AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

AMONG

 

MEDIVATION, INC.

 

ORION ACQUISITION CORP. II

 

AND

 

MEDIVATION ACQUISITION CORP.

 

DATED AS OF

 

DECEMBER 17, 2004

 

 

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

SCHEDULES AND EXHIBITS

 

 

iv

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (the “ Agreement ”) dated as of December 17, 2004, by and among Medivation, Inc., a Delaware corporation (the “ Target ”), Orion Acquisition Corp. II, a Delaware corporation (“ Orion ”), and Medivation Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Orion (the “ Merger Sub ”). Certain capitalized terms used in this Agreement are defined in ARTICLE XI of this Agreement.

 

W I T N E S S E T H:

 

WHEREAS, Orion desires to acquire Target, and Target desires to be acquired by Orion through the merger of Merger Sub with and into Target, with Target being the surviving entity pursuant to the terms hereinafter set forth (the “ Merger ”);

 

WHEREAS, the respective Boards of Directors of Orion, Merger Sub and Target have approved and declared advisable the Merger 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 ”);

 

WHEREAS, the respective Boards of Directors of Orion, Merger Sub and Target have determined that the Merger is in furtherance of and consistent with their respective business strategies and is in the best interest of their respective stockholders; and Orion, as the sole stockholder of Merger Sub, and the holders of Target Common Stock (as defined below), in each case have approved this Agreement and the Merger; and

 

WHEREAS, Orion, Merger Sub and Target each intend, for Federal income tax purposes, that the Merger contemplated thereby constitutes a reorganization pursuant to Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto, intending to be legally bound hereby, agree as follows:

 

ARTICLE I.

A DOPTION OF A GREEMENT

 

1.1

The Merger .

 

Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.2 herein), in accordance with this the relevant provisions of the DGCL, Merger Sub shall be merged with and into Target, and Target shall be the surviving corporation to the Merger (the “ Surviving Corporation ”). Upon completion of the Merger, the existence of Merger Sub shall cease at the Effective Time as a consequence of the Merger.

 

1.2

Effective Date of Merger .

 

Upon the terms and subject to the conditions hereof, as soon as practicable after the satisfaction or waiver of the conditions set forth in ARTICLE VII and ARTICLE VIII of this Agreement, the Certificate of Merger substantially in the form annexed hereto as EXHIBIT 1.2 (the “ Certificate of Merger ”) shall be executed in accordance with Section 251 of the DGCL and delivered to the Secretary of State of the State of Delaware (the time of such filing being the “ Effective Time ”, and the date of such filing being the “ Effective Date ”).

 

1.3

Surviving Corporation .

 

Following the Merger, Target shall continue to exist under and be governed by the laws of the State of Delaware and shall be the Surviving Corporation.

 

1.4

Effect of Merger .

 

At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Target and the Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Target and the Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

1.5

Certificate of Incorporation of Surviving Corporation .

 

The Certificate of Incorporation of Target, as in effect at the Effective Time, shall continue in full force and effect, and shall be adopted as the Certificate of Incorporation of the Surviving Corporation.

 

1.6

By-laws of Surviving Corporation .

 

The By-laws of Target, as in effect at the Effective Time, shall continue in full force and effect, and shall be adopted as the By-laws of the Surviving Corporation.

 

1.7

Directors and Officers of Surviving Corporation .

 

The directors of Target immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. The officers of Target immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation.

 

ARTICLE II.

P LAN OF M ERGER

 

2.1

Conversion .

 

(a)

Conversion of Target Common Stock .

 

At the Effective Time, each share of Common Stock, par value $0.001 per share, of Target (the “ Target Common Stock ”), issued and outstanding immediately prior to the Effective Time (other than any shares of Target Common Stock to be canceled pursuant to Section 2.1(e)) shall be converted, subject to Section 2.1(h), into the right to receive .122935 shares of Series B Convertible Preferred Stock, par value $0.01 per share (the “ Series B Preferred Stock ”), of Orion (the “ Conversion Rate ”). All such converted shares of Target Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each certificate previously representing any such converted shares shall thereafter represent the right to receive a certificate representing that number of shares of Series B Preferred Stock into which such shares of Target Common Stock were converted in the Merger pursuant to this Agreement.

 

(b)

Conversion of Target Warrants .

 

At the Effective Time, each issued and outstanding warrant to purchase shares of capital stock of Target at the Effective Time (the “ Target Warrants ”), by virtue of the terms thereof and the Merger and without further action, shall be assumed by Orion and modified so that, in lieu of having the right to acquire

 

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such shares of capital stock of Target on exercise of the applicable Target Warrant, the holders thereof shall have the right to acquire that number of shares of common stock, par value $0.01 per share, of Orion (the “ Orion Common Stock ”) equal to that number of shares of Target Common Stock as have been set forth in the applicable Target Warrant, in each case at an exercise price of $1.55 per share of Orion Common Stock.

 

(c)

Conversion of Target Options .

 

At the Effective Time, all unexercised and unexpired options to purchase shares of Target Common Stock then outstanding under any stock option plan of Target at the Effective Time, including the 2004 Equity Incentive Awards Plan or any other plan, agreement or arrangement (the “ Target Stock Option Plans ”), whether or not then exercisable (the “ Target Options ”), shall be assumed by Orion. Each Target Option so assumed by Orion under this Agreement shall continue to have, and be subject to, the same terms and conditions as set forth in the applicable Target Stock Option Plan and any agreements thereunder immediately prior to the Effective Time (including, without limitation, the vesting schedule (without acceleration thereof by virtue of the Merger and the transactions contemplated hereby)), except that (i) each Target Option shall be exercisable (or shall become exercisable in accordance with its terms) for that number of whole shares of Orion Common Stock equal to (A) twenty (20) times the number of shares of Target Common Stock issuable upon the exercise of such Target Option immediately prior to the Effective Time, multiplied by (B) the Conversion Rate, rounded down to the nearest whole number of shares of Target Common Stock; and (ii) the per share exercise price for the shares of Orion Common Stock issuable upon exercise of each such assumed Target Option shall be equal to the quotient determined by dividing (X) the quotient determined by dividing the exercise price per share of Target Common Stock at which such Target Option was exercisable immediately prior to the Effective Time by the Conversion Rate by (Y) twenty (20), rounded up to the nearest whole cent. The conversion of any Target Options which are “incentive stock options” within the meaning of Section 422 of the Code into options to purchase Orion Common Stock shall be made in a manner consistent with Section 424(a) of the Code so as not to constitute a “modification” of such Target Options within the meaning of Section 424 of the Code. Continuous employment with Target or its subsidiaries shall be credited to the optionee for purposes of determining the vesting of all assumed Target Options after the Effective Time.

 

(d)

Schedule of Target Warrants and Options .

 

Attached hereto as SCHEDULE 2.1(d) is the list of Target Warrants and Target Options, the respective holders thereof and the numbers and classes of Target Common Stock and Orion Common Stock for which they may now, and after the Merger be, exercised and the price per share of Orion Common Stock payable upon such exercise.

 

(e)

Cancellation of Certain Shares .

 

Each share of Target Common Stock held by Orion or the Merger Sub, or in the treasury of either, immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment shall be made with respect to either, as applicable.

 

(f)

Merger Sub .

 

Each share of common stock, par value $0.00001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and be exchanged for one newly and validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation (the “ Surviving Corporation Common Stock ”).

 

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(g)

Equitable Adjustments .

 

If during the period between the date of this Agreement and the Effective Time the outstanding shares of any of the Series B Preferred Stock, Orion Common Stock or Target Common Stock shall have been changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, then the Conversion Rate shall be correspondingly and equitably adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares.

 

(h)

Fractional Shares .

 

No certificates or scrip representing fractional shares of Series B Preferred Stock shall be issued upon the surrender for exchange of certificates, and no dividend or distribution with respect to Series B Preferred Stock shall be payable on or with respect to any fractional share and such fractional share interests shall not entitle the owner thereof to any rights of a stockholder of Orion.

 

2.2

Reservation of Shares for Target Warrants and Target Options .

 

Orion shall retain and reserve that number of authorized but unissued shares of Orion Common Stock that shall be issuable upon the exercise of the Target Warrants and the Target Options at any given time until their respective exercise, conversion or termination, as applicable.

 

2.3

Dissenting Shareholders .

 

Any holder of shares of Target Common Stock issued and outstanding immediately prior to the Effective Time with respect to which dissenters’ rights, if any, are available by reason of the Merger pursuant to Section 262 of the DGCL or Chapter 13 of the California Corporations Code (the “ CCC ”) who has not voted in favor of the Merger or consented thereto in writing and who complies with Section 262 of the DGCL or Chapter 13 of the CCC (the “ Target Dissenting Shares ”) shall not be entitled to receive any Series B Preferred Stock pursuant to this ARTICLE II, unless such holder fails to perfect, effectively withdraws or loses its dissenters’ rights under the DGCL or the CCC. Such holder shall be entitled to receive only such rights as are granted under Section 262 of the DGCL or Chapter 13 of the CCC, as applicable. If any such holder fails to perfect, effectively withdraws or loses such dissenters’ rights under the DGCL or the CCC, as applicable, such Target Dissenting Shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive that number of shares of the Series B Preferred Stock to which such shares of Target securities are entitled pursuant to this ARTICLE II, in each case without interest. Prior to the Effective Time, the Target shall give Orion prompt notice of any written demands for appraisal pursuant to Section 262 of the DGCL or Chapter 13 of the CCC, as applicable, received by the Target, withdrawals of any such written demands and any other documents or instruments received by the Target in connection therewith. Orion shall have the right to participate in and direct all negotiations and proceedings with respect to any such demands. Prior to the Effective Time, the Target shall not, except with the prior written consent of Orion, which consent shall not unreasonably be withheld or delayed, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. Any payments made with respect to Target Dissenting Shares shall be made solely by the Surviving Corporation, and no funds or other property shall be provided by Target, Orion or Merger Sub for such payment.

 

2.4

Conversion of Shares of Target Common Stock .

 

The manner of converting shares of Target Common Stock into shares of Series B Preferred Stock in accordance with Section 2.1(a) above, shall be as follows:

 

(a) From and after the Effective Time, Orion shall act as exchange agent in effecting the conversion of certificates representing shares of Target Common Stock pursuant to

 

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Section 2.1(a) hereof. As soon as practicable after the Effective Time, and after surrender to Orion by each holder of shares of Target Common Stock (each, a “ Participating Stockholder ”) of certificates which prior to the Effective Time represented shares of Target Common Stock, the Surviving Corporation shall cause to be distributed to such Participating Stockholder in whose name such stock certificates shall have been registered, or in accordance with the written instructions transmitted to Orion by the Participating Stockholder, certificates representing shares of Series B Preferred Stock, all in accordance with the provisions of Section 2.1(a) hereof. Upon the surrender by Participating Stockholders of each certificate representing shares of Target Common Stock, and upon the issuance and delivery by Orion of certificates representing shares of Series B Preferred Stock, the certificates which prior to the Effective Time represented outstanding shares of Target Common Stock shall forthwith be canceled. Until so surrendered and exchanged, each such certificate representing shares of Target Common Stock shall be deemed for all purposes to evidence only a right to receive shares of Series B Preferred Stock, and the holders of such certificates after the Effective Time shall no longer be deemed for any purpose to be holders of shares of Target Common Stock.

 

(b) Participating Stockholders shall, for all purposes (except for the payment of possible dividends or other distributions by Orion which shall be withheld until the exchange of certificates pursuant to Section 2.4(a) hereof), be deemed to be stockholders of Orion, as of the Effective Time, irrespective of whether they have received their certificates or agreements representing shares of Series B Preferred Stock.

 

(c) Immediately prior to the Effective Time, Orion shall have prepared certificates representing that number of shares of Series B Preferred Stock as Orion may be required to issue in accordance with Section 2.1(a) hereof.

 

(d) Promptly after the Effective Time, Orion, on behalf of Target and Orion, shall mail to each holder of record of certificates which immediately prior to the Effective Time represented shares of Target Common Stock a form of letter of transmittal and instructions for use in surrendering such certificates and receiving certificates representing shares of Series B Preferred Stock.

 

2.5

Notice of Change in Terms of Target Warrants and Options .

 

Promptly after the Effective Time, Orion shall mail to each holder of Target Warrants and Target Options a notice of the terms of their respective securities as a result of the Merger.

 

ARTICLE III.

C LOSING

 

3.1

Closing Date .

 

The closing of the Merger (the “ Closing ”) and the other transactions contemplated by this Agreement (the “ Related Transactions ”) shall take place at the offices of Latham & Watkins LLP, 505 Montgomery Street, San Francisco, California 94111 at 12:00 noon, California time, on December 17, 2004, as soon as practicable after the satisfaction or waiver of the conditions set forth in ARTICLE VII and ARTICLE VIII of this Agreement, or such other date, time and place as each of the parties hereto may otherwise agree in writing (the “ Closing Date ”).

 

3.2

Execution of Merger Documents .

 

On the Closing Date, the Surviving Corporation shall execute the Certificate of Merger as provided by the DGCL. The Certificate of Merger shall be transmitted by the Surviving Corporation to the

 

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appropriate offices for filing and/or recording on the Closing Date, in order that the Merger contemplated by this Agreement shall become effective at 12:00 noon, California time, on the Closing Date.

 

ARTICLE IV.

R EPRESENTATIONS AND W ARRANTIES OF T ARGET

 

Target represents and warrants to Orion and Merger Sub that all of the statements contained in this ARTICLE IV are true as of the date of this Agreement (or, if made as of a specified date, as of such date) except, in each case, as (a) set forth in the schedules attached to this Agreement (the “ Disclosure Schedules ”); or (b) as otherwise provided in this Agreement. For purposes of the representations and warranties of Target contained in this ARTICLE IV, disclosure in any section of the Disclosure Schedule of any facts or circumstances shall be deemed to be an adequate response and disclosure of such facts or circumstances with respect to all representations or warranties by Target calling for disclosure of such information, whether or not such disclosure is specifically associated with or purports to respond to one or more or all of such representations or warranties, if it is reasonably apparent on the face of the Disclosure Schedule that such disclosure is applicable. The inclusion of any information in any section of the Disclosure Schedule by Target shall not be deemed to be an admission or evidence of materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.

 

4.1

Due Incorporation .

 

(a) Target is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to own, lease and operate its properties and to carry on its business as they are now being owned, leased, operated and conducted. To the Knowledge of Target, Target is qualified or licensed to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of the properties owned, leased or operated by it and the business transacted by it requires such qualification or licensing, except where the failure to be so qualified or licensed would not have a Target Material Adverse Effect. All minutes of meetings (or written consents in lieu of meetings) of the Board of Directors (and all committees thereof) of Target, and all minutes of meetings (or written consents in lieu of meetings) of the stockholders of Target, in each case having occurred since October 10, 2003, have been, or prior to the Closing Date will have been, delivered to Orion.

 

(b) Target has no wholly or partially owned subsidiaries.

 

Target does not own any economic, voting or management interest in any Person.

 

4.2

Due Authorization .

 

Target has full power and authority to enter into this Agreement, the Certificate of Merger and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Target of this Agreement have been, or, in the case of the Certificate of Merger, prior to the Closing Date will be, duly and validly approved and authorized by the holders of Target Common Stock and the Board of Directors of Target, no other actions or proceedings on the part of Target are necessary to authorize this Agreement, the Certificate of Merger and the transactions contemplated hereby and thereby. Target has duly and validly executed and delivered this Agreement and will duly and validly execute and deliver the Certificate of Merger. This Agreement constitutes the legal, valid and binding obligation of Target, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other laws from time to time in effect which affect creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

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4.3

Consents; Non-Contravention .

 

(a) Except for the filing of the Certificate of Merger with the appropriate authorities pursuant to the DGCL, no permit, consent, authorization or approval of, or filing or registration with, any Governmental Authority or any other Person not a party to this Agreement is necessary in connection with the execution, delivery and performance by Target of this Agreement, the Certificate of Merger, or the consummation of the transactions contemplated hereby or thereby, or for the lawful continued operation by Orion following the Effective Time of the business currently conducted by Target.

 

(b) Except as would not result in a Target Material Adverse Effect, the execution, delivery and performance by Target of this Agreement and the Certificate of Merger do not and will not (i) violate any Law; (ii) violate or conflict with, result in a breach or termination of, constitute a default (or a circumstance which, with or without notice or lapse of time or both, would constitute a default) or give any third party any additional right (including a termination right) under, permit cancellation of, or result in the creation of any Lien upon any of the assets or properties of Target under any contract to which Target is a party or by which Target or any of its assets or properties is bound; (iii) permit the acceleration of the maturity of any indebtedness of Target or indebtedness secured by Target’s assets or properties; or (iv) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of Target.

 

(c) Target has obtained, and is in compliance with, all Permits required for the complete operation of the business of Target as currently operated, except as would not result in a Target Material Adverse Effect; and such Permits are currently valid and in full force, and, to the Knowledge of Target, no revocation, cancellation or withdrawal thereof has been threatened or noticed to Target; and Target has filed such timely and complete renewal applications as may be required with respect to such Permits; and, to the Knowledge of Target, such Permits in their current state will allow Target to continue to operate its business following the Effective Time in substantially the same manner as Target’s business is currently operated.

 

4.4

Capitalization .

 

(a) The authorized capital stock of Target consists of 5,000,000 shares of Target Common Stock. On the date hereof, there are issued and outstanding 2,700,000 shares of Target Common Stock. All of the issued and outstanding shares of Target Common Stock are validly issued, fully paid and non-assessable and the issuance thereof was not subject to preemptive rights.

 

(b) SCHEDULE 4.4(b) sets forth a complete list of all shares of Target Common Stock or other equity securities (whether or not such securities have voting rights) of Target issued or outstanding and any subscriptions, options, warrants, call rights, convertible securities or other agreements or commitments of any character obligating Target to issue, transfer or sell any shares of capital stock or other securities (whether or not such securities have voting rights) of Target; and SCHEDULE 4.4(b) sets forth all outstanding contractual obligations of Target which relate to the purchase, sale, issuance, repurchase, redemption, acquisition, transfer, disposition, holding or voting of any shares of capital stock or other securities of Target.

 

(c) Each outstanding security, agreement or arrangement of Target that gives the holder or contract party the right to acquire capital stock of any class of Target, including the Target Warrants and the Target Options, on the Effective Date, automatically with no action by Target or Orion, will become the right to acquire the securities of Orion as provided in ARTICLE II hereof.

 

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4.5

Financial Statements .

 

The Target Financial Statements present fairly the financial position, results of operations and cash flows for the periods covered therein. The Target Financial Statements are in accordance with the books and records of Target, do not reflect any transactions which are not bona fide transactions and do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. The Target Financial Statements make full and adequate disclosure of, and provision for, all material obligations and liabilities of Target as of the date thereof. There are no significant deficiencies or material weaknesses in the design or operation of Target’s internal controls which would adversely affect Target’s ability to record, process, summarize and report financial data.

 

4.6

No Adverse Effect .

 

Except as set forth on SCHEDULE 4.6 , as reflected in Target Financial Statements or as contemplated by the Certificate of Merger, since October 31, 2004, Target has not (a) taken any of the actions set forth in Section 6.3 (unless excepted therein); (b) suffered any Target Material Adverse Effect; (c) suffered any damage, destruction or Loss to any of its assets or properties (whether or not covered by insurance); or (d) increased the compensation of any executive officer of Target.

 

4.7

Title to Properties .

 

To the Knowledge of Target, Target (a) has good and marketable title to, and is the lawful owner of, all of the material tangible and intangible assets, properties (including real property) and rights reflected as being owned by Target in Target Financial Statements (other than assets disposed of in the ordinary course of business since October 31, 2004); and (b) at the Effective Time, will have good and marketable title to, and will be the lawful owner of, all of such tangible and intangible assets, properties, including real property, and rights, in each case with respect to (a) and (b), free and clear of any Liens, except for (i) any Lien for current taxes not yet due and payable; and (ii) Liens that have arisen in the ordinary course of business and that do not (in any case or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of Target.

 

4.8

Liabilities .

 

Except to the extent reflected in the Target Financial Statements, Target has no material debts, liabilities or obligations of any nature other than liabilities incurred subsequent to October 31, 2004 and incurred in the ordinary course of Target’s business.

 

4.9

Intellectual Property .

 

SCHEDULE 4.9 is a true and complete list of all Intellectual Property used by Target in the conduct of its business. Except as disclosed on SCHEDULE 4.9 :

 

(a) all of the Intellectual Property as set forth on SCHEDULE 4.9 is owned by Target or licensed on a perpetual, exclusive basis with royalties as set forth on SCHEDULE 4.9 ;

 

(b) none of the Intellectual Property as set forth on SCHEDULE 4.9 is the subject of any pending or, to the Knowledge of Target, threatened, litigation or claim of infringement;

 

(c) no license or royalty agreement as set forth on SCHEDULE 4.9 to which Target is a party is in breach or default by Target or, to the Knowledge of Target, any other party thereto; and no license or royalty agreement as set forth on SCHEDULE 4.9 is the subject of any notice of termination given or threatened in writing;

 

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(d) to the Knowledge of Target, the products and services being offered or developed by Target do not and currently will not infringe any Intellectual Property rights of another; and Target has not received any notice contesting its right to use any Intellectual Property as set forth on SCHEDULE 4.9 ;

 

(e) Target has not granted any license or agreed to pay or receive any royalty in respect of any Intellectual Property; and

 

(f) Target possesses adequate rights as owner or licensee in and to all Intellectual Property necessary to conduct its business as currently conducted.

 

(g) Target has no Knowledge which, directly or indirectly, indicates a material infirmity in any United States and foreign Intellectual Property set forth on SCHEDULE 4.9 , or any basis for invalidity or unenforceability of any rights claimed by Target in the Intellectual Property set forth on SCHEDULE 4.9 .

 

(h) Target has no Knowledge which, directly or indirectly, indicates that the licensor in each license agreement under which Target has been granted rights set forth on SCHEDULE 4.9 does not own the entire unencumbered right, title and interest in and to the Intellectual Property set forth on SCHEDULE 4.9 which is the subject of the license.

 

(i) Target has delivered to Orion for inspection and copying a true copy of each document in Target’s possession relating to each item of Target Intellectual Property set forth on SCHEDULE 4.9 , including each license agreement, relating to Target’s present and intended business activities, and has disclosed to Orion each and all facts, test results and other information known to Target which has, or to its Knowledge may have, any negative impact upon the efficacy of any of Target Intellectual Property set forth on SCHEDULE 4.9 .

 

4.10

Contracts .

 

(a) SCHEDULE 4.10 lists all the Target Material Contracts, including but not limited to those categories listed below:

 

(i) any collective bargaining agreement;

 

(ii) any Contract with any senior employee, consultant, officer or director of Target;

 

(iii) any Contract with a sales representative, manufacturer’s representative, distributor, dealer, broker, sales agency, advertising agency or other Person engaged in sales, distributing or promotional activities, or any Contract to act as one of the foregoing, on behalf of any Person;

 

(iv) any Contract which involves the payment or receipt of cash or other property, an unperformed commitment, or goods or services;

 

(v) any Contract pursuant to which Target has made or will make loans or advances, or has or will have incurred debts or become a guarantor or surety or pledged its credit on or otherwise become responsible with respect to any undertaking of another (except for the negotiation or collection of negotiable instruments in transactions in the ordinary course of business);

 

(vi) any indenture, credit agreement, loan agreement, note, mortgage, security agreement, lease of real property or personal property or agreement for financing;

 

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(vii) any Contract involving a partnership, joint venture or other cooperative undertaking;

 

(viii) any Contract or arrangement involving any restrictions with respect to the geographical area of operations or scope or type of business of Target;

 

(ix) any power of attorney or agency agreement or arrangement with any Person pursuant to which such Person is granted the authority to act for or on behalf of Target, or Target is granted the authority to act for or on behalf of any Person;

 

(x) any Contract relating to any corporate acquisition or disposition by Target, or any acquisition or disposition of any subsidiary, division, line of business, or real property, during the five (5) years prior to the date of this Agreement; and

 

(xi) any Target Material Contract not specified above that is otherwise a Target Material Contract.

 

Target has made available to Orion true and complete copies of each Target Material Contract listed on SCHEDULE 4.10 and indicated by written description each oral arrangement so listed. To the Knowledge of Target, the cancellation of any such Target Material Contracts at any time by the other Person would not have a Target Material Adverse Effect.

 

4.11

Insurance .

 

SCHEDULE 4.11 contains an accurate and complete list of all policies of fire, liability, workers’ compensation, product liability, title and other forms of insurance owned or held by Target. Except as would not result in a Target Material Adverse Effect, all such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been, or prior to the Closing Date, will be, paid, and no notice of cancellation or termination has been received with respect to any such policy therein listed. Target has not been refused any insurance with respect to its assets or operations, and its coverage has not been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance, during the two years prior to the date of this Agreement. To the Knowledge of Target, the insurance policies set forth on SCHEDULE 4.11 provide the types and amounts of insurance customarily obtained by businesses similar to the business of Target.

 

4.12

Employee Benefit Plans .

 

Except as provided in SCHEDULE 4.12 , Target nor any other member of the Controlled Group (as hereinafter defined) (a) has at any time maintained, contributed to or participated in; (b) has or had at any time any obligation to maintain, contribute to or participate in; or (c) has any liability or contingent liability, direct or indirect, with respect to: any employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), oral or written retirement or deferred compensation plan, incentive compensation plan, stock plan, unemployment compensation plan, vacation pay plan, severance plan, bonus plan, stock compensation plan or any other type or form of employee-related arrangement, program, policy, plan or agreement. For purposes of this Agreement, the term “ Controlled Group ” shall refer to Target and each other corporation or other entity under common control with Target (pursuant to the provisions of Sections 414(b), (c), (m) or (o) of the Code) at any time during the 60-month period ending on the Closing Date.

 

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4.13

Labor Matters .

 

(a) SCHEDULE 4.13(a) lists all the written employment, consulting and similar agreements, which are currently in effect to which Target is a party under which Target is obligated to pay in salary $100,000 pursuant to the current term (exclusive or without extensions thereof) or more in any twelve (12) month period. To the Knowledge of Target, Target has conducted and currently is conducting its business in material compliance with all Laws relating to employment and employment practices, terms and conditions of employment, wages and hours and nondiscrimination in employment. During the past two years there has been, no labor strike, dispute, slow-down, work stoppage or other material labor difficulty pending or, to Target’s Knowledge, threatened against or involving Target. None of the employees of Target is covered by any collective bargaining agreement, no collective bargaining agreement is currently being negotiated and no attempt is currently being made, or during the past two years has been made, to organize any employees of Target to form or enter a labor union or similar organization.

 

(b) Target has no material liability for any vacation time, vacation pay, retirement benefits, disability or other insurance benefits or severance pay attributable to services rendered prior to the date of each such balance sheet.

 

4.14

Tax Matters .

 

(a) “ Taxes ”, as used in this Agreement, means any Federal, state, county, local or foreign taxes, charges, fees, levies, or other assessments, including all net income, gross income, sales and use, ad valorem , transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance or withholding taxes or charges imposed by any Governmental Authority, and includes any interest and penalties (civil or criminal) on or additions to any such taxes and any expenses incurred in connection with the determination, settlement or litigation of any tax liability. “ Tax Return ”, as used in this Agreement, means a report, return or other information required to be supplied to a Governmental Authority with respect to Taxes including, where permitted or required, combined or consolidated returns for any group of entities.

 

(b) Target has not taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Target is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

 

(c) Target has duly and timely filed with the appropriate Tax authorities or other Governmental Entities all Tax Returns required to be filed. All such Tax Returns are complete and accurate in all material respects. All Taxes shown as due on such Tax Returns have been timely paid.

 

(d) The unpaid Taxes of Target (i) did not, as of the dates of the most recent financial statements, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets contained in such financial statements; and (ii) shall not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of Target in filing its Tax Returns.

 

(e) (i) No deficiencies for Taxes with respect to Target have been claimed, proposed or assessed by a Tax authority or other Governmental Entity; (ii) no audit or other proceeding for or relating to any liability in respect of Taxes of Target is being conducted by any Tax authority or Governmental Entity, and Target has not received notification in writing that any such audit or other proceeding is pending; and (iii) neither Target nor any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

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(f) There are no Tax liens upon any property or assets of Target except (i) liens for current Taxes not yet due and payable; and (ii) liens for Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained in accordance with GAAP.

 

(g) Target has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

 

(h) Target is not currently the beneficiary of any extension of time within which to file any material Tax Return.

 

(i) No claim has ever been made by an authority in a jurisdiction where any of Target does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

 

(j) Target has no liability for the Taxes of any person (other than members of the affiliated group of which Target is the common parent) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law); (ii) as a transferee or successor; (iii) by contract; or (iv) otherwise.

 

(k) Target has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period described in Section 897(c)(1)(A)(ii) of the Code.

 

(l) Target has not been a party to any distribution occurring during the two years preceding the date of this Agreement in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

 

(m) Target has not been a party to any Contract, plan or arrangement, under which it is obligated to make or to provide, or could be become obligated to make or to provide, a payment or benefit that would be nondeductible under Section 280G of the Code.

 

(n) Target is not a party to, bound by or have any obligation under any Tax sharing, Tax allocation or Tax indemnity agreement or similar contract or arrangement. Target (and its subsidiaries and affiliates) has, within the time and in the manner prescribed by law, paid (and until the Effective Time shall pay within the time and in the manner prescribed by law) all Taxes that are currently due and payable except for those contested in good faith and for which adequate reserves have been taken.

 

(o) There are no material liens for Taxes upon the assets of Target (and its subsidiaries and affiliates) except liens for Taxes not yet due.

 

(p) Target (and its Affiliates) has complied (and until the Effective Time shall comply) in all material respects with the provisions of the Code relating to the payment and withholding of Taxes and has, within the time and in the manner prescribed by Law, withheld from employee wages and paid over to the proper Governmental Authorities all amounts required.

 

(q) No audits or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns of Target (and its Affiliates).

 

(r) Target (and its Affiliates) has not received any Tax Rulings (as defined below) or entered into any Closing Agreements (as defined below) with any taxing authority that would have a continuing adverse effect after the Effective Time. “ Tax Ruling ”, as used in this Agreement, shall mean a

 

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written ruling of a taxing authority relating to Taxes. “ Closing Agreement ”, as used in this Agreement, shall mean a written and legally binding agreement with a taxing authority relating to Taxes.

 

4.15

Reorganization Treatment .

 

(a) Assets . At the Effective Time, Target will hold at least 90 percent of the fair market value of its net assets and at least 70 percent of the fair market value of its gross assets held immediately prior to the Effective Time. For purposes of this representation, amounts paid by Target to holders of Target Dissenting Shares, amounts paid by Target to Stockholders who receive cash or other property, amounts used by Target to pay Merger expenses, amounts paid by Target to redeem stock, securities, warrants or options of Target as part of any overall plan of which the Merger is part, and amounts distributed by Target to Stockholders (except for any regular, normal dividends) as part of an overall plan of which the Merger is a part, in each case will be treated as constituting assets of Target immediately prior to the Effective Time.

 

(b) Business . Target currently conducts a business. Such business is Target’s “historic business” within the meaning of Treasury Regulations Section 1.368-1(d), and no assets of Target have been sold, transferred, or otherwise disposed of that would prevent Orion from continuing the “historic business” of Target or from using a “significant portion” of Target’s “historic business assets” in a business following the Merger, as such terms are used in Treasury Regulations Section 1.368-1(d).

 

(c) Investment Company . Target is not an “investment company” as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.

 

(d) Title 11 . Target is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

 

(e) Redemptions and Distributions . Neither Target nor any person related to Target within the meaning of Treasury Regulations Sections 1.368-1(e)(3), (e)(4) and (e)(5) has purchased, redeemed or otherwise acquired, or made any distributions with respect to, any of Target’s stock prior to or in contemplation of the Merger, or otherwise as part of a plan of which the Merger is a part.

 

(f) Intercorporate Indebtedness . At the Effective Time, there will be no intercorporate indebtedness existing between Orion or Merger Sub, on one hand, and Target, on the other hand, that was issued or acquired, or will be settled, at a discount.

 

(g) Dividends . At the Effective Time, there will be no accrued but unpaid dividends on Target Common Stock.

 

(h) Control . In the Merger, stock of Target representing “control” of Target (within the meaning of Section 368(c) of the Code) will be exchanged solely for “voting stock” of Orion (within the meaning of Sections 368(a)(1)(B) and (2)(E) of the Code). For purposes of the preceding sentence, any Target Common Stock to be exchanged for cash or other property originating with Orion is treated as constituting outstanding Target Common Stock at the Effective Time.

 

(i) Dissenters . Payments made in respect of Target Dissenting Shares, if any, shall be made solely from the funds of Target.

 

4.16

Environmental .

 

To knowledge of Target, Target is in compliance in all material respects with all applicable federal, state and local laws and regulations governing the environment, public health and safety and

 

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employee health and safety (including all provisions of the Occupational Safety and Health Act (“ OSHA ”)) and no charge, complaint, action, suit, proceeding, hearing, investigation, claim, demand or notice has been filed or commenced against Target and, to the knowledge of Target, no such charge, complaint, action, suit, proceeding, hearing, investigation, claim, demand or notice is pending or threatened in writing.

 

4.17

Litigation .

 

(a) There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or governmental investigations pending or, to Target’s Knowledge, threatened in writing against Target or any of Target’s officers or directors in their capacity as such, or any of their respective properties or businesses, and Target has no Knowledge of any facts or circumstances which may reasonably be likely to give rise to any of the foregoing. Target is not subject to any order, judgment, decree, injunction, stipulation or consent order of or with any court or other Governmental Authority. Target has not entered into any agreement to settle or compromise any proceeding pending or threatened in writing against it which has involved any obligation for which Target has any continuing obligation.

 

(b) There are no claims, actions, suits, proceedings, or investigations pending or, to Target’s Knowledge, threatened in writing by or against Target with respect to this Agreement or the Certificate of Merger, or in connection with the transactions contemplated hereby or thereby.

 

4.18

Conflict of Interests .

 

Except as a holder of Target securities, to Target’s Knowledge, no Affiliate of Target has or claims to have any direct or indirect interest in any tangible or intangible property used in the business of Target.

 

4.19

Bank Accounts .

 

SCHEDULE 4.19 sets forth the names and locations of each bank or other financial institution at which Target has either an account (giving the account numbers) or safe deposit box and the names of all Persons authorized to draw thereon or have access thereto, and the names of all Persons, if any, now holding powers of attorney or comparable delegation of authority from Target and a summary statement thereof.

 

4.20

Compliance with Laws .

 

Target is not subject to and is not in default of any order of any court, Governmental Authority or other agency or arbitration board or tribunal to which Target is or was subject within the past two years and is not in violation of any laws, ordinances, governmental rules or regulations (including, but not limited to, those relating to environmental, safety, building, product safety or health standards or labor or employment matters) to which Target is or was subject within the past two years, except in each case as would not have a Target Material Adverse Effect. To Knowledge of Target, the business of Target is currently being conducted, and at the Closing Date will be so conducted, in material compliance with Applicable Laws, except to the extent failure to comply would not have a Target Material Adverse Effect.

 

4.21

Broker Fees .

 

Except as disclosed on SCHEDULE 4.21 , Target has not used any broker or finder in connection with the transactions contemplated by this Agreement and, to the Knowledge of Target, Orion has not and will not have any liability or otherwise suffer or incur any loss as a result of or in connection with any brokerage or finder’s fee or other commission payable as a result of any actions taken by Target with respect to any broker or finder in connection with the Merger contemplated by this Agreement.

 

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4.22

Board Approval .

 

The Board of Directors of Target, at a meeting duly called and held prior to execution of this Agreement, duly and unanimously adopted resolutions: (a) approving and declaring advisable this Agreement, the Voting Agreements and the transactions contemplated hereby and thereby (such approvals having been made in accordance with the DGCL, including for purposes of Section 203 thereof); (b) determining that the terms of the Merger are fair to and in the best interests of Target and its stockholders; (c) recommending that the stockholders of Orion approve and adopt this Agreement and the Merger; and (d) adopting this Agreement, which resolutions have not been modified, supplemented or rescinded and remain in full force and effect.

 

4.23

Takeover Restrictions .

 

No Takeover Statute is applicable to the Merger, except for such statutes or regulations as to which all necessary action has been taken by Target and its Board of Directors to permit the consummation of the Merger in accordance with the terms hereof, nor does Target have any stockholder rights or similar “poison pill” plans.

 

4.24

Full Disclosure .

 

No representation or warranty by Target contained in this Agreement as qualified by the schedules hereto contains any untrue statement of material fact or omits to state a material fact necessary, in light of the circumstances under which it was made, to make any of the representations and warranties therein not misleading.

 

ARTICLE V.

R EPRESENTATIONS OF O RION AND M ERGER S UB

 

Each of the Orion Parties represent and warrant to Target that all of the statements contained in this ARTICLE V are true as of the date of this Agreement (or, if made as of a specified date, as of such date) except in each case as (a) set forth in the Disclosure Schedule attached to this Agreement; or (b) otherwise provided in this Agreement. For purposes of the representations and warranties of the Orion Parties contained in this ARTICLE V, disclosure in any section of the Disclosure Schedule of any facts or circumstances shall be deemed to be an adequate response and disclosure of such facts or circumstances with respect to all representations or warranties by the Orion Parties calling for disclosure of such information, whether or not such disclosure is specifically associated with or purports to respond to one or more or all of such representations or warranties, if it is reasonably apparent on the face of the Disclosure Schedule that such disclosure is applicable. The inclusion of any information in any section of the Disclosure Schedule by the Orion Parties shall not be deemed to be an admission or evidence of materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.

 

5.1

Due Incorporation; Foreign Qualifications .

 

Each of the Orion Parties is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, in each case with all requisite power and authority to own, lease and operate their respective properties and to carry on their respective businesses as they are now being owned, leased, operated and conducted. Each of the Orion Parties is qualified or licensed to do business, and is in good standing, as a foreign corporation in each jurisdiction where the nature of their respective properties owned, leased or operated by them, and the business transacted by them, requires such qualification or licensing, except where the failure to be so qualified or licensed and in good standing would not, individually or in the aggregate, have an Orion Material Adverse Effect. True, correct and complete copies of the Certificate of Incorporation and Bylaws of each of the Orion Parties, each as

 

15

amended or restated as of the date hereof, have been, or prior to the Closing Date shall have been, delivered to Target. All minutes of meetings (or written consents in lieu of meetings) of the Board of Directors (and all committees thereof) of each of the Orion Parties, and all minutes of meetings (or written consents in lieu of meetings) of the stockholders of each of the Orion Parties, in each case having occurred since January 1, 2000, have been, or prior to the Closing Date will have been, delivered to Target. Except with respect to the ownership by Orion of all of the capital stock of Merger Sub pursuant to this Agreement, neither of the Orion Parties (a) have any wholly or partially owned subsidiaries; or (b) own any economic, voting or management interest in any other Person.

 

5.2

Due Authorization .

 

Each of the Orion Parties have full power and authority to enter into, as applicable, this Agreement and the Certificate of Merger, and each have full power and authority to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Orion Parties of this Agreement have been, or, in the case of the Certificate of Merger, prior to the Closing Date will be, duly and validly approved and authorized by the Boards of Directors of each Orion Party; and no other actions or proceedings on the part of either Orion Party are necessary to authorize this Agreement, the Certificate of Merger and the transactions contemplated hereby and thereby. Each Orion Party has duly and validly executed and delivered this Agreement, and each will duly and validly execute and deliver the Certificate of Merger on the Effective Time. This Agreement constitutes the legal, valid and binding obligation of each Orion Party, enforceable in accordance with its terms as to each Orion Party, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other laws from time to time in effect which affect creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (b) the Stockholder Approval. Upon the Stockholder Approval, the Series B Preferred Stock will be convertible into duly authorized, validly issued, fully paid and nonassessable shares of Orion Common Stock.

 

5.3

Non-Contravention .

 

(a) Except for (i) the filing of the Certificate of Merger with the appropriate authorities and pursuant to the DGCL; and (ii) the requirement to obtain the Stockholder Approval, which in any case shall be required to have occurred subsequent to the Closing Date, no permit, consent, authorization or approval of, or filing or registration with, any Governmental Authority, or any other Person not a party to this Agreement, is necessary in connection with the execution, delivery and performance by the Orion Parties of this Agreement or the Certificate of Merger, or the consummation of the transactions contemplated thereby, for the lawful continued operation of the respective businesses currently conducted by the Orion Parties following the Effective Time. SCHEDULE 5.3(a) lists all contracts that require a novation or consent to the Merger or change of control, as the case may be, prior to the Effective Time which, if no novation occurs or if no consent to the Merger or change of control is obtained, would have an Orion Material Adverse Effect on Surviving Corporation’s ability to operate the business.

 

(b) Except as would not result in an Orion Material Adverse Effect, the execution, delivery and performance by each of the Orion Parties of this Agreement, the Certificate of Amendment and Merger and the Certificate of Merger, as applicable, do not and will not (i) violate any Law; (ii) violate or conflict with, result in a breach or termination of, constitute a default (or a circumstance which, with or without notice or lapse of time or both, would constitute a default); (iii) give any third party any additional right (including a termination right) under, permit cancellation of, or result in the creation of any Lien (except for any Lien for taxes not yet due and payable), upon any of the assets or properties of either Orion Parties under any Contract to which either Orion Party is a party or by which either Orion Party or any of their respective assets or properties are bound; (iv) permit the acceleration of the maturity of any indebtedness of either Orion Party, or any indebtedness secured by Orion’s or Merger Sub’s assets or

 

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properties, respectively; or (v) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of either Orion Party.

 

(c) Each Orion Party has obtained, and is in compliance with, all their respective Permits required for the complete operation of the respective businesses of Orion or Merger Sub, as applicable, as each are currently operated, except for any Permits, the absence of which would not, individually or in the aggregate, result in an Orion Material Adverse Effect (the “ Material Orion Permits ”). All Material Orion Permits are currently valid and in full force, and, to the Knowledge of Orion, no revocation, cancellation or withdrawal thereof has been threatened. Each Orion Party has filed such timely and complete renewal applications as may be required with respect to all Material Orion Permits, respectively. To the Knowledge of Orion, all Material Orion Permits in their current state will allow Orion or Merger Sub, as applicable, to continue to operate their respective businesses following the Effective Time in substantially the same manner as such businesses are currently operated.

 

5.4

Capitalization .

 

(a) The authorized capital stock of Orion consists of an aggregate of 11,000,000 shares, consisting of (i) 10,000,000 shares of Common Stock, par value $0.01 per share; and (ii) 1,000,000 shares of Preferred Stock, par value $0.01 per share (of which 200 shares have been designated as Series A Convertible Preferred Stock). On the date hereof there are issued and outstanding an aggregate of: (x) 1,213,507 shares of Common Stock; and (y) 110 shares of Series A Convertible Preferred Stock. On the date hereof there are an aggregate of 450,000 shares of authorized but unissued shares of Series B Convertible Preferred Stock, par value $0.01 per share, which (i) shall be, subject to the Stockholder Approval, convertible into 9,000,000 shares of Common Stock; and (ii) have been duly reserved for issuance by Orion to the holders of Target Common Stock in connection with the Merger and pursuant to this Agreement. All such issued and outstanding shares of Common Stock and Series A Preferred Stock are validly issued, fully paid and non-assessable, and neither of their respective issuances were subject to preemptive rights. Upon the issuance of the shares of the Series B Preferred Stock, and, subject to the Stockholder Approval, the shares of Common Stock issuable upon conversion thereof, in each case in accordance with the terms of this Agreement, such shares, when issued, will be validly issued, fully paid and non-assessable; and neither of such respective issuances thereof will be subject to pre-emptive rights.

 

(b) Except for (i) the Class B Redeemable Unit Purchase Warrants representing rights for the purchase of an aggregate of 225,400 shares of Common Stock; and (ii) the 110,000 shares of Common Stock issuable on conversion of the Series A Preferred Stock, there are no (x) shares of Common Stock or other equity securities (whether or not such securities have voting rights) of Orion or Merger Sub issued or outstanding; (y) subscriptions, options, warrants, call rights, convertible securities or other agreements or commitments of any character obligating Orion or Merger Sub to issue, transfer or sell any shares of capital stock or other securities (whether or not such securities have voting rights) of Orion or Merger Sub, respectively; or (z) no outstanding contractual obligations of either Orion Party which relate to the purchase, sale, issuance, repurchase, redemption, acquisition, transfer, disposition, holding or voting of any shares of capital stock or other securities of Orion or Merger Sub, as applicable.

 

5.5

Financial Statements .

 

The Orion Financial Statements have been prepared from, are in accordance with and accurately reflect the books and records of Orion; and such have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be stated in the notes thereto), and fairly present the consolidated financial position and the consolidated results of operations and cash flows of Orion as of the times and for the periods referred to therein. The Orion Financial Statements are in accordance with the books and records of Orion, do not reflect any transactions which are not bona fide transactions and do not contain any untrue statement of a material fact or omit to state any material fact

 

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necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. The Orion Financial Statements make full and adequate disclosure of, and provision for, all obligations and liabilities of Orion as of the times and for the periods referred to therein. The Orion Financial Statements, when filed with the SEC, complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.

 

5.6

No Adverse Effects .

 

Except as reflected in the Orion Financial Statements or as contemplated by the Certificate of Merger, since September 30, 2004, neither Orion Party has (a) taken any of the actions set forth in Section 6.3, except as contemplated by this Agreement; (b) suffered any Orion Material Adverse Effect; (c) suffered any damage, destruction or Loss to any of their respective assets or properties (whether or not covered by insurance); or (d) increased the compensation of any executive officer of any Orion Party.

 

5.7

Title to Properties .

 

To the Knowledge of each Orion Party, each Orion Party, as applicable, (a) has good and marketable title to, and is the lawful owner of, all of the tangible and intangible assets, properties (including real property) and rights reflected in the Orion Financial Statements (other than assets disposed of in the ordinary course of business, consistent with past practice, since September 30, 2004); and (b) at the Effective Time will have good and marketable title to, and will be the lawful owner of, all of such tangible and intangible assets, properties and rights, in any case free and clear of any Liens, except for (i) any Lien for current taxes not yet due and payable; and (ii) Liens that have arisen in the ordinary course of business, consistent with past practice, which do not, individually or in the aggregate, materially detract from the value of the assets subject to such Lien, or materially impair the operations of either of the Orion Parties.

 

5.8

Liabilities .

 

Except as reflected in the Orion Financial Statements, neither Orion Party has any debts, liabilities or obligations of any nature, other than debts, liabilities or obligations incurred subsequent to September 30, 2004 in the ordinary course of business and consistent with past practice of Orion.

 

5.9

Intellectual Property .

 

SCHEDULE 5.9 is a true and complete list of all Intellectual Property currently used, owned or possessed by Orion, in each case in the conduct of its business; and:

 

(a) all Intellectual Property listed on SCHEDULE 5.9 is either licensed or owned by Orion, in each case free and clear of all Liens;

 

(b) no Intellectual Property listed on SCHEDULE 5.9 is the subject of, any pending or, to the Knowledge of Orion, threatened litigation or claim of infringement;

 

(c) no license or royalty agreement to which Orion is a party is in breach or default by Orion or, to the Knowledge of Orion, any other party thereto; and no such license or royalty agreement is or has been the subject of any notice of termination given or threatened by any Person;

 

(d) Orion has not granted any license, or agreed to pay or receive any royalty in respect of, any Intellectual Property listed on SCHEDULE 5.9 ; and

 

(e) Orion owns or possesses adequate rights in and to all Intellectual Property necessary to conduct its business as conducted currently.

 

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5.10

Contracts .

 

SCHEDULE 5.10 sets forth a list of all Contracts that are (x) material to the business or operations of Orion, taken as a whole, to either Orion Party; and (y) to which any of the Orion Parties are a party, by which either are bound or to which any of their respective assets or properties are subject, as applicable, including but not limited to the following types of Contracts:

 

(a) any collective bargaining agreement;

 

(b) any Contract with any employee, consultant, advisor, officer or director of Orion or Merger Sub;

 

(c) any Contract with a sales representative, manufacturer’s representative, distributor, dealer, broker, sales agency, advertising agency or other Person engaged in sales, distributing or promotional activities, or any Contract to act as one of the foregoing on behalf of any Person;

 

(d) any Contract which involves the payment or receipt of cash or other property, an unperformed commitment or goods or services, in each case having a value in excess of $10,000;

 

(e) any Contract pursuant to which either Orion Party (i) has made or will make any loans or advances; (ii) has or will have incurred debts, or become a guarantor or surety, or pledged its credit on; or (iii) has or will have otherwise become responsible with respect to any undertaking of another (except for the negotiation or collection of negotiable instruments in transactions in the ordinary course of business consistent with past practice);

 

(f) any indenture, credit agreement, loan agreement, note, mortgage, security agreement, lease of real property or personal property or agreement for financing;

 

(g) any Contract involving a partnership, joint venture or other cooperative undertaking;

 

(h) any Contract involving any restrictions with respect to (i) any geographical area of operations; or (ii) scope or type of business of Orion or Merger Sub;

 

(i) any power of attorney or agency agreement or arrangement with any Person pursuant to which such Person is granted the authority to act for or on behalf of Orion or Merger Sub, or pursuant to which Orion or Merger Sub are granted the authority to act for or on behalf of any Person;

 

(j) any Contract relating to any corporate acquisition or disposition of Orion or Merger Sub, or any acquisition or disposition of any subsidiary, division, line of business or real property, in each case during the five years prior to the date of this Agreement; and

 

(k) any Contract not specified above that is otherwise material to the business or operations of Orion, taken as a whole, to either Orion Party.

 

To the Knowledge of the Orion Parties, Orion has made available to Target true and complete copies of each document listed on SCHEDULE 5.10 , and a written description of each oral arrangement so listed is contained on SCHEDULE 5.10 . The cancellation of any Contracts listed on SCHEDULE 5.10 at any time by the other party or parties thereto would not have an Orion Material Adverse Effect.

 

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5.11

Insurance .

 

SCHEDULE 5.11 contains an accurate and complete list of all policies of fire, liability, workers’ compensation, product liability, professional malpractice, title and other forms of insurance owned or held by each of Orion and Merger Sub; and Orion and Merger Sub, as applicable, have heretofore delivered to Target a true and complete copy of all such policies. All such policies listed on SCHEDULE 5.11 are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been, or prior to the Closing Date, will be, paid and no notice of cancellation or termination has been received with respect to any such policy listed on SCHEDULE 5.11 . No Orion Party has been refused any insurance with respect to their respective assets or operations; and their respective coverage policies have not been limited by any insurance carrier to which they have applied for any such insurance, or with which they have carried insurance, in each case during the two years preceding the date hereof. The insurance policies listed on SCHEDULE 5.11 each provide the types and amounts of insurance customarily obtained by businesses similar to the businesses of Orion and Merger Sub, respectively.

 

5.12

Employee Benefit Plans .

 

The Orion Parties have no employee benefit plans.

 

5.13

Tax Matters .

 

(a) None of Orion, any of its subsidiaries or any of Orion’s affiliates has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Orion is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

 

(b) Orion and each of its subsidiaries have duly and timely filed with the appropriate Tax authorities or other Governmental Entities all Tax Returns required to be filed. All such Tax Returns are complete and accurate in all material respects. All Taxes shown as due on such Tax Returns have been timely paid.

 

(c) The unpaid Taxes of Orion and its subsidiaries (i) did not, as of the dates of the most recent financial statements, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets contained in such financial statements; and (ii) will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of Orion and its subsidiaries in filing their Tax Returns.

 

(d) No deficiencies for Taxes with respect to any of Orion and its subsidiaries have been claimed, proposed or assessed by a Tax authority or other Governmental Entity; (ii) no audit or other proceeding for or relating to any liability in respect of Taxes of any of Orion or any of its subsidiaries is being conducted by any Tax authority or Governmental Entity, and Orion and its subsidiaries have not received notification in writing that any such audit or other proceeding is pending; and (iii) neither Orion nor any of its subsidiaries nor any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(e) There are no Tax liens upon any property or assets of Orion or any of its subsidiaries except (i) liens for current Taxes not yet due and payable; and (ii) liens for Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained in accordance with GAAP.

 

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(f) Each of Orion and its subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

 

(g) None of Orion or any of its subsidiaries currently is the beneficiary of any extension of time within which to file any material Tax Return.

 

(h) No claim has ever been made by an authority in a jurisdiction where any of Orion and any of its subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

 

(i) None of Orion or any of its subsidiaries has any liability for the Taxes of any person (other than members of the affiliated group of which Orion is the common parent) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law); (ii) as a transferee or successor; (iii) by contract; or (iv) otherwise.

 

(j) None of Orion or any of its subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period described in Section 897(c)(1)(A)(ii) of the Code.

 

(k) None of Orion or any of its subsidiaries has been a party to any distribution occurring during the two years preceding the date of this Agreement in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

 

(l) None of Orion or any of its subsidiaries is a party to any Contract, plan or arrangement, under which it is obligated to make or to provide, or could be become obligated to make or to provide, a payment or benefit that would be nondeductible under Section 280G of the Code.

 

(m) None of Orion or any of its subsidiaries is a party to, is bound by or has any obligation under any Tax sharing, Tax allocation or Tax indemnity agreement or similar contract or arrangement.

 

5.14

Reorganization Treatment .

 

(a) Intention Regarding Target . Orion has no plan or intention: (i) to liquidate Target; (ii) to merge Target into another corporation; (iii) to sell or otherwise dispose of any shares of stock of Target pursuant to the Agreement, except for transfers and successive transfers described in Treasury Regulation Section 1.368-2(k) or transfers and successive transfers to one or more corporations controlled in each transfer by the transferor corporation (within the meaning of Section 368(c) of the Code); or (iv) to cause Target to sell or otherwise dispose of any of its assets, except for (w) dispositions made in the ordinary course of business, (x) transfers and successive transfers described in Treasury Regulation Section 1.368-2(k) or transfers and successive transfers to one or more corporations controlled in each transfer by the transferor corporation (within the meaning of Section 368(c) of the Code), (y) dispositions after which Target would continue to hold the amount of assets set forth in Section 4.15(a) following the Merger (assuming the correctness of the representation set forth in Section 4.15(a)), or (z) transfers to partnerships that satisfy the provisions of Treasury Regulation Section 1.368-1(d)(4)(iii)(B).

 

(b) Intention Regarding Orion Stock . Except with respect to open-market purchases of Orion’s stock pursuant to a general stock repurchase program of Orion that has not been created or modified in connection with the Merger, neither Orion nor any Person related to Orion within the meaning of Treasury Regulation Sections 1.368-1(e)(3), (e)(4) and (e)(5) has any plan or intention to repurchase, redeem or otherwise acquire any of the stock of Orion issued to the Stockholders pursuant to this

 

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Agreement following the Merger. Other than pursuant to this Agreement, neither Orion nor any Person related to Orion within the meaning of Treasury Regulation Sections 1.368-1(e)(3), (e)(4) and (e)(5) has acquired any Target Common Stock in contemplation of the Merger, or otherwise as part of a plan of which the Merger is a part.

 

(c) Control . Prior to the Merger, Orion will be in control of Merger Sub, and following the Merger, Orion will be in control of Target, within the meaning of Section 368(c) of the Code. Orion has no plan or intention to cause Target, after the Effective Time, to issue additional shares of stock that would result in Orion losing control of Target within the meaning of Section 368(c) of the Code.

 

(d) Business . Assuming the correctness of the representation set forth in 4.15(b), then following the Merger, Orion, or a member of its qualified group of corporations (as defined by Treasury Regulation Section 1.368-1(d)(4)(ii)), will continue the historic business of Target (or, alternatively, if Target has more than one line of business, will continue at least one significant line of Target’s historic business) or use a significant portion of Target’s historic business assets in a business, in a manner consistent with Treasury Regulation Section 1.368-1(d) ( provided, however , in the event Section 4.15(b) is or has been breached, this Section 5.14(d) will not be considered to be or have been breached).

 

(e) Investment Company . Neither Orion nor Merger Sub is an “investment company” as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.

 

(f) Assets . Assuming the correctness of the representation set forth in Section 4.15(a), then following the Merger, Target will hold at least 90 percent of the fair market value of Target’s net assets and at least 70 percent of the fair market value of Target’s gross assets and at least 90 percent of the fair market value of Merger Sub’s net assets and at least 70 percent of the fair market value of Merger Sub’s gross assets held immediately prior to the Effective Time. For purposes of this representation, amounts paid by Target to dissenting Stockholders, amounts paid by Target to Stockholders who receive cash or other property, amounts used by Target to pay Merger expenses, amounts paid by Target to redeem stock, securities, warrants or options of Target as part of any overall plan of which the Merger is part, and amounts distributed by Target to Stockholders (except for any regular, normal dividends) as part of an overall plan of which the Merger is a part, in each case will be treated as constituting assets of Target immediately prior to the Effective Time; provided, however , in the event Section 4.15(a) is or has been breached, this Section 5.14(f) will not be considered to be or have been breached.

 

5.15

Environmental .

 

To the Knowledge of the Orion Parties, Orion is in compliance in all material respects with all applicable federal, state and local laws and regulations governing the environment, public health and safety and employee health and safety (including all provisions of OSHA) and no charge, complaint, action, suit, proceeding, hearing, investigation, claim, demand or notice has been filed or commenced against Orion and, to the knowledge of Orion, no such charge, complaint, action, suit, proceeding, hearing, investigation, claim, demand or notice is pending or threatened in writing.

 

5.16

Litigation .

 

There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or governmental investigations pending or, to the Knowledge of Orion, threatened against Orion, Merger Sub or any of their respective officers or directors, in their capacities as such, or any properties or businesses of Orion, Merger Sub or any of their respective officers or directors; and, to the Knowledge of Orion, there are no facts or circumstances which may give rise to any such actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or governmental investigations. The Orion Parties are not subject to any order, judgment, decree, injunction, stipulation or consent order of or with any court

 

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or other Governmental Authority; and, except as disclosed in SCHEDULE 5.16 , the Orion Parties have not entered into any agreement to settle or compromise any proceeding against either which has involved any obligation for which either has any continuing obligation as of and subsequent to the date hereof. There are no claims, actions, suits, proceedings or investigations pending or, to the Knowledge of Orion, threatened, by or against either Orion Party with respect to this Agreement or in connection with the transactions contemplated hereby, and neither of the Orion Parties have reason to believe there is a valid basis for any such claim, action, suit, proceeding or investigation.

 

5.17

Conflict of Interest .

 

Except as set forth on SCHEDULE 5.17 , to the Knowledge of Orion, no Person affiliated with Orion has or will have any claims or rights with respect to any direct or indirect interest in any tangible or intangible property used in the business or operations of Orion.

 

5.18

Bank Accounts .

 

SCHEDULE 5.18 sets forth a complete list of the names and locations of each bank or other financial institution at which Orion or Merger Sub has either an account (in which case account numbers are provided) or safe deposit box, and the names of all Persons authorized to draw thereon or who have access thereto, respectively, and the names of all Persons, if any, now holding powers of attorney or comparable delegation of authority from Orion or Merger Sub and a summary statement thereof.

 

5.19

Compliance with Laws .

 

Neither of the Orion Parties are in default under any order of any court, Governmental Authority or other agency or arbitration board or tribunal to which Orion or Merger Sub are or were subject within the past two years; and neither of the Orion Parties are in violation of any laws, ordinances, governmental rules or regulations (including, but not limited to, those relating to environmental, safety, building, product safety or health standards or labor or employment matters) to which such parties are or were subject within the past two years, except for such violations as would not, individually or in the aggregate, have an Orion Material Adverse Effect. The businesses of Orion and Merger Sub are being, and at the Closing will be, conducted in compliance with all applicable laws, ordinances, rules and regulations applicable to them (including, but not limited to, those relating to environmental, safety, building, product safety or health standards or labor or employment matters), except where any such failure, individually or in the aggregate, would not have an Orion Material Adverse Effect.

 

5.20

Broker Fees .

 

Except for the fees and expenses incurred in connection with the retention and employment of MDB in connection with the Related Transactions as listed on SCHEDULE 5.20 , Orion has not used any broker or finder in connection with the Related Transactions; and, as of the Effective Date, Targe