock of Merger Sub consists of
1000 shares of common stock, $.001 par value, all of which are issued and
outstanding.
SECTION 4.4 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and the Merger Agreement and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Merger Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of Parent and Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize
this Agreement, the Merger Agreement, or to consummate the transactions
contemplated hereby or thereby. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Parent and Merger Sub enforceable against
each of them in accordance with its terms.
SECTION 4.5 No Conflict, Required Filings and Consents.
(a) Except as set forth in Section 4.5(c) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub
will not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of Parent or the Articles of Incorporation or By-Laws of Merger Sub,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or any of its subsidiaries or by which its or
their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or impair Parent's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance on any
of the properties or assets of Parent or any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or any of
its subsidiaries is a party or by which Parent or any of its subsidiaries or
its or any of their respective properties are bound or affected, except in
any such case for any such conflicts, violations, breaches, defaults or other
occurrences that could not reasonably be expected to have a Material Adverse
Effect.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the performance of this Agreement by Parent and Merger Sub
will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
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Securities Act, the Exchange Act, the Blue Sky Laws, any foreign antitrust or
similar filings and the filing and recordation of appropriate merger or other
documents as required by the CCC, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent Parent or Merger Sub from performing their respective
obligations under this Agreement, and would not have a Material Adverse
Effect.
SECTION 4.6 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed with the SEC, including (i) its Annual Reports on Form 10-K for the
fiscal years ended December 31, 1996 and December 31, 1995, (ii) its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, (iii) all
proxy statements relating to Parent's meetings of stockholders (whether
annual or special) since January 1, 1997, (iv) all other reports or
registration statements (other than Reports on Form 10-Q) filed by Parent
with the SEC since January 1, 1997, (v) all amendments and supplements to all
such reports and registration statements filed by Parent with the SEC and
(vi) a draft of the Parents Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 (collectively, the "Parent SEC Reports"). The Parent SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or in the case of June 30, 1997
10-Q, when filed) (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None
of Parent's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports has been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and each fairly presents in all material
respects the consolidated financial position of Parent and its subsidiaries
as at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
SECTION 4.7 Ownership of Merger Sub; No Prior Activities. As of the
date hereof and the Effective Time, except for obligations or liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated by this Agreement and except for this Agreement and
any other agreements or arrangements contemplated by this Agreement, Merger
Sub has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent, shall otherwise agree in
writing, the Company shall conduct its business only in, and the Company
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice other than actions taken by the Company
in contemplation of the Merger; and the Company shall use all reasonable
commercial efforts to preserve substantially intact the business organization
of the Company, to keep available the services of the present officers,
employees and consultants of the Company and to preserve the present
relationships of the Company with customers, suppliers and other persons with
which the Company or any of its subsidiaries has significant business
relations. By way of amplification and not limitation, except as
contemplated by this Agreement, the Company shall not, during the period from
the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, directly or indirectly
do, or propose to do, any of the following without the prior written consent
of Parent:
(a) amend or otherwise change the Articles of Incorporation or By-Laws
of the Company;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in
the Company, or its affiliates (except for the issuance of shares of Company
Common Stock issuable pursuant to Stock Options which were granted under the
Company Stock Option Plan and are outstanding on the date hereof).
(c) sell, pledge, dispose of or encumber any assets of the Company
(except for (i) sales of assets in the ordinary course of business and in a
manner consistent with past practice, (ii) dispositions of obsolete or
worthless assets, and (iii) sales of immaterial assets not in excess of
$10,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock (except for the issuance of shares of Company Common Stock
issuable pursuant to Stock Options which were granted under the Company Stock
Option Plan and are outstanding on the date hereof) or (iii) amend the terms
or change the period of exercisability of, purchase, repurchase, redeem or
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otherwise acquire, any of its securities, including, without limitation,
shares of Company Stock or any option, warrant or right, directly or
indirectly, to acquire shares of the Company's capital stock or propose to do
any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money calling for
aggregate payments in excess of $10,000 or issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any person or, except in the ordinary
course of business consistent with past practice, make any loans or advances;
(iii) enter into or amend any material contract or agreement; (iv) authorize
any capital expenditures or purchase of fixed assets which are, in the
aggregate, in excess of $10,000 for the Company and its subsidiaries taken as
a whole; or (v) enter into or amend any contract, agreement, commitment or
arrangement to effect any of the matters prohibited by this Section 5.1(e);
(f) increase the compensation payable or to become payable to its
officers or employees, or grant any severance or termination pay to, or enter
into any employment or severance agreement with any director, officer or
other employee of the Company, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any current or former directors,
officers or employees, except, in each case, as may be required by law
provided the Company may increase wages in the ordinary course of business
consistent with the Company's past practice but not more than 5% for any
individual employee;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the Financial Statements or incurred in the ordinary
course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1 (a) through (i) above, or any action which would
make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or prevent the Company from performing or
cause the Company not to perform its covenants hereunder.
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SECTION 5.2 No Solicitation.
(a) The Company shall not, directly or indirectly, through any officer,
director, employee, stockholder, representative or agent of the Company, (i)
solicit, initiate or encourage the initiation of any inquiries or proposals
regarding any merger, sale of substantial assets, sale of any shares of
capital stock (including without limitation by way of a tender offer or stock
sale), license to any of the Company Intellectual Property Rights or similar
transactions involving the Company other than the Merger (any of the
foregoing inquiries or proposals being referred to herein as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or provide
any nonpublic information to any person relating to, any Acquisition Proposal
or (iii) agree to, approve or recommend any Acquisition Proposal.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company in
connection with an Acquisition Proposal or for access to the properties,
books or records of the Company by any person or entity that informs the
Board of Directors of the Company that it is considering making, or has made,
an Acquisition Proposal. Such notice to Parent shall be made orally and in
writing.
(c) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent and
Merger Sub) conducted heretofore with respect to any Acquisition Proposal or
any request for nonpublic information relating to the Company. The Company
agrees not to release any third party from the confidentiality provisions of
any confidentiality agreement to which the Company is a party.
(d) The Company shall ensure that the officers, directors and employees
of the Company and any investment banker or other advisor or representative
retained by the Company are aware of the restrictions described in this
Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholder Meeting. As promptly as practicable after the
execution of this Agreement, and in any event within 20 days thereafter, the
Company shall call and hold a special meeting of its stockholders in
accordance with applicable laws for the purpose of obtaining the approval of
the Merger, this Agreement, the Merger Agreement, and the transactions
contemplated hereby (the "Stockholder Meeting"). Except as otherwise agreed
by Parent, the Company shall not solicit proxies from any of its stockholders
in connection with the Stockholder Meeting.
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SECTION 6.2 Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject (from which such party shall use reasonable
efforts to be released), the Company and Parent shall each (and shall cause
each of their subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of the other, reasonable
access, during the period to the Effective Time, to all its properties,
books, contracts, commitments and records and, during such period, the
Company and Parent each shall (and shall cause each of their subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request, and each
shall make available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the other's
business, properties and personnel as either Parent or the Company may
reasonably request. Each party shall keep such information confidential in
accordance with the terms of the confidentiality letter (the "Confidentiality
Letter") dated as of April 18, 1997 between Parent and the Company.
SECTION 6.3 Consents; Approvals. The Company and Parent shall each use
their reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States
and foreign governmental and regulatory rulings and approvals), and the
Company and Parent shall make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby, in each case as promptly as practicable.
SECTION 6.4 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company,
of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or
warranty contained in this Agreement to become materially untrue or
inaccurate, or (ii) any failure of the Company, Parent or Merger Sub, as the
case may be, materially to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; and provided further that failure to give such notice
shall not be treated as a breach of covenant for the purposes of Sections
7.2(a) or 7.3(a) unless the failure to give such notice results in material
prejudice to the other party.
SECTION 6.5 Further Action/Tax Treatment. Upon the terms and subject
to the conditions hereof each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement. The foregoing covenant shall not
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include any obligation by Parent to agree to divest, abandon, license or take
similar action with respect to any assets (tangible or intangible) of Parent
or the Company. Each of Parent, Merger Sub and the Company shall use its
best efforts to cause the Merger to qualify, and will not (both before and
after consummation of the Merger) take any actions which to its knowledge
could reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
SECTION 6.6 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger
or this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall
not be unreasonably withheld; provided, however, that Parent may, without the
prior consent of the Company (after reasonable efforts to give notice to the
Company), issue such press release or make such public statement as may upon
the advice of counsel be required by law or the rules and regulations of the
NASDAQ Stock Market.
SECTION 6.7 Conveyance Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar taxes which
become payable in connection with the transactions contemplated hereby that
are required or permitted to be filed at or before the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Requisite Approvals. This Agreement, the Merger Agreement and the
Merger shall have received the Requisite Approvals.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect, nor shall any proceeding
brought by any administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the
foregoing be pending; and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal;
and
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(c) Governmental Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation or other
inquiry that might result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, nor
shall there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, in
either case, seeking to prohibit or limit Parent from exercising all material
rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Parent or any of its
subsidiaries of all or a material portion of the business or assets of Parent
or any of its subsidiaries, or seeking to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Parent or any of its subsidiaries (including the
Surviving Corporation and its subsidiaries), as a result of the Merger or the
transactions contemplated by this Agreement.
(d) Merger Agreement; Officers' Certificates. The Merger Agreement
shall have been executed and delivered by the parties thereto. The Officers'
Certificates contemplated under Section 1103 of the CCC shall have been
executed and delivered by the requisite officers of the constituent
corporations to the Merger.
SECTION 7.2 Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects at and as of the Effective Time with the same force and effect as if
made at and as of such time, except where the failure of such representations
and warranties to be true and correct would not be reasonably expected to
have a Material Adverse Effect on the Company, and Parent shall have received
a certificate to such effect signed by the President of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective Time and Parent
and Merger Sub shall have received a certificate to such effect signed on
behalf of the Company by the President of the Company;
(c) Consents Obtained. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to
be made, by the Company for the due authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company;
(d) Opinion of Counsel to the Company. Parent shall have received an
opinion of Wilson, Sonsini, Goodrich & Rosati, counsel to the Company in form
and substance as set forth on Exhibit 7.2(d) attached hereto;
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(e) Tax Opinion. Parent shall have received an opinion of Ropes &
Gray, in form and substance reasonably satisfactory to Parent, to the effect
that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code. In rendering such opinion, counsel may rely upon
such reasonable representations and certificates of Parent, Merger Sub, the
Company and certain shareholders of the Company as the parties may agree, and
the parties to this Agreement agree to make, and to use reasonable efforts to
cause such shareholders of the Company to make, such representations and
deliver such certificates;
(f) Registration Rights. All existing registration rights, preemptive
rights and rights of first refusal with respect to the purchase of the
capital stock of the Company of holders of Company securities shall have been
terminated and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by the President and the Chief
Financial Officer of the Company;
(g) Consulting Agreements. Each of the Principal Stockholders other
than Richard Rose shall have entered into consulting agreements with Parent
in a the form reasonably satisfactory to Parent (the "Consulting Agreements")
and such agreements shall be in full force and effect as of the Effective
Time;
(h) Rose Employment Agreement. Richard Rose shall have entered into an
employment agreement with Parent in a from reasonably satisfactory to Parent
(the "Employment Agreement").
(i) Escrow Agreement. Each of the Principal Stockholders shall have
executed and delivered a counterpart to the Escrow Agreement which agreement
shall be substantially in the form of Exhibit 7.2(i) (the "Escrow
Agreement");
(j) Research Plan Agreement. Each of the Principal Stockholders (other
than Richard Rose) shall have executed a counterpart to the Research Plan
Agreement which Agreement shall be substantially in the form of Exhibit
7.2(j) (the "Research Plan Agreement");
(k) Stockholder Consent. In addition to obtaining the Requisite
Approvals, stockholders of the Company holding not less than 85% of the
Company Common Stock that will be outstanding immediately prior the Effective
Time and 85% of the Class B Common Stock outstanding shall have (a) either
(i) voted for and approved each of this Agreement, the Merger Agreement and
the Merger or (ii) approved each of this Agreement, the Merger Agreement and
the Merger by written consent and (b) executed and delivered an Investment
Letter in the form of Exhibit 7.2(k).
(l) License Agreements. Each of the license agreements listed on
Section 2.17(b) of the Company Disclosure Schedule and each of the sponsored
research agreements listed on Section 2.5(a) of the Company Disclosure
Schedule shall be in full force and effect and no party to any such license
or agreement shall have given any notice of its intention to terminate or
cease
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work under or not renew any such license or agreement. Each of the holders
of the Licensor Stock Options shall have consented in writing to the
assumption by Parent of such Licensor Stock Option and the issuance of shares
of Parent Common Stock in lieu of Company Common Stock under such option, all
as provided in Section 1.6(f) above.
SECTION 7.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct in all respects on and as of the Effective Time, with the same force
and effect as if made at and as of such time, except where the failure of
such representations and warranties to be true and correct would not be
reasonably expected to have Material Adverse Effect on Parent, and the
Company shall have received a certificate to such effect signed by the Chief
Financial Officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Effective, and the Company shall have received a
certificate to such effect signed by the Chairman and the Chief Financial
Officer of Parent;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to
be made, by Parent and Merger Sub for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Parent and Merger
Sub;
(d) Tax Opinions. The Company shall have received a written opinion of
Wilson, Sonsini, Goodrich & Rosati, in form and substance reasonably
satisfactory to the Company, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code. In rendering
such opinion, counsel may rely upon such reasonable representations and
certificates of Parent, Merger Sub, the Company and certain shareholders of
the Company as the parties may agree, and the parties to this Agreement agree
to make, and to use reasonable efforts to cause such shareholders of the
Company to make, such representations and deliver such certificates;
(e) Opinion of Counsel to Parent. The Company shall have received an
opinion of Ropes & Gray, counsel to Parent, in form and substance as set
forth on Exhibit 7.3(e) attached hereto;
(f) Rose Employment Agreement. Parent and Richard Rose shall have
entered into an employment agreement in a form reasonably acceptable to the
Company; and
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(g) Consulting Agreements. Parent shall have executed and delivered
counterparts to Consulting Agreements for each of the Principal Stockholders
other than Richard Rose and such Consulting Agreements shall be in a form
reasonably satisfactory to the Company.
(h) Research Plan Agreement. Parent shall have executed and delivered
a counterpart to the Research Plan Agreement.
(i) Legal Expenses. The legal expenses due to Wilson, Sonsini,
Goodrich & Rosati: ("W,S,G&R") set forth in Section 2.7(c) of the Company
Disclosure Schedule and the fees and expenses of W,S,G&R for services
rendered to the Company in connection with the transactions contemplated by
this Agreement shall have been paid.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
Stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by October 31, 1997 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling or
taken any other action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger (provided that the right to
terminate this Agreement under this Section 8.1(c) shall not be available to
any party who has not complied with its obligations under Section 6.6 and
such noncompliance materially contributed to the issuance of any such order,
decree or ruling or the taking of such action); or
(d) by Parent, (i) if any representation or warranty of the Company set
forth in this Agreement shall be untrue when made in any material respect, or
(ii) upon a breach of any covenant or agreement on the part of the Company
set forth in this Agreement, such that the conditions set forth in Section
7.2(a) or 7.2(b) would not be satisfied (each a "Terminating Breach"),
provided, that, if such Terminating Breach is curable prior to October 31,
1997 by the Company through the exercise of its reasonable best efforts and
for so long as the Company
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continues to exercise such reasonable best efforts, Parent may not terminate
this Agreement under this Section 8.1(d); or
(e) by the Company, (i) if any representation or warranty of Parent set
forth in this Agreement shall be untrue when made, or (ii) upon a breach of
any covenant or agreement on the part of Parent set forth in this Agreement,
such that the conditions set forth in Section 7.3(a) or 7.3(b) would not be
satisfied (each a "Company Terminating Breach"), provided that, if such
Company Terminating Breach is curable prior to October 31, 1997 by Parent
through the exercise of its reasonable best efforts and for so long as Parent
continues to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 8.1(e); or
(f) by Parent, if any representation or warranty of the Company shall
have become untrue such that the condition set forth in Section 7.2(a) would
not be satisfied, or by the Company, if any representation or warranty of
Parent shall have become untrue such that the condition set forth in Section
7.3(a) would not be satisfied, in either case other than by reason of a
Terminating Breach; or
(g) by Parent in the event an action is threatened or commenced for
which Parent is obligated to indemnify the directors and officers of the
Company pursuant to Section 9.1(e).
SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any
of its affiliates, directors, officers or stockholders except (i) for the
confidentiality provisions of Section 6.2, Sections 6.6, 8.3, 9.1, 9.2, 9.5,
9.7, 9.8, 9.9, 9.10, 9.12, 9.13 and 9.14 which shall survive any termination
of this Agreement, and (ii) nothing herein shall relieve any party from
liability for any breach hereof.
SECTION 8.3 Fees and Expenses.
Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated; provided, however, that in the event the Merger is
consummated, the stockholders of the Company shall pay all legal, accounting,
financial advisory, investment banking and other fees incurred by the Company
or any Subsidiary (or for which the Company or any Subsidiary may be or
become liable) in connection with this Agreement and the consummation of the
Merger in excess of $75,000 (the "Excess Company Expenses"). At the Closing,
the Company shall provide to Parent a good faith estimate of the total
Company Expenses and such amount shall be used in calculating the Exchange
Ratio pursuant to Section 1.1(e). If, following the Effective Time, it is
determined that there are additional unpaid Excess Company Expenses, the
Stockholders Representative shall permit Parent to receive Escrow Shares
having a value as calculated in accordance with the Escrow Agreement in
payment of such expenses.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Indemnification.
(a) Charters and By-Laws. The Surviving Corporation agrees that all
rights to indemnification or exculpation now existing in favor of the
employees, agents, directors or officers of the Company (the "Company
Indemnified Parties") as provided in its charter or By-Laws shall continue in
full force and effect for a period of not less than three years from the
Closing Date; provided, however, that, in the event any claim or claims are
asserted or made within such three-year period, all rights to indemnification
in respect of any such claim or claims shall continue until disposition of
any and all such claims. Any determination required to be made with respect
to whether a Company Indemnified Party's conduct complies with the standards
set forth in the charter or By-Laws of the Company or otherwise shall be made
by independent counsel selected by the Company Indemnified Party reasonably
satisfactory to the Surviving Corporation (whose fees and expenses shall be
paid by the Surviving Corporation).
(b) Survival of Representations and Warranties.
(i) The representations and warranties of the Company and Parent made
in this Agreement, shall survive the Merger for a period of eighteen months
from the Closing Date and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other
party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
(ii) No claim for indemnification under this Section 9.1 for breach
of a representation or warranty may be commenced after the date that is
eighteen months following of the Closing Date, provided, however, that
claims made within the applicable time period shall survive to the extent
of such claim until such claim is finally determined and, if applicable,
paid.
(c) Indemnification of the Parent and Merger Sub. By their approval of
this Agreement and their acceptance of the Merger Consideration, each of the
Principal Stockholders (each in his capacity as an indemnifying party, an
"Indemnifying Party") agrees to indemnify, defend, protect, and hold harmless
each of Parent, Merger Sub, the Surviving Corporation and each of their
respective subsidiaries and affiliates (each in its capacity as an
indemnified party, an "Parent Indemnitee") at all times from and after the
date of this Agreement from and against all claims, damages, actions, suits,
proceedings, demands,
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assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such Parent Indemnitee as a result of or
incident to (i) any breach of any representation or warranty of the Company
set forth herein with respect to which a claim for indemnification is brought
by a Parent Indemnitee within the applicable survival period described in
Section 9.1(b) or (ii) any breach or nonfulfillment by the Company, or any
noncompliance by the Company with, any covenant, agreement, or obligation
contained herein except to the extent waived by Parent.
(d) Indemnification of the Stockholders of the Company. Parent (in its
capacity as an indemnifying party, an "Indemnifying Party") agrees to
indemnify, defend, protect, and hold harmless each of the stockholders of the
Company (each in his or her or its capacity as an indemnified party, a
"Company Indemnitee") at all times from and after the date of this Agreement
from and against all Damages incurred by such Company Indemnitee as a result
of or incident to (i) any breach of any representation or warranty of the
Parent or Merger Sub set forth herein with respect to which a claim for
indemnification is brought by a Company Indemnitee within the applicable
survival period described in Section 9.1(b), (ii) any breach or
nonfulfillment by Parent or Merger Sub, or any noncompliance by Parent or
Merger Sub with, any covenant, agreement, or obligation contained herein
except to the extent waived by the Company.
(e) Indemnification of Directors and Officers of the Company. Parent
(in its capacity as an indemnifying party, an "Indemnifying Party") agrees to
indemnify, defend, protect and hold harmless each of the officers and
directors of the Company (in his or her capacity as an indemnified party a,
"Company Indemnitee"; the term "Indemnitee" shall refer to both Company
Indemnitees and Parent Indemnitees) from and against all Damages incurred by
such Company Indemnitee as a result of or incident to (i) any claim or action
brought by a stockholder or stockholders of Parent to which an officer or
director of the Company is made a party as a result of such stockholder's
service as a director or officer of the Company or as a result of such
person's ownership of shares of the capital stock of the Company or (ii) any
claim or action brought by a stockholder of the Company in connection with
the transactions contemplated by this Agreement alleging a breach of the
duties of the officers and directors of the Company to the stockholders of
the Company.
(f) Third Person Claims. Promptly after an Indemnitee has received
notice of or has knowledge of any claim by a person not a party to this
Agreement ("Third Person") or the commencement of any action or proceeding by
a Third Person, the Indemnitee shall, give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding;
provided, however, that the failure to give such notice will not effect the
Indemnities' right to indemnification hereunder with respect to such claim,
action or proceeding, except to the extent that the Indemnifying Parties have
been actually prejudiced as a result of such failure. If an Indemnifying
Party notifies the Indemnitee within 30 days from the receipt of the
foregoing notice that he or it wishes to defend against the claim by the
Third
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Person then the Indemnifying Parties shall have the right to assume and
control the defense of the claim by appropriate proceedings with counsel
reasonably acceptable to Indemnitee. The Indemnitee may participate in the
defense, at its sole expense of any such claim for which the Indemnifying
Parties shall have assumed the defense pursuant to the preceding sentence,
provided that counsel for the Indemnifying Parties shall act as lead counsel
in all matters pertaining to the defense or settlement of such claims, suit
or proceedings; provided, however, that Indemnitee shall control the defense
of any claim or proceeding that in Indemnitee's reasonable judgment could
have a material and adverse effect on Indemnitee's business apart from the
payment of money damages. The Indemnitee shall be entitled to
indemnification for the reasonable fees and expenses of its counsel for any
period during which the Indemnifying Parties have not assumed the defense of
any claim. Any such fees and expenses shall be paid promptly by the
Indemnifying Party following receipt of an invoice for such fees and
expenses. Whether or not the Indemnifying Parties shall have assumed the
defense of any claim, neither the Indemnitee nor any Indemnifying Party shall
make any settlement with respect to any such claim, suit or proceeding
without the prior consent of the other, which consent shall not be
unreasonably withheld or delayed. It is understood and agreed that in
situations where failure to settle a claim expeditiously could have an
adverse effect on the party wishing to settle, the failure of the party
controlling the defense to act upon a request for consent to such settlement
within five business days of receipt of notice thereof shall be deemed to
constitute consent to such settlement for purposes of this Section 9.1. If
the Indemnifying Party desires to accept a final and complete settlement of
any such Third Person claim and the Indemnitee refuses to consent to such
settlement, then the Indemnifying Party's liability under this Article IX
with respect to such Third Person claim shall be limited to the amount so
offered in settlement by said Third Person and the Indemnitee shall reimburse
the Indemnifying Party for any additional costs of defense which it
subsequently incurs with respect to such claim. For purposes of this Article
IX, notice by a Parent Indemnitee to the Stockholders Representative shall be
deemed to be notice to the Principal Stockholders in their capacity as
Indemnifying Parties hereunder and decisions by the Stockholders
Representative shall be binding upon each of the Principal Stockholders.
(g) Method of Payment. All claims for indemnification by Parent,
Merger Sub or the Surviving Corporation or another Parent Indemnitee shall be
paid solely from the Escrow Account. To the extent that Parent, Merger Sub,
or, the Surviving Corporation or another Indemnitee makes a claim against the
Escrow Account pursuant to the Escrow Agreement, and such claim is paid in
shares of Parent Common Stock, then for purposes of such payment, the shares
of Parent Common Stock shall be valued at the average of the daily closing
sales prices of a share of Parent Common Stock as reported by the NASDAQ
Stock Market (as reported by the Wall Street Journal or, if not reported
thereby, as reported by another authoritative source as mutually agreed by
Parent and the Company) for the five (5) consecutive trading days ending on
and including the date of the effective time. In no event shall any
Principal Stockholder be obligated to indemnity a Parent Indemnitee other
than from the Escrow Account. All claims for indemnification by a Company
Indemnitee shall be paid in cash.
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(h) Limitations. (i) Except as provided below, the Principal
Stockholders shall not be required to indemnify any Parent Indemnitee until
Damages suffered by such Parent Indemnitee, together with Damages suffered
with respect to all other claims for indemnification by Parent Indemnitees
pursuant to this Agreement, exceeds $1,000,000 and then the Parent Indemnitee
shall be entitled to recover from the Principal Stockholders all Damages
incurred by such Parent Indemnitee (including the first $1,000,000 of
Damages). The foregoing sentence shall not in any way limit Parent's right
to recover amounts in respect of the Excess Company Expenses from the Escrow
Account. Notwithstanding the foregoing, in connection with Damages resulting
from or incident to any breach of the representation and warranty of the
Company set forth in Section 2.3 or Section 2.7(c), the Parent Indemnitees
shall be entitled to be indemnified in full to the extent such Damages exceed
an aggregate of $250,000. The liability of the Principal Stockholders to
provide indemnification for Damages hereunder shall be limited to the Escrow
Shares.
(ii) With respect to claims by Company Indemnitees pursuant to Section
9.1(d), Parent shall not be required to indemnify any Company Indemnitee
until the Damages suffered by such Company Indemnitees, together with Damages
suffered with respect to all other claims for indemnification by Company
Indemnitees pursuant to Section 9.1(d), exceed $1,000,000 and then the
Company Indemnitees shall be entitled to recover from Parent all Damages
incurred by such Company Indemnitee (including the first $1,000,000 of
Damage).
(iii) All Damages paid to an Indemnitee shall be paid net of any
insurance recovery and tax benefit such Indemnitee actually receives as a
result of the claim or incident giving rise to such Damages.
(i) Exclusive Remedy; No Circular Recovery. The rights of Indemnitees
under this Article IX shall be the exclusive remedy of the Indemnitees with
respect to any claim for which such Indemnitee is entitled to indemnification
hereunder. Each Principal Stockholder hereby agrees that he will not make
any claim for indemnification against either Parent or Merger Sub by reason
of the fact that he was a director, officer, employee, consultant, agent or
other representative of the Company (whether such claim is for Damages of any
kind or otherwise and whether such claim is pursuant to any statute, charter,
by-law, contractual obligation or otherwise) with respect to any claim for
indemnification brought by a Parent Indemnitee against the Principal
Stockholders.
SECTION 9.2 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made if and when delivered personally or by overnight courier
to the parties at the following addresses or sent by electronic transmission,
with confirmation received, to the telecopy numbers specified below (or at
such other address or telecopy number for a party as shall be specified by
like notice):
(a) If to Parent or Merger Sub:
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CytoTherapeutics, Inc.
Two Richard Square
Providence, Rhode Island 02906
Telecopier No.: (401) 272-3310
Telephone No.: (401) 272-3485
Attention: General Counsel
With a copy to:
Geoffrey B. Davis, Esq.
Ropes & Gray
30 Kennedy Plaza
Providence, Rhode Island 02903
Telecopier No.: (401) 455-4400
Telephone No.: (401) 455-4401
(b) If to the Company or Principal Stockholder:
c/o Alan Austin, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94303-1050
Telecopier No.: (415) 496-4084
Telephone No.: (415) 493-9300
With a copy to:
Alan K. Austin, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94303-1050
Telecopier No.: (415) 496-4084
Telephone No.: (415) 493-9300
(c) If to the Principal Stockholders, to the address for such Principal
Stockholder set forth in the records of Parent.
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
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(a) "affiliates" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation, any
partnership or joint venture in which the first mentioned person (either
alone, or through or together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding, or (iii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a Saturday or Sunday or any
day on which banks in the State of Rhode Island are required or authorized to
be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of the Company, Parent or any other
person means any corporation, partnership, joint venture or other legal
entity of which the Company, the Surviving Corporation, Parent or such other
person, as the case may be (either alone or through or together with any
other subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the stockholders of the Company, no amendment
may be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
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SECTION 9.5 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
SECTION 9.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
SECTION 9.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than
the Confidentiality Letter), both written and oral, among the parties, or any
of them, with respect to the subject matter hereof.
SECTION 9.9 Assignment; Guarantee of Merger Sub Obligations. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Merger Sub may assign all or any of their rights hereunder to any
affiliate thereof provided that no such assignment shall relieve the
assigning party of its obligations hereunder. Parent guarantees the full and
punctual performance by Merger Sub of all the obligations hereunder of Merger
Sub or any such assignees.
SECTION 9.10 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including, without limitation, by way of
subrogation, other than Section 9.1(a) (which is intended to be for the
benefit of the Indemnified Parties and may be enforced by such Indemnified
Parties).
SECTION 9.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
any other
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or further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
SECTION 9.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California
applicable to contracts executed and fully performed within the State of
California.
SECTION 9.13 Waiver of Jury Trial. To the extent not prohibited by
applicable law which cannot be waived, each of the parties hereto hereby
waives, and covenants that he or it will not assert (whether as plaintiff,
defendant, or otherwise), any right to trial by jury in any forum in respect
of any issue, claim, demand, cause of action, action, suit or proceeding
arising out of or based upon this Agreement or the subject matter hereof, in
each case whether now existing or hereafter arising and whether in contract
or tort or otherwise. Any of the parties hereto may file an original
counterpart or a copy of this Section 9.13 with any court as written evidence
of the consent of each of the parties hereto to the waiver of his or its
right to trial by jury.
SECTION 9.14 Counterparts; Miscellaneous. This Agreement may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to have
been executed simultaneously and shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement. This
Agreement is to be deemed to have been prepared jointly by the parties
hereto, and any uncertainty or ambiguity existing herein, if any, shall not
be interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for agreements that have been
negotiated at arm's-length. To the extent not prohibited by applicable law
which cannot be waived, all of the rights and remedies of the parties
hereunder shall be cumulative.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CYTOTHERAPEUTICS, INC.
By: /s/ Seth Rudnick
-----------------------------------
Name: Seth Rudnick
Title: President
CTI ACQUISITION, CORP.
By: /s/ John McBride
------------------------------------
Name: John McBride
Title:
STEMCELLS, INC.
By: /s/ Richard Rose
---------------------------------------
Name: Richard Rose
Title: President
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