AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

Dated as of June 22, 2009

among

Laboratory Corporation of America Holdings,

Mastiff Acquisition Corp.

and

Monogram Biosciences, Inc.

 

Table of Contents

 

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of June 22, 2009 (this “ Agreement ”), is among Laboratory Corporation of America Holdings, a Delaware corporation (“ Parent ”), Mastiff Acquisition Corp., a Delaware corporation and a wholly owned Subsidiary of Parent (“ Purchaser ”), and Monogram Biosciences, Inc., a Delaware corporation (the “ Company ”). Certain terms used in this Agreement are used as defined in Section 8.11.

WHEREAS, the respective Boards of Directors of Parent, Purchaser and the Company have approved, and deem it advisable and in the best interests of their respective stockholders to consummate, the acquisition of the Company by Parent upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, in furtherance thereof and pursuant to this Agreement, Purchaser has agreed to commence a tender offer (the “ Offer ”) to purchase all of the outstanding shares of the Company’s common stock, par value $0.001 per share (“ Common Stock ”)(each share of Common Stock being referred to as a “ Share ” and collectively, as the “ Shares ”), at a price per Share of $4.55 (such price per share, or such higher price as may be paid in the Offer, is referred to herein as the “ Offer Price ”), subject to any withholding of Taxes required by Law, net to the seller of such Shares in cash;

WHEREAS, following the consummation of the Offer, upon the terms and subject to the conditions set forth in this Agreement, Purchaser will be merged with and into the Company with the Company as the Surviving Corporation (the “ Merger ,” and together with the Offer, the Top-Up Option and the other transactions contemplated by this Agreement, collectively, the “ Transactions ”), in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), whereby each issued and outstanding Share, except as otherwise provided herein, will be converted into the right to receive the Offer Price in cash, without interest, subject to any withholding of Taxes required by Law, in accordance with the terms hereof;

WHEREAS, the Board of Directors of the Company (the “ Company Board of Directors ”) by resolutions duly adopted, unanimously has (i) determined that this Agreement, the Offer, the Merger and the other Transactions are advisable, fair to, and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the Transactions, including the Offer, the Merger and the Top-Up Option, and (iii) resolved to recommend that the stockholders of the Company accept the Offer, tender their shares to Purchaser pursuant to the Offer, and, if necessary under applicable Law, adopt this Agreement;

WHEREAS, the Board of Directors, or an authorized committee thereof, of Parent and Purchaser have, on the terms and subject to the conditions set forth herein, declared advisable this Agreement and the Transactions, including the Offer, the Top-Up Option and the Merger; and

WHEREAS, as a condition to and inducement to Parent’s and Purchaser’s willingness to enter into this Agreement, contemporaneously with the execution and delivery of this Agreement, all of the members of the Company Board of Directors and the executive

officers of the Company are executing stockholder agreements with Parent and Purchaser (substantially in the form of Exhibits A-1 and A-2 attached hereto, respectively (the “ Support Agreements ”).

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows:

ARTICLE I. THE OFFER AND THE MERGER

Section 1.1 The Offer.

(a) Provided that this Agreement shall not have been terminated in accordance with Section 7.1, within seven business days after the date of this Agreement, Purchaser shall (and Parent shall cause Purchaser to) commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) the Offer to purchase for cash all Shares at the Offer Price (as adjusted as provided in this Agreement, if applicable) and in compliance with Section 14(d) of the Exchange Act and all other provisions of applicable securities laws.

(b) Subject to the terms and conditions of this Agreement, including the prior satisfaction or waiver of the conditions set forth in Annex I (the “ Offer Conditions ”), promptly after the latest of (i) the earliest date as of which Purchaser is permitted under applicable Law to accept for payment Shares tendered pursuant to the Offer, (ii) the earliest date as of which each of the Offer Conditions has been satisfied, or waived by Parent or Purchaser, and (iii) the Expiration Date, Purchaser shall (and Parent shall cause Purchaser to) consummate the Offer in accordance with its terms and accept for payment each Share validly tendered and not properly withdrawn pursuant to the Offer and promptly following the acceptance of Shares for payment pursuant to the Offer pay the Offer Price (without interest) for each Share validly tendered and not properly withdrawn pursuant to the Offer. The obligation of Purchaser (and of Parent to cause Purchaser) to accept for payment, and pay the Offer Price (without interest) for, each Share validly tendered and not properly withdrawn pursuant to the Offer shall be subject only to the satisfaction, or waiver by Parent or Purchaser, of each of the Offer Conditions.

(c) The Offer shall be made by means of an offer to purchase (the “ Offer to Purchase ”) that contains the terms set forth in this Agreement, the Minimum Condition (as defined in Annex I ) and the other conditions set forth in Annex I . Purchaser expressly reserves the right to (x) increase the Offer Price and (y) waive any Offer Condition and make any other changes in the terms and conditions of the Offer; provided , however , that unless otherwise provided by this Agreement, without the prior written consent of the Company, Purchaser shall not (i) decrease the Offer Price, (ii) change the form of consideration payable in the Offer, (iii) decrease the maximum number of Shares sought to be purchased in the Offer, (iv) impose conditions or requirements to the Offer in addition to the Offer Conditions, (v) amend or modify any of the Offer Conditions in a manner that adversely affects, or reasonably could adversely affect, the holder of Shares, (vi) change or waive the Minimum Condition, or (vii) extend or otherwise change the expiration date of the Offer in a manner other than as required or permitted by this Agreement.

 

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(d) Unless extended pursuant to and in accordance with the terms of this Agreement, the Offer shall expire at midnight (New York City time) on the date that is 20 business days (for this purpose calculated in accordance with Rule 14d-1(g)(3) under the Exchange Act) following the commencement (within the meaning of Rule 14d-2 under the Exchange Act) of the Offer (the “ Initial Expiration Date ”) or, in the event the Initial Expiration Date has been extended pursuant to and in accordance with this Agreement, the date to which the Offer has been so extended (the Initial Expiration Date, or such later date to which the Initial Expiration Date has been extended pursuant to and in accordance with this Agreement, is referred to as the “ Expiration Date ”).

(e) The Offer shall be extended from time to time as follows:

(i) If on or prior to any then scheduled Expiration Date, any of the Offer Conditions have not been satisfied (other than conditions which by their nature are to be satisfied at the Acceptance Time), or waived by Parent or Purchaser if permitted hereunder, then Purchaser may (or at the request of the Company, Purchaser shall) extend the Offer for one or more successive periods of 10 business days (or such other number of business days as may be jointly determined by Purchaser and the Company) each in order to permit the satisfaction of such conditions (subject to the right of the Purchaser to waive any condition (other than the Minimum Condition) in accordance with this Agreement), provided such extension of the Offer period does not extend past the earlier of (x) the termination of this Agreement pursuant to Section 7.1 and (y) the date, as applicable, that is (A) 90 days after commencement of the Offer (the “ Initial Outside Date ”), or (B) 120 days after commencement of the Offer in the event that the HSR Condition or the Banking Moratorium Condition shall not have been satisfied, or waived by Parent or Purchaser if permitted hereunder, by the Initial Outside Date (the “ Extended Outside Date ”); and

(ii) Purchaser shall extend the Offer for any period or periods required by applicable law, rule, regulation, interpretation or position of the Securities and Exchange Commission (“ SEC ”) or its staff or The NASDAQ Stock Market LLC (the “ NASDAQ ”) or its staff.

(f) If fewer than 90% of the number of outstanding Shares are accepted for payment pursuant to the Offer or acquired through the Offer and exercise of the Top-Up-Option, Purchaser may, in its sole discretion, provide for one “subsequent offering period” (and one or more extensions thereof) in accordance with Rule 14d-11 under the Exchange Act. Additionally, in the event that more than 80% of the then outstanding Shares have been validly tendered and not properly withdrawn pursuant to the Offer following the Expiration Date, Purchaser shall (and Parent shall cause Purchaser to), at the request of the Company, provide for one “subsequent offering period” in accordance with Rule 14d-11 under the Exchange Act of at least 10 business days immediately following the Expiration Date unless (i) Parent and Purchaser exercise the Top-Up Option or (ii) Parent, Purchaser and their respective Subsidiaries, in the aggregate, own more than 90% of the outstanding Shares. Subject to the terms and conditions of this Agreement and the Offer, Purchaser shall (and Parent shall cause Purchaser to) accept for payment, and pay the Offer Price (without interest) for, each Share that is validly tendered and not properly

 

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withdrawn pursuant to the Offer during such “subsequent offering period” promptly after any such Share is tendered during such “subsequent offering period.” The Offer Documents will provide for the possibility of a “subsequent offering period” in a manner consistent with the terms of this Section 1.1(f).

(g) Purchaser shall not terminate the Offer prior to any scheduled Expiration Date without the prior written consent of the Company except in the event that this Agreement is terminated pursuant to Section 7.1.

(h) In the event that this Agreement is terminated pursuant to Section 7.1, Purchaser shall (and Parent shall cause Purchaser to) promptly (and in any event within 24 hours of such termination), irrevocably and unconditionally terminate the Offer and shall not acquire any shares pursuant to the Offer.

(i) As soon as practicable on the date of commencement of the Offer (within the meaning of Rule 14d-2 under the Exchange Act), Parent and Purchaser shall file with the SEC, pursuant to Regulation M-A under the Exchange Act (“ Regulation M-A ”), a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments, supplements and exhibits thereto, the “ Schedule TO ”). The Schedule TO shall include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement, and ancillary documents and instruments pursuant to which the Offer will be made (collectively, together with any amendments and supplements thereto, and together with the Schedule TO and any amendments and supplements thereto, the “ Offer Documents ”). The Company will provide to Parent and Purchaser any information with respect to itself and its officers, directors and Affiliates required to be provided in the Offer Documents under applicable Laws or as reasonably requested by Parent and Purchaser. Parent and Purchaser agree to take all steps necessary to cause the Offer Documents to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by the Exchange Act. Parent and Purchaser shall use commercially reasonable efforts to cause the Offer Documents to comply in all material respects with the Exchange Act and all other applicable Laws. Parent and Purchaser, on the one hand, and the Company, on the other hand, agree to promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect or as otherwise required by applicable Law. Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents, as so corrected (if applicable), to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by the Exchange Act. The Company and its counsel shall be given a reasonable opportunity to review and comment upon the Offer Documents before they are filed with the SEC or disseminated to the holders of Shares, and Parent and Purchaser shall give due consideration to all the reasonable additions, deletions or changes suggested thereto by the Company and its counsel. In addition, Parent and Purchaser shall provide the Company and its counsel with copies of any written comments, and shall inform them of any oral comments, that Parent, Purchaser or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after receipt of such comments, and any written or oral responses thereto. The Company and its counsel shall be given a reasonable opportunity to review and comment on any such written responses before they are submitted to the SEC or its staff, and Parent and Purchaser shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel. Each of Parent and Purchaser

 

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shall respond promptly to any comments of the SEC or its staff with respect to the Offer Documents or the Offer. The Company hereby consents to the inclusion in the Offer Documents of the Company Board Recommendation, as such Company Board Recommendation may be amended and for so long as such Company Board Recommendation is not withdrawn (in each case as permitted by this Agreement). If the Offer is terminated or withdrawn by Purchaser, or this Agreement is terminated prior to the purchase of Shares in the Offer, Purchaser shall promptly return, and shall cause any depository, acting on behalf of Purchaser to return, all tendered Shares to the registered holders thereof.

(j) The Offer Price shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Common Stock), cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Common Stock occurring on or after the date hereof and prior to Purchaser’s acceptance for payment of, and payment for, Shares pursuant to the Offer.

(k) Parent shall cause to be provided to Purchaser all of the funds necessary to purchase any Shares that Purchaser becomes obligated to purchase pursuant to the Offer, and shall cause Purchaser to perform, on a timely basis, all of Purchaser’s obligations under this Agreement.

Section 1.2 Company Actions.

(a) As promptly as practicable on the day the Offer is commenced, following the filing of the Schedule TO, the Company shall, in a manner that complies with Rule 14d-9 under the Exchange Act, file with the SEC a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (together with all amendments, supplements and exhibits thereto, the “ Schedule 14D-9 ”) that shall, subject to the provisions of Section 5.2(c), contain the Company Board Recommendation. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by the Exchange Act. The Company shall use commercially reasonable efforts to cause the Schedule 14D-9 to comply in all material respects with the Exchange Act and all other applicable Laws. Parent and Purchaser will provide to the Company any information with respect to Parent and Purchaser and their respective officers, directors, Affiliates and agents required to be provided in the Schedule 14D-9 under applicable Laws or as reasonably requested by the Company. To the extent reasonably practicable, the Schedule 14D-9 shall be mailed to holders of Shares with the Offer Documents (and if so, the expense of such mailing shall be borne by Parent in connection with its dissemination of the Offer Documents). The Company, on the one hand, and Parent and Purchaser, on the other hand, agree to promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect or as otherwise required by applicable Law. The Company further agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected (if applicable), to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by the Exchange Act. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 before it is filed with the SEC or disseminated to the holders of Shares and the Company shall give due consideration to all reasonable additions,

 

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deletions or changes suggested thereto by Parent, Purchaser and their counsel. In addition, the Company shall provide Parent, Purchaser and their counsel with copies of any written comments, and shall inform them of any oral comments, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the Company’s receipt of such comments, and any written or oral responses thereto. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review and comment on any such written responses before they are submitted to the SEC or its staff and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel. The Company shall respond promptly to any comments of the SEC or its staff with respect to the Schedule 14D-9.

(b) In connection with the Offer, the Company shall promptly furnish or cause to be furnished to Purchaser mailing labels, security position listings and any available listing or computer files containing the names and addresses of the record holders of the Shares as of the most recent practicable date, together with copies of all lists of stockholders, security position listings and computer files and all other information known to the Company regarding the beneficial owners of the Shares, and shall promptly furnish Purchaser with such information and assistance (including, but not limited to, lists of holders of the Shares, updated promptly from time to time upon Purchaser’s request, and their addresses, mailing labels and lists of security positions) as Purchaser or its agent may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of the Shares. Except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, the Merger and the other Transactions contemplated by this Agreement, Purchaser shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall promptly deliver to the Company all copies of such information.

Section 1.3 Directors.

(a) Upon Purchaser accepting, for the first time, for payment and paying for such number of Shares validly tendered and not properly withdrawn pursuant to the Offer as satisfies the Minimum Condition (the “ Acceptance Time ”), and at all times thereafter, subject to compliance with the Company Charter Documents, applicable Law and the applicable Marketplace Rules of the NASDAQ, Purchaser shall be entitled to elect or designate such number of directors, rounded up to the next whole number, on the Company Board of Directors as is equal to the product of (i) the total number of directors on the Company Board of Directors (after giving effect to the directors elected or designated by Purchaser pursuant to this sentence) multiplied by (ii) the percentage that the aggregate number of Shares beneficially owned by Parent, Purchaser and any of their Affiliates bears to the total number of Shares then outstanding. The Company shall, upon Purchaser’s request at any time following the purchase of and payment for Shares pursuant to the Offer, take all such actions necessary to (I) appoint to the Company Board of Directors the individuals designated by Purchaser and permitted to be so designated by the first sentence of this Section 1.3(a), including, but not limited to, promptly filling vacancies or newly created directorships on the Company Board of Directors, promptly increasing the size of the Company Board of Directors (including by amending the bylaws of the Company if necessary so as to increase the size of the Company Board of Directors) and/or promptly securing the resignations of such number of its incumbent directors as are necessary or desirable

 

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to enable Purchaser’s designees to be so elected or designated to the Company Board of Directors, and (II) cause Purchaser’s designees to be so appointed at such time. The Company shall, upon Purchaser’s request following the Acceptance Time, also cause Persons elected or designated by Purchaser to constitute the same percentage (rounded up to the next whole number) as is on the Company Board of Directors of each committee of the Company Board of Directors to the extent permitted by applicable Law and the NASDAQ Marketplace Rules. From and after the Acceptance Time, the Company shall take all action necessary to elect to be treated as a “controlled company” as defined by NASDAQ Marketplace Rule 5615(c) and make all necessary filings and disclosures associated with such status. The Company’s obligations under this Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly upon execution of this Agreement take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.3(a), including mailing to stockholders (together with the Schedule 14D-9) the information required by Section 14(f) and Rule 14f-1 as is necessary to enable Purchaser’s designees to be elected or designated to the Company Board of Directors. Purchaser shall supply the Company with information with respect to Purchaser’s designees and Parent’s and Purchaser’s respective officers, directors and Affiliates to the extent required by Section 14(f) and Rule 14f-1. The provisions of this Section 1.3(a) are in addition to and shall not limit any rights that any of Purchaser, Parent or any of their respective Affiliates may have as a record holder or beneficial owner of Shares as a matter of applicable Law with respect to the election of directors or otherwise.

(b) In the event that Purchaser’s designees are elected or designated to the Company Board of Directors pursuant to Section 1.3(a), then, until the Effective Time, the Company shall cause the Company Board of Directors to maintain three (3) directors who are members of the Company Board of Directors on or prior to the date hereof and who are not officers, directors or employees of Parent, Purchaser, or any of their Affiliates, each of whom shall be an “independent director” as defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules and eligible to serve on the Company’s audit committee under the Exchange Act and NASDAQ rules, and at least one of whom shall be an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K and the instructions thereto (the “ Continuing Directors ”); provided , however , that if any Continuing Director is unable to serve due to death, disability or resignation, the Company shall take all necessary action (including creating a committee of the Company Board of Directors) so that the Continuing Director(s) shall be entitled to elect or designate another Person (or Persons) to fill such vacancy, and such Person (or Persons) shall be deemed to be a Continuing Director for purposes of this Agreement. If no Continuing Director then remains, the other directors shall designate three Persons who are not officers, directors or employees of Parent, Purchaser, or any of their Affiliates to fill such vacancies and such Persons shall be deemed Continuing Directors for all purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, if Purchaser’s designees constitute a majority of the Company Board of Directors after the Acceptance Time and prior to the Effective Time, then the affirmative vote of a majority of the Continuing Directors shall (in addition to the approval rights of the Company Board of Directors or the stockholders of the Company as may be required by the Company Charter Documents or applicable Law) be required (i) for the Company to amend or terminate this Agreement, (ii) to exercise or waive any of the Company’s rights, benefits or remedies hereunder, if such action would adversely affect, or would reasonably be expected to adversely affect, the holders of

 

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Shares (other than Parent or Purchaser), (iii) to amend the Company Charter Documents if such action would adversely affect the holders of Shares (other than Parent or Purchaser), or (iv) to take any other action of the Company Board of Directors under or in connection with this Agreement if such action would adversely affect, or would reasonably be expected to adversely affect, the holders of Shares (other than Parent or Purchaser).

Section 1.4 The Merger.

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, Purchaser shall be merged with and into the Company, and the separate corporate existence of Purchaser shall thereupon cease, and the Company shall be the surviving corporation in the Merger (the “ Surviving Corporation ”) and shall continue its existence under the DGCL as a wholly-owned subsidiary of Parent.

Section 1.5 Closing.

Unless this Agreement shall have been terminated and the transactions contemplated by this Agreement abandoned pursuant to the provisions of Article VII, the closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m. (New York City time) on a date to be specified by the parties (the “ Closing Date ”), which date shall be no later than the second (2nd) business day after satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time), at the offices of Hogan & Hartson LLP, 111 South Calvert Street, Suite 1600, Baltimore, Maryland 21202, unless another time, date or place is agreed to in writing by the parties hereto.

Section 1.6 Effective Time.

Subject to the provisions of this Agreement, as soon as practicable on the Closing Date the parties shall file with the Secretary of State of the State of Delaware a certificate of merger (the “ Certificate of Merger ”) satisfying the applicable requirements of the DGCL and duly executed in accordance with the relevant provisions of the DGCL. The Merger shall become effective upon the filing of the Certificate of Merger or at such later time as is agreed to by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective is herein referred to as the “ Effective Time ”).

Section 1.7 Effects of the Merger.

The Merger shall have the effects set forth in applicable provisions of Delaware law and this Agreement. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations and duties of the Company and Purchaser shall become the debts, liabilities, obligations and duties of the Surviving Corporation.

 

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Section 1.8 Certificate of Incorporation and Bylaws of the Surviving Corporation.

(a) At the Effective Time, the certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended in the Merger to be in the form of Exhibit B hereto and, as so amended, such certificate of incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable Law.

(b) At the Effective Time, the bylaws of Purchaser, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable Law.

Notwithstanding the foregoing, Parent and the Surviving Corporation shall ensure that the terms of such certificate of incorporation and bylaws will at all times comply with the requirements of Section 5.7 during the period of time specified in Section 5.7.

Section 1.9 Directors and Officers of the Surviving Corporation.

Each of the parties hereto shall take all necessary action to cause the directors and officers of Purchaser immediately prior to the Effective Time to be the directors and officers of the Surviving Corporation immediately following the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

Section 1.10 Stockholders’ Meeting.

If approval of the stockholders of the Company is required under DGCL in order to consummate the Merger:

(a) As promptly as practicable following the Acceptance Time and the expiration of any “subsequent offering period” provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, the Company shall prepare and file as promptly as practicable with the SEC a proxy or information statement for the Special Meeting (together with any amendments thereof or supplements thereto and any other required proxy materials, the “ Proxy Statement ”) relating to the Merger and this Agreement; provided, that Parent, Purchaser and their counsel shall be given a reasonable opportunity to review the Proxy Statement before it is filed with the SEC and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel with the intention that the Proxy Statement be in a form ready to print and mail to the stockholders of the Company as promptly as practicable following the Acceptance Time and the expiration of any “subsequent offering period” provided by Purchaser pursuant to and in accordance with this Agreement, if applicable. Parent and Purchaser will provide to the Company any information with respect to Parent and Purchaser and their respective officers, directors, Affiliates and agents required to be provided in the Proxy Statement under applicable Laws or as reasonably requested by the

 

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Company. The Company shall include in the Proxy Statement the recommendation of the Company Board of Directors that stockholders of the Company vote in favor of the adoption of this Agreement in accordance with the DGCL. The Company shall respond promptly to any comments made by the SEC or its staff with respect to the Proxy Statement. The Company shall provide Parent, Purchaser and their counsel with copies of any written comments, and shall inform them of any oral comments, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Proxy Statement promptly after the Company’s receipt of such comments, and any written or oral responses thereto. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review any such written responses before they are submitted to the SEC or its staff and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel. The Company, on the one hand, and Parent and Purchaser, on the other hand, agree to promptly correct any information provided by it for use in the Proxy Statement if and to the extent that it shall have become false or misleading in any material respect or as otherwise required by applicable Law, and the Company further agrees to cause the Proxy Statement, as so corrected (if applicable), to be filed with the SEC and, if any such correction is made following the mailing of the Proxy Statement as provided in Section 1.11(b)(ii), mailed to holders of Shares, in each case as and to the extent required by the Exchange Act or the SEC (or its staff).

(b) The Company, acting through the Company Board of Directors, shall, in accordance with and subject to the requirements of applicable Law:

(i) (A) as promptly as practicable following the Acceptance Time and the expiration of any “subsequent offering period” provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, duly set a record date for, call and give notice of a special meeting of the Company’s stockholders (the “ Special Meeting ”) for the purpose of considering and taking action upon this Agreement (with the record date and meeting date set in consultation with Purchaser), and (B) as promptly as practicable following the Acceptance Time and the expiration of any “subsequent offering period” provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, convene and hold the Special Meeting; and

(ii) cause the definitive Proxy Statement to be mailed to its stockholders.

(c) At the Special Meeting or any postponement or adjournment thereof, Parent shall vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of their respective Subsidiaries in favor of the adoption of this Agreement and to deliver or provide, in its capacity as a stockholder of the Company, any other approvals that are required by the DGCL and any other applicable Law to effect the Merger.

Section 1.11 Merger Without Meeting of Stockholders.

Notwithstanding the terms of Section 1.10, in the event that Parent, Purchaser and their respective Subsidiaries shall own of record, in the aggregate, at least 90% of the outstanding shares of each class of capital stock of the Company entitled to vote on the adoption

 

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of this Agreement under the DGCL (the “ Short Form Threshold ”), following the Acceptance Time and the expiration of any “subsequent offering period” provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, and the exercise of the Top-Up Option, if applicable, Parent shall cause the Merger to become effective as promptly as practicable, without a meeting of stockholders of the Company, in accordance with Section  253 of the DGCL.

Section 1.12 Top-Up Option.

(a) The Company hereby grants to Purchaser an irrevocable option (the “ Top-Up Option ”), exercisable only upon the terms and subject to the conditions set forth herein, to purchase with a promissory note, bearing simple interest at 6% per annum, and due 30 days after the Top-Up Closing (a “ Promissory Note ”), at a price per share equal to the Offer Price, that number of shares of Common Stock (the “ Top-Up Option Shares ”) equal to the lowest number of shares of Common Stock that, when added to the number of shares of Common Stock owned by Parent, Purchaser and their respective Subsidiaries at the time of such exercise, shall constitute 1,000 shares more than 90% of the shares of Common Stock then outstanding (after giving effect to the issuance of the Top-Up Option Shares); provided , however , that the Top-Up Option shall not be exercisable unless, immediately after such exercise and the issuance of shares of Common Stock pursuant thereto, the Short Form Threshold would be reached (assuming the issuance of the Top-Up Option Shares); and provided , further , that in no event shall the Top-Up Option be exercisable for a number of shares of Common stock in excess of the Company’s total authorized and unissued shares of Common Stock (including shares that are otherwise subscribed to or committed to be issued). The obligation of the Company to issue shares will be subject to compliance with all applicable regulatory and stock exchange requirements.

(b) Provided that no applicable Law or other legal impediment shall prohibit the exercise of the Top-Up Option or the issuance of the Top-Up Option Shares pursuant thereto, or otherwise make such exercise or issuance illegal, Purchaser may exercise the Top-Up Option, in whole but not in part, at any one time after the Acceptance Time and prior to the earlier to occur of (i) the Effective Time and (ii) the termination of this Agreement pursuant to Section 7.1.

(c) In the event Purchaser wishes to exercise the Top-Up Option, Purchaser shall send to the Company a written notice (a “ Top-Up Exercise Notice ,” the date of which notice is referred to herein as the “ Top-Up Notice Date ”) specifying the denominations of the certificate or certificates evidencing the Top-Up Option Shares which the Purchaser wishes to receive, and the place, time and date (which shall be no earlier than one business day after the Top-Up Notice Date and no later than seven business days after the Top-Up Notice Date) for the closing of the purchase and sale pursuant to the Top-Up Option (the “ Top-Up Closing ”). The Company shall, promptly after receipt of the Top-Up Exercise Notice, deliver a written notice to the Purchaser confirming the number of Top-Up Option Shares and the aggregate purchase price therefor (the “ Top-Up Notice Receipt ”). At the Top-Up Closing, Purchaser shall pay the Company the aggregate price required to be paid for the Top-Up Option Shares, by delivery of a Promissory Note in an aggregate principal amount equal to the amount specified in the Top-Up Notice Receipt, and the Company shall cause to be issued to Purchaser a certificate or certificates representing the Top-Up Option Shares. Such certificates may include any legends that are required by federal or state securities laws.

 

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(d) Parent and Purchaser acknowledge that the Top-Up Option Shares that Purchaser may acquire upon exercise of the Top-Up Option will not be registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “ Securities Act ”) and will be issued in reliance upon an exemption thereunder for transactions not involving a public offering. Parent and Purchaser represent and warrant to the Company that Purchaser is, or will be upon the purchase of the Top-Up Option Shares, an “accredited investor,” as defined in Rule 501 of Regulation D under the Securities Act. Purchaser agrees that the Top-Up Option and the Top-Up Option Shares to be acquired upon exercise of the Top-Up Option are being and will be acquired by Purchaser for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act.

ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK; EXCHANGE

OF CERTIFICATES

Section 2.1 Effect on Capital Stock.

At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares or of any shares of capital stock of Purchaser:

(a) Capital Stock of Purchaser . Each issued and outstanding share of capital stock of Purchaser shall be automatically converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

(b) Cancellation of Treasury Stock and Parent-Owned Stock . Any Shares that are owned by the Company as treasury stock or owned by any direct or indirect wholly-owned Subsidiary of the Company immediately prior to the Effective Time, and any Shares owned by Parent, Purchaser or any other direct or indirect wholly-owned Subsidiary of Parent immediately prior to the Effective Time, shall be automatically canceled and shall cease to exist and no consideration shall be delivered in exchange therefor.

(c) Conversion of Common Stock . Each issued and outstanding Share (other than Shares to be canceled in accordance with Section 2.1(b) and Dissenting Shares) shall be automatically converted into the right to receive an amount in cash, without interest, equal to the Offer Price (the “ Merger Consideration ”). The Shares that are so converted into the right to receive the Merger Consideration pursuant to this Section 2.1(c) are referred to herein as the “ Merger Shares .”

(d) Adjustment to Merger Consideration . Without duplication to the effects of Section 1.1(j), the Merger Consideration shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Common Stock), cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Common Stock occurring on or after the date hereof and prior to the Effective Time.

(e) Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, Shares that are issued and outstanding immediately prior to the Effective Time and

 

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which are held by a stockholder who did not vote in favor of the Merger (or consent thereto in writing or who otherwise did not validly waive their right to appraisal) and who is entitled to demand and properly demands appraisal of such Shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (the “ Dissenting Stockholders ”), shall not be converted into or be exchangeable for the right to receive the Merger Consideration (the “ Dissenting Shares ”), but instead such holder shall be entitled to payment of the fair value of such Shares in accordance with the provisions of Section 262 of the DGCL (and at the Effective Time, such Dissenting Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and such holder shall cease to have any rights with respect thereto, except the right to receive the fair value of such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL), unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost rights to appraisal under the DGCL. If any Dissenting Stockholder shall have failed to perfect or shall have effectively withdrawn or lost such right, such stockholder’s Shares shall thereupon be treated as if they had been converted into and become exchangeable for the right to receive, as of the Effective Time, the Merger Consideration for each such Share, in accordance with Section 2.1(c), without any interest thereon. The Company shall give Parent (i) prompt notice of any written demands for appraisal of any Shares, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company relating to stockholders’ rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle, or offer or agree to settle, any such demand for payment or waive any failure by a stockholder to timely comply with the requirements of the DGCL to perfect or demand appraisal rights. In any appraisal negotiations or proceeding, the Company, Purchaser and Parent shall not assert that the number of shares of the Company outstanding for purposes of determining fair value includes the Top-Up Option Shares. Any portion of the Merger Consideration made available to the Paying Agent pursuant to Section  2.2 to pay for Shares for which appraisal rights have been perfected shall be returned to Parent upon demand.

Section 2.2 Exchange of Certificates.

(a) Paying Agent . Prior to the Effective Time, Parent shall designate a bank or trust company to act as paying agent in connection with the Merger (the “ Paying Agent ”). Promptly after the Effective Time, Parent shall deposit the aggregate Merger Consideration to which holders of Merger Shares shall become entitled pursuant to Section 2.1(c) with the Paying Agent, for the benefit of the holders of the Merger Shares outstanding immediately prior to the Effective Time. Such aggregate Merger Consideration deposited with the Paying Agent shall, pending its disbursement to such holders, be invested by the Paying Agent as directed by Parent. Any net profit resulting from, or interest or income produced by, such amounts on deposit with the Paying Agent will be payable to Parent or as Parent otherwise directs.

(b) Payment Procedures . Promptly after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Merger Share (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates representing the Merger Shares (the “ Certificates ”) and to any uncertificated Merger Shares held in book-entry form (“ Uncertificated Shares ”) shall pass, only upon delivery of the

 

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Certificates or transfer of the Uncertificated Shares to the Paying Agent, and which shall be in such form and shall have such other provisions as is customary) and (ii) instructions for use in effecting the surrender of the Certificates or transfer of the Uncertificated Shares in exchange for payment of the Merger Consideration. Upon (i) surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions (and such other customary documents as may reasonably be required by the Paying Agent), or (ii) receipt of an “agent’s message” by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may require) in the case of book-entry transfer of Uncertificated Shares, the holder of such Certificate or Uncertificated Shares shall be entitled to receive promptly in exchange therefor the Merger Consideration, without interest, for each Merger Share formerly represented by such Certificate or Uncertificated Share, and the Certificate or Uncertificated Share so surrendered or transferred shall forthwith be canceled. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate or transferred Uncertificated Shares is registered, it shall be a condition of payment that (x) the Certificate so surrendered shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated Shares shall be properly transferred and (y) the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration in respect thereof or shall have established to the reasonable satisfaction of the Surviving Corporation that such Tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2, each Certificate or Uncertificated Share shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration as contemplated by this Article II, without interest.

(c) Transfer Books; No Further Ownership Rights in Company Capital Stock . The Merger Consideration paid in respect of the Merger Shares upon the surrender for exchange of Certificates or transfer of Uncertificated Shares in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Merger Shares previously represented by such Certificates or Uncertificated Shares, and at the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. From and after the Effective Time, the holders of Merger Shares shall cease to have any rights with respect to such Shares, except the right to receive the Merger Consideration to be paid in consideration therefor, without interest, upon compliance with the provisions of Section 2.2(b) or as otherwise provided by applicable Law. Subject to the last sentence of Section 2.2(e), if, at any time after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article II.

(d) Lost, Stolen or Destroyed Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Paying Agent, the posting by such Person of a bond, in such customary amount and upon such customary terms as Parent or the Paying Agent may reasonably direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will pay, in exchange for such lost, stolen or destroyed Certificate, the applicable Merger Consideration to be paid in respect of the Merger Shares formerly represented by such Certificate, as contemplated by this Article II.

 

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(e) Termination of Fund . At any time following 12 months after the Closing Date, Parent shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) that had been made available to the Paying Agent and which have not been disbursed to holders of Merger Shares, and thereafter such holders shall be entitled to look only to Parent (subject to abandoned property, escheat or other similar laws) with respect to the payment of any Merger Consideration that may be payable upon surrender of any Certificates or transfer of any Uncertificated Shares held by such holders, as determined pursuant to this Agreement, without any interest thereon. Any amounts remaining unclaimed by such holders at such time at which such amounts would otherwise escheat to or become property of any Governmental Authority shall become, to the extent permitted by applicable Law, the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto.

(f) No Liability . Notwithstanding any provision of this Agreement to the contrary, none of the parties hereto, the Surviving Corporation or the Paying Agent shall be liable to any Person for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

(g) Withholding Taxes . Parent, Purchaser, the Surviving Corporation and the Paying Agent, as the case may be, shall be entitled to deduct and withhold from the Offer Price and Merger Consideration otherwise payable to a holder of Shares or of Merger Shares pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the “ Code ”), or under any provision of state, local or foreign tax Law. To the extent amounts are so withheld, (i) Parent, Purchaser, the Surviving Corporation or the Paying Agent, as the case may be, shall remit such withheld amounts to the applicable Governmental Authority, and (ii) the withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

Section 2.3 Company Stock Options.

(a) Prior to the Acceptance Time, the Company shall take all actions necessary to provide that each option (other than Warrants) outstanding immediately prior to the Effective Time (whether or not then vested or exercisable) (each, an “ Option ”) that represents the right to acquire shares of Common Stock shall (i) be fully vested and exercisable, and (ii) be cancelled and be of no further force or effect as of the Effective Time (other than for the right to receive the cash payment, if any, contemplated by the next sentence). Each holder of an Option that is (i) outstanding and unexercised and (ii) has an Adjusted Exercise Price that is less than the Merger Consideration immediately prior to the Effective Time shall be entitled to receive from the Surviving Corporation immediately after the Effective Time, in exchange for the cancellation of such Option, an amount in cash (such amount, the “ Net Option Consideration ”) equal to the excess, if any, of (x) the Merger Consideration over (y) the Adjusted Exercise Price of such Option (including if such Adjusted Exercise Price is less than zero), multiplied by the number of Shares subject to such Option immediately prior to the Effective Time. For purposes of this Section 2.3 the “Adjusted Exercise Price” of each Option shall mean the per share exercise or “strike” price of such Option minus the amount payable to such holder for each Share covered by

 

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the Option pursuant to the Contingent Value Rights Agreement. Any such payment shall be subject to all applicable Tax withholding requirements. For the purpose of clarity, any unexercised Option with an Adjusted Exercise Price equal to or greater than the Merger Consideration shall be canceled upon the Effective Time without payment. Neither the Company nor the Company Board of Directors shall take any action, pursuant to the Company Stock Plans or otherwise, to cause Parent, Purchaser or the Surviving Corporation to (i) assume any of the Company Stock Plans or any Option, (ii) substitute any similar plan, option or restricted share for any of the Company Stock Plans or any Option, or (iii) cause any of the Company Stock Plans or any Option to continue in full force and effect following the Effective Time. Prior to or promptly following the Effective Time, the Company or the Surviving Corporation (as the case may be) shall mail to each person who is a holder of an outstanding Option (regardless of whether such Option is or was vested or exercisable at the Effective Time) a letter describing the treatment of and payment for such Option pursuant to this Section 2.3 and providing instructions for use in obtaining payment for such Option in accordance with this Section.

(b) Prior to the Acceptance Time, the Company shall take all actions necessary to terminate all the Company Stock Plans effective at or prior to the Effective Time.

(c) Without limiting the foregoing, the Company shall take all actions necessary to ensure that the Company will not, at the Effective Time, be bound by any options, stock appreciation rights, or other rights or agreements which would entitle any Person, other than Parent and its Subsidiaries, to own any capital stock of the Surviving Corporation or to receive any payment in respect thereof.

Section 2.4 Company Warrants.

At the Effective Time, any warrant outstanding immediately prior to the Effective Time that provides the right to acquire shares of Common Stock (each, a “ Warrant ”) shall be converted into a right to receive, upon exercise of such Warrant and payment of the exercise price in respect thereof, a cash amount equal to the Warrant Consideration for each share of Common Stock subject to such Warrant and for which such Warrant has been exercised. The “ Warrant Consideration shall mean, with respect to any share of Common Stock issuable under a particular Warrant, an amount equal to the Merger Consideration.

Section 2.5 Employee Stock Purchase Plan.

Prior to the Acceptance Time, the Company shall take any and all actions with respect to the Company’s 2000 Employee Stock Purchase Plan, as amended (the “ ESPP ”) as are necessary to provide that, subject to consummation of the Merger, the ESPP shall terminate, effective on the date immediately prior to the Closing Date (the “ ESPP Termination Date ”). Prior to the date of this Agreement, the Company has taken all action (and provided Parent evidence thereof) necessary to suspend the ESPP. As of the date of this Agreement, as of the ESPP Termination Date and as of the Closing, no Rights (as defined in the ESPP) are or will be outstanding under the ESPP providing any participant in the ESPP with the right to purchase any shares of Common Stock, and the Company has not taken any action and is not under any obligation to provide for the future grant of any Rights under the ESPP. Prior to the Closing, the

 

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Company shall not grant or provide for the grant of any Rights under the ESPP to any participant thereunder or provide for any Offering or set any Offering Date (each as defined under the ESPP).

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Purchaser as follows, except as set forth in (i) the disclosure schedule, with specific reference to the Section or subsection of this Agreement to which the information stated in such disclosure relates (it being agreed that disclosure of any information in a particular section or subsection of the Company Disclosure Schedule shall be disclosed with respect to any other section or subsection of this Agreement to the extent such disclosure is accompanied by an appropriate cross reference to such other section or subsection), delivered by the Company to Parent simultaneously with the execution of this Agreement and signed by an authorized officer of the Company in his or her capacity as an officer of the Company (the “ Company Disclosure Schedule ”) and (ii) the Recent SEC Documents (but only as and to the extent (A) specifically set forth on the face thereof (and not incorporated by reference therein) and (B) readily apparent from a reading of such Recent SEC Documents that they pertain to the subject matter of the representation and warranty and excluding (I) any disclosure that constitutes a “risk factor,” including disclosures contained in the “Risk Factors” sections of such Recent SEC Documents or that relates to forward-looking statements to the extent they are cautionary, predictive or forward-looking in nature, including disclosures contained in the “Disclosure Regarding Forward-Looking Statements” sections of such Recent SEC Documents and (II) any documents filed as exhibits to such Recent SEC Documents to the extent the information is only set forth in such exhibits); provided that the foregoing exception in clause (ii) shall not apply to the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.4, 3.20, 3.21 and 3.22.

Section 3.1 Organization, Standing and Corporate Power.

(a) Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing (to the extent that the laws of the jurisdiction of its formation recognize the concept of good standing) under the Laws of the jurisdiction in which it is incorporated and has all requisite corporate power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing, individually or in the aggregate, does not have and would not reasonably be expected to have a Company Material Adverse Effect.

(b) Section 3.1(b) of the Company Disclosure Schedule lists all Subsidiaries of the Company together with the jurisdiction of organization of each such Subsidiary. Except as set forth in Section 3.1(b) of the Company Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock, voting securities or equity interests in any Person.

 

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(c) The Company has delivered or made available to Parent correct and complete copies of its certificate of incorporation and bylaws, as amended (the “ Company Charter Documents ”), and correct and complete copies of the certificates of incorporation and bylaws (or comparable organizational documents) of each of its Subsidiaries (the “ Subsidiary Organizational Documents ”), in each case as amended to the date of this Agreement. All such Company Charter Documents and Subsidiary Organizational Documents are in full force and effect and neither the Company nor any of its Subsidiaries is in violation of any of their respective provisions in any material respect.

Section 3.2 Capitalization.

(a) The authorized capital stock of the Company consists of (i) 84,000,000 shares of Common Stock, and (ii) 5,000,000 shares of preferred stock, par value $.001 per share (the stock referred to in clause (ii) “ Preferred Stock ”). At the close of business on June 19, 2009, (i) 23,042,427 shares of Common Stock were issued and outstanding, (ii) no shares of Common Stock were held by the Company in its treasury, (iii) 5,837,882 shares of Common Stock were reserved for issuance under the Company Stock Plans (of which 4,733,255 shares of Common Stock were subject to outstanding Options granted under the Company Stock Plans), (iv) 4,465 shares of Common Stock were issuable upon the exercise of outstanding Warrants, (v) 3,524,598 shares of Common Stock were issuable upon conversion of the Convertible Notes, (vi) no shares of Preferred Stock were issued or outstanding, and (vii) no shares of Restricted Stock were outstanding. All outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except (x) as set forth above in this Section 3.2(a) or in Section 3.2(b) of the Company Disclosure Schedule or (y) as otherwise expressly permitted by Section 5.1 hereof, as of the date of this Agreement there are not, and as of the Acceptance Time and the Effective Time there will not be, any shares of capital stock, voting securities or equity interests of the Company issued and outstanding or any subscriptions, Options, Warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of any shares of capital stock, voting securities or equity interests of the Company or representing the right to purchase or otherwise receive any Common Stock or Preferred Stock. Section 3.2(a) of the Company Disclosure Schedule sets forth the total Net Option Consideration payable pursuant to the Merger to all holders of Options with an Adjusted Exercise Price less than the Merger Consideration, as of the date of the Agreement. There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests of the Company or any of its Subsidiaries.

(b) Section 3.2(b) of the Company Disclosure Schedule sets forth a correct and complete list, as of June 19, 2009, of all outstanding Options, Warrants, convertible securities (including the Convertible Notes) or other rights to purchase or receive shares of Common Stock and, for each such Option, Warrant, convertible security (including Convertible Note) or other right, the number of shares of Common Stock subject thereto, the name of the holder thereof, and, as applicable, the Company Stock Plan under which issued, the terms of any vesting thereof, the grant and expiration dates, and exercise or conversion price thereof. Since January 1, 2009, the Company has not issued any shares of its capital stock, voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, voting securities or equity interests, other than pursuant to the exercise of options granted under the Company’s equity incentive plans set forth in Section 3.12(a) of the Company Disclosure Schedule.

 

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(c) Each Subsidiary of the Company is wholly-owned by the Company. All the outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company have been duly authorized and validly issued and are fully paid and nonassessable (to the extent such concepts are applicable) and, except for Permitted Liens, are owned directly or indirectly by the Company free and clear of all liens, pledges, charges, mortgages, encumbrances, adverse rights or claims and security interests of any kind or nature whatsoever (including any restriction on the right to vote or transfer the same, except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various States of the United States (collectively, “ Liens ”)). None of the Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any shares of capital stock, voting securities or equity interests of any Subsidiary. There are no outstanding obligations of the Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests of the Subsidiaries.

Section 3.3 Authority; Noncontravention; Voting Requirements.

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions, subject, in the case of the Merger, to the receipt of Company Stockholder Approval, if required by applicable Law. The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Transactions, have been duly authorized and approved by the Company Board of Directors and no other corporate action on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and the consummation of the Transactions, subject, in the case of the Merger, to the receipt of Company Stockholder Approval, if required by applicable Law. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity, and public policy (the “ Bankruptcy and Equity Exception ”).

(b) The Company Board of Directors, at a meeting duly called and held, has unanimously (i) determined that this Agreement, the Offer, the Merger and the other Transactions are advisable, fair to, and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the Transactions, including the Offer, the Merger and the Top-Up Option, and (iii) resolved to recommend that the stockholders of the Company accept the Offer, tender their shares to Purchaser pursuant to the Offer, and, if necessary under applicable Law, adopt this Agreement ((i), (ii), and (iii) being referred to collectively as the “ Company Board Recommendation ”).

 

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(c) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company, will not (subject, in the case of the Merger, to the receipt of Company Stockholder Approval, if required by applicable Law):

(i) conflict with or violate any provision of the Company Charter Documents or any of the Subsidiary Organizational Documents; or

(ii) assuming that the authorizations, consents and approvals referred to in Section 3.4 are obtained and the filings referred to in Section 3.4 are made, (x) violate any Law of any Governmental Authority applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien (other than as set forth in Section 3.3(c) of the Company Disclosure Schedule) upon any of the respective properties or assets of, the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any Material Contract or Permit, to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets are bound or affected except, in the case of clauses (x) and (y), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens that, individually or in the aggregate, are not, or would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.

(d) In the event that Section 253 of the DGCL is inapplicable and unavailable to effect the Merger, the affirmative vote (in person or by proxy) of the holders of a majority of the outstanding shares of Common Stock in favor of the adoption of this Agreement (the “ Company Stockholder Approval ”) is the only vote or approval of the holders of any class or series of capital stock of the Company or any of its Subsidiaries which is necessary to adopt this Agreement and approve the Transactions.

Section 3.4 Governmental Approvals, Filings and Consents.

Except for consents, approvals, filings and/or notices required by (a) the SEC, including (1) a Proxy Statement if stockholder approval of the Merger is required under applicable Law, (2) the Schedule 14D-9, (3) the information required by Rule 14f-1 promulgated under the Exchange Act, (4) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement, the Offer and the Merger, and (4) any other filings required under, and compliance with other applicable requirements of, the Exchange Act and the rules and regulations promulgated thereunder, (b) the NASDAQ, (c) the DGCL, including the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, and (d) the HSR Act and Applicable Foreign Competition Laws, no material consents or approvals of, or material filings, declarations or registrations with, any Governmental Authority are necessary to be made or obtained by the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions, other than such other consents, approvals, filings, declarations or registrations that,

 

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if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to impair in any material respect the ability of the Company to perform its obligations hereunder.

Section 3.5 Company SEC Documents; Undisclosed Liabilities.

(a) The Company has filed and furnished all reports, schedules, forms, prospectuses, and registration, proxy and other statements required to be filed or furnished by it with the SEC since January 1, 2006 (collectively, and together with all documents incorporated by reference therein, but excluding any exhibits filed therewith to the extent the information set forth therein is not incorporated by reference into such report, schedule, form, prospectus, registration, proxy or other statement, the “ Company SEC Documents ”). None of the Company’s Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of their respective effective dates (in the case of Company SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective filing dates (in the case of all other Company SEC Documents) and if later amended or superseded, then as of the date of such later filing, the Company SEC Documents complied as to form in all material respects with the requirements of the Exchange Act and the Securities Act, as the case may be, applicable to such Company SEC Documents, and none of the Company SEC Documents as of such respective dates or if later amended or superseded then as of the date of such later filing contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) The consolidated financial statements of the Company included in the Company SEC Documents (i) at the time filed complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii) were prepared in accordance with GAAP (except, in the case of unaudited quarterly statements, as permitted by SEC rules and regulations, including Regulation S-X) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and (iii) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates indicated and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments).

(c) The Company is, and during the last three years has been, in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”) and the rules and regulations promulgated thereunder. The Company is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NASDAQ. The Company has established and maintains disclosure controls and procedures (as defined in and satisfying the requirements of Rule 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is made known to the Chief Executive Officer and the Chief Financial Officer of the Company. To the Knowledge of the Company, the Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Company’s Board of Directors (i) any significant deficiencies and material weaknesses in the design or operation of internal

 

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controls over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud or allegation of fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. As of the date hereof, to the Knowledge of the Company, the Company has not received any material complaints regarding accounting, internal accounting controls or auditing matters, including any such material complaint regarding questionable accounting or auditing practices. To the Knowledge of the Company, the Company has not identified any currently existing material weaknesses in the design or operation of internal controls over financial reporting. To the Knowledge of the Company, there is no reasonable basis to believe that its auditors and its Chief Executive Officer and Chief Financial Officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act when due. There are no outstanding loans made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.

(d) Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise, whether known or unknown), whether or not required, if known, to be reflected or reserved against on a consolidated balance sheet of the Company prepared in accordance with GAAP or the notes thereto, except liabilities (i) as and to the extent reflected or reserved against on the unaudited balance sheet of the Company and its Subsidiaries as of March 31, 2009 (the “ Company Balance Sheet ” and such date, the “ Balance Sheet Date ”) (including the notes thereto) included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 6, 2009, or (ii) liabilities that, individually or in the aggregate, do not have and would not reasonably be expected to have a Company Material Adverse Effect.

Section 3.6 Absence of Certain Changes or Events.

Between the Balance Sheet Date and the date of this Agreement, except as expressly contemplated by this Agreement or disclosed in the Company SEC Documents, (a) there has not been any event, circumstance, change, occurrence or effect that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; (b) the Company and its Subsidiaries have operated their respective businesses in all material respects in the ordinary course of business consistent with past practice; (c) neither the Company nor any of its Subsidiaries has taken any action described in Section 5.1 hereof that if taken after the date hereof and prior to the Effective Time without the prior written consent of Parent would violate such provision; and (d) there has not occurred any damage, destruction or loss (whether or not covered by insurance) of any material tangible asset of the Company or any of its Subsidiaries which materially adversely affects the use thereof.

Section 3.7 Legal Proceedings.

Except as disclosed in Section 3.7 of the Company Disclosure Schedule, as of the date of the Agreement there is no pending and served or, to the Knowledge of the Company, pending and not served or threatened, material legal, administrative, arbitral or other proceeding, claim, suit or action against, or governmental or regulatory investigation of, the Company or any

 

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of its Subsidiaries, nor is there any injunction, order, judgment, ruling or decree imposed (or, to the Knowledge of the Company, threatened to be imposed) upon the Company, any of its Subsidiaries or the assets of the Company or any of its Subsidiaries, by or before any Governmental Authority. Neither the Company nor any of its Subsidiaries is subject to any settlement agreement or stipulation with respect to any legal, administrative, arbitral or other proceeding, claim, suit or action by or before any Governmental Authority.

Section 3.8 Compliance With Laws.

(a) The Company and its Subsidiaries are, and during the last three years have been, in compliance in all material respects with all Laws applicable to the Company or to any of its Subsidiaries, any of their properties or other assets or any of their businesses or operations, except for violations that have not resulted in, or that would not reasonably be expected to result in, any fines, penalties, or other sanctions material to the Company and its Subsidiaries, taken as a whole, or in any criminal penalties (other than potential minor misdemeanor charges).

(b) The Company and its Subsidiaries have been duly granted all material Permits necessary for the conduct of their businesses as currently conducted. The Company and its Subsidiaries are, and during the last three years have been, in compliance in all material respects with the terms of all material Permits, each of which is valid and in full force and effect. Neither the Company nor any of its Subsidiaries has received notice to the effect that a Governmental Authority (i) has claimed or alleged that the Company or any Subsidiary of the Company was not in material compliance with any material Law applicable to the Company or any Subsidiary of the Company, any of their properties or other assets or any of their businesses or operations or was not in compliance with the provisions or obligations of any material Permits held by the Company or any Subsidiary of the Company, or (ii) was considering the amendment, suspension, restriction, termination, revocation or cancellation of any material Permit or the imposition of any fine, penalty or other sanctions for the violation of any requirements relating to any material Permit.

(c) In connection with any business of the Company or any of its Subsidiaries, neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any directors, officers, employees, or agents of the Company or any of its Subsidiaries have, in violation of any Law (i) directly or indirectly, in cash or in kind, made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other similar payment to any Person (including, in the case of an individual, any family members of such Person and in the case of an entity, any Affiliates of such entity) (A) to obtain favorable treatment in securing business, (B) to pay for favorable treatment for business secured, or (C) to obtain special concessions or to pay for special concessions already obtained for or in respect of the Company, or (ii) established or maintained any fund or asset that has not been recorded in the books and records of the Company.

(d) The Company and its Subsidiaries (i) are certified for participation and reimbursement under Titles XVIII and XIX of the Social Security Act (the “ Medicare and Medicaid Programs ”) and the TRICARE Program (the Medicare and Medicaid Programs, the TRICARE Program, and such other similar federal, state or local reimbursement or governmental programs for which the Company is eligible (including “Federal health care programs” as defined in 42 U.S.C. § 1320a-7b(f)), are referred to collectively as the

 

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“ Governmental Programs ”) (it being understood that not all of the Company’s and its Subsidiaries’ laboratory services are approved for reimbursement under any or all of such Governmental Programs) and (ii) currently participate in the Governmental Programs pursuant to provider agreements and receive payments from private, non-governmental programs (including any private insurance program) (such private, non-governmental programs are referred to collectively as “ Private Programs ”), and (iii) are in good standing with the Government Programs and Private Programs and (iv) have no outstanding overpayments or refunds due to Government Programs or Private Programs individually in excess of $25,000 or in the aggregate in excess of $100,000. The Company and its Subsidiaries have timely filed all material claims and reports required to be filed by them prior to the date hereof with respect to the Governmental Programs and Private Programs, all fiscal intermediaries and/or carriers for such programs, and other insurance carriers (“ Payor Claims ”). All Payor Claims that have been filed are complete, accurate and in compliance with applicable Law in all material respects. The Company and its Subsidiaries have paid or caused to be paid all known and undisputed refunds, overpayments, discounts or adjustments that have become due pursuant to Payor Claims. Neither the Company nor its Subsidiaries have claimed or received reimbursements from Government Programs or Private Programs in excess of the amounts permitted by applicable Law which have not been corrected or remitted to such Government Program or Private Program without the imposition of any fine, penalty or other sanction by such Government Program or Private Program. Except as set forth in Section 3.8(d) of the Company Disclosure Schedule, to the Knowledge of the Company, there are no pending or threatened investigations, audits or other actions, relating to the Company’s or its Subsidiaries’ participation in any Governmental Program or Private Program, nor have their been any within the last three years. The Company and its Subsidiaries are not subject to, nor have they been subject to in the last three years, any pre-payment utilization review or other utilization review.

(e) No Governmental Program or Private Program (collectively, “ Payment Program ”) has imposed in the last three years a fine, penalty or other sanction on the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries have been excluded in the last three years from participation in any Payment Program. All billing practices of the Company and its Subsidiaries with respect to all Payment Programs have been in compliance with all applicable Laws in all material respects.

(f) All of the Company’s tests, assays and other activities offered for patient testing comply in all material respects with all regulations and/or standards prescribed and/or endorsed by the College of American Pathologists.

(g) The Company and its Subsidiaries are, and during the last three years have been, in compliance in all material respects with 42 U.S.C. § 1395nn and the regulations promulgated thereunder.

(h) None of the Company nor its Subsidiaries, to the Knowledge of the Company, any director, officer or employee of the Company or its Subsidiaries, or, to the Actual Knowledge of the Company, any agent of the Company or its Subsidiaries:

(i) has been convicted of or, to the Knowledge of the Company, has been charged by any Governmental Authority or by any third party on behalf of any Governmental Authority with any violation of any Law related to any Governmental Program;

 

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(ii) has been convicted of, or, to the Knowledge of the Company, has been charged by any Governmental Authority with any violation of any Law related to fraud, theft, embezzlement, breach of fiduciary responsibility, financial misconduct, obstruction of an investigation, or controlled substances; or

(iii) is or has been excluded, suspended or debarred from participation, or is otherwise ineligible to participate, in any Governmental Program or, to the Knowledge of the Company, has committed any violation of any Law that could reasonably be expected to serve as the basis for any such exclusion, suspension, debarment or other ineligibility.

Section 3.9 Other Regulatory Matters

(a) During the last three years, neither the Company nor any of its Subsidiaries has received any written notice or other written communication from any Governmental Authority (i) contesting the uses of or the labeling and promotion of any of the Company Products or (ii) otherwise alleging any violation of any Laws by the Company or its Subsidiaries with respect to any Company Product.

(b) During the last three years, there have been no field notifications or adverse regulatory actions taken (or, to the Knowledge of the Company, threatened) by any Governmental Authority with respect to any of the Company Products and neither the Company nor its Subsidiaries has within the last three years, either voluntarily or at the request of any Governmental Authority, provided post-sale warnings regarding any Company Product.

(c) During the last five years, all filings with and submissions to any Governmental Authority made by the Company or its Subsidiaries with regard to the Company Products, whether oral, written or electronically delivered, were true, accurate and complete in all material respects as of the date made, and, to the extent required to be updated, as so updated remain true, accurate and complete in all material respects as of the date hereof, and do not materially misstate any of the statements or information included therein, or omit to state a material fact necessary to make the statements therein not misleading.

Section 3.10 Offer Documents and the Schedule 14D-9.

The information supplied by the Company expressly for inclusion in the Offer Documents will not, when filed with the SEC and at the time of distribution or dissemination thereof to the Company’s stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Schedule 14D-9 will comply as to form in all material respects with the provisions of Rule 14d-9 of the Exchange Act and the rules and regulations thereunder and will not, when filed with the SEC and at the time of distribution or dissemination thereof to the Company’s stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the

 

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circumstances under which they were made, not misleading, except that the Company makes no representation or warranty with respect to statements made in the Schedule 14D-9 based on information furnished by Parent or Purchaser expressly for inclusion therein.

Section 3.11 Tax Matters.

(a) Each of the Company and its Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all Tax Returns required to be filed by it, and all such filed Tax Returns are correct and complete in all material respects. The Company and each of its Subsidiaries has timely paid (or has had paid on its behalf) or reserved on the Company Balance Sheet in accordance with GAAP all Taxes due and owing (whether or not shown on any return).

(b) No deficiency with respect to Taxes has been proposed, asserted or assessed against the Company or any of its Subsidiaries that is not accurately reflected as a liability on the Company Balance Sheet.

(c) The Company and its Subsidiaries have disclosed on their respective Tax Returns all positions taken therein that could give rise to a substantial understatement of Tax within the meaning of Section 6662 of the Code or any similar provision of applicable Law, and is in possession of supporting documentation as may be required under any such provision.

(d) The Company and each of its Subsidiaries have withheld and paid all material Taxes required to have been withheld and paid by them in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(e) Neither the Company nor any of its Subsidiaries has been subject to a written claim by a taxing authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

(f) Neither the Company nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax free treatment under Section 355 of the Code.

(g) No audit or other administrative or court proceedings are pending with any Governmental Authority with respect to Taxes of the Company or any of its Subsidiaries and no written notice thereof has been received by the Company or any of its Subsidiaries.

(h) There is no material dispute or claim concerning any Tax liability of the Company or any of its Subsidiaries either (i) claimed or raised by any Governmental Authority in writing or (ii) to the Knowledge of the Company, otherwise claimed or raised by any Governmental Authority.

(i) Neither the Company nor any of its Subsidiaries is a party to any contract, agreement, plan or other arrangement that, individually or collectively, could reasonably be expected to give rise to the payment of any amount which would not be deductible by reason of Section 280G of the Code or would be subject to withholding under Section 4999 of the Code.

 

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(j) The Company has made available to Parent correct and complete copies of (i) all income and franchise Tax Returns of the Company and its Subsidiaries for the preceding three taxable years and (ii) any audit report issued within the last three years (or otherwise with respect to any audit or proceeding in progress) relating to income and franchise Taxes of the Company or any of its Subsidiaries.

(k) As of the Closing, neither the Company nor any of its Subsidiaries will be a party to any tax allocation, tax sharing, tax indemnity or similar agreement with respect to Taxes.

(l) There are no Liens for Taxes (other than Taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the Company’s financial statements in accordance with generally accepted accounting principles) upon any of the assets of the Company or any of its Subsidiaries.

(m) Neither the Company nor any of its Subsidiaries (i) has ever been a member of an “affiliated group” (as defined in Section 1504(a) of the Code) except for any affiliated group of which the Company was the common parent corporation or (ii) has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation § 1.1502-6 (or any similar provision of state, local, or non-U.S. law), as a transferee or successor, by Contract, or otherwise).

(n) Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any deduction in calculating, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date; or (iii) installment sale or open transaction disposition made on or prior to the Closing Date.

(o) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of any Taxes or agreed to any extension of time with respect to an assessment or deficiency for Taxes (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course).

(p) Neither the Company nor any of its Subsidiaries is required to make any disclosure to the Internal Revenue Service (“ IRS ”) with respect to a “listed transaction” pursuant to Section 1.6011-4(b)(2) of the Treasury Regulations promulgated under the Code.

(q) The Company has not been a “United States real property holding corporation” within the meaning of Section 897 of the Code during the five-year period ending on the Closing Date.

(r) The unpaid Taxes of the Company and its Subsidiaries (i) did not as of the Balance Sheet Date, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Company Balance Sheet (rather than in any notes thereto) and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns.

 

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(s) For purposes of this Agreement: (x) “ Taxes ” shall mean (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, premium, property, windfall profits and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority in connection with any item described in clause (i), and (iii) any transferee liability in respect of any items described in clauses (i) and/or (ii) payable by reason of contract, assumption, transferee liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under Law) or otherwise, and (y) “ Tax Returns ” shall mean any return, report, claim for refund, estimate, information return or statement or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Section 3.12 Employee Benefits and Labor Matters.

(a) Section 3.12(a) of the Company Disclosure Schedule sets forth, as of the date of this Agreement, a correct and complete list of: (i) all “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) and (ii) all other employee benefit plans, policies, agreements or arrangements with respect to which the Company or any of its ERISA Affiliates has any obligation or liability, contingent or otherwise, in effect, for current or former employees including but not limited to (A) employment, individual consulting or other compensation agreements, in each case, requiring annual compensation in excess of $50,000 (other than agreements with respect to at-will employment or with consultants, in each case, that are terminable without cause on 30 days or less notice and that do not require any payment in connection with such termination (other than with respect to wages, benefits or other amounts accrued prior to termination) in connection with such termination), (B) cash bonus plans or policies or other cash incentive compensation plans or policies, (C) stock purchase plans, equity or equity-based compensation plans, (D) deferred compensation plans, (E) director, officer or employee loans (excluding 401(k) Plan loans), (F) change in control and severance agreements and (G) retention, termination, retirement, death, disability, sick leave, vacation, salary continuation, health or life insurance and educational assistance plans and policies (collectively, the “ Company Plans ”); provided, that, Section 3.12(a) of the Company Disclosure Schedule need not list individual awards, grants or accrued levels, if the plan, policy, agreement or arrangement pursuant to which such individual awards, grants, or accrued levels relate is already listed on Section 3.12(a) of the Company Disclosure Schedule. No Company Plan is subject to Title IV of ERISA, is a “multiemployer plan,” as defined in Section 3(37) of ERISA (a “ Multiemployer Plan ”), is a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA, or is or has been subject to Sections 4063 or 4064 of ERISA. For purposes of this Agreement, the term “ ERISA Affiliate ” shall include any organization that is or has ever been treated as a single employer with the Company or any Subsidiary under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

 

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(b) Correct and complete copies of the following documents with respect to each of the Company Plans have been delivered or made available to Parent by the Company to the extent applicable: (i) any plans and related trust documents, insurance contracts or other funding arrangements, and all amendments thereto (for the last three completed plan years); (ii) Forms 5500 and all schedules thereto for the last three (3) completed plan years, (iii) the most recent actuarial report, if any; (iv) the most recent IRS determination or opinion letter; (v) the most recent summary plan descriptions and any subsequent summary of material modification; (vi) written summaries of all non-written Company Plans and (vii) any material correspondence with the IRS, Department of Labor or the Pension Benefit Guaranty Corporation.

(c) The Company Plans have been maintained, in all material respects, in accordance with their terms and with all applicable provisions of ERISA, the Code and other Laws. Neither the Company or any of its Subsidiaries nor to the Knowledge of the Company, any other “disqualified person” or “party in interest,” as defined in Code Section 4975 and ERISA Section 3(14), respectively, has engaged in any non-exempt “prohibited transaction,” as defined in Code Section 4975 or ERISA Section 406, with respect to any Company Employee Benefit Plan. No fiduciary violations under Title I of ERISA have occurred with respect to any Company Plan.

(d) The Company Plans intended to qualify under Section 401 or for other tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code have received a determination from the IRS that they are so qualified or are the subject of a favorable opinion letter, and any trusts intended to be exempt from federal income taxation under the Code are so exempt. Nothing has occurred with respect to the operation of the Company Plans that could reasonably be expected to cause the loss of such qualification or exemption, or the imposition of any liability, penalty or tax under ERISA or the Code.

(e) All contributions and benefits required to have been made or paid under any of the Company Plans or by Law (without regard to any waivers granted under Section 412 of the Code), have been timely made.

(f) There are no pending actions, claims or lawsuits arising from or relating to the Company Plans or the assets thereof (other than routine benefit claims), nor does the Company have any Knowledge of facts that could reasonably be expected to form the basis for any such claim or lawsuit that would, or would reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole.

(g) None of the Company Plans provide for post-employment life insurance or health insurance coverage or benefits for any participant or any beneficiary of a participant, except as may be required under Part 6 of the Subtitle B of Title I of ERISA or as may be required under the American Recovery and Reinvestment Act of 2009, Title III, Section 3001, and at the expense of the participant or the participant’s beneficiary.

 

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(h) Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (i) result in any payment becoming due to any employee of the Company or any of its Subsidiaries, (ii) increase any benefits otherwise payable under any Company Plan, (iii) result in the acceleration of the time of payment or vesting of any rights with respect to benefits under any such plan, or (iv) require any contributions or payments to fund any obligations under any Company Plan.

(i) Any individual who performs services for the Company or any of its Subsidiaries (other than through a contract with an organization other than such individual) and who is not treated as an employee of the Company or any of its Subsidiaries for federal income tax purposes by the Company is not an employee for such purposes.

(j) All arrangements that would be considered “deferred compensation” for purposes of Section 409A of the Code are in compliance with Section 409A of the Code. Each Company Plan that is subject to Section 409A of the Code has been administered in compliance with the applicable requirements of Section 409A of the Code and all applicable IRS and Treasury Department guidance issued thereunder. None of the Transactions will result in a deferral of compensation under any Company Plan that is subject to Section 409A of the Code. Each Option issued under any Company Plan (or any predecessor plan providing for the issuance of Options to employees of the Company or any of its Subsidiaries) that has been exercised has been properly treated by the Company as an incentive stock option under Code Section 422 or as a nonstatutory option, as applicable. All Options granted under any Company Plan were granted with an exercise price at least equal to the fair market value of the Common Stock on the date of grant of such Option and no Option has been amended to reduce the exercise price from that in effect on the date of grant (except pursuant to non-discretionary antidilution provisions governing such Option).

(k) To the Knowledge of the Company, none of the employees of the Company or its Subsidiaries is represented in his or her capacity as an employee of the Company or any of its Subsidiaries by any labor organization. Neither the Company nor any of its Subsidiaries has recognized any labor organization, nor, to the Knowledge of the Company, has any labor organization been elected as the collective bargaining agent of any employees, nor has the Company or any of its Subsidiaries entered into any collective bargaining agreement or union contract recognizing any labor organization as the bargaining agent of any employees. There is no union organization activity involving any of the employees of the Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened, nor has there ever been union representation involving any of the employees of the Company or any of its Subsidiaries. There is no picketing pending or, to the Knowledge of the Company, threatened, and there are no strikes, slowdowns, work stoppages, other job actions, lockouts, arbitrations, grievances or other labor disputes involving any of the employees of the Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened. There are no complaints, charges or claims against the Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened that could be brought or filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment or failure to employ by the Company or any of its Subsidiaries, of any individual. The Company and its Subsidiaries are in compliance with all Laws relating to the employment of labor, including all such Laws relating to wages, hours, the Worker Adjustment and Retraining

 

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Notification Act and any similar state or local “mass layoff” or “plant closing” law (“ WARN ”), collective bargaining, discrimination, civil rights, safety and health, workers’ compensation and the collection and payment of withholding and/or social security taxes and any similar tax, except for any immaterial non-compliance. There has been no “mass layoff” or “plant closing” (as defined by WARN) with respect to the Company or any of its Subsidiaries since January 1, 2005.

(l) The Company Board of Directors, at a meeting duly called and held, has determined that each of the members of the Compensation Committee of the Company Board of Directors (the “ Compensation Committee ”) is, and the Company represents and warrants that each of the members of the Compensation Committee is and at the Expiration Date will be, “independent directors” as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules and eligible to serve on the Compensation Committee under the Exchange Act and all applicable NASDAQ Listing Rules. On or prior to the date hereof, the Compensation Committee, at a meeting duly called and held, approved each Company Compensation Arrangement in effect as of the date hereof as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(1) under the Exchange Act (an “ Employment Compensation Arrangement ”), and has taken all other action necessary to satisfy the requirements of the non-exclusive safe-harbor with respect to such Company Compensation Arrangements in accordance with Rule 14d-10(d)(2) under the Exchange Act.

(m) No Company Plan is an employee stock ownership plan within the meaning of Code Section 4975(e)(7) or otherwise invests in employer securities as defined in Code Section 409(l).

Section 3.13 Environmental Matters.

(a) The Company and its Subsidiaries are in material compliance with all Environmental Laws and, except for any matters that have been fully and finally resolved without further liability to the Company and its Subsidiaries, at all other time have been in material compliance with all Environmental Laws.

(b) There are no pending and served or, to the Knowledge of the Company, pending and not served or threatened Environmental Claims against the Company or any of its Subsidiaries. To the Knowledge of the Company, there are no facts, circumstances, or conditions existing, initiated or occurring that would reasonably be anticipated to form the basis of an Environmental Claim against the Company or any of its Subsidiaries or to cause any of the Leased Real Property to be subject to any material restrictions on its ownership, occupancy, use or transferability under any Environmental Law.

(c) The Company and its Subsidiaries have been duly issued and maintain all material Environmental Permits necessary to operate the business or assets of the Company and its Subsidiaries as currently operated. Section 3.13(c) of the Company Disclosure Schedule sets forth a correct and complete list of all such Environmental Permits, all of which are valid and in full force and effect. The Company and its Subsidiaries have timely filed applications for all Environmental Permits, and all of the Environmental Permits listed on the Company Disclosure Schedule are transferable and none require consent, notification, or other action to remain in full force and effect following consummation of the Transactions.

 

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(d) The Company or its Subsidiaries have not installed or used any of the following in connection with their business, and to the Knowledge of the Company, none of the following are present at the Leased Real Property: (i) underground storage tanks; (ii) any landfill or other unit for the treatment or disposal of Hazardous Materials; (iii) filled in land or wetlands; (iv) PCBs; (v) toxic mold; (vi) lead-based paint; or (vii) asbestos-containing materials.

(e) Except as would not result in material liability to the Company or its Subsidiaries, there has not been, and the Company and its Subsidiaries have not caused, any Release of Hazardous Materials at, on, under or from any real property formerly owned, operated or leased by the Company or its Subsidiaries, during the period of such ownership, operation, or tenancy, and to the Company’s Knowledge, there has been no Release of Hazardous Materials at, on, under, or from the Leased Real Property.

(f) The Company and its Subsidiaries have made available to Parent copies of all environmental assessments, reports, audits and all material documents in their possession that relate to their compliance with Environmental Laws or the environmental condition of any real property that the Company or any of its Subsidiaries has owned, operated or leased.

(g) Neither the Company nor any of its Subsidiaries has received written notice that the Leased Real Property, or any property to which Hazardous Materials originating on or from such properties or the businesses or assets of the Company or any Subsidiary has been sent for treatment or disposal, is listed or proposed to be listed on the National Priorities List or CERCLIS or on any other governmental database or list of properties that may or do require Remediation under Environmental Laws. Neither the Company nor any of its Subsidiaries has arranged, by contract, agreement, or otherwise, for the transportation, disposal or treatment of Hazardous Materials at any location such that it is or could be subject to material liability for Remediation of such location pursuant to Environmental Laws.

Section 3.14 Contracts.

(a) Set forth on Section 3.14(a) of the Company Disclosure Schedule is a list of each Contract to which the Company or any Subsidiary of the Company is a party to or by which the Company or any Subsidiary, or any of their respective assets, is bound that, as of the date hereof:

(i) would be considered a “material contract” as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act;

(ii) is a customer, client or supply Contract that requires total annual consideration in excess of $100,000;

(iii) contains any non-compete or exclusivity provisions that purport to (A) limit, curtail or restrict the ability of the Company or any of its existing or future Subsidiaries or Affiliates to compete in any geographic area or line of business in any material respect or (B) restrict the Persons to whom the Company or any of its existing or future Subsidiaries or Affiliates may sell products or deliver services in any material respect;

 

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(iv) creates any partnership, limited liability company, joint venture, or other similar agreement or Contract with a third party (other than collaboration, joint sponsored study agreements and similar agreements entered into in the ordinary course of business and that are not otherwise Material Contracts);

(v) provides for the acquisition, sale, lease, exchange or option to purchase any material properties or assets of the Company or any Subsidiary (other than the sale of Company Products to its customers in the ordinary course of its business);

(vi) provides for the Company or any Subsidiary to indemnify or hold harmless any director, officer, employee or consultant (other than, in the case of consultants, Contracts which include provisions to indemnify or hold harmless such consultant, which were entered into in the ordinary course of business and that are not otherwise Material Contracts) of the Company or any Subsidiary or any Affiliate of the Company;

(vii) is a loan or credit agreement, mortgage, indenture, note or other Contract or instrument evidencing indebtedness for borrowed money by the Company or any of its Subsidiaries or any Contract or instrument pursuant to which indebtedness for borrowed money may be incurred or is guaranteed by the Company or any of its Subsidiaries, and including any Contract regarding any bonding facility or financial assurance program;

(viii) provides for interest rate caps, collars or swaps, currency hedging or any other similar agreement to which the Company or any Subsidiary of the Company is a party;

(ix) relates to the voting or registration for sale under the Securities Act of any securities of the Company;

(x) (a) to the extent material to the business or financial condition of the Company and its Subsidiaries, taken as a whole, is a (1) lease or rental Contract, (2) consulting Contract (requiring total annual consideration to the Consultant in excess of $50,000), or (3) Contract granting a right of first refusal or first negotiation or (b) is an Inbound License or an Outbound License;

(xi) primarily relates to the provision of services by any vendor relating to billing, coding and/or reimbursement;

(xii) is for the sale of goods or services that requires total annual consideration in excess of $100,000 to any Governmental Authority other than any participating provider agreement with Medicare, Medicaid or federal or state health departments;

 

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(xiii) is a material managed care Contract granting any party “most favored nation” status with respect to pricing; or

(xiv) represents any commitment or agreement to enter into any of the foregoing (the Contracts and other documents required to be listed on Section 3.14(a) of the Company Disclosure Schedule and any and all other Contracts entered into in accordance with Section 5.1 are each referred to herein as a “ Material Contract ” and collectively as the “ Material Contracts ”).

(b) The Company has heretofore delivered or made available to Parent or Parent’s legal counsel correct and complete copies of each Material Contract in existence as of the date hereof, together with any and all amendments and supplements thereto and material “side letters” and similar material documentation relating thereto.

(c) Each of the Material Contracts is in full force and effect and is enforceable in accordance with its terms by the Company and each of its Subsidiaries that is a party thereto, subject to the Bankruptcy and Equity Exception. Except as set forth in Section 3.14(c) of the Company Disclosure Schedule, no approval, consent or waiver of any Person is required by any Material Contract in connection with the execution and delivery by the Company of this Agreement, the consummation by the Company of the Transactions or the performance by the Company of its obligations hereunder. Neither the Company nor any of its Subsidiaries is in default under any Material Contract, nor, to the Knowledge of the Company, does any condition exist that, with notice or lapse of time or both, would constitute a default thereunder by the Company and its Subsidiaries party thereto, except for such defaults as, individually or in the aggregate, are not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. To the Knowledge of the Company, no other party to any Material Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default by any such other party thereunder, except for such defaults as, individually or in the aggregate, are not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries has received any written notice of termination or cancellation under any Material Contract.

Section 3.15 Title to Properties and Liens; Real Property.

(a) The Company and each of its Subsidiaries have good and marketable title to, or in the case of leased properties and assets, valid leasehold interests in, all of their material tangible properties and assets. There are no Liens on any such tangible properties or assets, except for Permitted Liens.

(b) Neither the Company nor any of its Subsidiaries owns or has, at any time, owned any real property.

(c) Section 3.15(c) of the Company Disclosure Schedule contains a true and complete list of all real property leased, subleased, or otherwise occupied (whether as tenant, subtenant or pursuant to other occupancy arrangements) by the Company or any of its Subsidiaries (collectively, including the improvements thereon, the “ Leased Real Property ”),

 

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and for each Leased Real Property, identifies the street address of such Leased Real Property. True and complete copies of all leases or subleases (each a “ Real Property Lease ”) or other agreements relating to the Leased Real Property have been delivered or made available to Parent.

(d) The Company or its Subsidiary holds a valid and existing leasehold interest in each of the Leased Real Property. With respect to each of the Real Property Leases:

(i) each such Real Property Lease is in full force and effect;

(ii) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any other party to any Real Property Lease is in material breach or material default of its obligations under such Real Property Lease in any material respect; and

(iii) Neither the Company nor any Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any of its rights and interest in any Real Property Lease, other than for any Permitted Liens.

(e) To the Knowledge of the Company, the current use, occupancy and operation of each Leased Real Property by the Company or its Subsidiaries is in compliance in all material respects with all applicable Laws, deeds, easements, restrictions, leases, licenses, Permits or other arrangements or requirements (including any building or zoning codes) affecting such leased premises.

Section 3.16 Intellectual Property.

(a) Section 3.16(a) of the Company Disclosure Schedule accurately identifies each Company Product as of the date of this Agreement.

(b) Section 3.16(b) of the Company Disclosure Schedule (i) sets forth, as of the date of this Agreement, a complete and accurate list of all Patents, registered Marks, pending applications for registrations of any Marks, and registered Copyrights owned by the Company or any of its Subsidiaries and included in the Company Intellectual Property (collectively, the “ Registered IP ”), identifying for each such item of Company Intellectual Property, if applicable, (A) the record owner, (B) the status, (C) the jurisdictions in which each item has been issued or registered or in which any application for such issuance and registration has been filed, and (D) any proceedings or actions before any court, tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) relating thereto (except for routine office actions by the United States Patent and Trademark Office or equivalent authority anywhere in the world, provided that a refusal of registration shall not be considered routine); and (ii) sets forth, as of the date of this Agreement, a complete and accurate list of all material Marks and Copyrights owned by the Company or any of its Subsidiaries and included in the Company Intellectual Property, but excluding all Registered IP (collectively, the “ Unregistered IP ”). The Company has provided to Parent complete and accurate copies of all applications, material correspondence with any Governmental Authority, and other material documents related to each such item of Registered IP.

 

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(c) Section 3.16(c) of the Company Disclosure Schedule accurately identifies each material Contract (other than customary nondisclosure agreements entered into in the ordinary course of business) pursuant to which any Person has been granted any license under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any Company Owned Intellectual Property or in any Company Intellectual Property exclusively licensed to the Company or its Subsidiaries (each, an “ Outbound License ”). Except for the Outbound Licenses identified on Section 3.16(c) of the Company Disclosure Schedule and customary nondisclosure agreements entered into in the ordinary course of business, the Company and its Subsidiaries are not bound by, and no Company Owned Intellectual Property or Company Intellectual Property exclusively licensed to the Company or its Subsidiaries is subject to, any Contract containing any covenant or other provision that in any way limits or restricts the ability of the Company or any of its Subsidiaries to use, enforce or exploit