AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

EXECUTION COPY

 

 

AGREEMENT AND PLAN OF MERGER

 

BY AND AMONG

 

EV3 INC.,

 

MICRO INVESTMENT, LLC

 

AND

 

MICRO THERAPEUTICS, INC.

 

DATED AS OF NOVEMBER 14, 2005

 

 

TABLE OF CONTENTS

 

 

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Index of Defined Terms

 

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of November 14, 2005, is by and among EV3 INC., a Delaware corporation (“ Parent ”), MICRO INVESTMENT, LLC, a Delaware limited liability company (“ Merger Sub ”) and a direct wholly owned Subsidiary of Parent, and MICRO THERAPEUTICS, INC., a Delaware corporation (the “ Company ”).

 

W I T N E S S E T H:

 

WHEREAS , Parent through Merger Sub presently holds a majority of the common stock, par value $0.001 per share of the Company (the “ Company Shares ”) along with the associated preferred share purchase rights (the “ Company Rights ” and together with the Company Shares, the “ Company Common Stock ”) issued pursuant to the Company’s Rights Agreement dated June 3, 1999, between the Company and U.S. Stock Transfer and Trust Company, as Rights Agent, as amended (the “ Rights Plan ”);

 

WHEREAS , upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”) and the Limited Liability Company Act of the State of Delaware (the “ DLLC Act ”), Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”), with the Company as the surviving entity (the “ Surviving Corporation ”) as a result of which, the Company will become a wholly owned subsidiary of Parent;

 

WHEREAS , the Board of Directors of the Company has established a Special Committee thereof (the “ Special Committee ”) and has delegated to the Special Committee the authority to, among other things, negotiate the terms and conditions of this Agreement, retain separate outside legal counsel and a separate financial advisor and recommend to the full Board of Directors of the Company whether the Board of Directors of the Company should approve and declare the advisability of this Agreement;

 

WHEREAS , the terms of such delegation provided that the Board of Directors of the Company would not recommend or approve any transaction such as that contemplated by this Agreement without the recommendation of the Special Committee;

 

WHEREAS , the Special Committee, after having consulted with its legal and financial advisors, has determined that the Merger is fair to, and in the best interests of, the holders of Company Common Stock other than Parent and its Subsidiaries, and has recommended to the full Board of Directors of the Company that the Board of Directors of the Company approve and declare the advisability of this Agreement, and the Board of Directors of the Company has approved and declared the advisability of this Agreement (which approval included the approval of each disinterested director of the Company for purposes of Section 144(a) of the DGCL);

 

WHEREAS , the Board of Directors of Parent has determined that the Merger is in the best interests of Parent and its stockholders and has approved and adopted this Agreement, the Merger and the other transactions contemplated by this Agreement;

 

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WHEREAS , the Board of Managers of Merger Sub (i) has determined that the Merger is in the best interests of Merger Sub and its sole member and has approved and adopted this Agreement, the Merger and the other transactions contemplated by this Agreement and declared its advisability and (ii) has recommended that Parent, as the sole member of Merger Sub, approve and adopt this Agreement and the Merger;

 

WHEREAS , Parent, in its capacity as sole member of Merger Sub, has approved and adopted this Agreement and the Merger by unanimous written consent in accordance with the requirements of the DLLC Act; and

 

WHEREAS , for U.S. federal income tax purposes, it is intended by Parent, Merger Sub and the Company that (a) the Merger shall qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the rules and regulations promulgated thereunder, (b) this Agreement shall constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g), and (c) Parent and the Company shall each be a party to such reorganization within the meaning of Section 368(b) of the Code.

 

NOW, THEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

THE MERGER

 

Section 1.1. The Merger . Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL and the DLLC Act, at the Effective Time, the Merger Sub shall be merged with and into the Company. At the Effective Time and as a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation following the Merger. The existence of the Company shall continue unaffected and unimpaired by the Merger and, as the Surviving Corporation, it shall be governed by the Laws of the State of Delaware.

 

Section 1.2. Effective Time; Closing .

 

(a) As promptly as practicable on the Closing Date, the Company shall file a certificate of merger (the “ Certificate of Merger ”), with the Secretary of State of the State of Delaware and make all other filings or recordings required under the DGCL or the DLLC Act in connection with the Merger, in such form as is required by, and executed in accordance with the relevant provisions of, the DGCL or the DLLC Act, as applicable. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such other time as the parties hereto agree and as shall be specified in the Certificate of Merger (the date and time the Merger becomes effective, the “ Effective Time ”).

 

(b) The closing (the “ Closing ”) of the Merger shall be held at 9:00 a.m., Eastern Time, at the offices of King & Spalding LLP, 1185 Avenue of the Americas, New York, NY 10036, on the third (3 ^rd ) business day following the satisfaction or waiver (subject to applicable

 

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Law) of the conditions set forth in Article VI hereof (other than those conditions that by their nature are to be satisfied at the Closing), unless this Agreement has been theretofore terminated pursuant to its terms or unless another time, date and location is agreed to in writing by Parent and the Company (the date of the Closing, the “ Closing Date ”).

 

Section 1.3. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL and the DLLC Act. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

 

Section 1.4. Certificate of Incorporation and Bylaws .

 

(a) At the Effective Time, the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety in the form set forth in Exhibit 1.4(a) hereto. Thereafter, the certificate of incorporation of the Surviving Corporation may be amended in accordance with its terms and as provided by applicable Law.

 

(b) At the Effective Time, the bylaws of the Surviving Corporation shall be amended and restated in their entirety in the form set forth in Exhibit 1.4(b) hereto. Thereafter, the bylaws may be amended or repealed in accordance with their terms and the certificate of incorporation of the Surviving Corporation and as provided by applicable Law.

 

Section 1.5. Directors and Officers . From and after the Effective Time, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified in accordance with applicable Law, (a) the members of the board of managers of Merger Sub immediately prior to the Effective Time shall be the members of the Board of Directors of the Surviving Corporation, and (b) the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation.

 

ARTICLE II

 

CONVERSION OF SECURITIES; EXCHANGE PROCEDURES

 

Section 2.1. Effect on Company Shares . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

 

(a) Subject to the other provisions of this Section 2.1 and Section 2.3(e), each Company Share issued and outstanding immediately prior to the Effective Time (other than Company Shares canceled pursuant to Section 2.1(b)) shall be canceled and shall by virtue of the Merger and without any action on the part of the holder thereof be converted automatically into the right to receive 0.476289 (the “ Exchange Ratio ”) of a share of Parent Common Stock (the “ Merger Consideration ”). At the Effective Time, such shares converted pursuant to this Section 2.1(a) shall no longer be outstanding and shall automatically be canceled and cease to exist, and each holder of record of a certificate or certificates that immediately prior to the Effective Time

 

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represented any such shares (collectively, “ Certificate ”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with this Section 2.1(a).

 

(b) Each Company Share held in treasury by the Company and each Company Share owned directly by Merger Sub, in each case immediately prior to the Effective Time, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist without any conversion thereof, and no payment, distribution or other consideration shall be made with respect thereto.

 

(c) All of the ownership interests in Merger Sub (the “ Merger Sub Units ”) outstanding immediately prior to the Effective Time shall be converted into and become 100 validly issued, fully paid and nonassessable shares of common stock, par value $0.001 per share, of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation from and after the Effective Time.

 

Section 2.2. Stock Options; Warrants .

 

(a) At the Effective Time and without any action on the part of the parties hereto, (i) the 1996 Stock Incentive Plan, the 1993 Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase Plan (together, the “ Company Stock Plans ”) and (ii) each unexercised and unexpired stock option that is then outstanding under the Company Stock Plans or any other plan or arrangement under which the Company or its subsidiaries grants stock options, whether or not exercisable and whether or not vested (the “ Company Options ”), shall be assumed by Parent and such Company Options shall be converted into options to purchase Parent Common Stock (individually an “ Assumed Option ” and collectively the “ Assumed Options ”). Each Assumed Option shall continue to have, and be subject to, the same terms and conditions as set forth in the applicable Company Stock Plan and any agreement evidencing the grant of such Assumed Option, as in effect immediately prior to the Effective Time, except that, as of the Effective Time, (i) the Assumed Options shall be exercisable for whole shares of Parent Common Stock, and the number of such shares shall be equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such Assumed Option, whether or not exercisable, immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole number of shares of Parent Common Stock, (ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such Assumed Option shall be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Assumed Option was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent, (iii) all references in the Company Stock Plan and the agreement evidencing the Assumed Option to the Company shall be deemed to be references to Parent and (iv) all references in the Company Stock Plan and the agreement evidencing the Company Option to Company Common Stock shall be deemed to be references to Parent Common Stock. Notwithstanding anything to the contrary in this Section 2.2, the conversion of any Assumed Options (regardless of whether such options qualify as “incentive stock options” within the meaning of Section 422 of the Code) into options to purchase Parent Common Stock shall be made in such a manner as would not constitute a “modification” of such Assumed Options within the meaning of Section 424 of the Code.

 

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(b) As soon as practicable after the Effective Time, Parent shall deliver, or cause to be delivered, to each holder of an Assumed Option an appropriate notice setting forth such holder’s rights pursuant thereto and such Assumed Option shall continue in effect on the same terms and conditions (including any antidilution provisions, and subject to the adjustments required by this Section 2.2 after giving effect to the Merger). Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise or settlement of the Assumed Options pursuant to the terms set forth in this Section 2.2. As soon as practicable after the Effective Time, Parent shall file a registration statement on Form S-8 (or another appropriate form) with respect to the shares of Parent Common Stock subject to the Assumed Options. Parent shall use reasonable best efforts to maintain the effectiveness of such registration statement or registration statements and to keep the current status of the prospectus or prospectuses required thereby maintained as long as Assumed Options remain outstanding. In addition, Parent shall use reasonable best efforts to cause the shares of Parent Common Stock subject to the Assumed Options to be quoted on NASDAQ National Market (“ NASDAQ ”).

 

(c) On or after the date of this Agreement and prior to the Effective Time, each of Parent and the Company shall take all necessary actions as may be required to cause any dispositions of the Company Common Stock (including derivative securities with respect to the Company Common Stock) or acquisitions of Parent Common Stock (including derivative securities with respect to Parent Common Stock) resulting from the transactions contemplated by this Agreement by each director or officer who is subject to the reporting requirements of Section 16(a) of the Exchange Act, to be exempt from the short-swing profit liability rules of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder. Such actions shall be consistent with all current applicable interpretation and guidance of the United States Securities and Exchange Commission (the “ SEC ”), including, but not limited to, the No-Action letter dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.

 

Section 2.3. Exchange of Certificates .

 

(a) Exchange Agent . At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust company that may be designated by Parent and reasonably satisfactory to the Company as exchange agent (the “ Exchange Agent ”), for the benefit of the holders of Company Shares, for exchange in accordance with this Article II through the Exchange Agent, (i) certificates representing the shares of Parent Common Stock issuable pursuant to Section 2.1(a), and (ii) cash, from time to time as required solely to make payments in lieu of any fractional shares pursuant to Section 2.3(e) (such cash and certificates for shares of Parent Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the “ Exchange Fund ”). The Exchange Agent shall, pursuant to irrevocable instructions, deliver the shares of Parent Common Stock and cash contemplated to be issued pursuant to Section 2.1(a) and this Section 2.3(a) out of the Exchange Fund. Except as contemplated by Section 2.3(g) hereof, the Exchange Fund shall not be used for any other purpose.

 

(b) Exchange Procedures . As promptly as practicable after the Effective Time (and in any event within three (3) business days), Parent shall cause the Exchange Agent to mail to each holder of record of a Certificate or Certificates whose shares were converted into the right

 

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to receive the Merger Consideration pursuant to Section 2.1(a): (i) a letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and (ii) instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal in exchange for the Merger Consideration. Upon surrender to the Exchange Agent of a Certificate for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions or as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor: (A) a certificate representing that number of whole shares of Parent Common Stock which such holder has the right to receive pursuant to this Article II in respect of the Company Shares formerly represented by such Certificate after taking into account all Company Shares then held by such holder, and (B) cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.3(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.3(c), and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or will accrue on any cash payable pursuant to Section 2.3(c) or (e). In the event of a transfer of ownership of Company Shares that is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Parent Common Stock and a check for cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.3(e) and for any dividends or other distributions to which such holder is entitled pursuant to Section 2.3(c) may be issued to a transferee if the Certificate representing such Company Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.3, each Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration, the cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.3(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.3(c).

 

(c) Distributions with Respect to Unexchanged Shares . No dividends or other distributions declared or made after the Effective Time with respect to the Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate formerly representing Company Shares with respect to the shares of Parent Common Stock issuable upon surrender thereof, until the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat, Tax or other applicable Law, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) promptly, the amount of dividends or other distributions with a record date after the Effective Time and theretofore paid with respect to such whole shares of Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of Parent Common Stock.

 

(d) No Further Rights in the Company Common Stock . All cash paid pursuant to Section 2.3 (e) and all shares of Parent Common Stock issued upon the surrender for exchange of

 

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the Company Shares in accordance with the terms of this Article II shall be deemed to have been paid and issued in full satisfaction of all rights pertaining to such Company Shares.

 

(e) No Fractional Shares . No certificates or script representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional shares interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Each holder of Company Shares exchanged pursuant to the Merger who would otherwise be entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Certificates delivered by such holder) shall receive, upon surrender of such holder’s Certificates in accordance with this Section 2.3, an amount in cash (without interest) rounded to the nearest cent, equal to the product obtained by multiplying (i) the amount of the fractional share interest to which such holder would otherwise be entitled under Section 2.1(a) (or would be entitled but for this Section 2.3(e)) by (ii) the amount equal to the average of the per share closing prices as reported on NASDAQ of shares of Parent Common Stock during the ten (10) consecutive trading days ending on (and including) the complete trading day immediately preceding the Closing Date. As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional share interests, the Exchange Agent shall so notify Parent, and Parent shall deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to such holders of fractional share interests subject to and in accordance with the terms of Section 2.3(b).

 

(f) Adjustments to Exchange Ratio . The Exchange Ratio shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Parent Common Stock or the Company Common Stock), cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Parent Common Stock or the Company Common Stock occurring on or after the date hereof and prior to the Effective Time.

 

(g) Termination of Exchange Fund . Any portion of the Exchange Fund (including any interest received with respect thereto) that remains undistributed to the holders of the Company Shares for one year after the Effective Time shall be delivered to Parent, upon demand, and any holders of the Company Shares who have not theretofore complied with this Article II shall thereafter look solely to Parent with respect to the Merger Consideration payable or issuable upon due surrender of their Certificates, and any distributions payable pursuant to Section 2.3(c), without any interest thereon. Any portion of the Exchange Fund remaining unclaimed by holders of Company Shares as of a date which is immediately prior to such times as such amounts would otherwise escheat to or become property of any Governmental Entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any person previously entitled thereto.

 

(h) No Liability . Neither the Exchange Agent nor any party hereto shall be liable to any holder of Certificates for any such Company Shares (or dividends or distributions with respect thereto), or any cash delivered to a public official pursuant to any abandoned property, escheat or similar Law.

 

(i) Withholding Rights . Each of the Surviving Corporation, Parent and the Exchange Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable

 

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pursuant to this Agreement to any holder of Company Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of federal, state, local or foreign Tax Law. To the extent that amounts are so withheld by Parent or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Shares in respect to which such deduction and withholding was made by Parent or the Exchange Agent, as the case may be.

 

(j) Lost 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, the posting by such person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.3(e) and any dividend or other distributions to which the holders thereof are entitled pursuant to Section 2.3(c).

 

Section 2.4. Stock Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Company Shares thereafter on the records of the Company or the Surviving Corporation. From and after the Effective Time, the holders of Certificates representing Company Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Company Shares, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent, the Surviving Corporation or Parent for any reason shall be canceled and exchanged as provided in this Article II.

 

Section 2.5. Forms of Company Options . Prior to the date hereof, the Company has made available to Parent correct and complete copies of the form of each stock option agreement that evidences any outstanding Company Options, restricted stock grants or other compensatory stock awards, and no stock option agreement or other award agreement that governs any such Company Options or other compensatory stock awards contains terms that are inconsistent with such forms.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to each of the other parties hereto as follows (except (i) as set forth in the written disclosure letter (which letter shall in each case specifically identify by reference to Sections of this Agreement any exceptions to each of the representations, warranties and covenants contained in this Agreement; provided , however , that any information set forth in one section of such disclosure letter shall be deemed to apply to each other Section or subsection thereof or hereof to which its relevance is reasonably apparent on its face) delivered by the Company to Parent and Merger Sub in connection with the execution and delivery of this Agreement (the “ Company Disclosure Letter ”), (ii) as disclosed in the Company SEC Reports filed or furnished to the SEC by the Company, and in either case, publicly available on or after

 

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January 1, 2005 and prior to the date hereof, but excluding any risk factor disclosure contained in any such Company SEC Reports under the heading “Risk Factors” or “Special Note Regarding Forward-Looking Statements”), or (iii) that the Company makes no representations in this Article III as to matters relating to Parent, the Parent Subsidiaries or their respective affiliates (other than the Company and the Company Subsidiaries) with respect to any matter covered in this Article III:

 

Section 3.1. Organization and Standing .

 

(a) The Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company has made available to Parent complete and correct copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof) of all meetings of the stockholders of the Company, the Board of Directors of the Company and the committees of Boards of Directors of the Company, in each case held since January 1, 2003 and prior to the date hereof.

 

(b) (i) Each Company Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, and (ii) each of the Company and each Company Subsidiary (A) has full corporate (or similar) power and authority and all necessary government approvals to own, lease and operate its properties and assets and to conduct its business as presently conducted, and (B) is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except in the case of clauses (b)(i) and (b)(ii), where any such failure has not had, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company has furnished or made available to Parent true and complete copies of the Amended and Restated Certificate of Incorporation of the Company (“ Company Certificate of Incorporation ”) and the Bylaws of the Company (the “ Company Bylaws ”), in each case as amended and in effect as of the date hereof. The Company Certificate of Incorporation and the Company Bylaws are in full force and effect and have not been amended or otherwise modified. The Company is not in material violation of any provision of the Company Certificate of Incorporation or the Company Bylaws, and no Company Subsidiary is in material violation of any provision of its certificate of incorporation, bylaws or equivalent organizational documents.

 

For purposes of this Agreement a “Subsidiary” of any person means another person, (i) an amount of the voting securities, other voting rights or voting partnership interests of which that is sufficient to elect at least a majority of its board of directors or other governing body is directly or indirectly owned or controlled by such first person or by any one or more of its Subsidiaries, or by such first person and one or more of its Subsidiaries (or, if there are no such voting interests, 50% or more of the equity interests of which is owned directly or indirectly by such first person) or (ii) of which such first person or any other Subsidiary of such first person is a general partner (excluding partnerships, the general partnership interests of which held by such first person and any Subsidiary of such first person do not have a majority of the voting interests in such partnership).

 

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Section 3.2. Capitalization .

 

(a) The authorized capital stock of the Company consists of 70,000,000 shares of the Company Common Stock and 5,000,000 shares of preferred stock, $0.001 par value (the “ Company Preferred Stock ”). As of November 11, 2005, (a) 48,578,719 shares of the Company Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable and free of preemptive rights, (b) no shares of the Company Common Stock are held in the treasury of the Company, (c) 5,113,596 Company Options are outstanding pursuant to the Company Stock Plans, each such option entitling the holder thereof to purchase one share of the Company Common Stock, and 1,164,383 shares of the Company Common Stock are authorized and reserved for future issuance pursuant to the exercise of such Company Options, (d) no shares of Company Preferred Stock are issued and outstanding, (e) there are no warrants issued and outstanding to purchase shares of the Company Common Stock (the “ Company Warrants ”), (f) no shares of restricted stock of the Company are issued and outstanding, (g) 189,156 shares of Company Common Stock are authorized and reserved for future issuance pursuant to the Company’s Fifth Amended and Restated Employee Stock Purchase Plan (the “ Company ESPP ”), and (h) 170,000 shares of Company Preferred Stock were designated Series A Preferred Stock, par value $0.001 per share, and were reserved for issuance upon exercise of the Company Rights pursuant to the Rights Plan. Section 3.2 of the Company Disclosure Letter sets forth a true and complete list, as of November 11, 2005, of the outstanding Company Options and Company Warrants with the exercise price of each such options and warrants.

 

(b) Except as set forth above, as of November 11, 2005, there are no options, warrants, convertible or exchangeable securities, subscriptions, stock appreciation rights, phantom stock plans or stock equivalents or other rights, agreements, arrangements or commitments (contingent or otherwise) of any character issued or authorized by the Company or any Company Subsidiary relating to the issued or unissued capital stock or equity interest of the Company or any Company Subsidiary or obligating Company or any Company Subsidiary to issue or sell any shares of capital stock of, or options, warrants, convertible or exchangeable securities, subscriptions or other equity interests (collectively, “ Stock Rights ”) in the Company or any Company Subsidiary. All shares of the Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any capital stock or equity interest of the Company (including any Company Shares) or any Company Subsidiary or any Stock Rights or to pay any dividend or make any other distribution in respect thereof or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any person.

 

(c) Exhibit 21.1 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 includes all the Subsidiaries of the Company (the “ Company Subsidiaries ”). All the outstanding shares of capital stock of, or other equity interests in, each such Company Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are, except as set forth in such Exhibit 21.1, owned directly or indirectly by the Company, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, “ Liens ”) and free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests), except for restrictions imposed by applicable securities laws. As of the date of this Agreement, neither the Company nor any of the Company Subsidiaries directly or

 

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indirectly owns or has any right or obligation to subscribe for or otherwise acquire any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity (other than the Company Subsidiaries).

 

Section 3.3. Authority for Agreement .

 

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining the Company Stockholder Approval (as defined below) in connection with this Agreement and the Merger, to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by the Company of this Agreement, and the consummation by Company of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than obtaining the Company Stockholder Approval and the filing and recordation of appropriate merger documents as required by the DGCL and the DLLC Act). This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights and remedies of creditors generally and to the effect of general principles of equity. The affirmative vote of a majority in voting power of the outstanding shares of the Company Common Stock entitled to vote in accordance with the DGCL, the Company Certificate of Incorporation and the Company Bylaws (the “ Company Stockholder Approval ”), acting at a duly called meeting of the stockholders of the Company or by written consent in lieu of such meeting, is the only vote of the holders of capital stock of the Company necessary to approve and adopt this Agreement, the Merger and the other transactions contemplated by this Agreement.

 

(b) At a meeting duly called and held on the date hereof, the Board of Directors of the Company acting subsequent to the unanimous recommendation of the Special Committee (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are advisable and in the best interests of the Company and the Company’s stockholders and (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger (such approval included the approval of each disinterested director of the Company for purposes of Section 144(a) of the DGCL) which, in each case, has not been subsequently rescinded, modified or withdrawn prior to the execution and delivery of this Agreement by the Company. The actions taken by the Board of Directors of the Company constitute approval of the Merger, this Agreement and the other transactions contemplated hereby by the Board of Directors of the Company under the provisions of Section 203 of the DGCL such that the restrictions on “business combinations” (as defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL do not apply to this Agreement, or the transactions contemplated hereby. Other than Section 203 of the DGCL, no state anti-takeover or similar statute is applicable to the Merger, this Agreement or any of the transactions contemplated by this Agreement.

 

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(c) Deutsche Bank Securities, Inc. (the “ Company Independent Advisor ”) has delivered to the Special Committee its opinion to the effect that, as of the date of such opinion and based on the assumptions, qualifications and limitations contained therein, the Exchange Ratio is fair, from a financial point of view, to the holders of Company Common Stock (other than Parent and its affiliates). The Company has made available to Parent a correct and complete copy of the form of each such opinion prior to the execution of this Agreement.

 

Section 3.4. No Conflict . The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation of the Merger and the other transactions contemplated by this Agreement will not, (a) assuming the Company Stockholder Approval is obtained, conflict with or violate (i) the Company Certificate of Incorporation, the Company Bylaws or the Rights Plan or (ii) the equivalent organizational documents of any Company Subsidiary, (b) subject to Section 3.5 and assuming the Company Stockholder Approval is obtained, conflict with or violate any United States federal, state or local or any foreign statute, law, rule, regulation, ordinance, code or any other requirement or rule of law (a “ Law ”) or any charge, order, writ, injunction, judgment, decree, ruling, determination, directive, award or settlement, whether civil, criminal or administrative (an “ Order ”), in each case applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (c) result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, give to others any right of termination, amendment, acceleration or cancellation of, result in the triggering of any payment or other obligation or any right of consent, or result in the creation of a Lien on any property or asset of the Company or any Company Subsidiary pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any property or asset of any of them is bound or affected (including any material contract of the Company), except, in the case of clauses (a)(ii), (b) and (c) above, for any such conflicts, violations, breaches, defaults or other occurrences which have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.5. Required Filings and Consents . The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, order, authorization or permit of, or declaration, registration, filing with, or notification to, any United States federal, state or local or any foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a “ Governmental Entity ”), except for (i) applicable requirements, if any, of (A) the Securities Act of 1933, as amended (the “ Securities Act ”), and the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, the filing with and declaration of effectiveness by the SEC of the Information Statement/Prospectus and the Other Filings, as applicable, (B) state securities or “blue sky” laws, (C) the DGCL and the DLLC Act to file the Certificate of Merger or other appropriate documentation, (D) NASDAQ, and (E) the filings by the Company required by applicable antitrust and competition laws, (ii) receipt of the Company Stockholder Approval, and (iii) such consents, approvals, orders, authorizations or permits of, or declarations, registrations, filings with, or notifications to any Governmental Entity which have not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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Section 3.6. Information Supplied . The information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Information Statement/Prospectus and the Other Filings, as applicable, shall not, at (i) the time the Information Statement/Prospectus is declared effective, (ii) the time the Information Statement/Prospectus (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, and (iii) the Effective Time, 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. If, at anytime prior to the Effective Time, any event or circumstance relating to the Company or any Company Subsidiary, or their respective officers or directors, should be discovered by the Company which should be set forth in an amendment or supplement to the Information Statement/Prospectus, the Company shall promptly inform Parent in writing. All documents that the Company is responsible for filing with the SEC in connection with the Merger or the other transactions contemplated by this Agreement will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Sub for inclusion or incorporation by reference in the Information Statement/Prospectus.

 

Section 3.7. Rights Plan . The Company has taken all actions necessary under the Rights Plan, to (i) render the Rights Plan inapplicable to this Agreement, the Merger and the other transactions contemplated by this Agreement, (ii) ensure that (x) none of Parent, Merger Sub or any other Parent Subsidiary is an Acquiring Person (as defined in the Rights Plan), (y) a Distribution Date or a Stock Acquisition Date (as such terms are defined in the Rights Plan) does not occur and (z) the Company Rights do not become exercisable, in the case of clauses (x), (y) and (z), solely by reason of the execution of this Agreement or the consummation of the Merger or the other transactions contemplated by this Agreement and (iii) provide that the Expiration Date (as defined in the Rights Plan) shall occur immediately prior to the Effective Time.

 

Section 3.8. Brokers . Except pursuant to the Company Independent Advisor’s engagement letter with the Company, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. Section 3.8 of the Company Disclosure Letter includes a true and complete copy of all agreements between the Company and the Company Independent Advisor pursuant to which such firm would be entitled to any payment relating to this Agreement, the Merger or the other transactions contemplated by this Agreement.

 

Section 3.9. Taxes . Neither the Company nor any of the Company Subsidiaries has taken any action or has any knowledge of any fact or circumstance that could reasonably be expected to prevent the transactions contemplated hereby, including the Merger, from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

OF PARENT AND MERGER SUB

 

Each of Parent and Merger Sub represents and warrants to the Company as follows (except (i) as set forth in the written disclosure letter (which letter shall in each case specifically identify by reference to Sections of this Agreement any exceptions to each of the representations, warranties and covenants contained in this Agreement; provided , however , that any information set forth in one section of such disclosure letter shall be deemed to apply to each other Section or subsection thereof or hereof to which its relevance is reasonably apparent on its face) delivered by Parent to the Company in connection with the execution and delivery of this Agreement (the “ Parent Disclosure Letter ”), (ii) as disclosed in the Parent SEC Reports filed or furnished to the SEC by Parent, and in either case, publicly available on or after January 1, 2005 and prior to the date hereof (including the report on Form 10-Q to be filed with the SEC on November 14, 2005) but excluding any risk factor disclosure contained in any such Parent SEC Reports under the heading “Factors That May Affect Future Results” or “Special Note Regarding Forward-Looking Statements”) or (iii) that Parent and Merger Sub make no representation in this Article IV as to matters relating to the Company or the Company Subsidiaries or their respective affiliates with respect to any of the matters covered in this Article IV:

 

Section 4.1. Organization and Standing .

 

(a) Each of Parent and Merger Sub is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation. Parent has made available to the Company complete and correct copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof) of all meetings of the stockholders of Parent, the Board of Directors of Parent and the committees of Boards of Directors of Parent, in each case held since January 1, 2003 and prior to the date hereof.

 

(b) (i) Each Parent Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and (ii) each of Parent, Merger Sub and each Parent Subsidiary (A) has full corporate (or similar) power and authority and all necessary government approvals to own, lease and operate its properties and assets and to conduct its business as presently conducted, and (B) is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except in the case of clauses (b)(i) and (b)(ii), where any such failure has not had, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Parent has furnished or made available to the Company true and complete copies of the Amended and Restated Certificate of Incorporation of Parent (the “ Parent Certificate of Incorporation ”) and the Amended and Restated Bylaws of Parent (the “ Parent Bylaws ”), in each case as amended and in effect as of the date hereof. The Parent Certificate of Incorporation and the Parent Bylaws are in full force and effect and have not been amended or otherwise modified. Parent is not in material violation of any provision of the Parent Certificate of Incorporation or the Parent Bylaws, and no Parent Subsidiary is in material violation of any provision of its certificate of incorporation, bylaws or equivalent organizational documents.

 

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(c) Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. Merger Sub has not engaged in any business activities, conducted any operations or incurred any liabilities, other than liabilities and obligations incurred in connection with the transactions contemplated by this Agreement.

 

Section 4.2. Capitalization .

 

(a) The authorized capital stock of Parent consists of (i) 100,000,000 shares of Parent Common Stock, par value $0.01 per share (“ Parent Common Stock ”) and (ii) 100,000,000 shares of preferred stock, par value $0.01 per share (“ Parent Preferred Stock ”). As November 1, 2005, (i) 49,155,616 shares of Parent Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable and free of preemptive rights, (ii) no shares of Parent Common Stock were held by Parent in its treasury, (iii) an aggregate of 2,000,000 shares of Parent Common Stock were reserved for issuance pursuant to Parent’s 2005 Stock Option Plan (the “ Parent Stock Plan ”), of which 1,691,924 shares of Parent Common Stock were subject to outstanding and unexercised stock options, and (iv) none of the issued and outstanding shares of Parent Common Stock were subject to vesting, restrictions on transfer or repurchase rights (shares so subject, “ Parent Restricted Stock ”). As of November 1, 2005, no shares of Parent Preferred Stock were issued and outstanding or were held by Parent in its treasury.

 

(b) Except as set forth above, as of November 1, 2005 there are no Stock Rights in Parent or any Parent Subsidiary. All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire any capital stock or equity interest of Parent (including any shares of Parent Common Stock) or any Parent Subsidiary or any Stock Rights or to pay any dividend or make any other distribution in respect thereof or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any person.

 

(c) All of the authorized interests in Merger Sub are directly owned by Parent free and clear of all Liens and are fully paid and nonassessable and free of preemptive rights. There are no options, warrants, convertible securities, subscriptions, stock appreciation rights, phantom stock plans or stock equivalents or other rights, agreements, arrangements or commitments (contingent or otherwise) of any character issued or authorized by Merger Sub relating to the issued or unissued equity interests of Merger Sub or obligating Merger Sub to issue or sell any equity interests of, or options, warrants, convertible securities, subscriptions or other equity interests in, Merger Sub.

 

(d) Exhibit 21.1 to Parent’s Form S-1 filed with the SEC on April 5, 2005, as amended, includes all the Subsidiaries of Parent (the “ Parent Subsidiaries ”). All the outstanding shares of capital stock of, or other equity interests in, each such Parent Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are, except as set forth in such Exhibit 21.1, owned directly or indirectly by Parent, free and clear of all Liens and free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests), except for restrictions imposed by applicable securities laws. As of the date of this Agreement, neither Parent nor any of the Parent

 

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Subsidiaries directly or indirectly owns or has any right or obligation to subscribe for or otherwise acquire any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity (other than the Parent Subsidiaries).

 

Section 4.3. Authority for Agreement .

 

(a) Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by each of Parent and Merger Sub of this Agreement, and the consummation by each of Parent and Merger Sub of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action on the part of each of Parent and Merger Sub and no other corporate proceedings on the part of each of Parent and Merger Sub are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than the filing and recordation of appropriate merger documents as required by the DGCL and the DLLC Act). This Agreement has been duly executed and delivered by each of Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub enforceable against each of Parent and Merger Sub in accordance with its terms subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights and remedies of creditors generally and to the effect of general principles of equity. The affirmative vote of the holders of the outstanding units of interest in Merger Sub entitled to vote at a duly called and held meeting of unitholders is the only vote of the holders of membership units of Merger Sub necessary to approve and adopt this Agreement, the Merger and the other transactions contemplated by this Agreement.

 

(b) The Board of Directors of Parent has unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are advisable and in the best interests of Parent and Parent’s stockholders and (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger.

 

(c) The Board of Managers of Merger Sub has unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are advisable and in the best interests of Merger Sub and Merger Sub’s stockholder, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger and (iii) resolved to recommend approval and adoption of this Agreement and the Merger by the sole member of Merger Sub.

 

(d) Parent, in its capacity as sole member of Merger Sub, has unanimously approved and adopted this Agreement and the Merger.

 

Section 4.4. No Conflict . The execution and delivery of this Agreement by each of Parent and Merger Sub do not, and the performance of this Agreement by each of Parent and Merger Sub and the consummation of the Merger and the other transactions contemplated by this Agreement will not, (a) conflict with or violate (i) the Parent Certificate of Incorporation or the Parent Bylaws, (ii) the Certificate of Formation of Merger Sub or the Operating Agreement of

 

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Merger Sub or (iii) the equivalent organizational documents of any of the Parent Subsidiaries, (b) subject to Section 4.5, conflict with or violate any Law or any Order, in each case applicable to Parent or any of the Parent Subsidiaries or by which any property or asset of Parent or any of the Parent Subsidiaries is bound or affected, or (c) result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, give to others any right of termination, amendment, acceleration or cancellation of, result in the triggering of any payment or other obligation or any right of consent, or result in the creation of a Lien on any property or asset of Parent or any of the Parent Subsidiaries pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or any of the Parent Subsidiaries is a party or by which Parent or any of the Parent Subsidiaries or any property or asset of any of them is bound or affected, except, in the case of clauses (a)(iii), (b) and (c) above, for any such conflicts, violations, breaches, defaults or other occurrences which have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.5. Required Filings and Consents .

 

The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, require any consent, approval, order, authorization or permit of, or declaration, registration, filing with, or notification to, any Governmental Entity, except for (i) applicable requirements, if any, of (A) the Securities Act and the Exchange Act, including, without limitation, the filing with, and declaration of effectiveness by, the SEC of the Information Statement/Prospectus and the Other Filings, as applicable, (B) state securities or “blue sky” laws, (C) the DGCL and the DLLC Act to file the Certificate of Merger or other appropriate documentation, (D) NASDAQ, and (E) the filings by Parent required by applicable antitrust and competition laws, and (ii) such consents, approvals, orders, authorizations or permits of, or declarations, registrations, filings with, or notifications to any Governmental Entity which have not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.6. Compliance; Regulatory Compliance .

 

(a) Each of Parent and the Parent Subsidiaries (i) is and has been operated at all times in compliance with all Laws applicable to Parent or any Parent Subsidiary or by which any property, business or asset of Parent or any Parent Subsidiary is bound or affected, including, but not limited to, the federal Food, Drug and Cosmetic Act (“ FDCA ”) (21 U.S.C § 321 et seq. ), the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the Stark Law (42 U.S.C. § 1395nn), the civil False Claims Act (31 U.S.C. §§ 3729 et seq .), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq .), the exclusion laws, SSA § 1128 (42 U.S.C. § 1320a-7), or the regulations promulgated pursuant to such laws, and comparable state laws, accreditation standards and all other state and federal laws, regulations, manual provisions, policies and administrative guidance relating to the regulation of the business of Parent and the Parent Subsidiaries, and (ii) is not in default or violation of any federal or state governmental licenses, registrations, approvals, authorizations, clearances, exemptions, filings, permits or franchises (collectively, “ Permits ”) to which Parent or any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or any property or asset of Parent or any Parent Subsidiary is bound or affected, except, in the case of clauses (a)(i) and (ii) above, for any such failures to comply,

 

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defaults, violations or other occurrences which have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b) Each of Parent and the Parent Subsidiaries has in effect all material Permits necessary for the conduct of their business and the use of their properties and assets, as presently conducted and used; and except as set forth on Section 4.6 of the Parent Disclosure Letter, neither Parent nor any Parent Subsidiary has received any notice or communication from any Governmental Entity regarding (i) any actual or possible violation of applicable law or any Permit or any failure to comply with any applicable law or the requirements of any Permit, or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, limitation, termination or modification of any Permit; except for any such violation, revocation, withdrawal, suspension, cancellation, limitation, termination or modification which has not had and would not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(c) Neither Parent nor any Parent Subsidiary is enrolled as a supplier or provider under Medicare, Medicaid, or any other governmental health care program or third party payment program or is a party to any participation agreement for payment by any such governmental health care program and third party payment program.

 

(d) Parent and the Parent Subsidiaries, as well as Parent’s and the Parent Subsidiaries’ manufacturers, suppliers, distributors or other third party contractors, manufacture, market, and distribute, and for the past three years have manufactured, marketed, and distributed, their products in compliance with all applicable federal statutes, and rules and regulations promulgated by the United States Food and Drug Administration (“ FDA ”) and with applicable laws, rules, regulations, and standards of any comparable state authority or foreign regulatory authority, including, but not limited to, the FDCA and its implementing regulations at 21 C.F.R. Parts 801, 803, 806, 807, 814 and 820, and Parent’s quality control procedures in effect at the time of manufacture, except for instances of noncompliance which have not had, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All of the products currently marketed by Parent and the Parent Subsidiaries in the United States have been approved or cleared for sale by the FDA and all other applicable federal and state regulatory agencies. For all of the products currently marketed by Parent and the Parent Subsidiaries outside the United States, Parent and the Parent Subsidiaries have obtained all material necessary regulatory approvals from all applicable foreign regulatory authorities. Neither Parent nor the Parent Subsidiaries have received any notice from, or otherwise have knowledge of, the FDA or any other federal, state or foreign regulatory authority, questioning its manufacturing practices, or threatening to limit, suspend, or revoke any product marketing clearance or approval, change the marketing classification or labeling of, or otherwise require market removal or withdrawal of any of Parent’s products. Except as set forth on Section 4.6 of the Parent Disclosure Letter, Parent has not received, nor has knowledge of any facts that furnish any basis for, any Form FDA-483 inspectional observations or untitled or warning letters from the FDA, or any other similar communications from the FDA, or any applicable state or foreign governmental regulatory authority within the past three (3) years; and there have been no voluntary or involuntary recalls, corrective actions, removals, field notifications, import alerts, product detentions, product seizures, governmental investigations, or civil or criminal enforcement action initiated, proposed, requested, or threatened relating to the products or Parent or the Parent Subsidiaries within the last three (3) years. Parent and the Parent Subsidiaries do

 

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not have knowledge of any false information or significant omission in any product application, registration, report, or other submission or communication to the FDA or comparable foreign regulatory authority.

 

(e) All pre-clinical trials and clinical trials conducted by or on behalf of Parent and the Parent Subsidiaries have been, and are being conducted in compliance with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and all applicable federal statutes and rules and regulations promulgated by the FDA relating thereto, including without limitation the FDCA and its applicable implementing regulations at 21 C.F.R. Parts 50, 54, 56 and 812, except for instances of noncompliance which have not had, or would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(f) No officer, employee or agent of Parent or the Parent Subsidiaries has committed any act, made any statement, or failed to make any statement, that would be reasonably expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto.

 

(g) Parent and the Parent Subsidiaries, and the officers, employees and agents of Parent and the Parent Subsidiaries, have not been convicted of any crime or engaged in any conduct that could result in a material debarment or exclusion (i) under 21 U.S.C. Section 335a, or (ii) any similar state law, rule or regulation. As of the date hereof, no claims, actions, proceedings or investigations that would reasonably be expected to result in such a material debarment or exclusion are pending or threatened against Parent or the Parent Subsidiaries, or the officers, employees or agents of Parent or the Parent Subsidiaries.

 

(h) This Section 4.6 does not relate to Tax matters, employee benefits matters, labor relations matters or environmental matters which are the subjects of Sections 4.9, 4.14, 4.15 and 4.16, respectively.

 

Section 4.7. SEC Filings; Financial Statements .

 

(a) Each of Parent and the Parent Subsidiaries has filed all forms, reports, statements and documents required to be filed with the SEC since June 17, 2005 (the “ Parent SEC Reports ”), each of which has complied in all material respects with the applicable requirements of the Securities Act and the rules and regulations promulgated thereunder, the Exchange Act, and the rules and regulations promulgated thereunder, each as in effect on the date so filed, except to the extent updated, amended, restated or corrected by a subsequent Parent SEC Report filed or furnished to the SEC by Parent, and in either case, publicly available prior to the date hereof (each, a “ Parent Filed SEC Report ”). Notwithstanding the foregoing, the report on Form 10-Q to be filed with the SEC on November 14, 2005 shall be deemed, for all purposes under this Agreement, a “Parent Filed SEC Report”. None of the Parent SEC Reports (including, any financial statements or schedules included or incorporated by reference therein) contained when filed, and any Parent SEC Reports filed with the SEC subsequent to the date hereof will not contain, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent updated, amended, restated or

 

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corrected by a subsequent Parent Filed SEC Report. The principal executive officer of Parent and the principal financial officer of Parent (and each former principal executive officer of Parent and each former principal financial officer of Parent, as applicable) have made the certifications required by Sections 302 and 906 of, and Parent has complied in all material respects with, the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), and the rules and regulations of the SEC promulgated thereunder with respect to Parent’s filings pursuant to the Exchange Act. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

 

(b) Except to the extent updated, amended, restated or corrected by a subsequent Parent Filed SEC Report, all of the financial statements included in the Parent SEC Reports, in each case, including any related notes thereto, as filed with the SEC (those filed with the SEC are collectively referred to as the “ Parent Financial Statements ”), have been prepared in accordance with U.S. generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as may be permitted by Form 10-Q of the SEC and subject, in the case of the unaudited statements, to normal, year-end audit adjustments which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect). The consolidated balance sheets (including the related notes) included in such Parent Financial Statements (if applicable, as updated, amended, restated or corrected in a subsequent Parent Filed SEC Report) fairly present the consolidated financial position of Parent and the Parent Subsidiaries at the respective dates thereof, and the consolidated statements of operations, stockholders’ equity and cash flows (in each case, including the related notes) included in such Parent Financial Statements (if applicable, as updated, amended, restated or corrected in a subsequent Parent Filed SEC Report) fairly present the consolidated statements of operations, stockholders’ equity and cash flows of Parent and the Parent Subsidiaries for the periods indicated, subject, in the case of the unaudited statements, to normal, year-end audit adjustments which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(c) Parent maintains a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP or any other criteria applicable to such statements and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to differences.

 

(d) Parent’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are reasonably designed to ensure that all material information (both financial and non-financial) required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to Parent’s management as appropriate to allow timely decisions

 

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regarding required disclosure and to make the certifications of the chief executive officer and chief financial officer of Parent required under the Exchange Act with respect to such reports.

 

(e) Neither Parent nor any of the Parent Subsidiaries has any liabilities or obligations of any kind whatsoever, whether or not accrued and whether or not contingent or absolute, that are material to Parent and the Parent Subsidiaries, taken as a whole, other than (i) liabilities or obligations disclosed or provided for in the consolidated balance sheet of Parent and the Parent Subsidiaries as of December 31, 2004, including the notes thereto, contained in the Parent Filed SEC Reports, (ii) liabilities or obligations incurred on behalf of Parent in connection with this Agreement and the contemplated Merger, (iii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since January 1, 2005, and (iv) which are, individually or in the aggregate, reasonably likely to have a Material Adverse Effect.

 

Section 4.8. Absence of Certain Changes or Events . Except as contemplated by this Agreement, since January 1, 2005, each of Parent and the Parent Subsidiaries has conducted its respective businesses only in the ordinary course in all material respects and in a manner consistent with prior practice in all material respects and there has not been any event or occurrence of any condition that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.9. Taxes .

 

(a) Each of the Parent and the Parent Subsidiaries has duly filed all Tax Returns required to be filed by it or has been granted extensions to file such Tax Returns, which extensions have not expired, except to the extent that all such failures to file, taken together, have not had and would not reasonably be expected to have a Material Adverse Effect. The Parent and each of the Parent Subsidiaries have paid (or the Parent has paid on behalf of the Parent Subsidiaries) all Taxes (i) shown as due on such Tax Returns or (ii) otherwise due and payable, except (i) for those Taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been established in the Parent Financial Statements, or (ii) to the extent that all such failures to pay, taken together, have not had and would not reasonably be expected to have a Material Adverse Effect.

 

(b) No deficiencies for any Taxes have been proposed, asserted or threatened in writing against the Parent or any of the Parent Subsidiaries that are not adequately reserved for, except for deficiencies that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect, and no requests for waivers of the time to assess any such Taxes have been granted or are pending (other than with respect to years that are currently under examination by the Internal Revenue Service or other applicable Tax authorities).

 

(c) Neither Parent nor any of the Parent Subsidiaries has taken any action or has any knowledge of any fact or circumstance that could reasonably be expected to prevent the transactions contemplated hereby, including the Merger, from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

 

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(d) Neither the Parent nor any of the Parent Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A)) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.

 

(e) Neither the Parent nor any of the Parent Subsidiaries has entered into a “listed transaction” within the meaning of Treasury Regulation §1.6011-4(b)(2).

 

(f) The Parent and the Parent Subsidiaries have complied with all applicable Laws relating to the payment and withholding of Taxes, except where a failure to comply, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.

 

(g) Neither the Parent nor any of the Parent Subsidiaries has any liability for the Taxes of any person (other than the Parent and the Parent Subsidiaries) under Treasury Regulation § 1.1502-6 (or any similar provision of any state, local or foreign law) as a transferee or successor, by contract or otherwise, that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

 

(h) As used in this Agreement (A) “ Tax ” means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, transfer or excise tax, or any other tax, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any related interest, penalty, addition to tax or additional amount, and (B) “ Tax Return ” means any report, return, document, declaration or other information or filing required to be filed with respect to Taxes (whether or not a payment is required to be made with respect to such filing), including information returns, any documents accompanying payments of estimated Taxes, or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.

 

Section 4.10. Litigation .

 

(a) There are no claims, suits, actions, investigations, indictments or information, or administrative, arbitration or other proceedings (“ Litigation ”) that which, if adversely determined, individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. There is no suit, action or proceeding (including in connection with the consummation of the Merger) pending or, to the knowledge of Parent, threatened, against or affecting Parent or any of the Parent Subsidiaries or any of their respective assets that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

 

(b) There is not any Order of any Governmental Entity or arbitrator outstanding against, or, to the knowledge of Parent, investigation by, any Governmental Entity involving Parent or any of the Parent Subsidiaries or any of their respective assets that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

 

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(c) This Section 4.10 does not relate to Tax matters, employee benefits matters, labor relations matters or environmental matters which are the subjects of Sections 4.9, 4.14, 4.15 and 4.16, respectively.

 

Section 4.11. Contracts and Commitments .

 

(a) Section 4.11(a) of the Parent Disclosure Letter sets forth a true and complete list as of the date hereof of each Parent Material Contract. “ Parent Material Contract ” means (i) a “material contract”, as such term is defined in Section 601(b)(10) of Regulation S-K of the SEC, (ii) a contract, agreement, license, commitment or arrangement which contains any non-compete or exclusivity provisions with respect to any line of business, distribution channel, medical condition application or geographic area with respect to Parent or any Parent Subsidiary, or restricts the conduct of the business of the Parent or any Parent Subsidiary, or the geographic area or manner in which Parent or any Parent Subsidiary may conduct business, in each case in any material respect, (iii) a contract, agreement, license, commitment or arrangement between Parent or any Parent Subsidiary on the one hand, and any officer, director or person directly or indirectly owning, controlling or holding power to vote 5% or more of Parent’s outstanding voting securities (other than compensation arrangements involving a director or officer of Parent listed or described in Section 4.14 of the Parent Disclosure Letter), on the other hand, or (iv) a contract, agreement or arrangement to which Parent or any Parent Subsidiary or any of their respective properties is subject that (A) involves annual revenue to Parent or the Parent Subsidiaries in excess of $1,000,000 in the calendar year ending December 31, 2005, (B) obligates Parent or any Parent Subsidiary to expend an amount in excess of $1,000,000 in the calendar year ending December 31, 2005, (C) obligates Parent or any Parent Subsidiary to make capital expenditures or acquire assets in an amount estimated by Parent as of the date hereof to be in excess of $1,000,000 over the remaining life of such contract or (D) is a material arrangement governing the legal relationship between Parent or any Parent Subsidiary and any of the purchasers, consignees, licensees, distributors, sales representatives (“ Customers ”) or sellers, consignors, vendors, licensors or service providers (“ Suppliers ”) of Parent and any Parent Subsidiary, taken as a whole, which Customer or Supplier (a) provides essential raw materials or components for any Key Existing Product or is obligated to provide essential raw materials or components for any Key Pipeline Product; (b) provides an essential administrative function; or (c) which Customer or Supplier was one of the ten largest Customers or Suppliers of Parent or any Parent Subsidiary, taken as a whole, for the calendar year ended December 31, 2004. Parent has delivered or made available true and complete copies of all such contracts, agreements, licenses, commitments and arrangements to Parent.

 

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Parent Material Contracts are legal, valid, binding and enforceable in accordance with their respective terms with respect to Parent or any Parent Subsidiary and, to the knowledge of Parent, with respect to each other party to any of such Parent Material Contracts, except, in each case, to the extent that enforcement of rights and remedies created by any Parent Material Contracts are subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general application related to or affecting creditors’ rights and to general equity principles. There are no existing defaults, violations or breaches by Parent or any Parent Subsidiary of any Parent Material Contract (or events or conditions which, with notice or lapse of time or both would constitute such a default,

 

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violation or breach) and, to the knowledge of Parent, there are no such defaults, violations or breaches (or events or conditions which, with notice or lapse of time or both, would constitute such a default, violation or breach) with respect to any third party to any such Parent Material Contracts that, in any such case, has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Parent has no knowledge of any pending or threatened bankruptcy, insolvency or similar proceeding with respect to any party to any of such agreements. Section 4.11(b) of the Parent Disclosure Letter identifies each Parent Material Contract set forth therein that requires the consent of or notice to the other party thereto to avoid any material breach, default or violation of such contract, agreement or other instrument in connection with the transactions contemplated hereby. Neither Parent nor any Company Subsidiary is a party to any voting agreement with respect to the voting of any securities of the Parent or Merger Sub.

 

Section 4.12. Information Supplied . The information supplied or to be supplied by Parent or Merger Sub for inclusion or incorporation by reference in the Information Statement/Prospectus shall not, at (i) the time the Information Statement/Prospectus is declared effective, (ii) the time the Information Statement/Prospectus (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company, and (iii) the Effective Time, 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. If, at anytime prior to the Effective Time, any event or circumstance relating to Parent or Merger Sub or any Parent Subsidiary, or their respective officers or directors, should be discovered by Parent which should be set forth in an amendment or supplement to the Information Statement/Prospectus, Parent shall promptly inform the Company in writing. All documents that Parent is responsible for filing with the SEC in connection with the Merger or the other transactions contemplated by this Agreement will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, no representation or warranty is made by Parent or Merger Sub with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference in the Information Statement/Prospectus.

 

Section 4.13. Stockholders’ Rights Agreement . Neither Parent nor any Parent Subsidiary has adopted, or intends to adopt, a stockholders’ rights agreement or any similar plan or agreement which limits or impairs the ability to purchase, or become the direct or indirect beneficial owner of, capital shares or any other equity or debt securities of Parent or any of the Parent Subsidiaries.

 

Section 4.14. Employee Benefit Plans .

 

(a) “ Parent ERISA Affiliate ” means any entity or trade or business (whether or not incorporated) other than the Parent and any Parent Subsidiary, that together with the Parent or any Parent Subsidiary is (or at any relevant time was) considered under common control and treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

 

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(b) “ Parent Pension Plan ” means each “employee pension benefit plan” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) which is or has been maintained or contributed to by Parent or any Parent Subsidiary, or with respect to which Parent or any Parent Subsidiary is or may be required to maintain or make contributions (collectively, the “ Parent Pension Plans ”).

 

(c) “ Parent Welfare Plan ” means each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) which is or has been maintained or contributed to by Parent, any Parent Subsidiary or with respect to which Parent or any Parent Subsidiary is or may be required to maintain or make contributions (collectively, the “ Parent Welfare Plans ”).

 

(d) “ Parent Compensation Plan ” means each vacation or paid time off, severance, termination, change in control, employment, incentive compensation, profit sharing, stock option, fringe benefit, stock purchase, stock ownership, phantom stock, deferred compensation plans, arrangements or agreements and other employee fringe benefit plans or arrangements maintained, contributed to or required to be maintained or contributed to by Parent or any Parent Subsidiaries for the benefit of any present or former officers, employees, directors or independent contractors of Parent or any of the Parent Subsidiaries an