Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered
into as of August 8, 2000, by and among Nastech Pharmaceutical Company Inc., a
Delaware corporation ("Parent"), Atossa Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent ("Sub"), and Atossa
HealthCare, Inc., a Delaware corporation (the "Company"). Parent, the Company,
and Sub are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
RECITALS
A. Pursuant to the Certificate of Merger in the form attached hereto as
Exhibit A (the "Certificate of Merger") providing for the merger of Sub with and
into the Company (the "Merger") pursuant to the Delaware General Corporation
Law, the shares of capital stock of the Company issued and outstanding
immediately prior to the Effective Time will be converted into rights to acquire
Common Stock of Parent.
B. The Parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants made as an
inducement to the execution and delivery of this Agreement, and to serve as
conditions precedent to the consummation of the Merger.
C. The respective Boards of Directors of Parent, Sub and the Company have
approved and adopted this Agreement, and (i) the Agreement is intended to be a
plan of reorganization under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and (ii) the Merger is intended to be
accounted for as a purchase.
D. Concurrent with the execution of this Agreement, as a material
inducement to Parent and Sub, Steven C. Quay, President and Chief Executive
Officer of the Company ("Quay"), is entering into an employment agreement with
Parent, a copy of which is attached hereto as Exhibit B hereto (the "Employment
Agreement").
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
Parties do hereby agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa). Certain other terms are defined
in the text of this Agreement.
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the
Person subject to that obligation to take actions that would result in a
materially adverse change in the benefits to such Person of this Agreement and
the Contemplated Transactions.
"Business Condition" means the current business, financial
condition, results of operations and assets of a corporate entity.
"Company Disclosure Letter" means the Company Disclosure Letter
delivered by the Company to the Parent concurrently with the execution and
delivery of this Agreement.
"Company Intellectual Property" means any and all Technology and any
and all Intellectual Property Rights, including the Company Registered
Intellectual Property Rights (as defined below), that is or are owned (in whole
or in part) by or exclusively licensed to the Company.
"Company Stockholders" shall mean the stockholders of record of the
Company immediately prior to the Effective Time (other than the holders of
Dissenting Shares, if any).
"Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including:
(a) the merger of Sub with the Company, the issuance by Parent of
the Parent Common Stock and Parent's acquisition and ownership of the Company
and exercise of control over the Company;
(b) the execution, delivery, and performance of the Employment
Agreement;
(c) the performance by Parent, the Company and Sub of their
respective covenants and obligations under this Agreement.
"Governmental Body" means any:
(a) nation, province, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Intellectual Property Rights" means any or all of the following and
all rights in and arising out of: (i) all United States and foreign patents and
utility models and applications therefor and all reissues, divisions,
re-examinations, renewals, extensions, provisionals, and continuations, and
equivalent rights arising therefrom anywhere in the world in inventions and
discoveries including without limitation invention disclosures ("Patents"); (ii)
all trade secrets and other rights in know-how and confidential or proprietary
information; (iii) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto throughout the world
("Copyrights"); (iv) all chemical formulations,
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clinical data and pre-clinical data; (v) all industrial designs and any
registrations and applications therefor throughout the world; (vi) all rights in
World Wide Web addresses and domain names and applications and registrations
therefor; (vii) all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world ("Trademarks"); and (viii)
any similar, corresponding or equivalent rights to any of the foregoing anywhere
in the world, including, without limitation, moral rights.
"Knowledge" --an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director, officer, partner, executor, or trustee of such Person (or
in any similar capacity) has, or at any time had, Knowledge of such fact or
other matter.
"Material Adverse Effect" shall mean a material adverse effect on
the Business Condition of the corporate entity and its subsidiaries, taken as a
whole, other than as a result of (i) general economic or industry conditions, or
(ii) performance by such corporate entity of its obligations under this
Agreement.
"Ordinary Course of Business" --an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Parent SEC Reports" has the meaning set forth in Section 6.5.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Registered Intellectual Property Rights" means all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related to
Trademarks; (iii) Copyrights registrations and applications to register
Copyrights; and (iv) any other
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Technology that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any state,
government or other public or private legal authority at any time.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"SEC" means the United States Securities and Exchange Commission.
"Technology" shall mean any or all of the following: (i) works of
authorship; (ii) inventions (whether or not patentable), improvements, and
technology; (iii) proprietary and confidential information, including technical
data and customer and supplier lists, trade secrets and know how; (iv)
databases, data compilations and collections and technical data; (v) logos,
trade names, trade dress, trademarks, service marks; (vi) World Wide Web
addresses, domain names and sites; (vii) tools, methods and processes; and
(viii) all instantiations of the foregoing in any form and embodied in any
media.
2. The Merger
2.1 Merger; Effective Time. Subject to the terms and conditions of
this Agreement and the applicable provisions of the Delaware General Corporation
Law ("Delaware Law"), Sub will be merged with and into the Company (the
"Merger"), the separate existence of Sub shall cease and the Company shall
continue as the surviving corporation and as a wholly owned subsidiary of
Parent. In accordance with the provisions of this Agreement, the Certificate of
Merger shall be filed with the Delaware Secretary of State in accordance with
Delaware Law and each issued and outstanding share of capital stock, of the
Company ("Company Capital Stock"), shall be converted into shares of Common
Stock, $0.006 par value, of Parent ("Parent Common Stock") in the manner
contemplated by Section 3. The Merger shall become effective at the time of the
acceptance of the Certificate of Merger by the Delaware Secretary of State (the
date of such acceptance being hereinafter referred to as the "Effective Date"
and the time of such acceptance being hereinafter referred to as the "Effective
Time").
2.2 Closing. The closing of the Merger (the "Closing") will take at
the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 5300
Carillon Point, Kirkland, Washington 98033, on the date hereof, or at such other
time, date and location as the Parties hereto agree in writing (the "Closing
Date").
2.3 Effect of the Merger. At the Effective Time, (i) the separate
existence of Sub shall cease and Sub shall be merged with and into the Company
(Sub and the Company are sometimes referred to herein as the "Constituent
Corporations" and the Company after the Merger is sometimes referred to herein
as the "Surviving Corporation"), (ii) the Certificate of Incorporation of Sub in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation; provided, however, that Article I of
the Certificate of Incorporation of the Surviving Corporation shall be amended
to read as follows: "The name of the corporation is Atossa HealthCare, Inc.",
(iii) the Bylaws of Sub in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation, (iv) the directors of Sub shall be
the directors of the Surviving Corporation until their successors shall have
been duly elected and qualified, (v) the officers of Sub shall be the initial
officers of the Surviving Corporation until their successors have been duly
appointed and qualified,
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(vi) all shares of capital stock of Sub shall be canceled, and (vii) the Merger
shall, from and after the Effective Time, have all the effects provided by
applicable law.
3. Effect of Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates; Additional Payments3.1 Exchange of Stock; Rights to
Additional Payments. As of the Effective Time, the shares of Company Capital
Stock that are issued and outstanding immediately prior to the Effective Time
(other than shares, if any, held by Persons exercising dissenters' rights in
accordance with Delaware Law as provided for in Section 3.8 below) shall, by
virtue of the Merger and without any action on the part of Company Stockholders,
be converted into the right to receive 600,000 shares of Parent Common Stock
(the "Merger Consideration") on a pro rata basis based upon the number of shares
of Company Capital Stock held by each.
3.2 Conversion of Sub Common Stock. Each share of common stock,
$0.01 par value, of Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation. Each stock certificate of Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
3.3 Adjustments to Parent Common Stock. The number of shares of
Parent Common Stock issuable hereunder shall be adjusted to reflect fully the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or
Company Capital Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Capital Stock occurring after the
date hereof.
3.4 Fractional Shares. No fractional shares of Parent Common Stock
shall be issued in the Merger. In lieu thereof, any fractional share shall be
rounded up to the nearest whole share of Parent Common Stock.
3.5 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall
appoint itself or American Stock Transfer and Trust Co. to act as the exchange
agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Parent Common Stock. Promptly after the
Effective Date, Parent shall make available for exchange in accordance with this
Section 3, through such reasonable procedures as Parent may adopt, the shares of
Parent Common Stock issuable pursuant to Section 3.1 in exchange for outstanding
shares of Company Capital Stock.
(c) Exchange Procedures. Within ten (10) days after the
Effective Date, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock (the "Certificates")
whose shares are being converted into the Merger Consideration pursuant to
Section 3.1 hereof, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and which
shall be in such form and have such other provisions as Parent may reasonably
specify, including appropriate investment representations)(the "Letter of
Transmittal") and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent,
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together with such letter of transmittal and a Stockholder Certificate in the
form of Exhibit C, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor the number of shares of Parent Common
Stock to which the holder of Company Common Stock is entitled pursuant to
Section 3.1 hereof. The Certificate so surrendered shall forthwith be canceled.
No interest will accrue or be paid to the holder of any outstanding Company
Common Stock. From and after the Effective Date, until surrendered as
contemplated by this Section 3.6, each Certificate shall be deemed for all
corporate purposes to evidence the number of shares of Parent Common Stock into
which the shares of Company Common Stock represented by such Certificate have
been converted.
(d) No Further Ownership Rights in Capital Stock of the
Company. The Merger Consideration delivered upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Company Capital Stock. There shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of Company Capital
Stock which were outstanding immediately prior to the Effective Date. If, after
the Effective Date, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section
3.6, provided that the presenting holder is listed on the Company's stockholder
list as a holder of Company Capital Stock.
(e) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock.
(f) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(g) Lost, Stolen or Destroyed Certificates. In the event that
any certificates evidencing shares of Company Capital Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of Parent Common Stock as may be
required pursuant to Section 3.1.
(h) No Liability. Notwithstanding anything to the contrary in
this Section 3.6, none of the Exchange Agent, the Surviving Corporation or any
Party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
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3.6 Taking of Necessary Action; Further Action. Parent, Sub and the
Company shall take all such actions as may be necessary or appropriate in order
to effect the Merger as promptly as possible. If, at any time after the
Effective Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of such corporation
are fully authorized in the name of the corporation or otherwise to take, and
shall take, all such action.
3.7 Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with Delaware Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into or represent
a right to receive the Merger Consideration, but the holder thereof shall only
be entitled to such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration, without interest thereon, upon surrender of the
Certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands.
3.8 Dissenting Shares After Payment of Fair Value. Dissenting
Shares, if any, after payments of fair value in respect thereto have been made
to dissenting stockholders of the Company pursuant to Delaware Law, shall be
canceled.
3.9 Tax and Accounting Consequences. It is intended by the Parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) qualify for accounting treatment as a purchase. Each Party has consulted
with its own tax advisors and accountants with respect to the tax and accounting
consequences, respectively, of the Merger.
4. Securities Act Compliance. The shares of Parent Common Stock issued in
connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), by reason of Rule 506 of Regulation D thereof and, as such, will
constitute "restricted securities" within the meaning of Rule 144 promulgated
thereunder. The certificates for the shares of Parent Common Stock to be issued
in the Merger shall bear appropriate legends to identify such privately placed
shares as being restricted under the Securities Act, to comply with applicable
state securities laws and, if applicable, to notice the restrictions on transfer
of such shares. It is acknowledged and understood that Parent is relying upon
certain written representations made by the Company Stockholders in the
Stockholder Certificates in substantially the form attached hereto as Exhibit C.
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5. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent that the statements contained in this Section
5 are correct and complete as of the date of this Agreement.
5.1 Organization, Qualification, and Corporate Power. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each other jurisdiction where
such qualification is required. There is no state other than Washington in which
the Company owns any property or in which it has any employees, offices or
operations. The Company has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The operations now being conducted by the Company have not been
conducted under any other name since its inception. The copies of the Company's
Certificate of Incorporation, Bylaws, minute books, and stock ledger which have
been delivered to Parent are accurate, correct and complete as of the date
hereof and shall be as of the Effective Time.
5.2 Authorization. The Company has full power and authority to
execute and deliver this Agreement and all agreements and instruments delivered
pursuant hereto (the "Ancillary Agreements") to which it is a Party, and,
subject to receipt of the requisite approval of its stockholders, to consummate
the transactions contemplated hereunder and to perform its obligations hereunder
and no other proceedings on the part of the Company are necessary to authorize
the execution, delivery and performance of this Agreement. This Agreement and
the Contemplated Transactions have been approved by the unanimous vote of the
Company's Board of Directors. This Agreement constitutes the valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms and conditions. Other than (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, and (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, the Company need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
5.3 Capitalization.
(a) Capital Stock. The entire authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, 3,030,612 of which are
issued and outstanding, and 10,000,000 shares of Preferred Stock, none of which
are issued or outstanding. All of the issued and outstanding shares of capital
stock have been duly authorized, are validly issued, fully paid, non-assessable
and were not issued in violation of any preemptive rights, rights of first
refusal, or any similar rights and are held of record by the Company
Stockholders as set forth in Section 5.3(a) of the Company Disclosure Letter.
All of the outstanding shares of capital stock have been offered, issued and
sold by the Company in compliance with applicable federal and state securities
laws.
(b) No Other Rights or Agreements. There are no subscriptions,
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Company is a party or by which it is bound
obligating Company to issue, deliver or sell, or cause to be issued, delivered
or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of Company or obligating Company to grant,
extend, accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement. As of the date
of this Agreement, there are no
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registration rights and there is no voting trust, proxy, rights plan,
antitakeover plan or other agreement or understanding to which Company is a
party or by which it is bound with respect to any equity security of any class
of Company. As a result of the Merger, Parent will be the sole beneficial owner
of all outstanding Company Capital Stock and all rights to acquire or receive
any Company Capital Stock, whether or not such Company Capital Stock is
outstanding.
5.4 Noncontravention. Neither the execution and the delivery of this
Agreement by the Company nor the consummation of the Contemplated Transactions
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of its Certificate of Incorporation or bylaws, or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any Party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under, any agreement, contract, lease, license, instrument,
franchise, permit, mortgage, indenture or other arrangement to which the Company
is a Party or by which it is bound or to which any of its assets are subject (or
result in the imposition of any Security Interest upon any of its assets).
5.5 Fees. The Company has no liability or obligation to pay any fees
or commissions to any broker, finder, agent or attorney, with respect to the
transactions contemplated by this Agreement.
5.6 Financial Statements. Section 5.6 of the Company Disclosure
Letter contains the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income and cash
flows as of and for the fiscal years ended December 31, 1999 for the Company;
and (ii) an unaudited balance sheet and statements of income and cash flows (the
"Most Recent Financial Statements") as of and for the 6 months ended June 30,
2000 (the "Most Recent Fiscal Period End") for the Company. The Financial
Statements are in accordance with the books and records of the Company and
present fairly the financial condition of the Company as of such dates and the
results of operations of the Company for such periods.
5.7 Subsidiaries. The Company does not have, and never has had, any
subsidiaries and does not otherwise own, and has not otherwise owned, any shares
of or any interest in, or control, directly or indirectly, any other
corporation, partnership, association, joint venture or other business entity.
5.8 Title to Assets and Property. Company does not own (and has
never owned) any real property. Company does not lease any real or personal
properties. Company has good and defensible title to all of its real and
personal properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby.
5.9 Events Subsequent to Most Recent Fiscal Period End. Since the
Most Recent Fiscal Period End, there has not been any material adverse change in
the Business Condition of the Company.
5.10 Legal Compliance. The Company has complied with all material
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof). No
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action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, notice or inquiry has been filed or commenced against the Company by any
governmental body alleging any failure to so comply.
5.11 Tax Matters All taxes, including without limitation, income,
property, sales, use, franchise, added value, withholding, and social security
taxes, imposed by the United States, any state, municipality, other local
government or other subdivision or instrumentality of the United States, or any
foreign country or any state or other government thereof, or any other taxing
authority, that are due or payable by Company, and all interest and penalties
thereon (unless disputed), other than taxes which are not yet due and payable,
have been paid in full, all tax returns required to be filed in connection
therewith have been prepared accurately and duly and timely filed, and all
deposits required by law to be made by Company with respect to employees'
withholding taxes have been duly made. Company is not delinquent in the payment
of any foreign or domestic tax, assessment or governmental charge or deposits,
and Company does not have a tax deficiency or claim outstanding, proposed or
assessed against it, and there is no basis for any such deficiency or claim.
Company is not a party to a tax allocation or sharing agreement.
5.12 Intellectual Property. 5.12(a) of the Company Disclosure Letter
lists all rights to Company Intellectual Property, including but not limited to,
Registered Intellectual Property Rights owned by, filed in the name of, or
applied for, by the Company (the "Company Registered Intellectual Property
Rights") and lists any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property Rights or Company Intellectual Property.
(b) The Company has no knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
Without limiting the foregoing, Company knows of no information, materials,
facts, or circumstances, including any information or fact that would constitute
prior art, that would render any of the Company Registered Intellectual Property
Rights invalid or unenforceable, or would adversely effect any pending
application for any Company Registered Intellectual Property Right which the
Company has a present duty to disclose and the Company has not misrepresented,
or failed to disclose, and has no knowledge of any misrepresentation or failure
to disclose, any fact or circumstances in any application for any Company
Registered Intellectual Property Right that would constitute fraud or a
misrepresentation with respect to such application or that would otherwise
affect the validity or enforceability of any Company Registered Intellectual
Property Right.
(c) Each item of Company Intellectual Property is free and
clear of any Security Interests. The Company is the exclusive owner or exclusive
licensee of all Company Intellectual Property.
(d) All Company Intellectual Property will be fully
transferable, alienable or licensable by Surviving Corporation and/or Parent
without restriction and without payment of any kind to any third party.
(e) All Technology used in or necessary to the conduct of
Company's business as presently conducted or currently contemplated to be
conducted by the Company was written and created solely by either (i) employees
of the Company acting within the scope of their employment or (ii) by third
parties who have validly and irrevocably assigned all of their rights, including
Intellectual
10
Property Rights therein, to the Company, and no third party owns or has any
rights to any of the Company Intellectual Property.
(f) The Company has not transferred ownership of, or granted
any exclusive license of or right to use, or authorized the retention of any
exclusive rights to use or joint ownership of, any Technology or Intellectual
Property Right that is or was Company Intellectual Property, to any other
person.
(g) To the Company's knowledge, no person is infringing or
misappropriating any Company Intellectual Property Right.
(h) No Company Intellectual Property or service of the Company
is subject to any proceeding or outstanding decree, order, judgment or
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(i) Neither this Agreement nor the transactions contemplated
by this Agreement, including the assignment to Parent or Surviving Corporation,
by operation of law or otherwise, of any contracts or agreements to which the
Company is a party, will result in (i) either Parent's or the Surviving
Corporation's granting to any third party any right to or with respect to any
Technology or Intellectual Property Right owned by, or licensed to, either of
them, (ii) either the Parent's or the Surviving Corporation's being bound by, or
subject to, any non-compete or other restriction on the operation or scope of
their respective businesses, or (iii) either the Parent's or the Surviving
Corporation's being obligated to pay any royalties or other amounts to any third
party in excess of those payable by Parent or Surviving Corporation,
respectively, prior to the Closing.
(j) There are no royalties, fees, honoraria or other payments
payable by the Company to any person or entity by reason of the ownership,
development, use, license, sale or disposition of the Company Intellectual
Property.
5.13 Contracts. Section 5.13 of the Company Disclosure Letter lists
all of the written or oral contracts, agreements, commitments and other
arrangements to which the Company is a Party or by which the Company or any of
its assets is bound.
5.14 Absence of Litigation. There are (and since Company's inception
there have been) no claims, actions, suits or proceedings pending or, to the
knowledge of Company, threatened (or any governmental or regulatory
investigation pending or, to the knowledge of Company, threatened) against
Company or any properties or rights of Company, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign. Neither Company nor any of its properties or rights is subject to any
outstanding court or Governmental Body injunction, order, decree, ruling or
charge.
5.15 Guaranties. The Company is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
6. Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company that the statements contained in this
Section 6 are correct and complete as of the date of this Agreement.
11
6.1 Organization, Qualification, and Corporate Power. Parent and Sub
are corporations duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Parent and Sub are duly authorized to conduct
business and are in good standing under the laws of each other jurisdiction
where such qualification is required and in which the failure to so qualify is
reasonably likely to have a Material Adverse Effect on Parent or Sub
respectively. Parent and Sub have full corporate power and authority, and have
all necessary licenses and permits, to carry on the businesses in which they are
engaged and to own and use the properties owned and used by them.
6.2 Authorization. Parent and Sub have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which they
are Parties, and to consummate the transactions contemplated hereunder and to
perform their obligations hereunder, and no other proceedings on the part of
Parent or Sub are necessary to authorize the execution, delivery and performance
of this Agreement and the Ancillary Agreements to which they are Parties. This
Agreement and the Ancillary Agreements to which they are Parties and the
transactions contemplated hereby and thereby have been approved by the Board of
Directors of both Parent and Sub. The consummation of the Contemplated
Transactions does not require the approval or consent of the stockholders of
Parent. This Agreement and the Ancillary Agreements to which they are Parties
constitute the valid and legally binding obligations of Parent and/or Sub,
enforceable against Parent and/or Sub in accordance with their respective terms
and conditions. Other than (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, (iv) the filing of the Merger
Amendment with the Secretary of State of the State of Delaware, and (iii) any
applicable filings required under the HSR Act, neither Parent nor Sub need give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
6.3 Capitalization.
(a) As of April 10, 2000, the authorized capital stock of
Parent consists of (i) 100,000 shares of Preferred Stock, $0.01 par value, none
of which is issued or outstanding, and (ii) 25,000,000 shares of Common Stock,
$0.006 par value, of which 6,190,485 shares are issued and outstanding. All of
the outstanding shares of Parent's capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in this
Section 6.3 or as described in the Parent SEC Reports, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of Parent or
obligating Parent to issue or sell any shares of capital stock of, or other
equity interests in, Parent.
(b) The shares of Parent Common Stock to be issued pursuant to
Section 3.1 of this Agreement are duly authorized and reserved for issuance, and
upon issuance thereof in accordance with this Agreement and the Certificate of
Merger will be validly issued, fully paid and nonassessable.
6.4 Noncontravention. Neither the execution and the delivery of this
Agreement nor the consummation of the Contemplated Transactions, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Parent or Sub is subject or any provision
of their respective charters or bylaws, or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
Party the right to accelerate, terminate, modify, or cancel, or require any
notice under, any agreement, contract, lease, license, instrument, or other
arrangement to which Parent or Sub is a Party or by which either is bound or to
which any of their assets is subject which has been filed as an exhibit to the
Parent SEC Reports.
12
6.5 SEC Filings. Parent has filed all forms, reports and documents
required to be filed with the SEC since December 31, 1999, and has heretofore
made available to the Company, in the form filed with the SEC, (i) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, (ii) its
Quarterly Report on Form 10-Q for the period ended March 31, 2000, (iii) the
proxy statement relating to Parent's annual meeting of stockholders held on June
20, 2000 and (iv) its Current Reports on Form 8-K dated March 16, 2000, and July
18, 2000, (collectively, the "Parent SEC Reports"). The Parent SEC Reports (i)
were prepared in accordance with the requirements of the Securities Exchange Act
of 1934, as amended, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
6.6 Brokers' Fees. Parent does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
6.7 Rights Agreement. In connection with and as a result of the
Contemplated Transactions, neither Quay nor his Affiliates, individually or
together, shall be deemed an "Acquiring Person" pursuant to the Rights Agreement
between Parent and American Stock Transfer & Trust Company dated as of February
22, 2000 (the "Rights Agreement").
7. Post-Closing Covenants. With respect to the period following the
Effective Time:
7.1 General. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party.
7.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time involving the Company or (B) arising out of Parent's
operation of the business of the Surviving Corporation following the Effective
Time in the manner in which it is presently conducted and planned to be
conducted, each of the other Parties will cooperate with the Party and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party.
7.3 Confidentiality. Each of the Parties hereto hereby agrees to
keep such information or Knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential, except to
the extent that such information is or becomes publicly known or available or is
independently acquired or developed. In this regard, the Company and its
employees and agents acknowledge that Parent's Common Stock is publicly traded
and that any information obtained during the course of its due diligence could
be considered to be material non-public information within the meaning of
federal and state securities laws. Accordingly, the Company and its employees
and agents, acknowledge and agree
13
not to engage in any transactions in Parent's Common Stock in violation of
applicable insider trading laws.
7.4 Tax Free Reorganization. The Parties intend to adopt this
Agreement and the Merger as a tax-free plan of reorganization under Section
368(a)(1)(A) of the code by virtue of the provisions of Section 368(a)(2)(E) of
the Code. The Parent Common Stock issued in the Merger will be issued solely in
exchange for the Company Capital Stock, and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to the
consideration paid for the Company Capital Stock. No consideration that could
constitute "other property" within the meaning of Section 356(b) of the Code is
being transferred by Parent for the Company Capital Stock in the Merger. The
Parties shall not take a position on any tax return inconsistent with this
Section 7.4 unless there has been a final "determination" (within the meaning of
Section 1313(a) of the Code) to the contrary. From and after the Effective Time,
neither Parent, Sub nor, the Company shall take any action that could reasonably
be expected to cause the Merger not to be treated as a reorganization within the
meaning of Section 368 of the Code.
8. Closing Deliverables.
8.1 Items to Be Delivered to Parent and Sub. At the Closing, the
following shall be delivered to Parent and Sub unless waived, in writing, by
Parent and Sub:
(a) [reserved]
(b) Legal Opinion. Parent and Sub shall have received a legal
opinion from Wilson Sonsini Goodrich & Rosati, P.C., legal counsel to Company,
substantially in the form attached hereto as Exhibit D.
(c) Employment Agreement. Steven C. Quay shall have entered
into the Employment Agreement in substantially the form attached hereto as
Exhibit B.
(d) Good Standing Certificate. The Company shall deliver to
Parent and Sub a Certificate of Good Standing issued by the Delaware Secretary
of State and dated as of the Closing Date.
(e) Secretary's Certificate. The Company shall deliver a
certified true copy of the resolutions of its Board of Directors and its
stockholders evidencing approval of this Agreement and the Contemplated
Transactions.
8.2 Items to Be Delivered to the Company. At the Closing, the
following shall be delivered to the Company unless waived, in writing, by the
Company:
(a) [reserved]
(b) Legal Opinion. The Company shall have received from Bruce
R. Thaw, Esq., counsel to Parent and Sub, an opinion in form and substance as
set forth in Exhibit E attached hereto, addressed to the Company, and dated as
of the Closing Date.
(c) Employment Agreement. Parent shall have entered into the
Employment Agreement in substantially the form attached hereto as Exhibit B.
14
(d) Good Standing Certificate. Parent and Sub shall each
deliver to the Company a Certificate of Good Standing issued by the Delaware
Secretary of State and dated as of the Closing Date.
(e) Secretary's Certificate. Parent shall deliver to the
Company a certified true copy of the resolutions of its Board of Directors
evidencing (i) approval of this Agreement and the Contemplated Transactions,
(ii) the election of Steven C. Quay ("Quay") as Chairman, Chief Executive
Officer and President of Parent, (iii) the election of Quay to the Board of
Directors of the Company, (iv) that Quay and any of his Affiliates, individually
or together, are exempted by the Board from the definition of "Acquiring Person"
as set forth in and pursuant to the Board's authority under the Rights
Agreement, and (v) the grant to Quay of options to purchase common stock of
Parent, as provided by the Employment Agreement. Sub shall deliver to the
Company a certified true copy of the resolutions of its Board of Directors and
its stockholders evidencing approval of this Agreement and the Contemplated
Transactions.
9. Survival of Representations, Warranties and Covenants. All covenants of
Parent and the Company to be performed prior to the Effective Time, and all
representations and warranties of Parent and the Company in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Merger for
a period ending six (6) months from the Effective Time.
10. Miscellaneous.
10.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that Parent may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case Parent will
use its Best Efforts to advise the Company prior to making the disclosure). In
furtherance of the foregoing sentence, the Parties agree and acknowledge that
Parent will issue a press release following the execution and delivery of this
Agreement by the Parties.
10.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, and their
respective successors and permitted assigns.
10.3 Entire Agreement and Modification. This Agreement (including
the exhibits hereto) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof. This Agreement may
not be amended except by a written agreement executed by all Parties.
10.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties; provided, however, that Parent may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder.
10.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
15
10.6 Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed to the intended recipient as set forth below:
If to Parent:
Nastech Pharmaceutical Company Inc.
45 Davids Drive
Hauppauge, NY 11758
Attention: Andrew Zinzi
If to the Company:
Atossa HealthCare, Inc.
23632 Highway 99, Suite F-454
Edmonds, WA 98026
Attention: Steven C. Quay
Facsimile: 425-697-6226
Copy to:
Wilson Sonsini Goodrich & Rosati
5300 Carillon Point
Kirkland, WA 98033
Attention: Patrick J. Schultheis
Facsimile: 425-576-5899
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties ten (10) days' advance written notice to the other Parties pursuant to
the provisions above.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
10.9 Waivers. The rights and remedies of the Parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any Party in exercising any right, power or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or
16
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one Party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other Party;
(b) no waiver that may be given by a Party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
Party will be deemed to be a waiver of any obligation of such Party or of the
right of the Party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.11 Expenses. Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby; provided, however, that
in the event the Merger is consummated, Parent will bear the costs and expenses
(including accounting and legal fees and expenses) of the Company incurred in
connection with this Agreement and the transactions contemplated thereby.
10.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
10.13 Company Disclosure Letter.
(a) The disclosures in the Company Disclosure Letter, and
those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Company Disclosure Letter (other
than an exception expressly set forth as such in the Company Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
10.14 Attorneys' Fees. If any legal proceeding or other action
relating to this Agreement is brought or otherwise initiated, the prevailing
Party shall be entitled to recover reasonable attorneys fees, costs and
disbursements (in addition to any other relief to which the prevailing Party may
be entitled).
10.15 Further Assurances. The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
17
10.16 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
18
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on of
the date first above written.
Parent: NASTECH PHARMACEUTICAL COMPANY, INC.
By: /s/ Andrew Zinzi
-----------------------------------
Title: Chief Financial Officer
Company: ATOSSA HEALTHCARE, INC.
By: /s/ Steven C. Quay
-----------------------------------
Name: Steven C. Quay
Title: President & CEO
Sub: ATOSSA ACQUISITION CORPORATION
By: /s/ Andrew Zinzi
-----------------------------------
|
Exhibits A, B, C, D & E Omitted
|
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, dated this 8th day of August, 2000 between Nastech
Pharmaceutical Company Inc., a Delaware corporation (the "Company") with offices
at 45 Davids Drive, Hauppauge, NY and Steven C. Quay, M.D., Ph.D. (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Company and the Executive wish to enter into an employment
and compensation arrangement on the following terms and conditions;
1. Employment. Subject to the terms and conditions of this Agreement, the
Company agrees to employ the Executive as its President, Chief Executive Officer
and Chairman of the Board of Directors during the Employment Period (as defined
in Section 7) and to perform such acts and duties and furnish such services to
the Company and its affiliates and related parties as the Company's Board of
Directors shall from time to time direct. The Executive shall have general and
active charge of the business and affairs of the Company as its Chief Executive
Officer and, in such capacity, shall have responsibility for the day-to-day
operations of the Company, subject to the authority and control of the Board of
Directors of the Company. During the Employment Period, the Company shall
continue to take such actions as necessary to cause the Executive's nomination
as Chairman of the Board of Directors of the Company. The Executive hereby
accepts such employment and agrees to devote his full time and best efforts to
the duties provided herein.
2. Compensation. For services rendered to the Company during the term of
this Agreement, the Company shall compensate the Executive with an initial
salary, payable in weekly installments, of $300,000 per annum.
3. Incentive Compensation. The Executive shall also be entitled to annual
incentive compensation of up to fifty thousand ($50,000) dollars if the
Company's business objectives as set forth in the Company's annual business plan
are achieved. The nature and extent of such incentive compensation shall be
determined by the Compensation Committee no later than ninety (90) days
following the end of the Company's fiscal year.
4. Stock Options. As further compensation, Employee shall be issued
600,000 incentive and non-qualified stock options (subject to allowable
limitations set forth in the Internal Revenue Code of 1986, as amended,
hereinafter "stock options") upon the effective date of this Agreement, as
follows: 300,000 stock options shall be issued with an exercise price equal to
the fair market value of the Company's common stock as of the date of this
Agreement; 200,000 stock options shall be issued with an exercise price of
$12.00/share; and the remaining 100,000 stock options shall be issued with an
exercise price of $15.00/share. All of the options shall vest at the rate of
33.33% per full year of service, and shall not be vested for interim periods on
a pro-rata basis.
If the Executive's employment is terminated (i) by the Company for any
reason other than for Cause or (ii) by the Executive for Good Reason: (x) the
portion of the stock option which was exercisable at termination shall remain
exercisable for a period of 1 year after such date; and (y) with respect to that
portion, if any, of the stock option which was to become vested at the next
anniversary date of this
Agreement, but not yet exercisable at termination, such portion shall
immediately become exercisable and shall remain exercisable until the end of
such 1-year period. The stock option shall be memorialized in a separate written
stock option agreement attached hereto as Exhibit A.
The Common Stock to be issued upon the exercise of said options shall,
within 90 days of this Agreement, be registered under the Securities Act of 1933
pursuant to a Form S-8.
5. Benefits. During the Employment Period, the Company shall provide or
cause to be provided to the Executive such employee benefits as are provided to
other executive officers of the Company, including family medical and dental,
disability and life insurance, and participation in pension and retirement
plans, incentive compensation plans, stock option plans and other benefit plans.
6. Vacation. The Executive shall be entitled to annual vacations in
accordance with the Company's vacation policies in effect from time to time for
executive officers of the Company.
7. Term; Employment Period. The "Employment Period" shall commence on the
date of this Agreement and shall terminate three years thereafter, unless
extended by written agreement between the parties or unless earlier terminated
pursuant to Section 8. If the Executive shall remain in the full-time employ of
the Company beyond the Employment Period without any written agreement between
the parties, this Agreement shall be deemed to continue on a month to month
basis and either party shall have the right to terminate this Agreement at the
end of any ensuing calendar month on written notice of at least 30 days.
8. Termination.
(a) Executive's employment with the Company shall be "at will". Either the
Company or the Executive may terminate this Agreement and Executive's employment
at any time, with or without Cause or Good Reason (as such terms are defined
below), in its or his sole discretion, upon thirty (30) days' prior written
notice of termination.
(b) Without limiting the foregoing Section 8(a), (i) the Executive may
terminate his employment with the Company at any time for Good Reason, or (ii)
the Company may terminate his employment at any time for Cause. "Good Reason"
shall mean a termination of employment as a result of (i) a substantial
diminution in the Executive's responsibilities, (ii) a reduction of the
Executive's base salary below $300,000, (iii) a demotion in the Executive's
title or status, or (iv) at any time prior to the third anniversary of the date
hereof, the Executive and a nominee selected by the Executive reasonably
acceptable to the Company (such nominee, at the option of the Executive, to be
changed prior to any annual or other meeting of the stockholders of the Company
at which directors are elected or due to the death or resignation of such
nominee) do not serve on the Board of Directors of the Company (unless due to
death or resignation, or, in the case of the nominee only, removal or lost
re-election as a result of the vote against such nominee of non-affiliates of
the Company and such vote represents the majority of votes cast). "Cause" shall
mean (i) the Executive's willful, repeated or neglectful failure to perform his
duties hereunder or to comply with any reasonable or proper direction given by
or on behalf of the Company's Board of Directors following thirty (30) days
written notice to such effect; (ii) the Executive being guilty of serious
misconduct on the Company's premises or elsewhere, whether during the
performance of his duties or not, which may cause damage to the reputation of
the Company or render it difficult for the Executive to satisfactorily continue
to perform his duties; (iii) the Executive being found guilty in a criminal
court of any offense of a nature likely to affect the reputation of the Company
or to prejudice its interests if the Executive were to continue to be employed
by the Company; (iv) the
2
Executive's commission of any material act of fraud, theft or dishonesty, or any
intentional tort against the Company; or (v) the Executive's violation of any of
the material terms, covenants, representations or warranties contained in this
Agreement and such violation is not cured within thirty (30) days following
receipt of written notice from the Company of such violation.
(c) "Disability" shall mean total and permanent disability as defined in
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
(d) "Termination Date" shall mean (i) if this Agreement is terminated on
account of death, the date of death; (ii) if this Agreement is terminated for
Disability, the date that such Disability is established; (iii) if this
Agreement is terminated by the Company, the date on which a notice of
termination is given to the Executive; (iv) if the Agreement is terminated by
the Executive, the date the Executive ceases work; or (v) if this Agreement
expires by its terms, the last day of the term of this Agreement.
9. Severance.
(a) If (i) the Company terminates the employment of the Executive against
his will and without Cause, or (ii) the Executive terminates his employment for
Good Reason, then (A) Executive shall be entitled to receive salary, target
incentive compensation and vacation accrued through the Termination Date plus
the lesser of (x) 1 years' salary computed using the latest applicable salary
rate, or (y) the balance of the Executive's compensation hereunder to the end of
the term of this Agreement computed using the latest applicable salary rate, and
(B) notwithstanding the vesting period provided for in the Company's Stock
Option Plan and any related stock option agreements between the Company and the
Executive for all stock options granted Executive by the Company pursuant to
Section 4 hereof or otherwise, all of such options shall be fully vested and
exercisable upon such termination and shall remain exercisable for a period of
one year from the date of termination. The Company shall make such termination
payment within 30 days of such termination. Notwithstanding the foregoing, the
Company shall not be required to pay any severance pay for any period following
the Termination Date if the Executive materially violates the provisions of
Section 15, Section 16 or Section 17 of this Agreement and such violation is not
cured within thirty (30) days following receipt of written notice from the
Company of such violation.
(b) If (i) the Executive voluntarily terminates his employment other than
for Good Reason, (ii) the Executive's employment is terminated due to death or
Disability, or (iii) the Executive is terminated by the Company for Cause, then
the Executive shall be entitled to receive salary, accrued vacation and
reimbursement of expenses pursuant ot Section 10 hereof through the Termination
Date only.
(c) In addition to the provisions of Section 9(a) and 9(b) hereof, to the
extent COBRA shall be applicable to the Company or as provided by law, the
Executive shall be entitled to continuation of group health plan benefits for
the periods provided by law following the Termination Date if the Executive
makes the appropriate conversion and payments.
(d) The Executive acknowledges that, upon termination of his employment,
he is entitled to no other compensation, severance or other benefits other than
those specifically set forth in this Agreement.
10. Expenses. The Company shall pay or reimburse the Executive for all
expenses normally reimbursed by Company, reasonably incurred by him in
furtherance of his duties hereunder and authorized and approved by the Company
in compliance with such rules relating thereto as the Company
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may, from time to time, adopt and as may be required in order to permit such
payments as proper deductions to Company under the Internal Revenue Code of
1986, as amended, and the rule and regulations adopted pursuant thereto now or
hereafter in effect.
11. Facilities and Services. The Company shall furnish the Executive with
office space, secretarial, support staff and such other facilities and services
as shall be reasonably necessary for the performance of his duties under this
Agreement.
12. Mitigation Not Required. In the event this Agreement is terminated,
the Executive shall not be required to mitigate amounts payable pursuant hereto
by seeking other employment or otherwise. The Executive's acceptance of any such
other employment shall not diminish or impair the amounts payable to the
Executive pursuant hereto.
13. Place of Performance. The Executive shall perform his duties primarily
in Hauppauge, New York or locations within a reasonable proximity thereof,
except for reasonable travel as the performance of the Executive's duties may
require.
14. Insurance and Indemnity. During the Employment Period, if available at
reasonable costs, the Company shall maintain, at its expense, officers and
directors fiduciary liability insurance covering the Executive and all other
executive officers and directors in an amount of no less than $3,000,000. The
Company shall also indemnify the Executive, to the fullest extent permitted by
law, from any liability asserted against or incurred by the Executive by reason
of the fact that the Executive is or was an officer or director of the Company
or any affiliate or related party or is or was serving in any capacity at the
request of the Company for any other corporation, partnership, joint venture,
trust, employment benefit plan or other enterprise. This indemnity shall survive
termination of this Agreement.
15. Noncompetition.
(a) The Executive agrees that, except in accordance with his duties under
this Agreement on behalf of the Company, he will not during the term of this
Agreement: Participate in, be employed in any capacity by, serve as director,
consultant, agent or representative for, or have any interest, directly or
indirectly, in any enterprise which is engaged in the business of developing,
licensing, selling technology, products or services which are directly
competitive to any technology, products or services of the Company or any of its
subsidiaries during the term of the Executive's employment with the Company, or
which are directly competitive to any technology, products or services being
actively developed, with the bona fide intent to market same, by the Company or
any of its subsidiaries during the term of the Executive's employment with the
Company. In addition, the Executive agrees that for a period of one year after
the end of the term of this Agreement (unless this Agreement is terminated due
to a breach of the terms hereof by the Company in failing to pay to the
Executive all sums due him under the terms hereof, in which event the following
shall be inapplicable), the Executive shall observe the covenants set forth in
this Section 15 and shall not own, either directly or indirectly or through or
in conjunction with one or more members of his or his spouse's family or through
any trust or other contractual arrangement, a greater than five percent (5%)
interest in, or otherwise control either directly or indirectly, any
partnership, corporation, or other entity which is engaged in the business of
developing, licensing, selling technology, products or services which are
directly competitive to any to technology, products or services of the Company
or any of its subsidiaries during the term of the Executive's employment with
the Company, or which are directly competitive to any technology, products or
services being actively developed, with the bona fide intent to market same, by
the Company or any of its subsidiaries. Executive further agrees, for such one
year period following termination, to refrain from directly or
4
indirectly soliciting Company's collaborative partners, consultants, certified
research organizations, principal vendors, licensees or employees except any
such solicitation (i) in connection with developing, licensing or selling
technology, products or services which are not directly competitive to any
technology, products or services (A) of the Company or any of its subsidiaries,
or (B) being actively developed, with the bona fide intent to market same, by
the Company or any of its subsidiaries, and (ii) which does not have a material
adverse effect on the Company.
(b) The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 15 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of this Section 15 by injunction or specific
performance, and may obtain any other appropriate remedy available in equity.
16. Assignment of Patents. Executive shall disclose fully to the Company
any and all discoveries he shall make and any and all ideas, concepts or
inventions which he shall conceive or make during his period of employment
related to the technology, products, or services of the Company, or during the
period of six months after his employment shall terminate, which are in whole or
in part the result of his work with the Company. Such disclosure is to be made
promptly after each discovery or conception, and the discovery, idea, concept or
invention will become and remain the property of the Company, whether or not
patent applications are filed thereon. Upon request and at the expense of the
Company, the Executive shall make application through the patent solicitors of
the Company for letters patent of the United States and any and all other
countries at the discretion of the Company on such discoveries, ideas and
inventions, and to assign all such applications to the Company, or at its order,
forthwith, without additional payment by the Company during his period of
employment and for reasonable compensation for time actually spent by the
Executive at such work at the request of the Company after the termination of
the employment. The Executive shall give the Company, its attorneys and
solicitors, all reasonable assistance in preparing and prosecuting such
applications and, on request of the Company, to execute all papers and do all
things that may be reasonably necessary to protect the right of the Company and
vest in it or its assigns the discoveries, ideas or inventions, applications and
letters patent herein contemplated. Said cooperation shall also include all
actions reasonably necessary to aid the Company in the defense of its rights in
the event of litigation.
17. Trade Secrets.
(a) In the course of the term of this Agreement, it is anticipated that
the Executive shall have access to secret or confidential technical, scientific
and commercial information, records, data, formulations, specifications,
systems, methods, plans, policies, inventions, material and other knowledge
("Confidential Material") owned by the Company and its subsidiaries. The
Executive recognizes and acknowledges that included within the Confidential
Material are the Company's confidential commercial information, technology,
formulations, STA-T (Systemic Transnasal Absorption Technology) and know-how,
methods of manufacture, chemical formulations, device designs, pending patent
applications, clinical data, pre-clinical data and any related materials, all as
they may exist from time to time, and that they are valuable special and unique
aspects of the Company's business. All such Confidential material shall be and
remain the property of the Company. Except as required by his duties to the
Company, the Executive shall not, directly or indirectly, either during the term
of his employment or at any time thereafter, disclose or disseminate to anyone
or make use of, for any purpose whatsoever, any Confidential Material. Upon
termination of his employment, the Executive shall promptly deliver to the
Company all Confidential Material (including all copies thereof, whether
prepared by the Executive or
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others) which are in the possession or under the control of the Executive. The
Executive shall not be deemed to have breached this Section 17 if the Executive
shall be specifically compelled by lawful order of any judicial, legislative, or
administrative authority or body to disclose any confidential material or else
face civil or criminal penalty or sanction.
(b) The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 17 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of this Section 17 by injunction or specific
performance, and may obtain any other appropriate remedy available in equity.
18. Payment and Other Provisions After Change of Control
(a) In the event Executive's employment with the Company is terminated
following the occurence of a Change of Control either (x) by the Company for any
reason other than for Cause, death or Disability, or (y) by Executive for Good
Reason, and the date of such termination is (i) within one year following the
occurrence of such Change of Control , or (ii) prior to the date upon which all
options granted to the Executive pursuant to Section 4 hereof are fully
vested,then Executive shall be entitled to receive from the Company, in lieu of
the severance payment otherwise payable pursuant to Section 9(a), the following:
(i) Base Salary: The greater of (a) Executive's annual base salary as in
effect at the date of termination, or (b) the balance of Executive's base salary
compensation hereunder to the end of the term of this Agreement, shall be paid
on the date of termination;
(ii) Target Incentive Compensation: The amount of the Executive's target
incentive compensation under the applicable Executive Bonus Plan for the fiscal
year in which the date of termination occurs shall be paid on the date of
termination; and
(iii) Other Benefits: Notwithstanding the vesting period provided for in
the Company's Stock Option Plan and any related stock option agreements between
the Company and the Executive for all stock options ("options") granted
Executive by the Company pursuant to Section 4 hereof or otherwise, all of such
options shall be fully vested and exercisable upon a Change of Control and shall
remain exercisable for a period of one year from such Change of Control.
(b) For purposes of this Agreement, the term "Change of Control" shall
mean:
(i) The acquisition by any individual, entity or group (within the meaning
of Rule 13d-3 promulgated under the Exchange Act or any successor provision)
(any of the foregoing described in this Paragraph 18.b.i hereafter a "Person")
of 50% or more of either (a) the then outstanding shares of Capital Stock of the
Company (the"Outstanding Capital Stock") or (b) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the" Voting Securities"), provided, however, that any
acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of
its subsidiaries or (y) any Person that is eligible, pursuant to Rule 13d-1(b)
under the Exchange Act, to file a statement on Schedule 13G with respect to its
beneficial ownership of Voting Securities, whether or not such Person shall have
filed a statement on Schedule 13G, unless such Person shall have filed a
statement on Schedule 13D with respect to beneficial ownership of 50% or more of
the Voting
6
Securities or (z) any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not constitute a
Change of Control; or
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to the date
hereof whose election or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A, or any successor section,
promulgated under the Exchange Act); or
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with respect
to which all or substantially all holders of the Outstanding Capital Stock and
Voting Securities immediately prior to such Business Combination do not,
following such Business Combination, beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from the Business Combination; or
(iv) (a) a complete liquidation or dissolution of the Company or (b) a
sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, following such sale
or disposition, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to such sale
or disposition in substantially the same proportion as their ownership of the
Outstanding Capital Stock and Voting Securities, as the case may be, immediately
prior to such sale or disposition.
19. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail, return receipt requested to his residence in the case of the
Executive, or to its principal office in the case of the Company, or to such
other addresses as they may respectively designate in writing.
20. Entire Agreement; Waiver. This Agreement contains the entire
understanding of the parties and may not be changed orally but only by an
agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Waiver of or failure to
exercise any rights provided by this Agreement in any respect shall not be
deemed a waiver of any further or future rights.
7
21. Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any assignee of all or substantially
all of the Company's business or properties. The Executive's rights hereunder
are personal to and shall not be transferable nor assignable by the Executive.
22. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
23. Governing Law; Arbitration. This Agreement shall be construed in
accordance with and governed for all purposes by the laws and public policy of
the State of New York applicable to contracts executed and to be wholly
performed within such state. Any dispute or controversy arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the rules of the American Arbitration Association and judgment upon the award
may be entered in any court having jurisdiction thereover. The arbitration shall
be held in Suffolk County, New York or in such other place as the parties hereto
may agree.
24. Further Assurances. Each of the parties agrees to execute,
acknowledge, deliver and perform, and cause to be executed, acknowledged,
delivered and performed, at any time and from time to time, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and/or
assurances as may be necessary or proper to carry out the provisions or intent
of this Agreement.
25. Severability. The parties agree that if any one or more of the terms,
provisions, covenants or restrictions of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
26. Counterparts. This Agreement maybe executed in several counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
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IN WITNESS WHEREOF, NASTECH PHARMACEUTICAL COMPANY INC. has caused this
instrument to be signed by a duly authorized officer and the Executive has
hereunto set his hand the day and year first above written.
Company: NASTECH PHARMACEUTICAL COMPANY INC.
By: /s/ Andrew Zinzi
--------------------------------
Name: Andrew Zinzi
Title: Chief Financial Officer
Executive: /s/ Steven C. Quay
------------------------------------
Steven C. Quay, M.D., Ph.D
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Exhibits Omitted
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