-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HSim61yXtLsCGYFCv5jK8xufrSGtbLKKLRzFi6EnVF/+/pAYdWFwy2JgYIPbsdnE qEcrYnFBUdbrIf8QV4IE0g== 0000914121-04-000986.txt : 20040514 0000914121-04-000986.hdr.sgml : 20040514 20040514171210 ACCESSION NUMBER: 0000914121-04-000986 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20040514 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NORTH AMERICAN SCIENTIFIC INC CENTRAL INDEX KEY: 0000949876 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 954283918 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-49267 FILM NUMBER: 04808771 BUSINESS ADDRESS: STREET 1: 20200 SUNBURST ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187348600 MAIL ADDRESS: STREET 1: 20200 SUNBURST ST CITY: CHATSWORTH STATE: CA ZIP: 91311 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FRIEDE JOHN A CENTRAL INDEX KEY: 0001175935 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: NOMOS CORP STREET 2: 2591 WEXFORD BAYNE RD CITY: SEWICKLEY STATE: PA ZIP: 15143 BUSINESS PHONE: 7249348200 MAIL ADDRESS: STREET 1: NOMOS CORP STREET 2: 2591 WEXFORD BAYNE RD CITY: SEWICKLEY STATE: PA ZIP: 15143 SC 13D 1 ci691907-13d.txt STATEMENT OF ACQUISITION OF BENEFICIAL OWNERSHIP UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 NORTH AMERICAN SCIENTIFIC, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $.01 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 65715D100 - -------------------------------------------------------------------------------- (CUSIP Number) John A. Friede One Shore Road Rye, NY 10580 (914) 698-2015 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copies to: Malcolm P. Wattman, Esq. Cadwalader, Wickersham & Taft LLP 100 Maiden Lane New York, NY 10038 (212) 504-6000 May 4, 2004 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [_]. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP NO. 65715D100 Page 2 of 10 Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON John A. Friede - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [ ] (b) [X] - -------------------------------------------------------------------------------- SEC USE ONLY 3 - -------------------------------------------------------------------------------- SOURCE OF FUNDS (See Instructions) 5 OO - -------------------------------------------------------------------------------- CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 5 2(d) or 2(e)[ ] - -------------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 United States of America - -------------------------------------------------------------------------------- SOLE VOTING POWER 7 0 NUMBER OF -------------------------------------------------------- SHARES SHARED VOTING POWER BENEFICIALLY 8 2,563,603 OWNED BY EACH -------------------------------------------------------- REPORTING SOLE DISPOSITIVE POWER PERSON 9 1,382,074 WITH -------------------------------------------------------- SHARED DISPOSITIVE POWER 10 1,181,529 - -------------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 2,563,603 - -------------------------------------------------------------------------------- CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - -------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 16.3% - -------------------------------------------------------------------------------- TYPE OF REPORTING PERSON* 14 IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D CUSIP NO. 65715D100 Page 3 of 10 Pages Item 1. Security and Issuer. This Statement relates to shares of common stock, par value $.01 per share ("Issuer's Common Stock"), of North American Scientific, Inc., a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 20200 Sunburst Street, Chatsworth, California 91311. Item 2. Identity and Background. Prior to the Merger (as defined in Item 4 below), John A. Friede (hereinafter, "Mr. Friede") was a director and the largest stockholder of NOMOS Corporation, a Delaware corporation ("NOMOS"). Following and as a result of the Merger, which became effective on May 4, 2004, Mr. Friede became a director and the largest stockholder of the Issuer. The Issuer designs, develops and produces innovative radioactive products for the treatment of cancer. Mr. Friede's residence address is One Shore Road, Rye, NY 10580. During the last five years, Mr. Friede has not been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Mr. Friede is a citizen of the United States of America. Item 3. Source and Amount of Funds or Other Consideration. The information contained in Item 4 below, to the extent it relates to the source of funds used in connection with the transactions described in such Item 4 is incorporated herein by reference. Item 4. Purpose of Transaction. On May 4, 2004, NOMOS merged with and into AM Capital I, Inc., a Delaware corporation and a wholly owned subsidiary of the Issuer ("Merger Sub"), with Merger Sub being the surviving corporation and a wholly owned subsidiary of the Issuer (the "Merger"). The Merger was consummated pursuant to the terms of an Agreement and Plan of Merger dated October 26, 2003 (as amended by that certain First Amendment to Agreement and Plan of Merger dated November 25, 2003 and that certain Second Amendment to Agreement and Plan of Merger dated March 2, 2004, the "Merger Agreement"), among the Issuer, Merger Sub and NOMOS. A copy of the Merger Agreement is attached hereto as Exhibit 2.1(a), Exhibit 2.1(b) and Exhibit 2.1(c). The Merger Agreement, as amended, is incorporated herein by reference. As a result of the Merger, stockholders of NOMOS received: o 0.891 shares of Issuer Common Stock for each share of NOMOS common stock they held; o approximately 1.212 shares of Issuer Common Stock for each share of NOMOS Series A preferred stock they held; SCHEDULE 13D CUSIP NO. 65715D100 Page 4 of 10 Pages o 0.603 shares of Issuer Common Stock and $2.15 per share in cash for each share of NOMOS Series B preferred stock they held; and o 0.340 shares of Issuer Common Stock and $5.99 per share in cash for each share of NOMOS Series C preferred stock they held. As a result of the Merger, each outstanding stock option exercisable for NOMOS common stock was converted into an option to purchase that number of shares Issuer Common Stock as is equal to the number (rounding down any fractional shares) of shares of NOMOS common stock that were acquirable upon the exercise of the option multiplied by 0.891. Other than securities of the Issuer that Mr. Friede may receive as compensation from the Issuer in exchange for his services as a director and except as otherwise set forth in Item 6, Mr. Friede does not presently have any plan or proposal which relates to or would result in any of the events set forth in Item 4 of Schedule 13D. Pursuant to the Stock Purchase Agreement, as described in Item 6 below, the Annenberg Trust (as defined in Item 6 below), to which Mr. Friede is a co-trustee, will acquire 81,529 additional shares of Issuer Common Stock from a family member of Mr. Friede and 1,100,000 shares of Issuer Common Stock from Mr. Friede, and as a result, Mr. Friede will beneficially own 81,529 additional shares of Issuer Common Stock. The information contained in Item 4 below under "Proposed Transfer to Trust" is incorporated herein by reference. Item 5. Interest in Securities of the Issuer. Prior to the Merger, Mr. Friede did not beneficially own any shares of Issuer Common Stock. As a result of the Merger, on May 4, 2004, Mr. Friede became the beneficial owner of 2,482,074 shares of Issuer Common Stock, of which: (i) 2,287,596 represent shares of Issuer Common Stock beneficially owned directly by Mr. Friede; (ii) 13,568 represent shares of Issuer Common Stock beneficially owned by Mr. Friede as Trustee of the Trust FBO Lisa Catherine Friede; (iii) 13,568 represent shares of Issuer Common Stock beneficially owned by Mr. Friede as Trustee of the Trust FBO Karen Michelle Friede; (iv) 15,829 represent shares of Issuer Common Stock beneficially owned by Mr. Friede as Trustee of the Trust FBO John William Friede; (v) 4,522 represent shares of Issuer Common Stock beneficially owned by Mr. Friede under the John Friede Irrevocable Trust dated 4/3/01; and (vi) 146,991 represent shares of Issuer Common Stock underlying options that are exercisable within 60 days of the date hereof. Certain of the shares referenced in foregoing clauses (i) - (v) are currently held by the Escrow Agent (as SCHEDULE 13D CUSIP NO. 65715D100 Page 5 of 10 Pages defined in Item 6 below) under the terms of the Escrow Agreement (as defined in Item 6 below). Pursuant to the Stock Purchase Agreement, as described in Item 6 below, the Annenberg Trust (as defined in Item 6 below), to which Mr. Friede is a co-trustee, will acquire 81,529 additional shares of Issuer Common Stock from a family member of Mr. Friede and 1,100,000 shares of Issuer Common Stock from Mr. Friede, and as a result, Mr. Friede will beneficially own 81,529 additional shares of Issuer Common Stock. The 2,563,603 shares of Issuer Common Stock beneficially owned by Mr. Friede represent approximately 16.3% of the outstanding shares of the Issuer based on an estimated 15,731,735 shares of Issuer Common Stock outstanding (which estimate is comprised of the sum of (i) the 10,463,638 shares of Issuer Common Stock outstanding on April 30, 2004 as reported on the Issuer's definitive proxy statement filed with the Securities and Exchange Commission on or about May 10, 2004 and (ii) the 5,268,097 shares of Issuer Common Stock that had been estimated to be issuable to NOMOS stockholders in connection with the Merger as set forth in the joint proxy statement/prospectus that was first mailed to the Issuer's stockholders and NOMOS' stockholders on or about March 26, 2004 (the "Joint Proxy Statement"). Mr. Friede has shared power to vote, or direct the vote of, all of the shares of Issuer Common Stock beneficially owned by him, which voting power is shared with Michael Cutrer pursuant to the Acquiror Shares Proxy (as defined in Item 6 below) and with respect to the 1,181,529 shares held by the Annenberg Trust, the voting power is shared with Citicorp Trust Bank, FSB, as a co-trustee of the Annenberg Trust. Mr. Friede has shared power to dispose, or direct the disposition, of the shares held by the Annenberg Trust and the sole power to dispose, or direct the disposition, of his remaining shares of Issuer Common Stock. Mr. Friede is the sole trustee of the trusts referenced in clauses (ii) - (v) above and a co-trustee of the Annenberg Trust, and such trusts have the right to receive dividends, or the proceeds, from the sale of the shares of Issuer Common Stock that such trusts respectively hold and are reported in this Statement. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Voting Agreement As a condition to the Issuer entering into the Merger Agreement, Mr. Friede entered into a Voting Agreement with the Issuer dated October 26, 2003 (the "Voting Agreement"), and executed an irrevocable proxy with respect to NOMOS capital stock and an irrevocable proxy with respect to the Issuer's capital stock (the "Acquiror Shares Proxy") subject to the Voting Agreement. The following description of the Voting Agreement and the Acquiror Shares Proxy is a summary only and is qualified in its entirety by reference to the actual Voting Agreement and Acquiror Shares Proxy, copies of which are attached hereto as Exhibit 10.1(a) and Exhibit 10.1(b), respectively, and are incorporated herein by reference. Under the terms of the Voting Agreement, Mr. Friede agreed to the following: o unless the Merger Agreement were validly terminated, to vote all shares of NOMOS capital stock that he beneficially owned (i) in favor of the approval of the Merger, the approval of the Merger Agreement and the other transactions contemplated by the Merger Agreement and (ii) against any matter that is intended to, or could reasonably be expected to, impede, interfere with, delay or otherwise adversely affect the consummation of the Merger of the other transactions contemplated by the Merger Agreement; SCHEDULE 13D CUSIP NO. 65715D100 Page 6 of 10 Pages o until the earlier of (i) the second anniversary of the consummation of the Merger or (ii) the date the Merger Agreement were validly terminated, to vote all shares of Issuer Common Stock over which he is the beneficial owner to elect to the Issuer's board of directors, subject to certain conditions, those individuals nominated by the members of the Issuer's board of directors that served in such function immediately prior to the consummation of the Merger (or the successors thereto) (the "Issuer Board Designees"); o until the earlier of (i) the second anniversary of the consummation of the Merger or (ii) the date the Merger Agreement were validly terminated, not to vote any shares of Issuer Common Stock over which he has voting power in favor of any change of control transaction with respect to the Issuer not approved by the Issuer Board Designees; and o not to acquire beneficial ownership of the Issuer's capital stock other than (a) pursuant to the Merger, (b) through the exercise of stock options held by him as of the date of consummation of the Merger or granted to him by the Issuer in connection with his services as a director of the Issuer or (c) the Issuer's capital stock acquired and deposited into the voting trust pursuant to a Voting Trust Agreement (as defined below) executed by Mr. Friede and the Issuer. Except with respect to the specific items covered by the Voting Agreement, Mr. Friede may vote such shares of Issuer Common Stock in any manner Mr. Friede deems appropriate. The Acquiror Shares Proxy appointed Michael Cutrer, the Issuer's president and chief executive officer, as the proxy for Mr. Friede to vote such shares in accordance with the Voting Agreement. The Voting Agreement will terminate upon the second anniversary of the consummation of the Merger. The irrevocable proxy with respect to the NOMOS capital stock terminated on May 4, 2004, the date of effectiveness of the Merger. The Acquiror Shares Proxy will terminate upon the second anniversary of the consummation of the Merger. Approximately 2,516,116 shares of Issuer Common Stock, which Mr. Friede beneficially owns, are subject to the terms of the Voting Agreement. Mr. Friede was not paid any additional consideration in connection with the Voting Agreement and the Acquiror Shares Proxy. Voting Trust Agreement As a condition to the Issuer's obligation to consummate the Merger, Mr. Friede entered into a Voting Trust Agreement dated May 4, 2004, with Messrs. Cutrer and King (the "Voting Trust Agreement"), pursuant to which Mr. Friede agreed to place into a voting trust all shares of Issuer Common Stock over which he acquires beneficial ownership other than (a) pursuant to the Merger, or (b) through the exercise of stock options held by Mr. Friede as of the date of consummation of the Merger or granted to Mr. Friede by the Issuer in connection with his services as a director of the Issuer. Messrs. Cutrer and King are trustees over the shares of Issuer Common Stock deposited into the voting trust and Mr. Friede grants the trustees full power and authority to vote such deposited shares of Issuer Common Stock on behalf of Mr. Friede. The Voting Trust Agreement and the voting trust will terminate upon the second anniversary of the date of consummation of the Merger. The foregoing description of the Voting Trust Agreement is a summary only and is qualified in its entirety by reference to the actual Voting Trust Agreement, a copy of which is attached hereto as Exhibit 9.1, and is incorporated herein by reference. SCHEDULE 13D CUSIP NO. 65715D100 Page 7 of 10 Pages Put Agreement On February 9, 2001, Mr. Friede entered into an agreement with one of NOMOS' stockholders which granted such stockholder the right to cause Mr. Friede to purchase certain shares owned by such stockholder at various intervals at predetermined intervals (the "Put Agreement"). This agreement continues to be applicable to Issuer Common Stock that was issued to such stockholder in connection with the Merger. Still outstanding under the Put Agreement are 79,149 shares of Issuer Common Stock which may be "put" to Mr. Friede at any time. If and when these shares are purchased by Mr. Friede, they will be deposited into the voting trust pursuant to the Voting Trust Agreement, at which time Mr. Friede will not have voting or dispositive power over such shares until the termination of the voting trust. It is currently contemplated that the stockholder will exercise his put right under the Put Agreement within the next few weeks, to cause Mr. Friede to purchase a portion of such stockholder's shares. The foregoing description of the Put Agreement is a summary only and is qualified in its entirety by reference to the actual Put Agreement, a copy of which is attached hereto as Exhibit 10.2, and is incorporated herein by reference. Indemnification Escrow Agreement. As a condition to the Issuer's obligation to consummate the Merger, Mr. Friede, acting on behalf of all of NOMOS' stockholders (in such capacity, the "Stockholder Representative") entered into an indemnification escrow agreement (the "Escrow Agreement") immediately prior to the consummation of the Merger with the Issuer, NOMOS and U.S. Bank National Association (the "Escrow Agent"). Pursuant to the Indemnification Escrow Agreement, an aggregate of approximately 15.8% of the shares of Issuer Common Stock and cash otherwise issuable or payable in the Merger to holders of NOMOS capital stock was automatically deposited in two separate escrow funds upon the consummation of the Merger. An aggregate of approximately 526,810 shares of Issuer Common Stock and approximately $1.2 million of the cash is being held with the Escrow Agent in an escrow fund (the "General Escrow Fund") for a period of two years following the effective time of the Merger and will serve as a source of reimbursement to the Issuer, Merger Sub, and their respective officers, directors, employees, consultants, stockholders and affiliates (collectively the "Indemnified Parties") for certain losses that may arise out of the Merger Agreement. Approximately 307,617 additional shares of Issuer Common Stock and $700,800 of additional cash is being held in a second escrow fund (the "Special Escrow Fund") to serve as a source of reimbursement to the Indemnified Parties for any losses incurred by the Indemnified Parties or NOMOS before the consummation of the Merger and by the Indemnified Parties after the consummation of the Merger arising out of a certain demand made against NOMOS by Parker/Hunter Incorporated as more fully described in the Joint Proxy Statement. In his capacity as the Stockholders Representative, Mr. Friede will serve as the representative of the former NOMOS stockholders under the Escrow Agreement and will have full power and authority to represent the former NOMOS stockholders with respect to all matters arising under the Escrow Agreement, including the power to object to claims for reimbursement, to negotiate and enter into settlements and compromises with respect to such claims and to take certain other actions with respect to claims made against the escrow consideration in the escrow funds. The Escrow Agreement also provides that Mr. Friede, as the Stockholder Representative, will be entitled to reimbursement for reasonable expenses incurred by him in performing his duties under the Escrow Agreement (including reasonable attorneys' fees), which reimbursement shall be made solely out of the escrow assets available for release under the General Escrow Fund after the General Escrow Fund termination date. SCHEDULE 13D CUSIP NO. 65715D100 Page 8 of 10 Pages Subject to holdbacks for any unresolved claims, the General Escrow Fund will terminate on the second anniversary of the effective date of the Merger. The escrow consideration remaining in the General Escrow Fund, if any, will be distributed to the former holders of NOMOS capital stock that contributed such shares of Issuer Common Stock and cash to the General Escrow Fund (including Mr. Friede) within 10 days after the second anniversary of the completion of the Merger except for any amounts that may be subject to such unsatisfied claims for indemnification, which will be distributed promptly upon the resolution of all pending claims, and any amounts payable to the Stockholder Representative as reimbursement of expenses. The Special Escrow Fund will terminate upon the final resolution of the dispute related to the demand made against NOMOS by Parker/Hunter Incorporated. The foregoing description of the Escrow Agreement is a summary only and is qualified in its entirety by reference to the actual Escrow Agreement, a copy of which is attached hereto as Exhibit 10.3, and is incorporated herein by reference. Lock-Up Agreement As a condition to the Issuer's obligation to consummate the Merger, Mr. Friede entered into a lock-up agreement (the "Lock-Up Agreement") with the Issuer. By entering into the Lock-Up Agreement, Mr. Friede, subject to certain conditions and exceptions, agreed, among other things, not to sell or otherwise transfer any shares of Issuer Common Stock received in connection with the proposed merger for a period of 545 days following the completion of the Merger. These permitted exceptions include (i) certain dispositions that are registered under the Securities Act of 1933 (as amended, the "Securities Act") pursuant to the Registration Rights Agreement (as defined below), and (ii) dispositions to members of Mr. Friede's immediate family or to any trust for the direct or indirect benefit of Mr. Friede or Mr. Friede's immediate family. The foregoing description of the Lock-Up Agreement is a summary only and is qualified in its entirety by reference to the actual Lock-Up Agreement, a copy of which is attached hereto as Exhibit 10.4, and is incorporated herein by reference. Affiliate Agreement As a condition to the Issuer's obligation to consummate the Merger, Mr. Friede entered into an affiliate letter agreement (the "Affiliate Letter") pursuant to which he acknowledged that he may be deemed an affiliate of NOMOS (as the term "affiliate" is used in Rule 145 promulgated under the Securities Act) and that, as a result of such status, the shares of Issuer Common Stock issued to him in the Merger would be subject to certain limitations on resale or other distribution. Mr. Friede agreed in the Affiliate Letter, among other things, (i) not to make any sale, transfer, encumbrance, pledge or disposition of any shares of Issuer Common Stock received in the Merger in violation of the Securities Act or the rules and regulation of the Securities and Exchange Commission and (ii) to have certain stop transfer instructions be given to the Issuer's transfer agent with respect to such shares and to have placed on the certificates evidencing such shares a restrictive legend. The foregoing description of the Affiliate Letter is a summary only and is qualified in its entirety by reference to the actual Affiliate Letter, a copy of which is attached hereto as Exhibit 10.5, and is incorporated herein by reference. Registration Rights Agreement In connection with the Merger, the Issuer entered into a registration rights agreement (the "Registration Rights Agreement") with certain NOMOS stockholders, including Mr. Friede, which stockholders currently hold, in the aggregate, approximately 3.3 million shares of Issuer Common Stock. By entering into the registration rights agreement, the Issuer agreed that in the event that it proposes to SCHEDULE 13D CUSIP NO. 65715D100 Page 9 of 10 Pages file a registration statement (other than a registration statement on form S-4 or S-8) with respect to Issuer Common Stock for its account pursuant to an underwritten offering, the Issuer will, subject to certain exceptions and upon the written request of the applicable NOMOS stockholders, register the shares of Issuer Common Stock held by such NOMOS stockholders along with the proposed shares of Issuer Common Stock to be registered for the Issuer's own account. The participation of such NOMOS stockholders in such registration is subject to certain reductions that may be required by the managing underwriters. The Issuer has also agreed to include the shares of Issuer Common Stock held by the NOMOS stockholders if the Issuer proposes to file a registration statement related to the resale of restricted securities issued in connection with certain business combinations or disposition transactions. The foregoing description of the Registration Rights Agreement is a summary only and is qualified in its entirety by reference to the actual Registration Rights Agreement, a copy of which is attached hereto as Exhibit 10.6, and is incorporated herein by reference. Proposed Transfer to Trust As of May 12, 2004, Mr. Friede entered into an Amended and Restated Stock Purchase Agreement (the "Stock Purchase Agreement") with Trust U/W Moses L. Annenberg (the "Annenberg Trust"). Pursuant to the Stock Purchase Agreement, the Annenberg Trust will acquire 1,100,000 shares of Issuer Common Stock from Mr. Friede and 81,529 shares of Issuer Common Stock from a family member of Mr. Friede, who is also a stockholder of the Issuer. The purchase price of each share will be the closing market price on the NASDAQ National Market on the trading day immediately preceding the delivery of the shares. The delivery of the shares under the Stock Purchase Agreement is subject to the satisfaction of certain conditions, such as the representations and warranties of the sellers being correct and complete and the purchase of the shares not prohibited by any law or governmental regulation. In connection with the acquisition of the shares pursuant to the Stock Purchase Agreement, the Annenberg Trust will also enter into other agreements, which will subject the Annenberg Trust to terms and provisions substantially similar to those in the Lock-Up Agreement, Voting Agreement, the Registration Rights Agreement and the Acquiror Shares Proxy. The foregoing description of the Stock Purchase Agreement is a summary only and is qualified in its entirety by reference to the actual Stock Purchase Agreement, a copy of which is attached hereto as Exhibit 10.7, and in incorporated herein by reference. Power of Attorney Mr. Friede has granted to each of Malcolm P. Wattman and Judy Kang a power of attorney, with full right of substitution, to file amendments to this Schedule 13D with the Securities and Exchange Commission and otherwise, which power of attorney is included on the signature page to this Statement. Other Arrangements and Understandings Except for the agreements described above in this Item 6, to the best knowledge of Mr. Friede, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between Mr. Friede and any other person, with respect to any securities of the Issuer, including, but not limited to, transfer or voting of any of the securities, finder's fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. Exhibit 2.1(a) Agreement and Plan of Merger dated October 26, 2003, among the Issuer, Merger Sub and NOMOS. SCHEDULE 13D CUSIP NO. 65715D100 Page 10 of 10 Pages Exhibit 2.1(b) First Amendment to Agreement and Plan of Merger dated November 25, 2003, among the Issuer, Merger Sub and NOMOS. Exhibit 2.1(c) Second Amendment to Agreement and Plan of Merger dated March 2, 2004, among the Issuer, Merger Sub and NOMOS. Exhibit 9.1 Voting Trust Agreement dated May 4, 2004, among Mr. Friede and the other stockholders of the Issuer who shall join in and become parties thereto, and L. Michael Cutrer and David King as Trustees. Exhibit 10.1(a) Voting Agreement dated October 26, 2003, between the Issuer and Mr. Friede. Exhibit 10.1(b) Acquiror Shares Proxy dated October 26, 2003, between the Issuer and Mr. Friede. Exhibit 10.2 Put Agreement dated February 9, 2001, between Mr. Friede and Robert W. Hill. Exhibit 10.3 Indemnification Escrow Agreement dated May 4, 2004, among Mr. Friede, the Issuer, NOMOS and U.S. Bank National Association. Exhibit 10.4 Lock-Up Agreement between Mr. Friede and the Issuer. Exhibit 10.5 Affiliate Letter dated April 22, 2004, between Mr. Friede and the Issuer. Exhibit 10.6 Registration Rights Agreement dated May 4, 2004, among the Issuer, Mr. Friede and the other signatories listed thereon. Exhibit 10.7 Amended and Restated Stock Purchase Agreement dated May 12, 2004, among the Annenberg Trust, Mr. Friede and Karen F. Holden. Exhibit 24.1 Power of Attorney (included on signature page). SIGNATURE After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this Schedule 13D is true, complete and correct. KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints each of Malcolm P. Wattman, Esq. and Judy Kang, Esq., and any of them, his true and lawful attorney-in-fact and agent with full power of substitution or resubstitution, for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments to this Schedule 13D, and to file the same, with all exhibits thereto, and other documentation in connection therewith, with the Securities and Exchange Commission, The NASDAQ National Market and the Issuer, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to accomplish the foregoing, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Date: May 14, 2004 By: /s/ John A. Friede ------------------------- John A. Friede INDEX OF EXHIBITS TO SCHEDULE 13D Exhibit 2.1(a) Agreement and Plan of Merger dated October 26, 2003 among the Issuer, Merger Sub and NOMOS. Exhibit 2.1(b) First Amendment to Agreement and Plan of Merger dated November 25, 2003, among the Issuer, Merger Sub and NOMOS. Exhibit 2.1(c) Second Amendment to Agreement and Plan of Merger dated March 2, 2004, among the Issuer, Merger Sub and NOMOS. Exhibit 9.1 Voting Trust Agreement dated May 4, 2004 among Mr. Friede and the other stockholders of the Issuer who shall join in and become parties thereto, and L. Michael Cutrer and David King as Trustees. Exhibit 10.1(a) Voting Agreement dated October 26, 2003, between the Issuer and Mr. Friede. Exhibit 10.1(b) Acquiror Shares Proxy dated October 26, 2003, between the Issuer and Mr. Friede. Exhibit 10.2 Put Agreement dated February 9, 2001, between Mr. Friede and Robert W. Hill. Exhibit 10.3 Indemnification Escrow Agreement dated May 4, 2004, among Mr. Friede, the Issuer, NOMOS and U.S. Bank National Association. Exhibit 10.4 Lock-Up Agreement between Mr. Friede and the Issuer. Exhibit 10.5 Affiliate Letter dated April 22, 2004, between Mr. Friede and the Issuer. Exhibit 10.6 Registration Rights Agreement dated May 4, 2004, among the Issuer, Mr. Friede and the other signatories listed thereon. Exhibit 10.7 Amended and Restated Stock Purchase Agreement dated May 12, 2004, among the Annenberg Trust, Mr. Friede and Karen F. Holden. Exhibit 24.1 Power of Attorney (included on signature page). EX-2.1(A) 2 ci691907-ex2_1a.txt AGREEMENT AND PLAN OF MERGER Exhibit 2.1(a) ================================================================================ AGREEMENT AND PLAN OF MERGER by and among NOMOS CORPORATION, NORTH AMERICAN SCIENTIFIC, INC. AND AM CAPITAL I, INC. ----------------------------------------------- Dated as of October 26, 2003 ----------------------------------------------- ================================================================================ TABLE OF CONTENTS ARTICLE I THE MERGER......................................................1 1.1 The Merger.........................................................1 1.2 The Closing........................................................2 1.3 Effective Time.....................................................2 1.4 Effect of Merger ..................................................2 1.5 Tax Consequences...................................................2 ARTICLE II THE SURVIVING CORPORATION.......................................2 2.1 Certificate of Incorporation.......................................2 2.2 Bylaws.............................................................2 2.3 Director...........................................................3 2.4 Officers...........................................................3 ARTICLE III EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY.........................................................3 3.1 Merger Sub Capital Stock...........................................3 3.2 Company Securities.................................................3 3.3 Exchange of Certificates Evidencing Company Common Stock and Company Preferred Stock........................................6 3.4 Dissenter's Rights.................................................8 3.5 Adjustment of Exchange Ratio.......................................8 3.6 Indemnification Escrow Agreement...................................8 3.7 Appointment of Stockholder Representative..........................9 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR.....................10 4.1 Organization and Qualification....................................10 4.2 Capitalization....................................................10 4.3 Subsidiaries......................................................11 4.4 Power and Authority; Non-contravention; Government Approvals......11 4.5 Reports and Financial Statements; Information Provided............13 4.6 Absence of Undisclosed Liabilities................................14 4.7 Absence of Certain Changes or Events..............................14 4.8 Litigation........................................................15 4.9 No Violation of Law; Licenses, Permits and Registrations..........15 4.10 Taxes.............................................................15 4.11 Labor and Employment Matters......................................15 4.12 Compliance With Environmental Laws................................16 4.13 Good Title to and Condition of Assets.............................18 4.14 Insurance.........................................................18 4.15 Affiliated Transactions...........................................19 4.16 Material Contracts................................................19 -i- 4.17 Intellectual Property.............................................19 4.18 Brokers and Finders...............................................21 4.19 Opinion of Financial Advisor......................................21 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................22 5.1 Organization and Qualification....................................22 5.2 Capitalization....................................................22 5.3 Subsidiaries......................................................23 5.4 Power and Authority; Non-contravention; Government Approvals......24 5.5 Financial Statements; Information Provided........................25 5.6 Absence of Undisclosed Liabilities................................26 5.7 Absence of Certain Changes or Events..............................27 5.8 Litigation........................................................27 5.9 No Violation of Law; Licenses, Permits and Registrations..........28 5.10 Taxes.............................................................28 5.11 Labor and Employment Matters......................................29 5.12 Employee Benefit Plans............................................29 5.13 Compliance With Environmental Laws................................30 5.14 Real Estate.......................................................31 5.15 Good Title to and Condition of Assets.............................32 5.16 Insurance.........................................................32 5.17 Relationships with Customers and Suppliers; Affiliated Transactions......................................................33 5.18 Bank Accounts; Business Locations.................................33 5.19 Names; Prior Acquisitions.........................................33 5.20 Material Contracts................................................34 5.21 Brokers and Finders...............................................35 5.22 Opinion of Financial Advisor......................................36 5.23 Intellectual Property.............................................36 5.24 Records of the Company............................................38 5.25 Accuracy of Information Furnished by Company......................38 ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.........................39 6.1 Conduct of Business Pending the Merger............................39 6.2 Control of Acquiror's Operations..................................40 6.3 Control of Company's Operations...................................40 ARTICLE VII ADDITIONAL AGREEMENTS..........................................40 7.1 Access to Information.............................................40 7.2 Affiliate Letter..................................................41 7.3 No Solicitation...................................................41 7.4 Joint Proxy Statement/Prospectus; Registration Statement..........44 7.5 All Reasonable Efforts; Agreement to Cooperate....................44 7.6 Public Statements.................................................45 7.7 Notification of Certain Matters...................................46 -ii- 7.8 Approval of Stockholders..........................................46 7.9 Section 16 Matters................................................47 7.10 368(a) Reorganization.............................................47 7.11 Nasdaq National Market Listing....................................47 7.12 Stockholder Litigation............................................48 7.13 Indemnification...................................................48 7.14 Acquiror Board....................................................49 7.15 Employee Benefits; Termination of Pension Plan....................49 7.16 Rights Agreement Amendment........................................49 7.17 Voting Agreement..................................................50 7.18 Lock-up Agreements................................................50 7.19 Addresses for Option Holders......................................50 ARTICLE VIII CONDITIONS.....................................................50 8.1 Conditions to Each Party's Obligation to Effect the Merger........50 8.2 Conditions to Obligation of the Company to Effect the Merger......51 8.3 Conditions to Obligation of Acquiror and Merger Sub to Effect the Merger.................................................52 ARTICLE IX TERMINATION; FEES AND EXPENSES.................................54 9.1 Termination by Mutual Consent.....................................54 9.2 Termination by Acquiror or the Company............................54 9.3 Termination by the Company........................................54 9.4 Termination by Acquiror...........................................55 9.5 Effect of Termination and Abandonment.............................55 9.6 Fees and Expenses.................................................55 ARTICLE X AMENDMENT AND WAIVER...........................................56 10.1 Amendment.........................................................56 10.2 Waiver............................................................56 ARTICLE XI DEFINITIONS....................................................56 ARTICLE XII INDEMNIFICATION................................................59 12.1 Indemnification of Acquiror Indemnified Parties...................59 12.2 Defense of Third-Party Claims.....................................59 12.3 Direct Claims.....................................................61 12.4 Limitations on Liability..........................................61 ARTICLE XIII GENERAL PROVISIONS.............................................61 13.1 Survival of Representations and Warranties after the Effective Time....................................................61 13.2 Notices...........................................................62 13.3 Interpretation....................................................62 -iii- 13.4 Entire Agreement..................................................63 13.5 Governing Law.....................................................63 13.6 Waiver of Jury Trial..............................................63 13.7 Counterparts......................................................63 13.8 Parties in Interest...............................................63 13.9 Severability......................................................63 13.10 Equitable Relief..................................................63 EXHIBITS AND SCHEDULES EXHIBIT 3.5 INDEMNIFICATION ESCROW AGREEMENT EXHIBIT 7.2 AFFILIATE LETTER EXHIBIT 7.16 VOTING TRUST EXHIBIT 7.17(a) VOTING AGREEMENT EXHIBIT 8.2(b) FORM OF MWE OPINION TO COMPANY EXHIBIT 8.2(c) FORM OF C&G OPINION TO COMPANY EXHIBIT 8.2(d) FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT 8.3(b) FORM OF C&G OPINION TO ACQUIROR EXHIBIT 8.3(c) FORM OF MWE OPINION TO ACQUIROR EXHIBIT 8.3(d) REQUIRED CONSENTS EXHIBIT 8.3(e) LIST OF PERSONS SIGNING AFFILIATE LETTER EXHIBIT 8.3(f) FORM OF LOCK-UP AGREEMENT EXHIBIT 8.3(f)(1) LIST OF SIGNATORIES TO THE LOCK UP AGREEMENT EXHIBIT 8.3(l) SHAREHOLDERS VOTING AGREEMENT ACQUIROR DISCLOSURE SCHEDULES COMPANY DISCLOSURE SCHEDULES -iv- AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER, dated as of October 26, 2003 (this "Agreement"), is made and entered into by and among NOMOS Corporation, a Delaware corporation (the "Company"), North American Scientific, Inc., a Delaware corporation ("Acquiror"), and AM Capital I, Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"). Certain capitalized terms used herein are defined in Article XI hereof. W I T N E S S E T H: WHEREAS, the Board of Directors of Acquiror (the "Acquiror Board") has determined that a business combination between Acquiror and the Company, upon the terms and subject to the conditions set forth in this Agreement, is advisable and in the best interests of Acquiror and its stockholders; WHEREAS, the Board of Directors of the Company (the "Company Board") has determined that a business combination between the Company and Acquiror, upon the terms and subject to the conditions set forth in this Agreement, is advisable and in the best interests of the Company and its stockholders; WHEREAS, Acquiror and the Company intend that the merger provided for herein qualify as a reorganization under the provisions of Section 368(a)(2)(d) of the Code for federal income tax purposes; WHEREAS, the Acquiror Board has, by duly adopted resolutions, approved this Agreement and the transactions contemplated hereby; and WHEREAS, the Company Board has, by duly adopted resolutions, approved this Agreement and the transactions contemplated hereby; NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I THE MERGER 1.1 The Merger. At the Effective Time (as defined in Section 1.3 hereof), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), the Company shall be merged with and into Merger Sub, the separate existence of the Company shall thereupon cease and Merger Sub shall continue as the surviving corporation and as a wholly owned subsidiary of the Acquiror (the "Merger"). Merger Sub shall be the surviving corporation in the Merger and is hereinafter sometimes referred to as the "Surviving Corporation." 1.2 The Closing. Subject to the terms and conditions of this Agreement, the consummation of the Merger (the "Closing") shall take place (a) at the offices of McDermott, Will & Emery, 2049 Century Park East, 34th Floor, Los Angeles, California 90067, at 10:00 a.m., local time, as promptly as practicable (and in any event no later than the third business day) after the satisfaction or waiver of all the conditions set forth in Article VIII hereof (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing) or (b) at such other time, date or place as Acquiror and the Company may agree. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." 1.3 Effective Time. As promptly as practicable after all the conditions to the Merger set forth in Article VIII hereof shall have been satisfied or waived in accordance herewith and provided that this Agreement shall not have been terminated pursuant to Article IX hereof, the parties hereto shall cause a Certificate of Merger (the "Certificate of Merger") meeting the requirements of Section 251 of the DGCL to be properly executed and filed in accordance with such Section on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL or at such later time which the parties hereto shall have agreed upon and designated in the Certificate of Merger as the effective time of the Merger (the "Effective Time"). 1.4 Effect of Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company shall become the debts, liabilities and duties of the Surviving Corporation. 1.5 Tax Consequences. The parties hereto intend that the Merger shall constitute a reorganization within the meaning of Section 368(a)(2)(d) of the Code. The parties hereto adopt this Agreement as a "plan of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the U.S. Income Tax Regulations. ARTICLE II THE SURVIVING CORPORATION 2.1 Certificate of Incorporation. The Certificate of Incorporation of the Merger Sub as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation after the Effective Time until duly amended in accordance with applicable law; 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 NOMOS Corporation." 2.2 Bylaws. The Bylaws of the Merger Sub as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation after the Effective Time until duly amended in accordance with applicable law. -2- 2.3 Director. At the Effective Time, L. Michael Cutrer shall be the sole director of the Surviving Corporation and shall serve in accordance with the Bylaws of the Surviving Corporation until his successor is duly elected or appointed and qualified. 2.4 Officers. The officers of the Company in office immediately prior to the Effective Time shall be the officers of the Surviving Corporation after the Effective Time, and such officers shall serve in accordance with the Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified. ARTICLE III EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY 3.1 Merger Sub Capital Stock. At the Effective Time, each share of common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of common stock, par value $0.0001 per share, of the Surviving Corporation. 3.2 Company Securities. (a) Subject to Article IX hereof, at the Effective Time, each share of Common Stock, par value $0.0001 per share, of the Company (the "Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than those shares held by any Dissenting Stockholder (as defined in Section 3.4 hereof), shall by virtue of the Merger and without any action on the part of the holder thereof be converted into the right to receive 0.891 shares (the "Exchange Ratio") of common stock, par value $0.01 per share, of the common stock of Acquiror (the "Acquiror Common Stock"). Each share of Acquiror Common Stock issued to holders of Company Common Stock in the Merger shall be issued together with one associated common stock purchase right (a "Right") in accordance with the Rights Agreement, dated as of October 14, 1998, between Acquiror and U.S. Stock Transfer Corporation, a California corporation, as Rights Agent (the "Rights Agreement"). References herein to the shares of Acquiror Common Stock issuable in the Merger shall be deemed to include such associated Rights. (b) At the Effective Time: (i) Each share of Series A Preferred Stock, par value $0.0001 per share, of the Company shall be converted into the right to receive that number of shares of Company Common Stock that each such share could have been converted into by the holder thereof in accordance with the Certificate of Incorporation of the Company immediately prior to the Effective Time multiplied by the Exchange Ratio; (ii) Each share of Series B Preferred Stock, par value $0.0001 per share, of the Company shall be converted into the right to receive: (A) 0.603 shares of Acquiror Common Stock and (B) $2.15 in cash (the "Series B Cash Exchange Ratio"); and -3- (iii) Each share of Series C Preferred Stock, par value $0.0001 per share (together with the Series A Preferred Stock and the Series B Preferred Stock, collectively, the "Company Preferred Stock"), of the Company shall be converted into the right to receive: (A) 0.340 shares of Acquiror Common Stock and (B) $5.99 in cash (the "Series C Cash Exchange Ratio"). (c) At the Effective Time, all shares of Company Common Stock and the Company Preferred Stock, as a result of the Merger and without any action on the part of the holder thereof, shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of shares of Company Common Stock or Company Preferred Stock shall thereafter cease to have any rights with respect to such shares of Company Common Stock or Company Preferred Stock, as applicable, except the right to receive, without interest, Acquiror Common Stock and cash, as applicable in accordance with Section 3.2(a) and (b), hereof and cash in lieu of fractional shares of Acquiror Common Stock in accordance with Section 3.3(b) hereof upon the surrender of one or more stock certificates evidencing such shares of Company Common Stock or Company Preferred Stock, as applicable (each, a "Certificate"). (d) Each share of Company Common Stock and Company Preferred Stock issued and held in the Company's treasury at the Effective Time shall, by virtue of the Merger, cease to be outstanding and shall be canceled and retired without payment of any consideration therefor. (e) At the Effective Time, each outstanding option to purchase Company Common Stock (each a "Company Option") issued pursuant to the Company's 1993 Stock Option Plan, 1999 Stock Option Plan and 2001 Stock Option Plan (each an "Employee Plan") and each outstanding option listed on Section 3.2(e) of the Company Disclosure Schedule (the "Off Plan Options") shall be converted into an option under an applicable stock option plan of Acquiror (a "Replacement Option"). The Replacement Option into which any Company Option is converted shall be exercisable for the number of shares of Acquiror Common Stock equal to the Exchange Ratio multiplied by the number of shares of Company Common Stock subject to such Company Option, rounded down to the nearest whole number of shares. The per share exercise price of the Replacement Option which any Company Option is converted will equal the per share exercise price of such Company Option immediately prior to the Effective Time divided by the Exchange Ratio, rounded up to the nearest whole cent. No cash will be paid in lieu of fractional shares that are rounded down pursuant to this Section 3.2. No Replacement Options shall be issued with respect to Company Options that are canceled subsequent to the date of this Agreement and prior to the Effective Time. Notwithstanding anything in this Section 3.2 to the contrary, each Replacement Option shall contain such terms that are necessary for it to be a substitution for a new option in a transaction to which Section 424(a) of the Code applies. Following the Effective Time, upon surrender of the outstanding Company Options, Acquiror shall deliver to the holders of Options appropriate option agreements with respect to the Replacement Options. (f) The term, exercisability, vesting schedule, status as an "incentive stock option" under Section 422 of the Code, if applicable and to the maximum extent -4- permissible under applicable laws and regulations, and all other terms of each Replacement Option will be the same in all material respects as the corresponding Company Option, and all outstanding Company Options will be accelerated and vest immediately as a result of the Merger. Each Company Option shall be immediately extinguished after issuance of the corresponding Replacement Option by the Acquiror. (g) As soon as practicable after the Effective Time, Acquiror shall deliver to each holder of an outstanding Company Option an appropriate notice setting forth such holder's rights pursuant hereto. Acquiror shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Acquiror Common Stock for delivery upon exercise of Replacement Options issued in accordance with this Section 3.2. Promptly after the Effective Time, but in no event later than forty-five (45) days thereafter, Acquiror shall file one or more registration statements on Form S-8 (or any successor form) with respect to the shares of Acquiror Common Stock subject to such Replacement Options (to the extent such a registration statement is available for such options) and shall use commercially reasonable efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. (h) At the Effective Time, each outstanding warrant to purchase shares of Company Common Stock (a "Company Stock Warrant") shall by virtue of the Merger be assumed by Acquiror. Each Company Stock Warrant so assumed by Acquiror under this Agreement will continue to have, and be subject to, the same terms and conditions of such warrant immediately prior to the Effective Time, except that (i) each Company Stock Warrant will be exercisable for a number of shares of Acquiror Common Stock equal to that number of shares of Company Common Stock that were subject to such Company Stock Warrant immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole number of shares of Acquiror Common Stock and (ii) the per share exercise price for the shares of Acquiror Common Stock issuable upon exercise of such assumed Company Stock Warrant will be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Company Stock Warrant was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. No cash will be paid in lieu of fractional shares that are rounded down pursuant to this Section 3.2. (i) As soon as practicable after the Effective Time, Acquiror shall deliver to each holder of an outstanding Company Stock Warrant an appropriate notice setting forth such holder's rights pursuant thereto and such Company Stock Warrant shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 3.2 after giving effect to the Merger). Acquiror shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Acquiror Common Stock for delivery upon exercise of all Company Stock Warrants pursuant to the terms set forth in this Section 3.2. -5- 3.3 Exchange of Certificates Evidencing Company Common Stock and Company Preferred Stock. (a) As of the Effective Time, Acquiror shall deposit, or shall cause to be deposited, with Acquiror's transfer agent, or with such other party designated by Acquiror as is reasonably satisfactory to the Company (the "Exchange Agent"), for the benefit of the holders of shares of Company Common Stock and Company Preferred Stock for exchange in accordance with this Article III, certificates evidencing the shares of Acquiror Common Stock and cash payable in accordance with Section 3.2(b) hereof, as applicable, and cash in lieu of fractional shares in accordance with Section 3.3(b) hereof (such cash and certificates for shares of Acquiror Common Stock, together with any dividends or distributions with respect thereto (relating to record dates for such dividends or distributions after the Effective Time), being hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section 3.2 hereof and paid pursuant to this Section 3.3 in exchange for outstanding shares of Company Common Stock and Company Preferred Stock. (b) Promptly after the Effective Time, Acquiror shall cause the Exchange Agent to mail to each holder of record of shares of Company Common Stock and Company Preferred Stock (i) a letter of transmittal which shall specify that delivery of such shares of Company Common Stock or Company Preferred Stock shall be effected, and risk of loss regarding and title to such shares of Company Common Stock or Company Preferred Stock, as the case may be, shall pass, only upon delivery of the Certificates evidencing such shares to the Exchange Agent and (ii) instructions for use in effecting the surrender of such Certificates in exchange for certificates evidencing shares of Acquiror Common Stock and cash payable in accordance with Section 3.2(b) hereof, as applicable, and cash in lieu of fractional shares. Notwithstanding any other provision of this Agreement to the contrary, each holder of shares of Company Common Stock converted pursuant to the Merger that would otherwise have been entitled to receive a fraction of a share of Acquiror Common Stock (after taking into account all Certificates delivered by such holder and the aggregate number of shares of Company Common Stock represented thereby) shall, upon surrender of such holder's Certificates, receive, in lieu of such fraction of a share, cash (without interest) in an amount equal to such fractional part of a share of Acquiror Common Stock multiplied by the average of the last reported sales prices of shares of Acquiror Common Stock at the end of regular trading hours on the Nasdaq National Market ("Nasdaq") during the ten (10) consecutive trading days ending on and including the last trading day prior to the Effective Time. Upon surrender of a Certificate for cancellation to the Exchange Agent, together with such duly executed letter of transmittal, the holder of the shares evidenced by such Certificate shall be entitled to receive in exchange therefor a certificate evidencing that number of whole shares of Acquiror Common Stock and a check representing the amount of cash payable in accordance with Section 3.2(b) hereof, as applicable, and cash in lieu of fractional shares, if any, which such holder has the right to receive in respect of the Certificate so surrendered pursuant to the provisions of this Article III (after giving effect to any required withholding tax) and the shares evidenced by the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on cash in lieu of fractional shares payable to holders of shares of Company Common Stock or Company Preferred Stock. In the event of a transfer of ownership of Company Common Stock or Company -6- Preferred Stock which is not registered in the transfer records of the Company, a certificate evidencing the proper number of shares of Acquiror Common Stock, together with a check for the cash payable in accordance with Section 3.2(b), if any, and cash to be paid in lieu of fractional shares, may be issued to the transferee thereof if the Certificate evidencing such Company Common Stock or Company Preferred Stock, as the case may be, is presented to the Exchange Agent accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. (c) Dividends and other distributions declared after the Effective Time on Acquiror Common Stock issued hereunder shall be paid to the holder surrendering a Certificate as contemplated hereby; provided, however, that no such dividends or other distributions so declared shall be paid in respect of any shares of Company Common Stock or Company Preferred Stock evidenced by a Certificate until such Certificate is surrendered for exchange as provided herein. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the holder of the certificates evidencing whole shares of Acquiror 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 payable with respect to such whole shares of Acquiror Common Stock and not yet paid, less the amount of any withholding taxes which may be required thereon. (d) At or after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock or Company Preferred Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for certificates evidencing shares of Acquiror Common Stock and cash payable in accordance with Section 3.2(b), if any, and cash in lieu of fractional shares, if any, deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Article III. Certificates surrendered for exchange by any person constituting an "affiliate" of the Company for purposes of Rule 145(c) under the Securities Act shall not be exchanged until Acquiror has received an Affiliate Letter from such person as provided in Section 7.2 hereof. (e) Any portion of the Exchange Fund (including the proceeds of any investments thereof and any shares of Acquiror Common Stock) that remains unclaimed by the former stockholders of the Company one year after the Effective Time shall be returned to Acquiror. (f) None of Acquiror, the Company, the Surviving Corporation, the Exchange Agent or any other Person shall be liable to any former holder of shares of Company Common Stock or Company Preferred Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (g) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit with respect thereto by the Person claiming such Certificate to be lost, stolen or destroyed, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Certificate the shares of Acquiror Common Stock and cash in lieu of -7- fractional shares, and unpaid dividends and distributions on shares of Acquiror Common Stock as provided in Section 3.3(c) hereof, deliverable in respect thereof pursuant to this Agreement. (h) Each of the Exchange Agent, Acquiror and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise deliverable pursuant to this Agreement to any holder or former holder of shares of Company Common Stock such amounts as it reasonably determines that it is required to deduct and withhold with respect to the making of such payment under the Code, or any other applicable provision of state, local or foreign tax law or any other applicable legal requirement. To the extent that amounts are so deducted or withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the person to whom such amounts would have otherwise have been delivered. 3.4 Dissenter's Rights. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock and Company Preferred Stock, if any, issued and outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger and who has delivered a written demand for appraisal of such shares in accordance with Section 262 of the DGCL (a "Dissenting Stockholder") shall not be converted into the right to receive the Merger consideration, as applicable, provided in Section 3.2 hereof, unless and until such holder fails to perfect or effectively withdraws or otherwise loses such holder's right to appraisal under the DGCL. A Dissenting Stockholder may receive payment of the fair value of the shares of Company Common Stock or Preferred Stock, as applicable, issued and outstanding immediately prior to the Effective Time and held by such Dissenting Stockholder ("Dissenting Shares") in accordance with the provisions of the DGCL, provided that such Dissenting Stockholder complies with Section 262 of the DGCL. At the Effective Time, all Dissenting Shares shall be cancelled and cease to exist and shall represent only the right to receive the fair value thereof in accordance with the DGCL. If, after the Effective Time, any Dissenting Stockholder fails to perfect or effectively withdraws or otherwise loses such Dissenting Stockholder's right to appraisal, such Dissenting Stockholder's Dissenting Shares shall thereupon be treated as if they had been converted, as of the Effective Time, into the right to receive the Merger consideration set forth in Section 3.2 hereof. The Company shall give Acquiror (a) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other instruments served under the DGCL and (b) the opportunity to participate in and direct all negotiations, proceedings or settlements with respect to demands for appraisal under the DGCL. The Company shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with Acquiror's prior written consent, settle or offer to settle any such demands. 3.5 Adjustment of Exchange Ratio. In the event that, subsequent to the date of this Agreement but prior to the Effective Time, the outstanding shares of any of Acquiror Common Stock or Company Common Stock shall have been changed into a different number of shares or a different class as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, split, combination, exchange, recapitalization or other similar transaction, the Exchange Ratio shall be proportionately adjusted. 3.6 Indemnification Escrow Agreement. Pursuant to Article XII hereof, the stockholders of the Company shall indemnify and hold the Acquiror and the Surviving -8- Corporation harmless from and against certain Indemnified Losses (as hereinafter defined). On or prior to Closing, Acquiror, an escrow agent (the "Escrow Agent") mutually agreed upon by Acquiror and the Company, and the Company, on behalf of its stockholders, shall enter into an Indemnification Escrow Agreement in substantially the form of Exhibit 3.5 attached hereto (the "Indemnification Escrow Agreement"). Notwithstanding any other provision in this Agreement to the contrary, in order to secure the indemnification obligations to the Acquiror Indemnified Parties under this Agreement, a certificate evidencing ten percent (10%) of the shares of Acquiror Common Stock which would otherwise be delivered to the stockholders of the Company at Closing pursuant to Section 3.3 hereof (collectively, the "Escrowed Shares") shall be registered in the name of the Escrow Agent, as nominee for the stockholders of the Company, and ten percent (10%) of the aggregate amount of cash which would otherwise be delivered to the stockholders of the Company pursuant to Section 3.3 hereof (the "Escrowed Cash"), shall instead be deposited into and held in escrow pursuant to the terms of the Indemnification Escrow Agreement. Acquiror is hereby directed by the Company, on behalf of each of the Company's stockholders, to deposit the number of Escrowed Shares and amount of Escrowed Cash set forth opposite such stockholder's name in Annex A to the Indemnification Escrow Agreement with the Escrow Agent at the Closing, and Acquiror shall make such deposit as so directed and as contemplated in the preceding sentence. 3.7 Appointment of Stockholder Representative. By virtue of the approval of this Agreement by the holders of Company Common Stock and Company Preferred Stock, John A. Friede shall be approved and appointed by the Company the "Stockholder Representative" under the Indemnification Escrow Agreement (the "Stockholder Representative") and shall be constituted and appointed as agent and attorney-in-fact for and on behalf of each such holder. The Stockholder Representative shall have full power and authority to represent such holders and their successors with respect to all matters arising under the Indemnification Escrow Agreement and all actions taken by the Stockholder Representative thereunder shall be binding upon all stockholders and their successors as if expressly confirmed and ratified in writing by each of them, including, without limitation, resolving all claims relating to the Escrow Fund (as defined in the Indemnification Escrow Agreement) and any indemnification claims and obligations. -9- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR Except as set forth in the schedules delivered to the Company prior to or simultaneously with the execution hereof (collectively, the "Acquiror Disclosure Schedule"), Acquiror represents and warrants to the Company that the statements contained in this Article IV are true and correct as of the date hereof. The Sections of the Acquiror Disclosure Schedule setting forth exceptions to the representations and warranties contained in this Article IV are numbered to correspond to the applicable sections of this Article IV. Notwithstanding any other provision of this Agreement to the contrary, each exception set forth in the Acquiror Disclosure Schedule will be deemed to qualify each representation and warranty set forth in this Article IV (i) that is specifically identified (by cross-reference or otherwise) in the Acquiror Disclosure Schedule as being qualified by such exception or (ii) with respect to which the relevance of such exception to such representation and warranty is reasonably apparent on the face of the disclosure of such exception. 4.1 Organization and Qualification. Each of Acquiror and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to carry on its business as it is now being conducted. Acquiror is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not, when taken together with all other such failures, have a material adverse effect on the business, operations, assets, condition (financial or other) or prospects of Acquiror and its subsidiaries, taken as a whole (any such material adverse effect with respect to Acquiror and its subsidiaries being referred to herein as an "Acquiror Material Adverse Effect"); provided, however, that an Acquiror Material Adverse Effect shall not include (a) any changes, events, circumstances, developments or effects that are (x) caused by global or national economic or business conditions generally or (y) attributable to the public announcement or pendency of this Agreement or the performance of this Agreement or (b) a decrease in the market price of Acquiror Common Stock in and of itself. 4.2 Capitalization. (a) Except as set forth in the Acquiror SEC Reports, the authorized capital stock of Acquiror consists of 40,000,000 shares of Acquiror Common Stock and 2,000,000 shares of preferred stock, par value $0.01 per share ("Acquiror Preferred Stock"). Except as set forth in the Acquiror SEC Reports, as of October 22, 2003 (i) 10,276,741 shares of Acquiror Common Stock, all of which were validly issued and fully paid and nonassessable and free of preemptive rights, were issued and outstanding, (ii) no shares of Acquiror Preferred Stock were issued and outstanding, (iii) 19,000 shares of Acquiror Common Stock and no shares of Acquiror Preferred Stock were held in the treasury of Acquiror, (iv) 4,000,000 shares of Acquiror Common Stock were reserved for issuance under the Acquiror's Amended and Restated 1996 Stock Option Plan and 500,000 shares under the Acquiror's 2003 Non-Employee Directors' Equity Compensation Plan, of which 2,294,154 shares of Acquiror Common Stock were subject -10- to outstanding options to purchase Acquiror Common Stock pursuant to Acquiror's Amended and Restated 1996 Stock Option Plan and Acquiror's 2003 Non-Employee Directors' Equity Compensation Plan and (v) no shares of Acquiror Common Stock were reserved for issuance upon the exercise of outstanding warrants to purchase Acquiror Common Stock. (b) The shares of Acquiror Common Stock issued to stockholders of the Company in the Merger will be, at the Effective Time, duly authorized, validly issued, fully paid and nonassessable and free of preemptive or other similar rights. (c) The authorized capital stock of Merger Sub consists solely of 1,000 shares of common stock, $0.0001 par value per share, of which, as of the date hereof, 1,000 were issued and outstanding. All of such shares have been duly authorized and validly issued and are fully paid and nonassessable, free of any preemptive or other similar right. (d) Except for the Rights Agreement, there is no other similar "poison pill" or rights agreement to which Acquiror is bound with respect to any equity securities of Acquiror. 4.3 Subsidiaries. Each direct and indirect subsidiary of Acquiror (including Merger Sub) is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the requisite power and authority to carry on its business as it is now being conducted and each such subsidiary is qualified to do business, and is in good standing, in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in such good standing will not have an Acquiror Material Adverse Effect. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement. 4.4 Power and Authority; Non-contravention; Government Approvals. (a) Power and Authority. Each of Acquiror and Merger Sub has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and, subject only to the Acquiror Required Statutory Approvals (as defined in Section 4.4(c) hereof) and the approval of the Acquiror Voting Proposal (as defined below) by Acquiror's stockholders under the rules of the Nasdaq Stock Market, Inc. and the DGCL (the "Acquiror Stockholder Approval"), to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, the Acquiror Board, at a meeting duly called and held, by the unanimous vote of all directors (i) determined that the Merger is fair to and in the best interests of Acquiror and its stockholders, (ii) approved (A) this Agreement in accordance with the provisions of the DGCL and the Certificate of Incorporation of Acquiror, as amended, and (B) the filing and recordation of the Certificate of Merger as required by the DGCL, (iii) approved the issuance of Acquiror Common Stock in the Merger, (iv) approved the other transactions contemplated by this Agreement and (v) directed that the Acquiror Voting Proposal be submitted to the stockholders of Acquiror for their approval and resolved to recommend -11- that the stockholders of Acquiror vote in favor of the Acquiror Voting Proposal. The execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement by Acquiror and Merger Sub have been duly and validly authorized by all necessary corporate action on the part of Acquiror and Merger Sub, subject (in the case of the Merger Agreement) only to the required receipt of the Acquiror Stockholder Approval and the filing and recordation of the Certificate of Merger as required by the DGCL. Assuming this Agreement constitutes the valid and legally binding obligation of the Company, this Agreement constitutes the valid and legally binding obligation of Acquiror and Merger Sub, enforceable against Acquiror and Merger Sub in accordance with its terms, except as such enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity. For purposes of this Agreement, "Acquiror Voting Proposal" shall mean, collectively, the proposal for approval of: (i) this Agreement, (ii) the issuance of the Acquiror Common Stock in the Merger and the other transactions contemplated hereby and (iii) any amendments to stock option plans necessary or advisable in connection with the transactions contemplated hereby. (b) Non-contravention. The execution and delivery by each of Acquiror and Merger Sub of the Transaction Documents to which it is a party, the performance by each of Acquiror and Merger Sub of its obligations under such Transaction Documents and the consummation by each of Acquiror and Merger Sub of the transactions contemplated by such Transaction Documents will not (i) contravene any provision of the certificate of incorporation or bylaws thereof, (ii) violate or conflict with any law, statute, ordinance, rule, regulation, decree, writ, injunction, judgment or order of any Governmental Authority or any arbitration award which is either applicable to, binding upon or enforceable against Acquiror or Merger Sub, as the case may be, (iii) conflict with, result in any breach of, or constitute a default under, or constitute an event which would with the passage of time or the giving of notice or both constitute a default under, or give rise to a right to terminate, amend, modify, abandon or accelerate, any agreement, contract, lease, note, mortgage, indenture, loan agreement, franchise agreement, covenant, employment agreement, license, instrument, purchase and sales order, commitment, undertaking or obligation material to the business, assets, properties or operations thereof, which is applicable to, binding upon or enforceable against Acquiror or Merger Sub, as the case may be, in any case which conflict, breach, default or right would materially and adversely effect the ability of Acquiror or Merger Sub to consummate the transactions contemplated hereby or (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the property or assets thereof, except in each of the cases of (i) through (iv) for any such contravention, violation, conflict, breach, default, event or Lien that would not have an Acquiror Material Adverse Effect. (c) Government Approvals. Except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in connection with the Merger and the appropriate documents with the relevant authorities of other states or jurisdictions in which Acquiror and Merger Sub are qualified to do business, compliance with any applicable requirements of the HSR Act and any comparable foreign filings or approvals, compliance with any applicable requirements of the Securities Act and the -12- Exchange Act and such filings as may be required under any applicable state securities or blue sky laws or the rules and regulations of any securities exchange (such filings and approvals being referred to herein, collectively, as the "Acquiror Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any Governmental Authority is necessary for the execution and delivery of this Agreement by Acquiror or the consummation by Acquiror of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not have an Acquiror Material Adverse Effect. 4.5 Reports and Financial Statements; Information Provided. (a) Since January 1, 2001, Acquiror has filed with the SEC all forms, statements, reports and documents (including those filed subsequent to date hereof and all exhibits, post-effective amendments and supplements thereto) required to be filed by it under each of the Securities Act and the Exchange Act (together with all forms, statements, reports and documents which shall be filed subsequent to the date hereof up to the Closing, being referred to herein, collectively, the "Acquiror SEC Reports"). As of their respective dates, the Acquiror SEC Reports did not or will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except for any such misstatement or omission in any Acquiror SEC Report filed prior to the date of this Agreement which was superseded by a subsequent Acquiror SEC Report filed prior to the date of this Agreement. The consolidated financial statements included in the Acquiror SEC Reports, together with the notes and schedules related thereto (collectively, the "Acquiror Financial Statements"), (i) complied in all material respects with the applicable accounting requirements as set forth in the published rules and regulations of the SEC and (ii) have been prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes thereto) and (iii) fairly present the consolidated financial position of Acquiror and its subsidiaries as of the respective dates thereof and the results of their operations and changes in financial position for the periods then ended, except as otherwise noted therein and subject, in the case of the unaudited interim financial statements, to normal year-end adjustments and any other adjustments described therein. (b) Each of Acquiror and its subsidiaries maintains accurate books and records reflecting its assets and liabilities and maintains proper and adequate internal accounting controls which provide reasonable assurance that (i) transactions are executed with management's authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of Acquiror and to maintain accountability for Acquiror's consolidated assets; (iii) access to Acquiror's assets is permitted only in accordance with management's authorization, (iv) the reporting of Acquiror's assets is compared with existing assets at regular intervals; and (iv) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. -13- (c) The information to be supplied by or on behalf of Acquiror for inclusion or incorporation by reference in the registration statement on Form S-4 to be filed by Acquiror pursuant to which shares of Acquiror Common Stock issuable in connection with the Merger shall be registered under the Securities Act (the "Registration Statement"), or in any Regulation M-A Filing, shall not at the time the Registration Statement or such Regulation M-A Filing is filed with the SEC, at any time the Registration Statement is amended or supplemented, or at the time the Registration Statement is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The information to be supplied by or on behalf of Acquiror for inclusion in the joint proxy statement/prospectus (the "Joint Proxy Statement/Prospectus") to be sent to the stockholders of Acquiror in connection with the meeting of Acquiror's stockholders to consider the Acquiror Voting Proposal (the "Acquiror Meeting") and to stockholders of the Company in connection with the Company Meeting (as defined in Section 5.5(c) hereof), which shall be deemed to include all information about or relating to Acquiror, the Acquiror Voting Proposal and the Acquiror Meeting, shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of Acquiror and the Company, or at the time of the Acquiror Meeting, the Company Meeting or the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Acquiror Meeting or the Company Meeting which has become false or misleading. If at any time prior to the Effective Time, any fact or event relating to Acquiror or any of its Affiliates should be discovered by Acquiror or should occur which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, Acquiror shall promptly inform the Company of such fact or event. 4.6 Absence of Undisclosed Liabilities. Neither Acquiror nor any of its subsidiaries (including Merger Sub) had at July 31, 2003, or has incurred since such date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except liabilities, obligations or contingencies which (a) are accrued or reserved against in the Acquiror Financial Statements or reflected in the notes thereto, (b) were incurred after July 31, 2003 and were incurred in the ordinary course of business, consistent with past practices, (c) would not have an Acquiror Material Adverse Effect, (d) are disclosed in the Acquiror SEC Reports filed prior to the date hereof, (e) are contemplated by this Agreement or the transactions contemplated hereby or (f) have been discharged or paid in full prior to the date hereof. 4.7 Absence of Certain Changes or Events. Except as set forth in Section 4.7 of the Acquiror Disclosure Schedule and as set forth in the Acquiror SEC Reports filed prior to the date hereof, since July 31, 2003 (a) there have been no events, changes or occurrences which have had, or would reasonably be expected to have, an Acquiror Material Adverse Effect and (b) Acquiror and its subsidiaries (including Merger Sub) have not changed, in any material respect, the accounting methods or practices followed by Acquiror, including any material change in any assumption underlying, or method of calculating, any bad debt, contingency or other reserve. -14- 4.8 Litigation. Except as set forth in Section 4.8 of the Acquiror Disclosure Schedule and as set forth in the Acquiror SEC Reports filed prior to the date hereof, there are no claims, suits, actions or proceedings pending or, to the knowledge of Acquiror, threatened against, relating to or affecting Acquiror or any of its subsidiaries (including Merger Sub), before any Governmental Authority or arbitrator that seek to restrain the consummation of the Merger or which would reasonably be expected, either alone or in the aggregate with all such claims, suits, actions or proceedings, to have an Acquiror Material Adverse Effect. None of Acquiror or any of its subsidiaries (including Merger Sub) or any of their respective properties or assets is subject to any judgment, decree, injunction, rule or order of any Governmental Authority or arbitrator which prohibits or restricts the consummation of the transactions contemplated hereby or would have an Acquiror Material Adverse Effect. 4.9 No Violation of Law; Licenses, Permits and Registrations. Neither Acquiror nor any of its subsidiaries (including Merger Sub) is in violation of, or has been given notice or been charged with any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable environmental law, ordinance or regulation) of any Governmental Authority, except for violations which would not reasonably be expected to have an Acquiror Material Adverse Effect. As of the date of this Agreement, no investigation or review by any Governmental Authority is pending or, to the knowledge of Acquiror, threatened involving Acquiror or its subsidiaries (including Merger Sub). Each of Acquiror and each of its subsidiaries (including Merger Sub) has all permits, licenses, approvals and authorizations of, and registrations with and under, all federal, state, local and foreign laws, and from all applicable Governmental Authorities, required thereby to carry on its businesses as currently conducted, except where the failure to have any such permits, licenses, approvals, authorizations or registrations would not reasonably be expected to have an Acquiror Material Adverse Effect. 4.10 Taxes. All Tax Returns required to be filed prior to the date hereof with respect to Acquiror and its subsidiaries or their respective income, properties, franchises or operations have been timely filed, except for such Tax Returns which are not material to Acquiror. Each such Tax Return has been prepared in compliance with all applicable laws and regulations, and all such Tax Returns are true and correct in all material respects. All Taxes due and payable by or with respect to Acquiror and its subsidiaries have been paid or are accrued on the balance sheet included in the Acquiror Financial Statements. Each of Acquiror and its subsidiaries has withheld and paid all Taxes to the appropriate Governmental Authorities 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. Except as set forth in Section 4.10 of the Acquiror Disclosure Schedule, with respect to each taxable period of Acquiror and its subsidiaries (a) no deficiency or proposed adjustment which has not been settled or otherwise resolved for any amount of Taxes has been asserted or assessed by any taxing authority against Acquiror or its subsidiaries, other than a deficiency or an adjustment which would not reasonably be expected to have an Acquiror Material Adverse Effect and (b) there are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of Acquiror or any of its subsidiaries. 4.11 Labor and Employment Matters. Neither Acquiror nor any of its subsidiaries is a party to or bound by any collective bargaining agreement or any other agreement with a labor union; and, to the knowledge of Acquiror, there has been no effort by any labor union during the -15- 24 months prior to the date hereof to organize any employees of Acquiror or any of its subsidiaries into one or more collective bargaining units. There is no pending or, to the knowledge of Acquiror, threatened labor dispute, strike or work stoppage which materially affects or which may materially affect the business of Acquiror or any of its subsidiaries or which may materially interfere with its continued operations. None of Acquiror, its subsidiaries or any agent, representative or employee thereof has, within the last 24 months, committed any unfair labor practice as defined in the National Labor Relations Act, as amended, and there is no pending or, to the knowledge of Acquiror, threatened charge or complaint against Acquiror or any of its subsidiaries by or with the National Labor Relations Board or any representative thereof. There has been no strike, walkout or work stoppage involving any of the employees of Acquiror or any of its subsidiaries during the 24 months prior to the date hereof. Each of Acquiror and its subsidiaries has complied in all material respects with applicable laws, rules and regulations relating to employment, civil rights and equal employment opportunities, including but not limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, and the Americans with Disabilities Act, as amended. 4.12 Compliance With Environmental Laws. (a) Acquiror (as such term is defined in paragraph (d) of this Section 4.12) is and has at all times been in full compliance with all Environmental Laws (as such term is defined in paragraph (d) of this Section 4.12) governing its business, operations, properties and assets, including, without limitation (i) all requirements relating to the Discharge (as such term is defined in paragraph (d) of this Section 4.12) and Handling (as such term is defined in paragraph (d) of this Section 4.12) of Hazardous Substances (as such term is defined in paragraph (d) of this Section 4.12), (ii) all requirements relating to notice, record keeping and reporting, (iii) all requirements relating to obtaining and maintaining Licenses (as such term is defined in paragraph (d) of this Section 4.12) for the ownership of its properties and assets and the operation of its business as presently conducted, including any required Licenses relating to the Handling and Discharge of Hazardous Substances and (iv) all applicable writs, orders, judgments, injunctions, governmental communications, decrees, informational requests or demands issued pursuant to, or arising under, any Environmental Laws. (b) There are no, and there is no basis for any, non-compliance orders, warning letters or notices of violation (collectively, "Notices"), or claims, suits, actions, judgments, penalties, fines, or administrative or judicial investigations or proceedings (collectively, "Proceedings") pending or, to the knowledge of Acquiror, threatened against or involving Acquiror, or the business, operations, properties or assets of Acquiror, by any Governmental Authority or third party with respect to any Environmental Laws or Licenses issued to Acquiror thereunder in connection with, related to or arising out of the ownership by Acquiror of its properties or assets or the operation of its business, which have not been resolved. (c) Except as set forth in Section 4.12(c) of the Acquiror Disclosure Schedule, (i) Acquiror does not use, nor has it used, any Aboveground Storage Tanks (as such term is defined in paragraph (d) of this Section 4.12) or Underground Storage Tanks -16- (as such term is defined in paragraph (d) of this Section 4.12), and there are not now nor have there ever been any Underground Storage Tanks beneath any real property currently or previously owned, leased or operated by Acquiror that are required to be registered under any applicable Environmental Laws and (ii) to Acquiror's knowledge, Acquiror has not Discharged Hazardous Substances to, at or upon any site which, pursuant to any Environmental Laws, (x) has been placed on the National Priorities List or its state equivalent or (y) the Environmental Protection Agency or a relevant state agency or other Governmental Authority has notified Acquiror that such Governmental Authority has proposed or is proposing to place on the National Priorities List or its state equivalent. (d) For purposes of this Section 4.12 (and Section 5.19, to the extent applicable), the following terms shall have the following meanings: "Aboveground Storage Tank" shall have the meaning ascribed to such term in Section 6901 et seq., as amended, of RCRA, or any applicable state or local statute, law, ordinance, code, rule, regulation, order ruling, or decree governing aboveground storage tanks. "Acquiror" means Acquiror, any subsidiary thereof or any other Affiliate of Acquiror. "Discharge" means any manner of spilling, leaking, dumping, discharging, releasing or emitting, as any of such terms may further be defined in any Environmental Law, into any medium including, without limitation, ground water, surface water, soil, sediments or air. "Environmental Laws" means all federal, state, regional or local statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees, rulings, and changes or ordinances or judicial or administrative interpretations thereof, or similar laws of foreign jurisdictions where Acquiror conducts business, whether currently in existence or hereafter enacted or promulgated, any of which govern (or purport to govern) or relate to pollution, protection of the environment, public health and safety, air emissions, water discharges, hazardous or toxic substances, solid or hazardous waste or occupational health and safety, as any of these terms are or may be defined in such statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees, rulings and changes or ordinances, or judicial or administrative interpretations thereof, including, without limitation: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.9601, et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq. (collectively, "RCRA"); the Hazardous Materials Transportation Act, as amended, 49 U.S.C. ss.1801, et seq.; the Clean Water Act, as amended, 33 U.S.C. ss.1311, et seq.; the Clean Air Act, as amended (42 U.S.C. ss.7401-7642); the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. ss.136-136y; the Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C. -17- ss.11001, et seq. (Title III of SARA); and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651, et seq. "Handle" means any manner of generating, accumulating, storing, treating, disposing of, transporting, transferring, labeling, handling, manufacturing or using, as any of such terms may further be defined in any Environmental Law, of any Hazardous Substances or Hazardous Waste. "Hazardous Substances" and "Hazardous Waste" shall be construed broadly to include any toxic or hazardous substance, material, or waste, and any other contaminant, pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including without limitation, chemicals, compounds, by-products, pesticides, asbestos containing materials, petroleum or petroleum products, and polychlorinated biphenyls, the presence of which requires investigation or remediation under any Environmental Laws or which are or become regulated, listed or controlled by, under or pursuant to any Environmental Laws, or which has been or shall be determined or interpreted at any time by any Governmental Authority to be a hazardous or toxic substance regulated under any other statute, law, regulation, order, code, rule, order, or decree. "Licenses" means all licenses, certificates, permits, approvals and registrations. "Underground Storage Tank" shall have the meaning ascribed to such term in Section 6901 et seq., as amended, of RCRA, or any applicable state or local statute, law, ordinance, code, rule, regulation, order ruling, or decree governing underground storage tanks. 4.13 Good Title to and Condition of Assets. (a) Each of Acquiror and it subsidiaries has good and marketable title to all of its material properties and assets, other than real property leased by Acquiror or such subsidiaries, whether personal or mixed, tangible or intangible, and wherever located. (b) The Acquiror Fixed Assets (as such term is hereinafter defined) currently in use or necessary for the business and operations of Acquiror and each of its subsidiaries are in good operating condition, normal wear and tear excepted. For purposes hereof, the term "Acquiror Fixed Assets" means all vehicles, machinery, equipment, tools, supplies, leasehold improvements, furniture and fixtures used, leased or owned by Acquiror or its subsidiaries. (c) Notwithstanding anything contained herein to the contrary, no representation contained in this Section 4.13 shall be made with respect to any Intellectual Property of Acquiror or its subsidiaries (the sole representations with respect to which are made in Section 4.17 below). 4.14 Insurance. Each of Acquiror and its subsidiaries is covered by valid and enforceable policies of insurance covering its properties, assets and businesses against risks of the nature normally insured against by corporations in the same or similar lines of business and -18- in coverage amounts determined to be appropriate by the Acquiror Board. Insurance policies meeting the criteria in the preceding sentence are in full force and effect, and all premiums due thereon have been paid (collectively, the "Acquiror Insurance Policies"). As of the Closing, each of the Acquiror Insurance Policies will be in full force and effect. None of the Acquiror Insurance Policies will lapse or terminate as a result of the transactions contemplated by this Agreement. 4.15 Affiliated Transactions. Except as disclosed in Acquiror SEC Reports filed prior to the date hereof or as otherwise set forth in Section 4.15 of the Acquiror Disclosure Schedule, neither Acquiror nor any of its subsidiaries has entered into any transaction with any Affiliate of Acquiror or any of its subsidiaries or any transaction that would be subject to proxy statement disclosure pursuant to Item 404 of Regulation S-K. 4.16 Material Contracts. There are no agreements, contracts and commitments to which Acquiror or any of its subsidiaries is a party or is bound that are material contracts (as defined in Item 601(b)(10) of Regulation S-K) with respect to Acquiror or any of its subsidiaries ("Acquiror Material Contracts"), other than those Acquiror Material Contracts identified on the exhibit indices of the Acquiror SEC Reports filed prior to the date hereof. Except as set forth in Section 4.16 of the Acquiror Disclosure Schedule, (a) each of Acquiror and its subsidiaries has performed, in all material respects, its obligations under the Acquiror Material Contracts to which it is a party to the extent such obligations to perform have accrued and (b) to the knowledge of Acquiror, the other parties to the Acquiror Material Contracts have performed, in all material respects, their respective obligations thereunder. There is no non-competition or other similar agreement, contract, arrangement, understanding, commitment, judgement, injunction or order to which Acquiror or any of its subsidiaries is a party or to which Acquiror or any of its subsidiaries is subject that has or could reasonably be expected to have the effect of prohibiting or impairing the conduct of the business of Acquiror or any of its subsidiaries as currently conducted in any material respect. 4.17 Intellectual Property. (a) Section 4.17(a) of the Acquiror Disclosure Schedule lists all of the Registered Intellectual Property ("Acquiror Registered Intellectual Property") and software (other than software that is generally mass-produced and commercially available software) ("Acquiror Software") owned by, developed by or filed in the name of, Acquiror or any subsidiary thereof (collectively, the "Acquiror Intellectual Property"). (b) Except as set forth in Section 4.17(b) of the Acquiror Disclosure Schedule, no Acquiror Intellectual Property or product or service of Acquiror is the subject of any claim, proceeding or outstanding decree, order, judgment, agreement or stipulation that does or is claimed to restrict in any manner the use, transfer or licensing thereof by Acquiror or which does or is claimed to affect the validity, use or enforceability of any such Acquiror Intellectual Property. (c) To Acquiror's knowledge, each item of Acquiror Intellectual Property (excluding any item of Acquiror Registered Intellectual Property that is only covered by a pending application) is valid and subsisting. All necessary registration, maintenance and renewal fees in connection with Acquiror Intellectual Property have been made and, to -19- Acquiror's knowledge, all necessary documents and certificates in connection with such Acquiror Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of procuring, perfecting and maintaining such Acquiror Registered Intellectual Property. (d) Except as set forth on Section 4.17(d) of the Acquiror Disclosure Schedule (i) Acquiror and each of its subsidiaries owns all right, title and interest to each item of Intellectual Property purported to be owned by it and used in connection with the operation and conduct of its business, including the Acquiror Intellectual Property listed in Section 4.17(a) of the Acquiror Disclosure Schedule, free and clear of any Lien, and (ii) Acquiror and each subsidiary thereof is the exclusive owner of all trademarks, service marks and trade names used in connection with the operation or conduct of its business, including the sale of any products or drug candidates or the provision of any services thereby. (e) To the extent that any work, invention, software or material has been developed or created by an employee or a third party for Acquiror or any of its subsidiaries, Acquiror or such subsidiary, as the case may be, has a valid and enforceable written agreement with such employee or third party that transfers, or contains an undertaking to transfer, to Acquiror or such subsidiary full ownership of, or a valid exclusive license to use, all Intellectual Property in such work, software, material or invention. (f) Except as set forth in Section 4.17(f) of the Acquiror Disclosure Schedule, neither Acquiror nor any of its subsidiaries has transferred to any third party ownership of, or granted to any third party any exclusive license with respect to, any Intellectual Property that is or was Acquiror Intellectual Property. (g) Section 4.17(g) of the Acquiror Disclosure Schedule lists all contracts, licenses and agreements to which Acquiror and each of its subsidiaries is a party that are currently in effect (i) with respect to Intellectual Property licensed or offered by the Company or any of its subsidiaries to any third party or (ii) pursuant to which a third party has licensed or transferred any Intellectual Property to Acquiror or any of its subsidiaries, other than contracts, licenses or agreements relating to generally commercially available software. Except as set forth in Section 4.17(a) of the Acquiror Disclosure Schedule, the contracts, licenses and agreements listed in Section 4.17(g) of the Acquiror Disclosure Schedule are in full force and effect. The consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination, or suspension of such contracts, licenses and agreements. Acquiror and each of its subsidiaries is in compliance in all material respects with, and has not materially breached any term of any such contracts, licenses and agreements and, to the knowledge of Acquiror, all other parties to such contracts, licenses and agreements are in compliance in all material respects with, and have not materially breached any term of, such contracts, licenses and agreements. (h) Section 4.17(h) of the Acquiror Disclosure Schedule lists all contracts, licenses and agreements between Acquiror or any of its subsidiaries, on the one hand, and -20- any third party, on the other hand, wherein or whereby Acquiror or any such subsidiary has agreed to, or assumed, any obligation or duty to warrant, indemnify, hold harmless or otherwise assume or incur any obligation or liability with respect to the infringement or misappropriation by Acquiror or any such subsidiary of the Intellectual Property of any other third party. (i) Except as set forth in Section 4.17(j) of the Acquiror Disclosure Schedule, to Acquiror's knowledge, the operation of the business of Acquiror and each of its subsidiaries, including Acquiror's and each such subsidiary's design, development, manufacture, marketing and sale of the products or services (including products and drug candidates currently under development), has not and does not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction. (j) To Acquiror's knowledge (i) no other Person claims the right to use, in connection with similar or closely related goods and in the same geographic area, any mark which is identical or confusingly similar to any trademarks or service marks owned by Acquiror or any of its subsidiaries, (ii) no other Person asserts ownership rights in any of the Intellectual Property owned by Acquiror or any of its subsidiaries and (iii) no other Person is infringing any rights of Acquiror or any of its subsidiaries in any of Intellectual Property owned by Acquiror. (k) Each of Acquiror and its subsidiaries has taken reasonable steps to protect its rights in its confidential information and trade secrets or any trade secrets or confidential information of third parties provided thereto and, without limiting the foregoing, each of Acquiror and its subsidiaries has and enforces a policy requiring each employee and contractor with access to Intellectual Property of Acquiror or such subsidiaries to execute a proprietary information/confidentiality agreement substantially in Acquiror's standard form as then in effect and all current employees and contractors of Acquiror and each such subsidiary have executed such an agreement. 4.18 Brokers and Finders. Except with respect to Bear, Stearns & Co. Inc. (a) Acquiror has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of Acquiror to pay any finder's fees, brokerage or agent commissions or other similar payments in connection with the transactions contemplated hereby and (b) there is no claim for payment by Acquiror of any investment banking fees, finder's fees, brokerage or agent commissions or other similar payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. 4.19 Opinion of Financial Advisor. The financial advisor of Acquiror, Bear, Stearns & Co. Inc., has delivered to Acquiror an opinion, dated the date of this Agreement, to the effect that the Exchange Ratio is fair to Acquiror from a financial point of view. -21- ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the schedules delivered to Acquiror and Merger Sub prior to or simultaneously with the execution hereof (collectively, the "Company Disclosure Schedule"), the Company represents and warrants to Acquiror and Merger Sub that the statements contained in this Article V are true and correct as of the date hereof. The Sections of the Company Disclosure Schedule setting forth exceptions to the representations and warranties in this Article V are numbered to correspond to the applicable sections of this Article V. Notwithstanding any other provision of this Agreement to the contrary, each exception set forth in the Company Disclosure Schedule will be deemed to qualify each representation and warranty set forth in this Article V (i) that is specifically identified (by cross-reference or otherwise) in the Company Disclosure Schedule as being qualified by such exception or (ii) with respect to which the relevance of such exception to such representation and warranty is reasonably apparent on the face of the disclosure of such exception. 5.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as it is now being conducted. The Company is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not, when taken together with all other such failures, have a material adverse effect on the business, operations, assets, condition (financial or other) or prospects of the Company and its subsidiaries, taken as a whole (any such material adverse effect with respect to the Company and its subsidiaries being referred to herein as a "Company Material Adverse Effect"); provided, however, that a Company Material Adverse Effect shall not include any changes, events, circumstances, developments or effects that are (a) caused by global or national economic or business conditions generally or (b) attributable to the public announcement or pendency of this Agreement or the performance of this Agreement. 5.2 Capitalization. (a) The authorized capital stock of the Company consists of 25,000,000 shares of Company Common Stock, par value $0.0001 per share, and 8,000,000 shares of Company Preferred Stock, of which 1,000,000 shares have been designated Series A Preferred, par value $0.0001 per share, 4,000,000 shares have been designated Series B Preferred, par value $0.0001 per share, and 3,000,000 shares have been designated Series C Preferred, par value $0.0001 per share. As of October __, 2003, (i) 3,631,997 shares of Company Common Stock were issued and outstanding, (ii) 374,748 shares of Series A Preferred Stock were issued and outstanding, (iii) 1,861,909 shares of Series B Preferred Stock were issued and outstanding, (iv) 1,336,152 shares of Series C Preferred Stock were issued and outstanding and (v) 75,599 shares of Company Common Stock and no shares of Company Preferred Stock were held in the treasury of the Company. Except as set forth in Section 5.2(a) of the Company Disclosure Schedule, all outstanding shares of Company Common Stock and Company Preferred Stock are duly authorized, validly issued, full paid and non-assessable and are not subject to preemptive rights. -22- (b) The Company has reserved 3,785,211 shares of Common Stock for issuance to employees and consultants pursuant to the Company Employee Plans of which 2,039,459 shares are subject to outstanding, unexercised options and 1,745,752 shares remain available for future grant. There are 362,245 shares of Common Stock subject to Off Plan Options. Section 5.2(b) of the Company Disclosure Schedule sets forth for each outstanding, unexercised Company Option and each Off Plan Option granted under the Option Plan, as applicable, the name of the holder of such Company Option or Off Plan Option, as applicable, the number of shares of Common Stock subject to such Company Option or Off Plan Option, as applicable, the exercise price of such option and the vesting schedule for such Company Option or Off Plan Option, as applicable. The schedule of domicile addresses for each such holder to be provided by the Company in accordance with Section 7.19 hereof shall be true and accurate for each such holder as of the date so provided. Except for the Company Options or as otherwise described in Section 5.2(b) of the Company Disclosure Schedule, there are no outstanding options or rights or warrants (including any right of conversion or exchange under any outstanding security, instrument or other agreement) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, any shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such agreement or commitment. Except as described in Section 5.2(b) of the Company Disclosure Schedule, none of the outstanding options or rights or warrants (including any right of conversion or exchange under any outstanding security, instrument or other agreement) shall become exerciseable upon the consummation of the transactions contemplated hereby. There are no outstanding stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company. Except for the Company Options or as otherwise described in Section 5.2(b) of the Company Disclosure Schedule, (i) there are no proxies, voting rights or other agreements or understandings with respect to the voting or transfer of the capital stock of the Company and (ii) the Company is not obligated to redeem or otherwise acquire any of its outstanding shares of capital stock. (c) Section 5.2(c) of the Company Disclosure Schedule sets forth the name, address and the number of outstanding shares of each class of its capital stock owned of record or beneficially by, each stockholder of the Company. As of the date hereof, such stockholders constitute all of the holders of all issued and outstanding shares of capital stock of the Company. (d) Except as set forth in Section 5.2(d) of the Company Disclosure Schedule, all sales of equity securities by the Company prior to the date hereof have been made in compliance in all material respects with applicable federal and state securities laws. 5.3 Subsidiaries. The name and jurisdiction of incorporation or organization of each direct and indirect subsidiary of the Company (including, without limitation, any corporation, partnership, limited liability company, joint venture or other business entity in which the Company owns, directly or indirectly, any outstanding voting securities of, or other interests in, or has control of such entity) is set forth in Section 5.3 of the Company Disclosure Schedule. Each such subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or incorporation and has the requisite power and authority to carry on its business as it is now being conducted and each such subsidiary is qualified to do business, -23- and is in good standing, in each jurisdiction in which the properties owned, leased or operated thereby or the nature of the business conducted thereby makes such qualification necessary, except where the failure to be so qualified and in such good standing will not have a Company Material Adverse Effect. There are no subscriptions or rights relating to the issuance of any shares of capital stock of any such subsidiary of the Company, including any right of conversion or exchange under any outstanding security, instrument or agreement. 5.4 Power and Authority; Non-contravention; Government Approvals. (a) Power and Authority. The Company has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and, subject only to the Company Required Statutory Approvals (as defined in Section 5.4(c) hereof) and the approval of the Company Voting Proposal (as defined below) by the Company's stockholders (including applicable class votes) under the DGCL (the "Company Stockholder Approval"), to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, the Company Board, at a meeting duly called and held, by the unanimous vote of all directors (i) determined that the Merger is fair to and in the best interests of the Company and its stockholders, (ii) approved (A) this Agreement in accordance with the provisions of the DGCL and the Certificate of Incorporation of the Company, as amended, and (B) the filing and recordation of the Certificate of Merger as required by the DGCL; (iii) approved the other transactions contemplated by this Agreement and (iv) directed that the Company Voting Proposal be submitted to the stockholders of the Company for their approval and resolved to recommend that the stockholders of the Company vote in favor of the Company Voting Proposal. The execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement by the Company have been duly and validly authorized by all necessary corporate action on the part of the Company, subject (in the case of the Merger Agreement) only to the required receipt of the Company Stockholder Approval and the filing and recordation of the Certificate of Merger as required by the DGCL. Assuming this Agreement constitutes valid and legally binding obligations of the Acquiror and Merger Sub, this Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity. For purposes of this Agreement, "Company Voting Proposal" shall mean, collectively, the proposal for approval of (i) this Agreement and the Merger and (ii) the amendment and restatement of the Company's Certificate of Incorporation as contemplated by the Voting Agreement contemplated by Section 8.3(l) hereof (the "Company Amended Certificate"). (b) Non-contravention. Except as set forth in Section 5.4(b) of the Company Disclosure Schedule, the execution and delivery of the Transaction Documents to which it is a party by the Company, the performance by the Company of its obligations thereunder and the consummation by the Company of the transactions contemplated by such Transaction Documents will not (i) contravene any provision of the certificate of -24- incorporation or bylaws of the Company, (ii) violate or conflict with any law, statute, ordinance, rule, regulation, decree, writ, injunction, judgment or order of any Governmental Authority or any arbitration award which is either applicable to, binding upon or enforceable against the Company, (iii) conflict with, result in any breach of, or constitute a default under, or constitute an event which would with the passage of time or the giving of notice or both constitute a default under, or give rise to a right to terminate, amend, modify, abandon or accelerate the maturity of or to be entitled to a penalty or other payment or price reduction under, any agreement, contract, lease, note, mortgage, indenture, loan agreement, franchise agreement, covenant, employment agreement, license, instrument, purchase and sales order, commitment, undertaking or obligation material to the business, assets, properties or operations of the Company, which is applicable to, binding upon or enforceable against the Company or (iv) result in or require the creation or imposition of any Lien other than Permitted Liens upon or with respect to any of the property or assets of the Company, except in each of the cases of (i) through (iv) for any such contravention, violation, conflict, breach, default, event or Lien that would not have a Company Material Adverse Effect. (c) Government Approvals. Except for the filing of the Company Amended Certificate with the Secretary of State of the State of Delaware and the Certificate of Merger with the Secretary of State of the State of Delaware in connection with the Merger and the appropriate documents with the relevant authorities of other states or jurisdictions in which the Company is qualified to do business, compliance with any applicable requirements of the HSR Act and any comparable foreign filings or approvals, compliance with any applicable requirements of the Securities Act and the Exchange Act and such filings as may be required under any applicable state securities or blue sky laws (such filings and approvals being herein referred to, collectively, as the "Company Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval or permit of, any Governmental Authority is necessary for the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not have a Company Material Adverse Effect. 5.5 Financial Statements; Information Provided. (a) Attached to Section 5.5 of the Company Disclosure Schedule are true copies of (i) the financial statements of the Company as of and for the periods ended December 31, 2000, 2001 and 2002, including the notes thereto, audited by Ernst & Young LLP (collectively, the "Company Financial Statements") and (ii) the unaudited financial statements of the Company for the nine-month period ended September 30, 2003 (such unaudited financial statements being referred to herein, collectively, as the "Interim Financial Statements"). The balance sheet of the Company, dated as of December 31, 2002, included in the Financial Statements is referred to herein as the "Current Balance Sheet." The Company shall provide such additional unaudited quarterly financial statements for the Company as and when they become available after the date of this Agreement and before the Closing Date. The Company Financial Statements and the Interim Financial Statements fairly present in all material respects the -25- financial position of the Company as of the respective dates of the balance sheets included therein and the results of the Company's operations, cash flows and stockholders' equity for the respective periods indicated and such presentation is all in accordance with generally accepted accounting principles consistently applied throughout such periods, subject in the case of the Interim Financial Statements, to normal year-end adjustments and the lack of footnotes and other presentation items. (b) Each of the Company and its subsidiaries maintains accurate books and records reflecting its assets and liabilities and maintains proper and adequate controls which provide assurance that (i) transactions are executed with management's authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of the Company and to maintain accountability for the Company's consolidated assets; (iii) access to the Company's assets is permitted only in accordance with management's authorization, (iv) the reporting of the Company's assets is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. (c) The information to be supplied by or on behalf of the Company for inclusion in the Registration Statement or in any Regulation M-A Filing shall not at the time the Registration Statement or such Regulation M-A Filing is filed with the SEC, at any time the Registration Statement is amended or supplemented or at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The information to be supplied by or on behalf of the Company for inclusion in the Joint Proxy Statement/Prospectus to be sent to the stockholders of the Company in connection with the meeting of the Company's stockholders to consider the proposed Company Stockholder Approval (the "Company Meeting") and to stockholders of Acquiror in connection with the Acquiror Meeting, which shall be deemed to include all information about or relating to the Company, the proposed Company Stockholder Approval and the Company Meeting, shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of the Company and Acquiror, or at the time of the Company Meeting or the Acquiror Meeting or the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Meeting or the Acquiror Meeting which shall have become false or misleading. If at any time prior to the Effective Time, any fact or event relating to the Company or any of its Affiliates should be discovered by the Company or should occur which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, the Company shall promptly inform Acquiror of such fact or event. 5.6 Absence of Undisclosed Liabilities. Except as set forth in Section 5.6 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries had at the date of the Current Balance Sheet, or since the date of the Current Balance Sheet, has incurred, any -26- liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except liabilities, obligations or contingencies which (a) are accrued or reserved against in the Company Financial Statements or reflected in the notes thereto, (b) were incurred after the date of the Current Balance Sheet and were incurred in the ordinary course of business, consistent with past practices, (c) are contemplated by this Agreement or the transactions contemplated hereby, (d) would not have a Company Material Adverse Effect or (e) have been discharged or paid in full prior to the date hereof. 5.7 Absence of Certain Changes or Events. Since the date of the Current Balance Sheet, and except as set forth in Section 5.7 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has (a) made any distribution of or with respect to its capital stock or other securities or purchased or redeemed any of its securities; (b) paid any bonus to or increased the rate of compensation of any of its executive officers or amended any other terms of employment of such persons other than in the ordinary course of business; (c) sold, leased or transferred any of its material properties or assets other than in the ordinary course of business consistent with past practice; (d) made or obligated itself to make capital expenditures other than in the ordinary course of business consistent with past practice; (e) made any payment in respect of its liabilities other than in the ordinary course of business consistent with past practice; (f) incurred any obligations or liabilities or entered into any transaction or series of transactions involving in excess of $100,000 in the aggregate, other than in the ordinary course of business consistent with past practice, except for this Agreement and the transactions contemplated hereby; (g) suffered any theft, damage, destruction, casualty or extraordinary loss, not covered by insurance and for which a timely claim was filed, in excess of $100,000 in the aggregate; (h) suffered any extraordinary losses (whether or not covered by insurance); (i) waived, canceled, compromised or released any material rights having a value in excess of $100,000 in the aggregate; (j) made or adopted any material change in its accounting methods, practices or policies (including any material change in any assumption underlying, or method of calculating, any bad debt, contingency or other reserve); (k) terminated, amended or modifying any agreement involving an amount in excess of $100,000; (l) delayed paying any accounts payable which are due and payable except to the extent being contested in good faith; (m) made or pledged any charitable contribution in excess of $100,000; (n) entered into any other transaction or been subject to any event, change or occurrence which has or may have a Company Material Adverse Effect; or (o) agreed to do or authorized any of the foregoing. 5.8 Litigation. Except as set forth in Section 5.8 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries (a) is subject to any outstanding injunction, judgment, order, decree, ruling or charge or (b) is a party or, to the Company's knowledge, threatened to be made a party to any action, suit, proceeding, hearing or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator. Section 5.8 of the Company Disclosure Schedule sets forth, with respect to each matter listed thereon, the name, address, telephone number and facsimile number of the legal counsel handing such matter on behalf of the Company. None of the actions, suits, proceedings, hearings, and investigations set forth in the Company Disclosure Schedule would reasonably be expected to result in any Material Adverse Effect on the Company. Without limiting the generality of the foregoing, no action, suit, or proceeding is pending or, to the Company's knowledge, threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator, wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) prevent -27- consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (iii) affect adversely the right of the Company to own any material portion of its assets or affect adversely, in any material respect, the right of the Company to operate its business, and no such injunction, judgment, order, decree, ruling, or charge is in effect. There are no outstanding orders, decrees or stipulations issued by any Governmental Authority in any proceeding to which the Company was a party which have not been complied with in full and in any event does not prohibit or restrict the consummation of the transactions contemplated hereby or would have a Company Material Adverse Effect. 5.9 No Violation of Law; Licenses, Permits and Registrations. Neither the Company nor any of its subsidiaries is in violation of, or has been given notice or been charged with any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable environmental law, ordinance or regulation) of any Governmental Authority, except for violations which would not reasonably be expected to have a Company Material Adverse Effect. As of the date of this Agreement, no investigation or review by any Governmental Authority is pending or, to the knowledge of the Company, threatened involving the Company or its subsidiaries. Each of the Company and each of its subsidiaries has all permits, licenses, approvals and authorizations of, and registrations with and under, all federal, state, local and foreign laws, and from all applicable Governmental Authorities, required thereby to carry on its businesses as currently conducted, except where the failure to have any such permits, licenses, approvals, authorizations or registrations would not reasonably be expected to have a Company Material Adverse Effect. 5.10 Taxes. Except as set forth in Section 5.10 of the Company Disclosure Schedule, all Tax Returns required to be filed prior to the date hereof with respect to the Company and its subsidiaries or their respective income, properties, franchises or operations have been timely filed. Each such Tax Return has been prepared in compliance with all applicable laws and regulations, and all such Tax Returns are true and correct in all material respects. All Taxes due and payable by or with respect to the Company and its subsidiaries have been paid or are accrued on the balance sheet included in the Company Financial Statements. Each of the Company and its subsidiaries has withheld and paid all Taxes to the appropriate Governmental Authorities 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. With respect to each taxable period of the Company and its subsidiaries: (a) no deficiency or proposed adjustment which has not been settled or otherwise resolved for any amount of Taxes has been asserted or assessed by any taxing authority against the Company or its subsidiaries, other than a deficiency or an adjustment which would not reasonably be expected to have a Company Material Adverse Effect, (b) neither the Company nor any of its subsidiaries has consented to extend the time in which any Taxes may be assessed or collected by any taxing authority, (c) neither the Company nor any of its subsidiaries has requested or been granted an extension of the time for filing any Tax Return, (d) there is no action, suit, taxing authority proceeding, or audit or claim for refund now in progress, or pending or, to the knowledge of the Company, threatened against or with respect to the Company or any of its subsidiaries regarding Taxes and (e) there are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company or any of its subsidiaries. -28- 5.11 Labor and Employment Matters. Section 5.11 of the Company Disclosure Schedule sets forth the name and current rate of compensation of each employee of the Company and its subsidiaries. Neither the Company nor any of its subsidiaries is a party to or bound by any collective bargaining agreement or any other agreement with a labor union; and, to the knowledge of the Company, there has been no effort by any labor union during the 24 months prior to the date hereof to organize any employees of the Company or any of its subsidiaries into one or more collective bargaining units. There is no pending or, to the knowledge of the Company, threatened labor dispute, strike or work stoppage which materially affects or which may materially affect the business of the Company or any of its subsidiaries or which may materially interfere with its continued operations. None of the Company, its subsidiaries or any agent, representative or employee thereof has, within the last 24 months, committed any unfair labor practice as defined in the National Labor Relations Act, as amended, and there is no pending or, to the knowledge of the Company, threatened charge or complaint against the Company or any of its subsidiaries by or with the National Labor Relations Board or any representative thereof. There has been no strike, walkout or work stoppage involving any of the employees of the Company or any of its subsidiaries during the 24 months prior to the date hereof. Each of the Company and its subsidiaries has complied in all material respects with applicable laws, rules and regulations relating to employment, civil rights and equal employment opportunities, including but not limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, and the Americans with Disabilities Act, as amended. Except as set forth in Section 5.11 of the Company Disclosure Schedule, the Company has no knowledge that any executive or key employee or group of employees of the Company or any of its subsidiaries has any plans to terminate employment with the Company or such subsidiaries as a result of the transactions contemplated hereby or otherwise. 5.12 Employee Benefit Plans. (a) Section 5.12 of the Company Disclosure Schedule sets forth a list of each material Employee Benefit Plan of the Company and its subsidiaries. Neither the Company nor any of its subsidiaries has been a participating employer in any "multiemployer plan" within the meaning of Section 3(37) of ERISA within the last six years, except to the extent that any employee benefit plan in which the Company or any of its subsidiaries is or was the sole participating entity may be deemed to be or have been such a multiemployer plan. All Employee Benefit Plans of the Company and its subsidiaries have been administered at all times and are being administered in compliance in all material respects with their terms and applicable law, including, where applicable, ERISA and the Code and the regulations promulgated thereunder. Except as set forth in Section 5.12(a) of the Company Disclosure Schedule, the Company has made or accrued on the appropriate balance sheet all contributions due to date under or with respect to such Employee Benefit Plans. With respect to each Employee Benefit Plan of the Company and its subsidiaries, (i) no "reportable event," as defined in Section 4043 of ERISA, exists that would constitute grounds for termination of such Employee Benefit Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such Employee Benefit Plan, in each case as contemplated by Section 4042 of ERISA; (ii) none of the Company or any of its subsidiaries or any fiduciary, trustee, or administrator of any such Employee Benefit Plan has engaged in a "prohibited transaction" as defined in Section 4975 of the Code or a "prohibited transaction" as defined in Section 406 of ERISA that could -29- reasonably be expected to subject the Company or any such subsidiaries to any material tax imposed by Section 4975 of the Code or any material penalty imposed by Section 502 of ERISA; and (iii) there is no current matter, including (without limitation) any matter involving the administration and operation of such Employee Benefit Plans, which would reasonably be expected to result in any such Employee Benefit Plan being deemed to be not in substantial compliance with the pertinent provisions of any law, regulation or ruling applicable thereto and which would reasonably be expected to impose any material liability upon the Company or any of its subsidiaries. No accumulated funding deficiency under Section 302 of ERISA or Section 412 of the Internal Revenue Code, whether or not waived, exists with respect to any such Employee Benefit Plan that is subject to either of such sections. (b) With respect to all Employee Benefit Plans of the Company which are group health plans, all such plans have been operated in compliance in all material respects with applicable law, including the group health plan continuation coverage requirements of Section 4980B of the Code, to the extent such requirements are applicable. (c) Each Employee Benefit Plan of the Company that is intended to be a qualified plan, as described in Section 401(a) of the Internal Revenue Code (i) has received from the Internal Revenue Service a determination that such Employee Benefit Plan is a qualified plan under section 401 of the Internal Revenue Code, (ii) has been timely and properly amended so as to comply in all material respects with all laws applicable to such Employee Benefit Plans and (iii) has received a favorable determination letter issued by the Internal Revenue Service to the extent required by all applicable laws. Section 5.12(c) of the Company Disclosure Schedule sets forth a list of all required reports and descriptions (including, but not limited to, Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions) that have not been properly and timely filed or distributed with respect to each Employee Benefit Plan of the Company and its subsidiaries. 5.13 Compliance With Environmental Laws. (a) The Company (as such term is defined in paragraph (g) of this Section 5.13) is and has at all times been in full compliance with all Environmental Laws governing its business, operations, properties and assets, including, without limitation (i) all requirements relating to the Discharge and Handling of Hazardous Substances, (ii) all requirements relating to notice, record keeping and reporting, (iii) all requirements relating to obtaining and maintaining Licenses for the ownership of its properties and assets and the operation of its business as presently conducted, including Licenses relating to the Handling and Discharge of Hazardous Substances and (iv) all applicable writs, orders, judgments, injunctions, governmental communications, decrees, informational requests or demands issued pursuant to, or arising under, any Environmental Laws. (b) There are no, and there is no basis for any Notices or Proceedings pending or, to the knowledge of the Company, threatened against or involving the Company, or the business, operations, properties or assets of the Company, by any Governmental -30- Authority or third party with respect to any Environmental Laws or Licenses issued to the Company thereunder in connection with, related to or arising out of the ownership by the Company of its properties or assets or the operation of its business which have not been resolved or which would impose any obligation, burden or continuing liability on Acquiror or the Company in the event that the transactions contemplated hereby are consummated. (c) The Company has not Handled or Discharged, nor has it allowed or arranged for any third party to Handle or Discharge, Hazardous Substances to, at or upon: (i) any real property currently or previously owned, leased or operated by the Company or (ii) any site which, pursuant to any Environmental Laws, (x) has been placed on the National Priorities List or its state equivalent or (y) the Environmental Protection Agency or a relevant state agency or other Governmental Authority has notified the Company that such Governmental Authority has proposed or is proposing to place on the National Priorities List or its state equivalent. (d) The Company Disclosure Schedule identifies the operations and activities, and locations thereof, which have been conducted or are being conducted by the Company on any real property currently or previously owned, leased or operated by the Company which have involved the Handling or Discharge of Hazardous Substances. (e) The Company does not use, nor has it used, any Aboveground Storage Tanks or Underground Storage Tanks, and there are not now nor have there ever been any Underground Storage Tanks beneath any real property currently or previously owned, leased or operated by the Company that are required to be registered under any applicable Environmental Laws. (f) The Company Disclosure Schedule identifies (i) all environmental audits, assessments and occupational health studies undertaken by the Company or its agents or, to the knowledge of the Company, undertaken by any Governmental Authority, or any third party, relating to or affecting the Company or any real property currently or previously owned, leased or operated by the Company; (ii) the results of any ground, water, soil, air or asbestos monitoring undertaken by the Company or its agents or, to the knowledge of the Company, undertaken by any Governmental Authority or any third party, relating to or affecting the Company or any real property currently or previously owned, leased or operated by the Company which indicate the presence of Hazardous Substances at levels requiring a notice or report to be made to a Governmental Authority or in violation of any applicable Environmental Laws; and (iii) all material written communications between the Company and any Governmental Authority arising under or related to Environmental Laws. (g) For purposes of this Section 5.13, the term "Company" means the Company, any subsidiary thereof or any other Affiliate of the Company. 5.14 Real Estate. Neither the Company nor any of its subsidiaries owns any parcels of real property. Section 5.14 of the Company Disclosure Schedule sets forth (a) a list of all real property leases or similar agreements to which the Company or any of its subsidiaries is a party (each, a "Real Property Lease"), true and complete copies of which have previously been -31- furnished to Acquiror, (b) the lessor and lessee of each Real Property Lease and the date and term of each Real Property Lease and (c) the street address of each property covered by each Real Property Lease (the "Leased Premises"). The Real Property Leases are in full force and effect and have not been amended, and neither the Company nor, to the knowledge of the Company, any other party thereto is in default or breach thereunder. No event has occurred which, with the passage of time or the giving of notice or both, would cause a material breach of or material default by the Company under any of such Real Property Leases and, to Company's knowledge, there is no breach or anticipated breach by any other party thereto. With respect to each of the Leased Premises: (i) the Company has valid leasehold interests or other rights of use and occupancy in such Leased Premises, free and clear of any Liens; (ii) such Leased Premises are properly zoned for the uses to which the Company puts such Leased Premises, are in good repair and condition, reasonable wear and tear excepted, and are sufficient to satisfy the Company's normal business activities as conducted thereat; (iii) each of the Leased Premises (w) has direct access to public roads or access to public roads by means of a perpetual access easement, such access being sufficient to satisfy the current and reasonably anticipated normal transportation requirements of the Company's business as presently conducted at such parcel; and (x) is served by all utilities in such quantity and quality as are reasonably sufficient to satisfy the current normal business activities as conducted at such Leased Premises; and (iv) the Company has not received notice of any condemnation proceeding with respect to any portion of such Leased Premises or any access thereto and, to the knowledge of the Company, no such proceeding is contemplated by any Governmental Authority. 5.15 Good Title to and Condition of Assets. (a) Each of the Company and it subsidiaries has good and marketable title to all of its material Assets (as such term is hereinafter defined), free and clear of any Liens other than Permitted Liens. For purposes of this Agreement, the term "Assets" means all of the properties and assets of the Company and its subsidiaries which are reflected on the Current Balance Sheet or acquired after the date of the Current Balance Sheet (except assets or properties sold or otherwise disposed of in the ordinary course of business since such date), other than the Leased Premises, whether personal or mixed, tangible or intangible, and wherever located. (b) The Fixed Assets (as such term is hereinafter defined) currently in use or necessary for the business and operations of the Company and each of its subsidiaries are in good operating condition, normal wear and tear excepted. For purposes of this Agreement, the term "Fixed Assets" means all vehicles, machinery, equipment, tools, supplies, leasehold improvements, furniture and fixtures used, leased or owned by the Company or its subsidiaries. (c) Notwithstanding anything contained herein to the contrary, no representation contained in this Section 5.15 shall be made with respect to any Intellectual Property of the Company or its subsidiaries (the sole representations with respect to which are made in Section 5.23 below). 5.16 Insurance. Each of the Company and its subsidiaries is covered by valid and enforceable policies of insurance covering its properties, assets and businesses against risks of the nature normally insured against by corporations in the same or similar lines of business and -32- in coverage amounts typically and reasonably carried by such corporations. Insurance policies meeting the criteria in the preceding sentence are in full force and effect, and all premiums due thereon have been paid (collectively, the "Company Insurance Policies"). As of the Closing, each of the Company Insurance Policies will be in full force and effect. None of the Company Insurance Policies will lapse or terminate as a result of the transactions contemplated by this Agreement. Each of the Company and its subsidiaries has complied with the provisions of such Company Insurance Policies. Section 5.16 of the Company Disclosure Schedule contains (a) a complete and correct list of all Company Insurance Policies and all amendments and riders thereto (copies of which have been provided or made available to Acquiror) and (b) a description of each pending claim under any of the Company Insurance Policies, or any insurance policy previously in effect, for an amount in excess of $100,000 that relates to loss or damage to the properties, assets or businesses of the Company. 5.17 Relationships with Customers and Suppliers; Affiliated Transactions. No current customer of the Company or any of its subsidiaries that was responsible for five percent or more of the Company's revenue during the Company's last full fiscal year has, to the knowledge of the Company, threatened in writing to terminate its business relationship with the Company or any such subsidiary for any reason. Neither the Company nor any of its subsidiaries has any direct or indirect interest in any customer, supplier or competitor of the Company or such subsidiary, or in any Person from whom or to whom the Company or such subsidiary leases real or personal property. Except as set forth in Section 5.17 of the Company Disclosure Schedule, no officer, director or stockholder of the Company or any of its subsidiaries, nor any person related by blood or marriage to any such officer, director or stockholder, nor any entity in which any such officer, director or stockholder owns any beneficial interest, is a party to any agreement or transaction with the Company or any such subsidiary or has any interest in any property used by the Company or any such subsidiary. 5.18 Bank Accounts; Business Locations. Section 5.18 of the Company Disclosure Schedule sets forth all accounts of the Company and each of its subsidiaries with any bank, broker or other depository institution and the names of all persons authorized to withdraw funds from each such account. As of the date hereof, neither the Company nor any of its subsidiaries has any office or place of business other than as identified in such Section 5.18 of the Company Disclosure Schedule and the respective principal places of business and chief executive offices of the Company and each of its subsidiaries are indicated in such Section 5.18 and all locations where the equipment, inventory, chattel paper and books and records of the Company and its subsidiaries are located, as of the date hereof, are fully identified in Section 5.18 of the Company Disclosure Schedule. 5.19 Names; Prior Acquisitions. All names under which the Company and each of its subsidiaries does business, as of the date hereof, are specified in Section 5.19 of the Company Disclosure Schedule. Except as set forth in Section 5.19 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has changed its name or used any assumed or fictitious name, or been the surviving entity in a merger, acquired any business or changed its principal place of business or chief executive office, within the past three years. -33- 5.20 Material Contracts. (a) The following agreements, contracts and commitments to which the Company or any of its subsidiaries is a party or is bound are referred to herein, collectively, as the "Company Material Contracts": (i) any employment or consulting agreement, contract or commitment with any executive officer or member of the Company Board, other than those that are terminable by the Company or any of its subsidiaries on no more than thirty (30) days' notice without liability or financial obligation to the Company; (ii) any agreement or plan, including (without limitation) any stock option plan, stock appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement; (iii) any agreement of indemnification or any guaranty other than, in either case, as entered into in the ordinary course of business; (iv) any agreement, contract or commitment containing any covenant limiting in any respect the right of the Company or any of its subsidiaries to engage in any line of business or to compete with any person or granting any exclusive distribution rights; (v) any agreement, contract or commitment currently in force relating to the disposition or acquisition by the Company or any of its subsidiaries after the date of this Agreement of assets in excess of $250,000 not in the ordinary course of business or pursuant to which the Company or any of its subsidiaries has any material ownership interest in any corporation, partnership, limited liability company, joint venture or other business enterprise other than the Company's subsidiaries; (vi) any dealer, distributor, joint marketing or development agreement currently in force under which the Company or any of its subsidiaries have continuing material obligations to jointly market any product, technology or service and which may not be canceled without penalty upon notice of ninety (90) days or less, or any material agreement pursuant to which the Company or any of its subsidiaries have continuing material obligations to jointly develop any Intellectual Property that will not be owned, in whole or in part, by the Company or any of its subsidiaries and which may not be canceled without penalty upon notice of ninety (90) days or less; (vii) any material agreement, contract or commitment currently in force to license any third party to manufacture or reproduce any product or service of the Company or any of its subsidiaries or any material agreement, contract or commitment currently in force to sell or distribute any products or services of the -34- Company or any of its subsidiaries, including any material agreement, contract or commitment related to any Intellectual Property owned by the Company or any of its subsidiaries, except agreements with distributors or sales representative in the ordinary course of business cancelable without penalty upon notice of ninety (90) days or less and substantially in the form previously provided to Acquiror; (viii) any mortgage, indenture, guarantee, loan or credit agreement, security agreement or other agreement or instrument relating to the borrowing of money or extension of credit, other than accounts receivable and payable in the ordinary course of business; (ix) any settlement agreement entered into during the five-year period preceding the date hereof; (x) any other agreement, contract or commitment (i) in connection with or pursuant to which the Company and its subsidiaries will spend or receive (or are expected to spend or receive), in the aggregate, more than $250,000 during the current calendar year or during the next calendar year, (ii) the termination, expiration or loss of the other contracting party's performance of which would reasonably be expected to have a Company Material Adverse Effect or (iii) that is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC rules); or (xi) any agreement, contract or commitment currently in force to provide source code to any third party for any product or technology that is material to the Company or any of its subsidiaries. (b) Section 5.20 of the Company Disclosure Schedule contains a true and complete list of the Company Material Contracts not set forth in Section 5.23(g) of the Company Disclosure Schedule. The Company has provided or made available a complete and correct copy of each Material Contract to Acquiror. Each of the Company and each of its subsidiaries has performed, in all material respects, its obligations under the Company Material Contracts to which it is a party to the extent such obligations to perform have accrued. To the knowledge of the Company, the other parties to the Company Material Contracts have performed, in all material respects, their respective obligations thereunder. All the Company Material Contracts are in full force and effect in the form provided or made available to Acquiror. 5.21 Brokers and Finders. Except with respect to CIBC World Markets Corp., (a) the Company has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of the Company to pay any finder's fees, brokerage or agent commissions or other similar payments in connection with the transactions contemplated hereby and (b) there is no claim for payment by the Company of any investment banking fees, finder's fees, brokerage or agent commissions or other similar payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. -35- 5.22 Opinion of Financial Advisor. The Company Board has received the opinion of CIBC World Markets Corp. to the effect that, as of the date of this Agreement, the Exchange Ratio is fair, from a financial point of view, to the holders of Company Common Stock. 5.23 Intellectual Property. (a) Section 5.23(a) of the Company Disclosure Schedule lists all of the Registered Intellectual Property ("Company Registered Intellectual Property") and software (other than software that is generally mass-produced and commercially available software) ("Company Software") owned by, developed by or filed in the name of, the Company or any subsidiary thereof (collectively, the "Company Intellectual Property"). (b) Section 5.23(b) of the Company Disclosure Schedule lists all unresolved claims that have been asserted by or against the Company or its subsidiaries, including, without limitation, all proceedings or actions before any court or tribunal (including the United States Patent and Trademark Office ("PTO") or equivalent authority anywhere in the world), that are related to any Company Intellectual Property or claimed to be owned by a third party. Except as set forth in Section 5.23(b) of the Company Disclosure Schedule, no Company Intellectual Property or product or service of the Company is the subject of any claim, proceeding or outstanding decree, order, judgment, agreement or stipulation that does or is claimed to restrict in any manner the use, transfer or licensing thereof by the Company or which does or is claimed to affect the validity, use or enforceability of any Company Intellectual Property. (c) To Company's knowledge, each item of Company Intellectual Property (excluding any item of Company Intellectual Property that is only covered by a pending application) is valid and subsisting. All necessary registration, maintenance and renewal fees in connection with Company Intellectual Property have been made and, to the Company's knowledge, all necessary documents and certificates in connection with Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of procuring, perfecting and maintaining such Company Registered Intellectual Property. (d) Except as set forth on Section 5.23(d) of the Company Disclosure Schedule (i) the Company and each of its subsidiaries owns all right, title and interest to each item of Intellectual Property purported to be owned by it and used in connection with the operation or conduct of its business, including the Company Intellectual Property listed in Section 5.23(a) of the Company Disclosure Schedule, free and clear of any Lien other than Permitted Liens and (ii) the Company and each subsidiary thereof is the exclusive owner of all trademarks, service marks and trade names used in connection with the operation or conduct of its business, including the sale of any products or drug candidates or the provision of any services thereby. (e) To the extent that any work, invention, software or material has been developed or created by an employee or a third party for the Company or any of its subsidiaries, the Company or such subsidiary, as the case may be, has a valid and -36- enforceable written agreement with such employee or third party that transfers to the Company or such subsidiary full ownership of or a valid exclusive license to use, all Intellectual Property in such work, software, material or invention. (f) Except as set forth in Section 5.23(f) of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has transferred to any third party ownership of, or granted to any third party any exclusive license with respect to, any Intellectual Property that is or was Company Intellectual Property. (g) Section 5.23(g) of the Company Disclosure Schedule lists all contracts, licenses and agreements to which the Company and each of its subsidiaries is a party that are currently in effect (i) with respect to Intellectual Property licensed or offered by the Company or any of its subsidiaries to any third party or (ii) pursuant to which a third party has licensed or transferred any Intellectual Property to the Company or any of its subsidiaries, other than contracts, licenses or agreements relating to generally mass-produced and commercially available software. The contracts, licenses and agreements listed in Section 5.23(g) of the Company Disclosure Schedule are in full force and effect. The consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination, or suspension of such contracts, licenses and agreements. The Company and each of its subsidiaries is in compliance in all material respects with, and has not breached any term of any such contracts, licenses and agreements and, to the knowledge of the Company, all other parties to such contracts, licenses and agreements are in compliance in all material respects with, and have not materially breached any term of, such contracts, licenses and agreements. (h) Except as set forth in Section 5.23(h) of the Company Disclosure Schedule, following the Closing Date, the Surviving Corporation will be permitted to exercise all of the Company's rights under the contracts, licenses and agreements listed in Section 5.23(g) of the Company Disclosure Schedule, without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company would otherwise be required to pay, to the same extent the Company would have been able to exercise such rights had the transactions contemplated by this Agreement not occurred. (i) Section 5.23(i) of the Company Disclosure Schedule lists all contracts, licenses and agreements between the Company or any of its subsidiaries, on the one hand, and any third party, on the other hand, wherein or whereby the Company or any such subsidiary has agreed to, or assumed, any obligation or duty to warrant, indemnify, hold harmless or otherwise assume or incur any obligation or liability with respect to the infringement or misappropriation by the Company or any such subsidiary or such third party of the Intellectual Property of any other third party. (j) To the Company's knowledge, the operation of the business of the Company and each of its subsidiaries, including the Company's and each such subsidiary's design, development, manufacture, marketing and sale of the products or services (including products and drug candidates currently under development), has not, -37- and does not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction. (k) Except as set forth in Section 5.23(k) of the Company Disclosure Schedule, to the Company's knowledge (i) no other Person claims the right to use in connection with similar or closely related goods and in the same geographic area, any mark which is identical or confusingly similar to any trademarks or service marks owned by the Company or any of its subsidiaries, (ii) no other Person asserts ownership rights in any of the Intellectual Property owned by the Company or any of its subsidiaries and (iii) no other Person is infringing any rights of the Company or any of its subsidiaries in any of the Intellectual Property owned by the Company. (l) Each of the Company and its subsidiaries has taken reasonable steps to protect its rights in its confidential information and trade secrets or any trade secrets or confidential information of third parties provided thereto and, without limiting the foregoing, each of the Company and its subsidiaries has and enforces a policy requiring each employee and contractor with access to Intellectual Property of the Company or such subsidiaries to execute a proprietary information/confidentiality agreement substantially in the Company's standard form as then in effect and all current and former employees and contractors of the Company and each such subsidiary have executed such an agreement. Attached to Section 5.23(l) of the Company Disclosure Schedule is the Company's standard form of proprietary information/confidentiality agreement for employees and contractors. 5.24 Records of the Company. The minute books for the Company made available to Acquiror for review were correct and complete in all material respects as of the date of such review, no further entries have been made through the date of this Agreement, such minute books contain the true signatures of the persons purporting to have signed them, and such minute books contain an accurate record of all material corporate actions of the stockholders and directors, and any committees thereof, of the Company taken by written consent or at a meeting since incorporation of the Company. All material corporate actions taken by the Company have been duly authorized or ratified. All accounts, books, ledgers and official and other records of the Company have been fully, properly and accurately kept and completed in all material respects, and there are no material inaccuracies or discrepancies of any kind contained therein. The stock ledgers of the Company, as previously made available to Acquiror, contain accurate and complete records of all issuances, transfers and cancellations of shares of the capital stock of the Company. 5.25 Accuracy of Information Furnished by Company. No statement made or information provided by the Company in this Agreement, any other Transaction Document or the Company Disclosure Schedule, contains or shall contain any untrue statement of a material fact or omits or shall omit any material fact necessary to make the information contained therein, in light of the circumstances in which such statements were made, not misleading. The Company has made available to or provided Acquiror with true, accurate and complete copies of all documents listed or described in the Company Disclosure Schedule. -38- ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER 6.1 Conduct of Business Pending the Merger. After the date hereof and prior to the Closing Date or earlier termination of this Agreement, except (i) as set forth in Section 6.1 of the Company Disclosure Schedule or the Acquiror Disclosure Schedule, as applicable, (ii) in connection with specific actions that a party is explicitly required or permitted to take pursuant to this Agreement or (iii) to the extent that the other party hereto shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), each of the Company and Acquiror shall, and shall cause each of its subsidiaries to: (a) conduct its business in all material respects in the ordinary course and consistent with past practice; (b) not (i) amend or propose to amend its certificate of incorporation or bylaws, except for the Company Amended Certificate (ii) split, combine or reclassify its outstanding capital stock or (iii) declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise, except for (x) dividends or distributions paid by a subsidiary of the Company to the Company or another subsidiary of the Company or by a subsidiary of Acquiror to Acquiror or another subsidiary of Acquiror, as the case may be, and (y) any declaration, set-aside, or payment pursuant to the terms of any Employee Benefit Plan of the Company or its subsidiaries or the Acquiror or its subsidiaries, as the case may be; (c) not issue or sell or agree to issue or sell any additional shares of, or any options, warrants or rights to acquire any shares of, capital stock thereof, except that the Company may issue shares upon exercise of outstanding stock options or warrants referred to in Section 5.2 hereof and Company Options under the Company Employee Plans or upon the conversion of any Company Preferred Stock and (ii) Acquiror may issue shares upon exercise of outstanding stock options or warrants referred to in Section 4.2 hereof and options issuable under any stock option plan of Acquiror, in each case in accordance with the terms thereof; (d) not (i) incur any indebtedness for borrowed money, other than borrowings in the ordinary course of business (including any borrowings under existing credit facilities), (ii) redeem, purchase, acquire or offer to purchase or acquire any shares of its capital stock or any options, warrants or rights to acquire any of the capital stock thereof or any security convertible into or exchangeable for such capital stock, (iii) knowingly take or fail to take any action which action or failure to take action would cause the Merger not to qualify as a reorganization under Section 368(a) of the Code, (iv) make any acquisition of any assets or businesses, other than acquisitions of assets in the ordinary course of business or other than acquisitions involving aggregate consideration of no more than $250,000, (v) sell, dispose of or encumber any material assets or businesses, other than sales of businesses or assets in the ordinary course of business or (vi) enter into any binding contract, agreement, commitment or arrangement with respect to any of the foregoing; and -39- (e) use all reasonable efforts to preserve intact its business organization and goodwill and preserve the business relationships with material customers and others having material business relationships with them. 6.2 Control of Acquiror's Operations. Nothing contained in this Agreement shall give to the Company, directly or indirectly, rights to control or direct Acquiror's operations prior to the Effective Time. 6.3 Control of Company's Operations. Nothing contained in this Agreement shall give to Acquiror, directly or indirectly, rights to control or direct the Company's operations prior to the Effective Time. ARTICLE VII ADDITIONAL AGREEMENTS 7.1 Access to Information. (a) Subject to applicable law, the Company shall afford, and cause its subsidiaries to afford, to Acquiror and its accountants, counsel, financial advisors and other representatives (the "Acquiror Representatives") and Acquiror and its subsidiaries shall afford to the Company and its accountants, counsel, financial advisors and other representatives (the "Company Representatives") full access during normal business hours with reasonable notice throughout the period prior to the Effective Time to all of their respective properties, books, contracts, commitments and records (including, but not limited to, Tax Returns) and, during such period, shall furnish promptly to one another such information concerning their respective businesses, properties and personnel as Acquiror or the Company, as the case may be, shall reasonably request. Any investigation pursuant to this Section 7.1 shall be conducted in a manner which will not interfere unreasonably with the conduct of the business of the other party. Acquiror and its subsidiaries (including Merger Sub) shall hold and cause Acquiror Representatives to hold, and the Company shall hold and cause the Company Representatives to hold, in strict confidence all nonpublic documents and information furnished to Acquiror or to the Company, as the case may be, in connection with the transactions contemplated by this Agreement, except that (i) Acquiror and the Company may disclose such information as may be necessary in connection with seeking Acquiror Required Statutory Approvals and the Company Required Statutory Approvals, (ii) each of Acquiror and the Company may disclose any information that it is required by law or judicial or administrative order to disclose and (iii) Acquiror may disclose any such information that it is required by any stock exchange rule to disclose. (b) In the event that this Agreement is terminated in accordance with its terms, each party shall promptly redeliver to the other all nonpublic written material provided pursuant to this Section 7.1 and shall not retain any copies, extracts or other reproductions in whole or in part of such written material. In such event, all documents, memoranda, notes and other writings prepared by Acquiror or the Company based on the information in such material shall be destroyed (and Acquiror and the Company shall use their respective reasonable efforts to cause their advisors and representatives to similarly -40- destroy their documents, memoranda and notes), and such destruction (and reasonable efforts) shall be certified in writing by an authorized officer supervising such destruction. (c) The parties hereto acknowledge that Acquiror and the Company have previously executed a Confidentiality Agreement, dated as of June 6, 2003 (the "Confidentiality Agreement"), which shall continue in full force and effect in accordance with its terms, except as expressly modified by this Agreement. 7.2 Affiliate Letter. The Company shall use its commercially reasonable efforts to cause each officer, each director and each other person who is an "affiliate" (as that term is used in Rule 145 promulgated under the Securities Act) thereof to deliver to Acquiror, on or prior to the Effective Time, a written agreement (an "Affiliate Letter") in substantially the form of Exhibit 7.2 attached hereto. At least 30 days prior to the Closing Date, the Company shall deliver to Acquiror a list of names and addresses of those persons who were, in the reasonable judgment of the Company, at the record date for such party's stockholders' meeting to approve the Merger, "affiliates" (as so defined). 7.3 No Solicitation. (a) From and after the date hereof until the Effective Time or the termination of this Agreement pursuant to Article IX hereof, except as set forth in this Section 7.3, neither Company nor Acquiror shall authorize or permit any of their respective directors, officers, employees, investment bankers, attorneys, accountants or other advisors or representatives (such directors, officers, employees, investment bankers, attorneys, accountants, other advisors and representatives being referred to herein, collectively, as "Representatives"), to directly or indirectly: (i) solicit, initiate, induce, encourage or take any other action to facilitate any inquiries or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal (as defined in Section 7.3(d) hereof), including (without limitation) amending or granting any waiver or release under any standstill or similar agreement with respect to any Company Common Stock or Acquiror Common Stock, respectively; or (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, furnish to any person any information with respect to, assist or participate in any effort or attempt by any person with respect to, or otherwise cooperate in any way with, any Acquisition Proposal. Notwithstanding the foregoing, prior to the approval of the Company Voting Proposal at the Company Stockholder Meeting (the "Specified Time"), the Company may, to the extent required by the fiduciary obligations of the Company Board, as determined in good faith by the Company Board, after consultation with outside counsel, in response to an unsolicited Acquisition Proposal that did not result from a breach or a deemed breach of this Section 7.3 and that is, or that is reasonably likely to result in, a Superior Proposal that did not result from a breach by the Company of this Section 7.3, and subject to compliance with Section 7.3(c), (x) furnish information with respect to the Company to the person making such Acquisition Proposal and its representatives pursuant to a customary confidentiality agreement not less restrictive of the other -41- party than the Confidentiality Agreement and (y) participate in discussions or negotiations with such person and its representative regarding such Acquisition Proposal. Without limiting the foregoing, the Company and Acquiror agree that any violation of the restrictions set forth in this Section 7.3 by any Representative of the Company or Acquiror, as the case may be, or their respective Affiliates, whether or not such Person is purporting to act on behalf of the Company or Acquiror, as the case may be, or their respective Affiliates, shall constitute a breach by the Company or Acquiror, as the case may be, of this Section 7.3. The Company and Acquiror shall enforce, to the fullest extent permitted under applicable law, the provisions of any standstill, confidentiality or similar agreement entered into by the Company or Acquiror, as the case may be, or any of their subsidiaries or their respective Affiliates or Representatives, including (without limitation) where necessary, obtaining injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof in any court having jurisdiction. (b) No Change in Recommendation or Alternative Acquisition. Beginning immediately upon the release of the press release announcing the execution of this Agreement, neither the Company Board nor the Acquiror Board nor any committee thereof shall: (i) withdraw or modify, or publicly propose to withdraw or modify, in a manner adverse to the other party, its approval or recommendation with respect to the Company Voting Proposal or the Acquiror Voting Proposal, as the case may be; (ii) cause or permit the Company or Acquiror to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement constituting or relating to any Acquisition Proposal; or (iii) adopt, approve or recommend, or propose to adopt, approve or recommend any Acquisition Proposal. Notwithstanding the foregoing, the Company Board may, in response to a Superior Proposal that did not result from a breach by the Company of this Section 7.3, withdraw or modify its recommendation with respect to the Company Voting Proposal if the Company Board determines in good faith (after consultation with outside counsel) that its fiduciary obligations require it to do so, but only at a time that is prior to the Specified Time and is after the fifth business day following receipt by Acquiror (if the Company has received a Superior Proposal) of written notice advising it that the Company Board desires to withdraw or modify the recommendation due to the existence of a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal. Nothing in this Section 7.3 shall be deemed to (A) permit the Company to take any action described in clauses (ii) or (iii) of the first sentence of this Section 7.3(b), (B) affect any obligation of the Company under this Agreement or (C) limit the Company's obligation to call, give notice of, convene and hold the Company's shareholder meeting, regardless of whether the Company Board has withdrawn or modified its recommendation. -42- (c) Notices; Additional Negotiations. The Company and Acquiror shall immediately advise the other orally, with written confirmation to follow promptly (and in any event within two business days), of any Acquisition Proposal or any request for nonpublic information in connection with any Acquisition Proposal, or of any inquiry with respect to, or that could reasonably be expected to lead to, any Acquisition Proposal, the material terms and conditions of any such Acquisition Proposal or inquiry and the identity of the person making any such Acquisition Proposal or inquiry. The party receiving an Acquisition Proposal shall (i) keep the other party fully informed, on a current basis, of the status and details (including any change to the terms) of any such Acquisition Proposal or inquiry and (ii) provide to the other party as soon as practicable after receipt or delivery thereof copies of all correspondence and other written material sent or provided to the party receiving such Acquisition Proposal from any third party in connection with such Acquisition Proposal. Notwithstanding the foregoing, in the event that the Company receives an Acquisition Proposal that is, or is reasonably likely to result in, a Superior Proposal, contemporaneously with providing any information to a third party in connection with any such Superior Proposal or inquiry, the Company shall furnish a copy of such information to the Acquiror to the extent that such copy has not previously been provided to Acquiror. In addition to the foregoing, the Company shall (i) provide Acquiror with at least 24 hours prior notice (or such lesser prior notice as provided to the members of the Company's Board of Directors but in no event less than eight hours) of any meeting of the Company's Board of Directors at which the Company's Board of Directors is reasonably expected to consider a Superior Proposal and (ii) provide Acquiror with at least two business days prior written notice of a meeting of the Company's Board of Directors at which the Company's Board of Directors is reasonably expected to recommend a Superior Proposal to its stockholders and together with such notice a copy of the definitive documentation relating to such Superior Proposal to the extent that such copy has not previously been provided to Acquiror. (d) Definition. For purposes of this Agreement, (i) "Acquisition Proposal" means, with respect to any party, any offer or proposal (other than an offer or proposal by Acquiror) relating to any transaction or series of related transactions other than the transactions contemplated by this Agreement involving (i) any acquisition or purchase by any Person of more than a 15 percent interest in the total outstanding voting securities of the Company, Acquiror or any of their subsidiaries or any tender offer or exchange offer that if consummated would result in any Person beneficially owning 15 percent or more of the total outstanding voting securities of the Company, Acquiror or any of their subsidiaries or any merger, consolidation, business combination or similar transaction involving the Company or Acquiror pursuant to which the securityholders of the such party immediately preceding such transaction hold less than 85 percent of the equity interests in the surviving or resulting entity of such transaction, (ii) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of more than 15 percent of the assets of the Company or Acquiror representing more than 15 percent of the value of all the assets of the Company or Acquiror or (iii) any liquidation, -43- dissolution, recapitalization or other significant corporate reorganization of the Company or Acquiror. (ii) "Superior Proposal" means any unsolicited, bona fide written Acquisition Proposal (i) on terms which the Company Board determines in its good faith judgment to be more favorable from a financial point of view to the stockholders of the Company than the transactions contemplated by this Agreement (after consultation with an internationally recognized independent financial advisor), taking into account all the terms and conditions of such proposal and this Agreement (including any proposal by Acquiror to amend the terms of this Agreement) and (ii) that is reasonably capable of being completed on the terms proposed, taking into account all financial, regulatory, legal and other aspects of such proposal. 7.4 Joint Proxy Statement/Prospectus; Registration Statement. (a) As promptly as practical after the execution of this Agreement, Acquiror and the Company shall jointly prepare the Registration Statement, which shall include the Joint Proxy Statement/Prospectus, and Acquiror shall file the Registration Statement with the SEC. Acquiror shall respond to any comments of the SEC and shall use its commercially reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and Acquiror and the Company shall cause the Joint Proxy Statement/Prospectus to be mailed to their respective securityholders at the earliest practicable time after the Registration Statement is declared effective under the Securities Act. The Company shall cooperate with, and use all reasonable efforts to assist, Acquiror in its efforts to have the Registration Statement declared effective under the Securities Act as promptly as practical after the filing therewith with the SEC. Whenever any event occurs with respect to Acquiror or the Company that is required to be set forth in an amendment or supplement to the Joint Proxy Statement/Prospectus, the Registration Statement or any filing pursuant to Section 7.4(b), Acquiror or the Company, as the case may be, shall promptly inform the other such party of such occurrence and cooperate in filing or assisting in filing with the SEC or its staff or any other Governmental Authority or government officials, or mailing or assisting in preparing and mailing to securityholders of Acquiror and the Company, such amendment or supplement. (b) In addition to the filing described in subsection (a) above, each of the Company and Acquiror shall promptly make any filings with respect to the Merger required under applicable state securities or "Blue Sky" laws and other applicable laws of any other jurisdiction and the rules and regulations promulgated thereunder. 7.5 All Reasonable Efforts; Agreement to Cooperate. (a) Subject to the terms and conditions herein provided each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using its reasonable efforts to obtain all necessary or appropriate -44- waivers, consents or approvals of third parties required in order to preserve material contractual relationships of Acquiror and the Company and their respective subsidiaries, all necessary or appropriate waivers, consents and approvals and SEC "no-action" letters to effect all necessary registrations, filings and submissions and to lift any injunction or other legal bar to the Merger (and, in such case, to proceed with the Merger as expeditiously as possible) and to amend the Acquiror's stock option plans as necessary or advisable in connection with the transactions contemplated hereby in order to issue the Replacement Options as contemplated by Section 3.2(e) hereto. Acquiror shall reasonably consult with the Company and, subject to being permitted by the applicable Governmental Authority to do so, the Company shall have the right to attend and participate in any telephone calls or meetings that Acquiror or Merger Sub have with any person with regard to this Agreement. (b) Subject to the terms hereof, the Company and Acquiror agree, and shall cause each of their respective subsidiaries, to cooperate and to use their respective commercially reasonable efforts to obtain any government clearances or approvals required for Closing under the HSR Act and any other federal, state or foreign law or, regulation or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade reasonably determined by the parties to apply (collectively "Antitrust Laws"), to respond to any government requests for information under any Antitrust Law, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an "Antitrust Order") that restricts, prevents or prohibits the consummation of the Merger or any other transactions contemplated by this Agreement under any Antitrust Law. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to any Antitrust Law. Notwithstanding anything in this Agreement to the contrary in this Section 7.5, neither the Company nor Acquiror shall be under any obligation to (i) make proposals, execute or carry out agreements or submit to orders providing for the sale or other disposition or holding separate (through the establishment of a trust or otherwise) of any material assets or categories of assets of the Company or Acquiror or the holding separate of the shares of Company Common Stock (or shares of stock of the Surviving Corporation) or imposing or seeking to impose any material limitation on the ability of the Company or Acquiror to conduct its business or own such assets or to acquire, hold or exercise full rights of ownership of the shares of Company Common Stock (or shares of stock of the Surviving Corporation) or (ii) take any action under this Section 7.5 if the United States Department of Justice or the United States Federal Trade Commission or any applicable foreign regulatory agency authorizes its staff to seek a preliminary injunction or restraining order to enjoin consummation of the Merger. 7.6 Public Statements. Except as may be required by applicable law or any listing agreement with a national securities exchange, the parties shall consult with each other prior to issuing any press release or any written public statement with respect to this Agreement or the -45- transactions contemplated hereby and shall not issue any such press release or written public statement prior to such consultation. 7.7 Notification of Certain Matters. Each of the Company and Acquiror agrees to give prompt notice to the other such party of, and to use commercially reasonable efforts to remedy (a) the occurrence or failure to occur of any event which occurrence or failure to occur would reasonably be expected to cause any of the representations or warranties of the Company or Acquiror, as the case may be, in this Agreement to be untrue or inaccurate in any material respect at the Effective Time and (b) any material failure on the part of the Company or Acquiror, as the case may be, to comply with or satisfy any covenant, agreement or condition to be complied with or satisfied thereby hereunder; provided, however, that the delivery of any notice pursuant to this Section 7.7 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.8 Approval of Stockholders. (a) Acquiror, acting through the Acquiror Board, shall take all actions in accordance with applicable law, its Certificate of Incorporation and Bylaws and the rules of The Nasdaq Stock Market, Inc. to promptly and duly call, give notice of, convene and hold as promptly as practicable after the declaration of effectiveness of the Registration Statement the Acquiror Meeting for the purpose of considering and voting upon the proposed issuance of Acquiror Common Stock in the Merger and related matters. The Acquiror Board shall recommend approval of the proposed issuance of Acquiror Common Stock in the Merger and related matters by the stockholders of Acquiror and include such recommendation in the Joint Proxy Statement/Prospectus and neither the Acquiror Board nor any committee thereof shall withdraw or modify, or propose or resolve to withdraw or modify in a manner adverse to the Company, the recommendation of the Acquiror Board that Acquiror's stockholders vote in favor of the proposed issuance of Acquiror Common Stock in the Merger and related matters. Acquiror shall take all action that is both reasonable and lawful to solicit from its stockholders proxies in favor of the proposed issuance of Acquiror Common Stock in the Merger and related matters and shall take all other action necessary or advisable to secure the vote or consent of the Acquiror stockholders required by the rules of The Nasdaq Stock Market, Inc. Notwithstanding anything to the contrary contained in this Agreement, after consultation with the Company, Acquiror may adjourn or postpone the Acquiror Meeting to the extent necessary (i) to ensure that any required supplement or amendment to the Joint Proxy Statement/Prospectus is provided to Acquiror's stockholders, (ii) to enable Acquiror to solicit additional votes in favor of the proposed issuance of Acquiror Common Stock in the Merger and related matters such that the required vote of the Acquiror stockholders is more likely to be received or (iii) if, as of the time for which the Acquiror Meeting is originally scheduled (as set forth in the Joint Proxy Statement/Prospectus), there are insufficient shares of Acquiror Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Acquiror Meeting. (b) The Company, acting through the Company Board, shall take all actions in accordance with applicable law and its Certificate of Incorporation and Bylaws to promptly and duly call, give notice of, convene and hold as promptly as practicable after the declaration of effectiveness of the Registration Statement, the Company Meeting for -46- the purpose of considering and voting upon the Merger. Subject to Section 7.3, to the fullest extent permitted by applicable law, the Company Board shall recommend approval of the Merger by the stockholders of the Company and include such recommendation in the Joint Proxy Statement/Prospectus and neither the Company Board nor any committee thereof shall withdraw or modify, or propose or resolve to withdraw or modify in a manner adverse to Acquiror, the recommendation of the Company Board that the Company's stockholders vote in favor of the Merger. The Company shall take all action that is both reasonable and lawful to solicit from its stockholders proxies in favor of the Merger and shall take all other action necessary or advisable to secure the vote or consent of the stockholders of the Company to approve the Merger. Notwithstanding anything to the contrary contained in this Agreement, after consultation with Acquiror, the Company may adjourn or postpone the Company Meeting to the extent necessary (i) to ensure that any required supplement or amendment to the Joint Proxy Statement/Prospectus is provided to the Company's stockholders, (ii) to enable the Company to solicit additional votes in favor of the Merger such that the required vote of the Company stockholders is likely to be received or (iii) if, as of the time for which the Company Meeting is originally scheduled (as set forth in the Joint Proxy Statement/Prospectus), there are insufficient shares of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Meeting. (c) Acquiror and the Company shall call, give notice of, convene and hold the Acquiror Meeting and the Company Meeting, respectively, and shall take action to secure the vote or consent of the stockholders thereof in accordance with this Section 7.8 whether or not any actual, potential or purported Acquisition Proposal has been commenced, disclosed, announced or submitted to Acquiror or the Company, as the case may be. 7.9 Section 16 Matters. Acquiror and Company shall take all steps reasonably necessary to cause the acquisitions of shares of Acquiror Common Stock or other equity securities (including stock options and other derivative securities) of Acquiror in connection with the Merger, and subsequent dispositions of such equity securities of Acquiror (including stock options and other derivative securities), by each individual who is a director or officer of the Company to be exempt pursuant to Rule 16b-3 under the Exchange Act. Without limiting the foregoing, the Acquiror Board, or a committee thereof consisting of two or more non-employee directors (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall adopt a resolution in advance of the Effective Time providing that the acquisition of Acquiror Common Stock and Replacement Options by those officers and directors of the Company who will become subject to the reporting requirements of Section 16 of the Exchange Act pursuant to the transactions contemplated hereby and as required by applicable law, is intended to be exempt pursuant to Rule 16b-3 under the Exchange Act. 7.10 368(a) Reorganization. The Company and Acquiror shall each use commercially reasonable efforts to cause the Merger to be treated as a reorganization within the meaning of Section 368 of the Code. The parties hereto hereby adopt this Agreement as a plan of reorganization. 7.11 Nasdaq National Market Listing. Acquiror shall, if required by the rules of The Nasdaq Stock Market, Inc., file with The Nasdaq Stock Market, Inc. a Notification Form: Listing -47- of Additional Shares with respect to the Acquiror Common Stock issuable pursuant to the transactions contemplated by this Agreement. 7.12 Stockholder Litigation. Until the earlier of the termination of this Agreement in accordance with its terms or the Effective Time, each party shall give the other party the opportunity to participate in the defense or settlement of any stockholder litigation relating to this Agreement or any of the transactions contemplated by this Agreement, and shall not settle any such litigation without the other party's prior written consent, which will not be unreasonably withheld or delayed. 7.13 Indemnification. (a) From and after the Effective Time, Acquiror shall, to the fullest extent permitted by law, cause the Surviving Corporation, for a period of six years from the Effective Time, to indemnify and hold harmless each present and former director and officer of the Company (the "Board Indemnified Parties"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been permitted under Delaware law and its Certificate of Incorporation or By-laws in effect on the date hereof to indemnify a Board Indemnified Party (and Acquiror and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided the Board Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Board Indemnified Party is not entitled to indemnification). (b) For a period of six years after the Effective Time, Acquiror shall cause the Surviving Corporation to maintain (to the extent available in the market) in effect a directors' and officers' liability insurance policy covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy (a copy of which has been heretofore delivered or made available to Acquiror) with coverage in amount and scope at least as favorable to such persons as the Company's existing coverage; provided, however, that in no event shall Acquiror or the Surviving Corporation be required to expend in excess of 150% of the annual premium currently paid by the Company for such coverage; provided, further, that if the annual premium exceeds such amount, Acquiror will cause the Surviving Corporation to obtain as much coverage as possible for such amount. (c) The provisions of this Section 7.13 are intended to be in addition to the rights otherwise available to the current officers and directors of the Company by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Board Indemnified Parties, their heirs and their representatives. -48- 7.14 Acquiror Board. The Acquiror Board will take all actions necessary to cause its membership, immediately after the Effective Time, to consist of nine persons, seven of whom shall have served on the Acquiror Board immediately prior to the Effective Time (collectively, "Acquiror Board Designees"), and two of whom shall have served on the Company Board immediately prior to the Effective Time and shall be John A. Friede and John Manzetti (collectively "Company Board Designees"). 7.15 Employee Benefits; Termination of Pension Plan. (a) Following the Effective Time, Acquiror will give each employee of the Company who continues as an employee of the Surviving Corporation immediately following the effectiveness of the Merger (a "Continuing Employee") full credit for prior service with the Company or its subsidiaries for purposes of (i) eligibility and vesting under any Acquiror Employee Plans, (ii) determination of benefits levels under any Acquiror Employee Plan or policy relating to vacation or severance and (iii) determination of "retiree" status under any Acquiror Employee Plan, in each case for which the Continuing Employee is otherwise eligible and in which the Continuing Employee is offered participation, but except where such crediting would (A) result in a duplication of benefits or (B) otherwise cause Acquiror or its subsidiaries or any Acquiror Employee Plan or trust relating thereto to accrue or pay for benefits that relate to any time period prior to the Continuing Employee's participation in the Acquiror Employee Plan. Acquiror agrees that each Continuing Employee shall be eligible to either: (i) participate in Acquiror Employee Plans as permitted by the terms of such Acquiror Employee Plans, (ii) participate in Company Employee Plans that are continued by Acquiror, or (iii) a combination of clauses (i) and (ii) so that each Continuing Employee is eligible for benefits that are substantially similar in the aggregate to those of similarly situated employees of Acquiror. (b) Effective as of the day immediately preceding the Effective Time, the Company shall terminate any and all group severance, separation or salary continuation plans, programs or arrangements and any and all plans intended to include a Code Section 401(k) arrangement (unless Acquiror elects, as evidenced by written notice to the Company, to the continuation of any such plan, program or arrangement) (collectively, "Company Terminating Plan(s)"). Acquiror agrees that the Continuing Employees shall be eligible to participate, to the extent they were eligible to participate in the Company Terminating Plan, in a comparable Acquiror plan, program or arrangement, as promptly following the Effective Time as is permitted by the terms of such Acquiror plan, program or arrangement. Unless Acquiror provides such written consent to the Company, no later than three business days prior to the Effective Time, the Company shall provide Acquiror with evidence that such Company Terminating Plan(s) have been terminated (effective as of the day immediately preceding the Effective Time) pursuant to resolutions of the Company's Board of Directors. 7.16 Rights Agreement Amendment. The Acquiror shall take all action necessary so that John A. Freide shall not be an "Acquiring Person" under the Rights Agreement due solely to (a) the consummation of the transactions contemplated hereby, (b) the exercise of stock options currently held by the John A. Freide and any additional stock options granted to John A. Freide by Acquiror in connection with the services provided by John A. Freide as a member of the -49- Acquiror Board or (c) the acquisition of beneficial ownership of any other equity securities of Acquiror representing up to 5% of Acquior Common Stock and which are deposited in, and subject to, the Voting Trust Agreement in substantially the form of Exhibit 7.16 attached hereto (the "Voting Trust"). 7.17 Voting Agreement. Concurrently with the execution and delivery of this Agreement, John A. Freide shall execute and deliver to Acquiror a Voting Agreement, in substantially the form of Exhibit 7.17(a) attached hereto (the "Voting Agreement"). 7.18 Lock-up Agreements. The Company shall use its commercially reasonable efforts to cause each person who is required to sign an Affiliate Letter and each employee of the Company (the "Employee Lock-up Signatories" ) who is a holder of outstanding equity securities of the Company (including, without limitation, stock options and other derivative securities) (collectively, the "Lock-up Signatories") to deliver to Acquiror, on or prior to the Effective Time, a written agreement (the "Lock-Up Agreement") in substantially the form of Exhibit 8.3(f) attached hereto . 7.19 Addresses for Option Holders. Within 30 days after the date hereof, the Company shall deliver to Acquiror a schedule setting forth the domicile address for each holder of Company Options or Off Plan Options. ARTICLE VIII CONDITIONS 8.1 Conditions to Each Party's Obligation to Effect the Merger. The obligation of each party hereto to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The Acquiror Voting Proposal shall have been approved in the manner required by applicable law, by the applicable regulations of The Nasdaq Stock Market, Inc. and by the vote of the requisite holders of the issued and outstanding shares of capital stock of the Acquiror under applicable law and the certificate of incorporation of the Acquiror. The Company Voting Proposal shall have been approved in the manner required by applicable law and by the vote of the requisite holders of the issued and outstanding shares of capital stock of the Company under applicable law and the certificate of incorporation of the Company. (b) The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. (c) None of the parties hereto shall be subject to any order or injunction of a court of competent jurisdiction which prohibits the consummation of the transactions contemplated by this Agreement. In the event any such order or injunction shall have been issued, each party agrees to use its reasonable efforts to have any such injunction lifted. (d) All consents, authorizations, orders and approvals of (or filings or registrations with) any Governmental Authority or other regulatory body required in -50- connection with the execution, delivery and performance of this Agreement shall have been given or made, except for (i) the filing of the Certificate of Merger and (ii) any documents required to be filed after the Effective Time. (e) The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for such purpose shall have been initiated or threatened in writing (and not abandoned or withdrawn) by the SEC or its staff. (f) Acquiror shall, if required by the Rules of The Nasdaq Stock Market, Inc., have submitted to The Nasdaq Stock Market, Inc. a Notification Form: Listing of Additional Shares with respect to the Acquiror Common Stock to be issued pursuant to the transactions contemplated by this Agreement. 8.2 Conditions to Obligation of the Company to Effect the Merger. The obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) (i) Acquiror shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Closing Date, and (ii) the representations and warranties of Acquiror and Merger Sub set forth in this Agreement shall be true and correct in all respects, in each case, on and as of the date made and on and as of the Closing Date as if made on of such date except (x) to the extent that such representations and warranties speak as of an earlier date, in which case such representations and warranties shall be true and correct as of such date, (y) for changes required by this Agreement, and (z) where the failure to be true and correct (without regard to any materially, Acquiror Material Adverse Effect or knowledge qualifications contained therein), individually or in the aggregate, have not had, and are not reasonably likely to have, an Acquiror Material Adverse Effect). The Company shall have received a certificate of the President or a Vice President of Acquiror, dated the Closing Date, certifying to the foregoing. (b) The Company shall have been furnished with an opinion of McDermott, Will & Emery, counsel to Acquiror, in substantially the form of Exhibit 8.2(b) attached hereto. (c) The Company shall have received a written opinion from Cohen & Grigsby, PC, counsel to the Company, to the effect that the Merger will qualify for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; provided, however, that if Cohen & Grigsby, PC does not render such opinion, this condition shall nonetheless be deemed satisfied if McDermott, Will & Emery renders such opinion to the Company (it being agreed that the Company and Acquiror shall each provide reasonable cooperation to McDermott, Will & Emery and Cohen & Grigsby, PC, including making reasonable and customary representations to McDermott, Will & Emery and Cohen & Grigsby, PC (and not to any other person, whether or not a party to this Agreement) substantially in the form attached as Exhibit 8.2(c) attached hereto, to enable them to render such opinion and that counsel shall be entitled to rely on such -51- representations and assumptions as they may deem appropriate in rendering such opinion). (d) Acquiror shall have executed a Registration Rights Agreement with John Friede and the other signatories thereto in the form attached hereto as Exhibit 8.2(d). 8.3 Conditions to Obligation of Acquiror and Merger Sub to Effect the Merger. The obligations of Acquiror and Merger Sub to effect the Merger shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) (i) the Company shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Closing Date, and (ii) the representations and warranties of Company set forth in this Agreement shall be true and correct in all respects, in each case, on and as of the date made and on and as of the Closing Date as if made on and as of such date except (x) to the extent that such representations and warranties speak as of an earlier date, in which case such representations and warranties shall be true and correct as of such date, (y) for changes required by this Agreement, and (z) where the failure to be true and correct (without regard to any materiality, Company Material Adverse Effect or knowledge qualifications contained therein), individually or in the aggregate, have not had, and are not reasonably likely to have, a Company Material Adverse Effect). The Acquiror shall have received a certificate of the President or a Vice President of Company, dated the Closing Date, certifying to the foregoing. (b) Acquiror shall have been furnished with an opinion of Cohen & Grigsby, PC, counsel to the Company, in substantially the form of Exhibit 8.3(b) attached hereto. (c) Acquiror shall have received a written opinion from McDermott, Will & Emery, counsel to Acquiror, to the effect that the Merger will qualify for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; provided, however, that if McDermott, Will & Emery does not render such opinion, this condition shall nonetheless be deemed satisfied if Cohen & Grigsby, PC renders such opinion to Acquiror (it being agreed that Acquiror and the Company shall each provide reasonable cooperation to Cohen & Grigsby, PC and McDermott, Will & Emery, including making reasonable and customary representations to Cohen & Grigsby, PC and McDermott, Will & Emery (and not to any other person, whether or not a party to this Agreement) substantially in the form attached as Exhibit 8.3(c) attached hereto, to enable them to render such opinion and that counsel shall be entitled to rely on such representations and assumptions as they may deem appropriate in rendering such opinion). (d) All consents, waivers or assignments set forth on Exhibit 8.3(d) attached hereto shall have been obtained by the Company. (e) All of the Persons listed on Exhibit 8.3(e) attached hereto and any other such Persons referenced in Section 7.2, shall have duly executed and delivered an Affiliate Letter to Acquiror. -52- (f) Lock-up Agreements substantially in the form of Exhibit 8.3(f) attached hereto shall have been duly executed and delivered by each of the Persons listed on Exhibit 8.3(e) and Exhibit 8.3(f)(1) and a sufficient number of Employee Lock-up Signatories such that at least 95% of the Employee Lock-Up Signatories is subject to a Lock-up Agreement, which Lock-up Agreements prohibit, among other things, disposition of any securities of Acquiror (i) in the case of the John A. Freide, for a period of 18 months after the Effective Time, (ii) in the case of the Persons listed on Exhibit 8.3(e) identified as members of management for a period of 12 months after the Effective Time (provided that such persons shall be entitled to sell up to 25% of the Acquiror Common Stock owned thereby commencing 180 days after the Effective Time) and (iii) in the case of all such other Persons for a period of 180 days after the Effective Time. The shares of Acquiror Common Stock held by such holders shall bear a legend reflecting such restrictions. (g) Dissenters' rights, as contemplated by Section 3.4 hereof, shall not have been exercised with respect to more than five percent (5%) of the outstanding shares of Company Common Stock. (h) The Company, on behalf of its stockholders, and the Escrow Agent shall have executed and delivered to Acquiror the Indemnification Escrow Agreement. (i) The John A. Freide shall have executed and delivered to Acquiror the Voting Agreement and Voting Trust. (j) The Company shall have delivered to Acquiror a copy of (i) the text of the resolutions adopted by the Company Board authorizing the execution, delivery and performance of this Agreement and the consummation of all of the transactions contemplated by this Agreement, (ii) the text of the resolutions adopted by the stockholders of the Company approving the principal terms of this Agreement, the Merger and the other transactions contemplated hereby, and terms of this Agreement, the Merger and other transactions contemplated hereby, and (iii) the Certificate of Incorporation and Bylaws of the Company, along with a certificate executed on behalf of the Company by its corporate secretary certifying to Acquiror that such copies of the Company by its corporate secretary certifying to Acquiror that such copies are true, correct and complete copies of such resolutions, Certificate of Incorporation and Bylaws, respectively, and the such resolutions were duly adopted and have not been amended or rescinded. (k) The Company Amended Certificate shall have been accepted for filing with the Secretary of State of the State of Delaware. (l) The Company and the applicable stockholders of the Company shall have executed and delivered to Acquiror the Shareholders' Voting Agreement in substantially the form of Exhibit 8.3(l) attached hereto. -53- ARTICLE IX TERMINATION; FEES AND EXPENSES 9.1 Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by the mutual written agreement of the parties hereto. 9.2 Termination by Acquiror or the Company. This Agreement may be terminated and the Merger may be abandoned by either Acquiror or the Company if (a) the Merger shall not have been consummated by April 16, 2004 (the "Termination Date"), provided that the terminating party shall not have breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure to consummate the Merger by the Termination Date; (b) at the Company Meeting (including any adjournment or postponement permitted by this Agreement), at which a vote on the Company Voting Proposal is taken, the requisite vote of the stockholders of the Company in favor of the Merger shall not have been obtained (provided, however, that the right to terminate this Agreement under this Section 9.2(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been a principal cause of or resulted in the failure to obtain such requisite vote), (c) at the Acquiror Meeting (including any adjournment or postponement permitted by this Agreement), at which a vote on the issuance of Acquiror Common Stock in the Merger and related matters is taken, the requisite vote of the stockholders of Acquiror in favor of the issuance of Acquiror Common Stock in the Merger and related matters shall not have been obtained (provided, however, that the right to terminate this Agreement under this Section 9.2(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been a principal cause of or resulted in the failure to obtain such requisite vote) or (d) a United States federal or state court of competent jurisdiction or United States federal or state governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable; provided that the party seeking to terminate this Agreement pursuant to clause (d) above shall have used all reasonable efforts to remove such order, decree or ruling. 9.3 Termination by the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Company Board if (a) there has been a breach by Acquiror or Merger Sub of any representation or warranty contained in this Agreement which breach has not been cured in all material respects and which has caused any of the conditions set forth in Section 8.2(a) to be incapable of being satisfied by the Termination Date or (b) there has been a material breach of any of the covenants or agreements set forth in this Agreement on the part of Acquiror which has not been cured in all material respects and which has caused any of the conditions set forth in Section 8.2(a) to be incapable of being satisfied by the Termination Date. 9.4 Termination by Acquiror. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Acquiror Board if (a) there has been a breach by the Company of any representation or warranty contained in this Agreement which has not been cured in all material respects and which has caused any of the -54- conditions set forth in Section 8.3(a) to be incapable of being satisfied by the Termination Date or (b) there has been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the Company which has not been cured in all material respects and which has caused any of the conditions set forth in Section 8.3(a) to be incapable of being satisfied by the Termination Date. 9.5 Effect of Termination and Abandonment. In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article IX, all obligations of the parties hereto shall terminate, except the obligations of the parties pursuant to Section 9.6 hereof. 9.6 Fees and Expenses. (a) Except as set forth in this Section 9.6, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Merger is consummated; provided, however, that Acquiror and the Company shall share equally (i) the aggregate filing fees of the parties' pre-merger notification report under the HSR Act, if any, and (ii) all fees and expenses, other than accountant's and attorneys' fees, incurred with respect to the printing and filing of the Joint Proxy Statement/Prospectus (including any related preliminary materials) and the Registration Statement and any amendments or supplements thereto. (b) The Company shall pay to the Acquiror a termination fee of $3,000,000 (the "Company Termination Fee") in the event that (i) this Agreement is terminated (A) by Acquiror pursuant to Section 9.2(a), to the extent that the failure to consummate the Merger was proximately contributed to by a material breach of any obligation of the Company under this Agreement, (B) by the Acquiror or the Company pursuant to Section 9.2(b) or (C) by the Acquiror pursuant to Section 9.4, (ii) following the execution and delivery of this Agreement and prior to the termination of this Agreement, an Acquisition Proposal shall have been received by the Company and (iii) within 12 months following the termination of this Agreement, either a Third-Party Acquisition (as defined below) is consummated, or the Company enters into a definitive agreement providing for a Third-Party Acquisition and such Third-Party Acquisition is consummated within 12 months following execution of such definitive agreement. (c) The Acquiror shall pay to the Company a termination fee of $1,500,000 (the "Acquiror Termination Fee") in the event that (i) this Agreement is terminated by Acquiror or the Company pursuant to Section 9.2(c), (ii) following the execution and delivery of this Agreement and prior to the termination of this Agreement, an Acquisition Proposal shall have been received by Acquiror and (iii) within 12 months following the termination of this Agreement, either a Third-Party Acquisition is consummated by the Acquiror, or Acquiror enters into a definitive agreement providing for a Third-Party Acquisition and such Third-Party Acquisition is consummated by the Acquiror within 12 months following execution of such definitive agreement. (d) For the purposes hereof, the term "Third-Party Acquisition" means any of the following transactions, other than the transactions contemplated by this Agreement: (A) a merger, consolidation, business combination, recapitalization, -55- liquidation, dissolution or similar transaction as a result of which the stockholders of the Company or Acquiror, as applicable, immediately preceding such transaction hold less than 50 percent of the aggregate equity interests in the surviving or resulting entity of such transaction, (B) a sale or other disposition of assets representing in excess of thirty 30 percent of the aggregate fair market value of the business of the Company or Acquiror, as applicable, immediately prior to such sale, or (C) the acquisition by any person or group (including by way of a tender offer or an exchange offer or issuance), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 30 percent of the voting power of the then outstanding shares of capital stock of the Company or the Acquiror, as applicable. (e) The parties acknowledge that the agreements contained in this Section 9.6 are an integral part of the transactions contemplated by this Agreement and that, without such agreements, the parties would not enter into this Agreement. If either party fails to promptly pay to the other party the applicable termination fee if and when it becomes due hereunder, such breaching party shall pay the costs and expenses (including legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment, together with interest on the amount of any unpaid fee at the publicly announced prime rate of Bank of America, N.A. plus five percent per annum, compounded quarterly, from the date such applicable termination fee was required to be paid. ARTICLE X AMENDMENT AND WAIVER 10.1 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Such amendment may take place at any time prior to the Closing Date, and, subject to applicable law, whether before or after approval by the stockholders of the Company or Acquiror (if required). 10.2 Waiver. At any time prior to the Effective Time, the parties hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant thereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE XI DEFINITIONS As used herein, the following terms shall have the following meanings: "Acquiror Material Adverse Effect" shall have the meaning provided in Section 4.1 hereof. -56- "Acquiror SEC Reports" shall have the meaning provided in Section 4.5 hereof. "Affiliate" means, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by, or under common control with, such Person. For purposes of this definition, the term "control" (including the correlative terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Company Material Adverse Effect" shall have the meaning provided in Section 5.1 hereof. "Employee Benefit Plan" means any: (i) employee pension benefit plan as defined in Section 3(2) of ERISA; (ii) multiemployer plan as defined in Section 3(37) of ERISA; (iii) employee welfare benefit plan as defined in Section 3(1) of ERISA; and (iv) any stock option, bonus, stock purchase, or insurance plan and any severance or termination pay plan or policy in which employees, spouses or dependents participate. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time. "Governmental Authority" means any nation or government, any state, regional, local or other political subdivision thereof, and any entity or official exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Intellectual Property" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (i) all United States, international, regional and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (ii) all inventions (whether patentable or not), invention disclosures, improvements, drug candidates, trade secrets, proprietary information, know how, technology, technical data, non-technical data, formula, methods, techniques, financial data, and customer lists, and all documentation relating to any of the foregoing; (iii) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (iv) all industrial designs and any registrations and applications therefor throughout the world; (v) all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor throughout the world; (vi) all databases and data collections and all rights therein throughout the world; and (vii) any similar or equivalent rights to any of the foregoing anywhere in the world. -57- "knowledge" means, (i) with respect to the Company, the actual knowledge, after reasonable inquiry, of John Manzetti, John A. Friede, David Haffner, William Wells, Fred Marroni, Joseph Argyros and Francis Dobscha (provided that such reasonable inquiry by Messrs. Wells, Marroni, Argyros and Dobscha shall only relate to the respective areas of supervision and responsibility within the Company thereof) and (ii) with respect to Acquiror, the actual knowledge, after reasonable inquiry, of L. Michael Cutrer, Alan Edrick, Allan Green and Elliot Lebowitz (provided that such reasonable inquiry by Messrs. Green and Lebowitz shall only relate to the respective areas of supervision and responsibility within the Acquiror thereof) . "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, but not limited to, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or comparable law or any jurisdiction in connection with such mortgage, pledge, security interest, encumbrance, lien or charge). "Permitted Liens" means (i) Liens for taxes, assessments and other governmental charges that are not delinquent or that are being contested in good faith and in respect of which adequate reserves have been established, (ii) mechanics', materialmen's, carriers', workmen's, warehousemen's, repairmen's landlord's or other similar Liens securing obligations that are not due and payable or that are being contested in good faith and in respect of which adequate reserves have been established, (iii) Liens reflected in the Current Balance Sheet or created in the ordinary or usual course of business subsequent to date of the Current Balance Sheet, (iv) Liens set forth in Section 11.1 of the Company Disclosure Schedule and (v) imperfections of title and Liens that do not and would not reasonably be expected to detract materially from the value or materially interfere with the present use of the properties subject thereto or affected thereby. "Person" means an individual, corporation, limited liability company, partnership, association, trust or any other entity or organization. "Registered Intellectual Property" means all United States, international and foreign: (i) patents and patent applications (including provision applications); (ii) registered trademarks, applications to register trademarks, intent to use applications, or other registrations or applications related to trademarks; (iii) registered copyrights and applications for copyright registration; and (iv) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any state, government or other public legal authority. "Regulation M-A Filing" means any filing pursuant to Rule 165 and Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Tax Returns" means any return, report or other document required to be supplied to a taxing authority in connection with Taxes. -58- "Taxes" means all taxes, including, without limitation, income, gross receipts, excise, property, sales, withholding, social security, occupation, use, service, license, payroll, franchise, transfer and recording taxes, fees and charges, windfall profits, severance, customs, import, export, employment or similar taxes, charges, fees, levies or other assessments imposed by the United States, or any state, local or foreign government or subdivision or agency thereof. "Transaction Documents" means this Agreement, the Indemnification Escrow Agreement, the Voting Agreement, the Voting Trust, and the Affiliate Letters and all other documents to be executed by the parties hereto in connection with the consummation of transactions contemplated hereby. "Voting Trust" has the meaning provided in Section 7.16 hereof. ARTICLE XII INDEMNIFICATION 12.1 Indemnification of Acquiror Indemnified Parties. Each stockholder of the Company, jointly and severally (an "Indemnifying Party"), shall indemnify and hold harmless Acquiror and the Surviving Corporation, and their respective officers, directors, employees, consultants, stockholders and affiliates (collectively, the "Acquiror Indemnified Parties") from and against any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs and expenses, including court costs and reasonable attorneys' fees and expenses incurred in investigating and preparing for any litigation or proceeding (collectively, "Damages") which any of the Acquiror Indemnified Parties shall have actually sustained, or to which any of Acquiror Indemnified Parties shall have actually been subjected, relating to or arising directly or indirectly out of any breach or default by the Company of any of its representations or warranties contained in Article V hereof or any covenants or agreements under this Agreement. Any Damages which any Acquiror Indemnified Party shall have actually sustained, or to which any of the Acquiror Indemnified Parties shall have actually been subjected, are referred to herein as "Indemnified Losses". 12.2 Defense of Third-Party Claims. An Acquiror Indemnified Party shall give prompt written notice to the Stockholder Representative of the commencement or assertion of any action, proceeding, demand or claim by a third party (each, a "third-party action") in respect of which such Acquiror Indemnified Party will seek indemnification hereunder. Any failure to so notify the Stockholder Representative shall not relieve Indemnifying Parties from any liability that they may have under this Article XII, except to the extent the failure to give such notice materially and adversely prejudices the Indemnifying Parties. The Indemnifying Parties shall have the right to assume control of the defense of, settle or otherwise dispose of such third-party action on such terms as the Indemnifying Parties, acting through the Stockholder Representative, deem appropriate; provided, however, that: (a) the Acquiror Indemnified Parties shall be entitled, at their own expense, to participate in the defense of such third-party action (provided, however, that the Indemnifying Parties shall pay the reasonable attorneys' fees of the Acquiror Indemnified Party if (i) the employment of separate counsel shall have been authorized in writing by any such Indemnifying Parties in connection with the defense of such third-party action, -59- (ii) the Indemnifying Parties shall not have promptly employed counsel reasonably satisfactory to the Acquiror Indemnified Party to take charge of such third-party action or (iii) the Acquiror Indemnified Parties' counsel shall have advised the Acquiror Indemnified Party in writing, with a copy to the Stockholder Representative, that there is a conflict of interest that could make it inappropriate under applicable standards of professional conduct to have common counsel or that there are defenses available to the Acquiror Indemnified Party that are not available to the Indemnifying Parties); (b) the Indemnifying Parties shall obtain the prior written approval of the Acquiror Indemnified Party (which shall not be unreasonably withheld) before entering into or making any settlement, compromise, admission or acknowledgment of the validity of such third-party action or any liability in respect thereof if, pursuant to or as a result of such settlement, compromise, admission or acknowledgment, injunctive or other equitable relief would be imposed against the Acquiror Indemnified Party; (c) to the extent that the Acquiror Indemnified Party participates in the defense of any third party action as contemplated by Section 12.2(a), the Acquiror Indemnified Party shall obtain the prior written approval of the Stockholder Representative (which shall not be unreasonably withheld) before entering into or making any settlement, compromise, admission or acknowledgment of the validity of such third party action or any liability in respect thereof; (d) the Indemnifying Parties shall not consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by each claimant or plaintiff to each Acquiror Indemnified Party of a release from all liability in respect of such third-party action; and (e) the Indemnifying Parties shall not be entitled to control (but shall be entitled to participate at their own expense in the defense of), and the Acquiror Indemnified Party shall be entitled to have sole control over, the defense or settlement, compromise, admission or acknowledgment of any third-party action (i) as to which the Indemnifying Parties fail to assume the defense within a reasonable length of time or (ii) to the extent the third-party action seeks an order, injunction or other equitable relief against the Acquiror Indemnified Party which, if successful, would materially adversely affect the business, operations, properties, assets condition (financial or other) or results of operations of the Acquiror Indemnified Party; provided, however, that the Acquiror Indemnified Party shall make no settlement, compromise, admission or acknowledgment that would give rise to liability on the part of the Indemnifying Parties without the prior written consent of the Stockholder Representative; and (f) the parties hereto shall extend reasonable cooperation in connection with the defense of any third-party action pursuant to this Article XII and, in connection therewith, shall furnish such records, information, and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested. 12.3 Direct Claims. In any case in which an Acquiror Indemnified Party seeks indemnification hereunder which is not subject to Section 12.2 hereof because no third-party -60- action is involved, the Acquiror Indemnified Party shall notify the Stockholder Representative in writing of any Indemnified Losses which such Acquiror Indemnified Party claims are subject to indemnification under the terms hereof. The failure of the Acquiror Indemnified Party to exercise promptness in such notification shall not amount to a waiver of such claim except to the extent the resulting delay materially prejudices the position of the Indemnifying Parties with respect to such claim. 12.4 Limitations on Liability. (a) Notwithstanding anything contained herein to the contrary, no Indemnifying Party shall have any indemnification obligations under this Article XII until such time as the aggregate Indemnified Losses for which the Acquiror Indemnified Parties are otherwise entitled to indemnification hereunder equals or exceeds $400,000 (the "Basket"), at which point, the Indemnifying Party shall be liable for the full amount of all such Indemnified Losses without regard to the Basket. (b) The aggregate indemnification obligations under this Article XII shall be capped at 10% of the aggregate Merger Consideration. The rights of the Acquiror Indemnified Parties to make claims against the escrowed shares and any proceeds thereof shall be the sole and exclusive remedy of such Acquiror Indemnified Parties after the Closing with respect to any representation, warrant, covenant or agreement made by the Company under this Agreement and no former stockholder, optionholder, warrantholder, director, officer, employee or agent of the Company shall have any personal liability hereunder to the Acquiror Indemnified Parties after the Closing in connection with the Merger. (c) If any matters giving rise to a claim of Indemnified Losses pursuant to this Article XII by the Acquiror Indemnified Parties is reasonably likely to be covered by any insurance policy of Acquiror, then no amount shall be recovered pursuant to this Article XII unless and until such Acquiror Indemnified Parties shall have made all commercially reasonable efforts for a period of six months to obtain reimbursement for such Indemnified Loss under such insurance policy, and then only to the extent aggregate insurance proceeds actually received by such Acquirior Indemnified Parties in respect of all Damages arising from such claim (less any premium adjustments and similar charges made as a result of making such claim) are less than such Damages; provided, however, that if no insurance proceeds are received after making such commercially reasonable efforts upon the termination of such six month period, such Acquiror Indemnified Parties shall be entitled to recover the full amount of such Indemnified Losses. ARTICLE XIII GENERAL PROVISIONS 13.1 Survival of Representations and Warranties after the Effective Time. Each of the representations and warranties made by the Company in this Agreement or pursuant hereto shall survive after the Effective Time for a period ending on the second anniversary of the Effective Time. Each of the representations and warranties made by Acquiror and Merger Sub in this Agreement shall expire at the Effective Time. Notwithstanding any knowledge of facts -61- determined or determinable by any party by investigation, each party shall have the right to fully rely on the representations, warranties, covenants and agreements of the other parties contained in this Agreement or in any other documents or papers delivered in connection herewith. Each representation, warranty, covenant and agreement of the parties contained in this Agreement is independent of each other representation, warranty, covenant and agreement. 13.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, mailed by registered or certified mail (return receipt requested) or sent via facsimile to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to Acquiror or Merger Sub to: North American Scientific, Inc. 20200 Sunburst Street Chatsworth, California 91311 Attention: L. Michael Cutrer, President Facsimile: (818) 734-5837 with a copy to: McDermott, Will & Emery 2049 Century Park East Suite 3400 Los Angeles, California 90067-3208 Attention: Mark J. Mihanovic, Esq. Facsimile: (310) 277-4730 If to the Company, to: NOMOS Corporation 200 West Kensinger Drive, Suite 100 Cranberry Township, Pennsylvania 16006 Attention: John W. Manzetti, President Facsimile: (724) 741-8600 with a copy to: Cohen & Grigsby 11 Stanwix Street, 15th Floor Pittsburgh, Pennsylvania 15222 Attention: Mark Baseman, Esq. Facsimile: (412) 209-0672 13.3 Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless a contrary intention appears (i) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision and (ii) reference to any Article or Section means -62- such Article or Section hereof. No provision of this Agreement shall be interpreted or construed against any party hereto solely because such party or its legal representative drafted such provision. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party, whether under any rule of construction or otherwise. No party to this Agreement shall be considered the draftsman. The parties hereto acknowledge and agree that this Agreement has been reviewed, negotiated and accepted by all parties and their attorneys and shall be construed and interpreted according to the ordinary meaning of the words used so as fairly to accomplish the purposes and intentions of the parties hereto . 13.4 Entire Agreement. This Agreement (including the documents and instruments referred to herein and the exhibits and schedules attached hereto) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and shall not be assigned by operation of law or otherwise. 13.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. 13.6 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. 13.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 13.8 Parties in Interest. This Agreement shall be binding upon and, except for Sections 3.2 and 3.3 hereof, inure solely to the benefit of each party hereto and, except for such Section, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 13.9 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 13.10 Equitable Relief. The parties hereto agree that the remedies at law for any breach of the terms of this Agreement are inadequate. Accordingly, the parties hereto consent and agree that an injunction may be issued to restrain any breach or alleged breach of such provisions. The parties hereto agree that terms of this Agreement shall be enforceable by a -63- decree of specific performance. Such remedies shall be cumulative and not exclusive, and shall be in addition to any other remedies which the parties may have at law or in equity. -64- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above. North American Scientific, Inc. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer NOMOS Corporation By: /s/ John W. Manzetti -------------------------------------------- Name: John W. Manzetti Title: President and Chief Executive Officer AM Capital I, Inc. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer -65- EX-2.1(B) 3 ci691907-ex2_1b.txt FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER Exhibit 2.1(b) FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is made and entered into as of November 25, 2003, by and among NOMOS Corporation, a Delaware corporation (the "Company"), North American Scientific, Inc., a Delaware corporation ("Acquiror"), and AM Capital I, Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"). RECITALS WHEREAS, the Company, Acquiror and Merger Sub entered into the Agreement and Plan of Merger, dated as of October 26, 2003 (the "Merger Agreement"), which provides for the merger (the "Merger") of the Company with and into Merger Sub, which shall continue as surviving corporation in the Merger, on the terms and subject to the conditions set forth therein; WHEREAS, on November 4, 2003 Parker/Hunter Incorporated made a demand against the Company for a sum of approximately $2,250,000 (the "Demand Amount") which Parker/Hunter alleges is due in connection with the Merger pursuant to the terms of an engagement letter executed by the Company dated June 2, 2000 (any dispute, claim or controversy arising out of such demand being referred to herein as the "Parker/Hunter Dispute"); and WHEREAS, in order to establish a separate escrow fund under the Indemnification Escrow Agreement to secure indemnification obligations to the Acquiror Indemnified Parties under the Merger Agreement in respect of any Damages (including, without limitation, the Demand Amount and anticipated attorneys' fees and expenses incurred in investigating and preparing for any litigation or proceeding) that has been or may be incurred by the Company or the Acquiror Indemnified Parties in connection with the Parker/Hunter Dispute after the date of the Merger Agreement, the Company, Acquiror and Merger Sub desire to amend the Merger Agreement as set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants contained in this Amendment, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Certain Definitions. All capitalized terms used but not defined herein are used herein as defined in the Merger Agreement. 2. Indemnification Escrow Agreement. Section 3.6 of the Merger Agreement is hereby amended and restated in its entirety as follows: "3.6 Indemnification Escrow Agreement. Pursuant to Article XII hereof, the stockholders of the Company shall indemnify and hold the Acquiror and the Surviving Corporation harmless from and against certain Indemnified Losses (as hereinafter defined). On or prior to Closing, Acquiror, an escrow agent (the "Escrow Agent") mutually agreed upon by Acquiror and the Company, and the Company, on behalf of its stockholders, shall enter into an Indemnification Escrow Agreement in substantially the form of Exhibit 3.5 attached hereto (as the same may be modified pursuant to mutual agreement of the parties hereto prior to the Closing, the "Indemnification Escrow Agreement"). Notwithstanding any other provision in this Agreement to the contrary (a) in order to secure the general indemnification obligations to the Acquiror Indemnified Parties (as hereinafter defined) under this Agreement, other than with respect to any Special Indemnified Losses (as hereinafter defined), a certificate evidencing ten percent (10%) of the shares of Acquiror Common Stock which would otherwise be delivered to the stockholders of the Company at Closing pursuant to Section 3.3 hereof (collectively, the "General Escrowed Shares") shall be registered in the name of the Escrow Agent, as nominee for the stockholders of the Company, and ten percent (10%) of the aggregate amount of cash which would otherwise be delivered to the stockholders of the Company pursuant to Section 3.3 hereof (the "General Escrowed Cash") shall instead be deposited into and held in escrow (the "General Escrow Fund") pursuant to the terms of the Indemnification Escrow Agreement and (b) in order to secure the indemnification obligations to the Acquiror Indemnified Parties under this Agreement solely with respect to any Special Indemnified Losses, a certificate evidencing 307,617 shares of Acquiror Common Stock which would otherwise be delivered to the stockholders of the Company pursuant to Section 3.3 hereof (collectively, the "Special Escrowed Shares") shall be registered in the name of the Escrow Agent, as nominee for the stockholders of the Company, and an aggregate amount of cash equal to $700,800 which would otherwise be delivered to the stockholders of the Company pursuant to Section 3.3 hereof (the "Special Escrowed Cash"), shall instead be deposited into and held in escrow (the "Special Escrow Fund"), separate from the General Escrow Fund, pursuant to the terms of the Indemnification Escrow Agreement. Acquiror is hereby directed by the Company, on behalf of each of the Company's stockholders, to deposit the number of General Escrowed Shares and Special Escrowed Shares (collectively, the "Escrowed Shares") and amount of General Escrowed Cash and Special Escrowed Cash (collectively, the "Escrowed Cash") set forth opposite such stockholder's name in Annex A to the Indemnification Escrow Agreement with the Escrow Agent at the Closing, and Acquiror shall make such deposit as so directed and as contemplated in the preceding sentence." 3. Indemnification Escrow Agreement. Section 3.7 of the Merger Agreement is hereby amended and restated in its entirety as follows: "3.7 Appointment of Stockholder Representative. By virtue of the approval of this Agreement by the holders of Company Common Stock and Company Preferred Stock, John A. Friede shall be approved as and appointed by the Company to be the "Stockholder Representative" under the Indemnification Escrow Agreement (the "Stockholder Representative") and shall be constituted and appointed as agent and attorney-in-fact for and on behalf of each such holder. The Stockholder Representative shall have full power and authority to represent such holders and their successors with respect to all matters arising under the Indemnification Escrow Agreement and all actions taken by the Stockholder Representative thereunder shall be binding upon all -2- stockholders and their successors as if expressly confirmed and ratified in writing by each of them, including, without limitation, resolving all claims relating to the General Escrow Fund and the Special Escrow Fund and any indemnification claims and obligations." 4. Definitions. The following definitions are hereby added to Article XI of the Merger Agreement: "'Parker/Hunter' means Parker/Hunter Incorporated." "'Parker/Hunter Dispute' means any dispute, claim or controversy (including, without limitation, any action, suit, proceeding, hearing or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator) relating to or arising out of the demand made by Parker/Hunter against the Company on November 4, 2003 for a sum of approximately $2,250,000 that Parker/Hunter alleges is due in connection with the Merger pursuant to the terms of an engagement letter executed by the Company dated June 2, 2000." 5. Indemnification of Acquiror Indemnified Parties. Section 12.1 of the Merger Agreement is hereby amended and restated in its entirety as follows: "12.1 Indemnification of Acquiror Indemnified Parties. Each stockholder of the Company, jointly and severally (an "Indemnifying Party"), shall indemnify and hold harmless Acquiror and the Surviving Corporation, and their respective officers, directors, employees, consultants, stockholders and affiliates (collectively, the "Acquiror Indemnified Parties") from and against any and all damages, losses, claims, liabilities, demands, charges, suits, penalties, costs and expenses, including court costs and reasonable attorneys' fees and expenses incurred in investigating and preparing for any litigation or proceeding (collectively, "Damages") which any of the Acquiror Indemnified Parties shall have actually sustained, or to which any of Acquiror Indemnified Parties shall have actually been subjected, relating to or arising directly or indirectly out of (i) any breach or default by the Company of any of its representations or warranties contained in Article V hereof or any covenants or agreements under this Agreement or (ii) the Parker/Hunter Dispute, which for the removal of doubt would include, without limitation, any Damages incurred by any Acquiror Indemnified Parties or the Company between the date of the Merger Agreement and the Closing. Any Damages relating to or arising out of the Parker/Hunter Dispute which any Acquiror Indemnified Party or the Company shall have actually sustained, or to which any of the Acquiror Indemnified Parties the Company shall have actually been subjected, are referred to herein as 'Special Indemnified Losses'. Any Damages, other than Special Indemnified Losses, which any Acquiror Indemnified Party shall have actually sustained, or to which any of the Acquiror Indemnified Parties shall have actually been subjected, are referred to herein as 'General Indemnified Losses'. The Special Indemnified Losses and General Indemnified Losses shall be referred to herein as 'Indemnified Losses'." 6. Limitations on Liability. Section 12.4 of the Merger Agreement is hereby amended and restated in its entirety as follows: -3- "12.4 Limitations on Liability. (a) Notwithstanding anything contained herein to the contrary, no Indemnifying Party shall have any indemnification obligations under this Article XII with respect to General Indemnified Losses until such time as the aggregate General Indemnified Losses for which the Acquiror Indemnified Parties are otherwise entitled to indemnification hereunder equals or exceeds $400,000 (the "Basket"), at which point, the Indemnifying Party shall be liable for the full amount of all such General Indemnified Losses without regard to the Basket. The Special Indemnified Losses are not subject to or limited in any way by the Basket, and the Indemnifying Parties shall be liable for the full amount of all such Special Indemnified Losses. (b) The aggregate indemnification obligations under this Article XII with respect to General Indemnified Losses shall be capped at 10% of the aggregate Merger Consideration. The rights of the Acquiror Indemnified Parties to make claims against the Escrowed Shares, Escrowed Cash and any proceeds thereof shall be the sole and exclusive remedy of such Acquiror Indemnified Parties after the Closing with respect to any representation and warranty, covenant or agreement made by the Company under this Agreement and with respect to the Parker/Hunter Dispute and no former stockholder, optionholder, warrantholder, director, officer, employee or agent of the Company shall have any personal liability hereunder to the Acquiror Indemnified Parties after the Closing in connection with the Merger. (c) If any matters giving rise to a claim of General Indemnified Losses pursuant to this Article XII by the Acquiror Indemnified Parties is reasonably likely to be covered by any insurance policy of Acquiror, then no amount shall be recovered pursuant to this Article XII unless and until such Acquiror Indemnified Parties shall have made all commercially reasonable efforts for a period of six months to obtain reimbursement for such General Indemnified Loss under such insurance policy, and then only to the extent aggregate insurance proceeds actually received by such Acquiror Indemnified Parties in respect of all Damages arising from such claim (less any premium adjustments and similar charges made as a result of making such claim) are less than such Damages; provided, however, that if no insurance proceeds are received after making such commercially reasonable efforts upon the termination of such six month period, such Acquiror Indemnified Parties shall be entitled to recover the full amount of such General Indemnified Losses. Matters giving rise to a claim of Special Indemnified Losses pursuant to this Article XII by the Acquiror Indemnified Parties shall not be subject to this Section 12.4(c)." 7. Exhibit 3.5; Form of Indemnification Escrow Agreement. On or prior to the Closing, the parties hereto shall modify the form of Indemnification Escrow Agreement attached to the Merger Agreement as Exhibit 3.5 (a) to provide for the establishment, maintenance and administration by the Escrow Agent of the Special Escrow Fund for the sole purpose of satisfying Claims (as defined in the Indemnification Escrow Agreement) arising out of the Parker/Hunter Dispute and (b) to provide, in form and substance reasonably satisfactory to the Company and Acquiror, that the Stockholder Representative will be entitled to be indemnified out of any funds remaining in the General Escrow Fund after any required distributions to the -4- Acquiror Indemnified Parties and the Escrow Agent, but prior to any distributions to the Stockholders (as defined in the Escrow Agreement), to cover any losses that may incurred by the Stockholder Representative as a result of actions or inactions taken by the Stockholder Representative in such capacity, other than losses for which indemnification would be inappropriate (e.g., losses resulting from willful misconduct, gross negligence or bad faith). For purposes of clause (a) of this Section 7, the Special Escrow Fund shall be established, maintained and administered pursuant to provisions substantially similar to the provisions relating to the establishment, maintenance and administration of the Escrow Fund as set forth in the form of Indemnification Escrow Agreement attached as Exhibit 3.5 to the Merger Agreement on the date hereof, except as set forth below: (a) the Escrow Termination Date (as defined in the Indemnification Escrow Agreement) shall be modified to provide for the termination of the Special Escrow Fund upon the payment of all Claims (as defined in the Indemnification Escrow Agreement) relating to the Parker/Hunter Dispute as soon as practicable after the final resolution of the Parker/Hunter Dispute as evidenced by (i) a certified copy of a final non-appealable judicial order or judgment with respect to the Parker/Hunter Dispute setting forth the Claim Amount (as defined in the Indemnification Escrow Agreement), if any, that the Acquiror Indemnified Parties are entitled to receive out of the Special Escrow Fund with respect to the Parker/Hunter Dispute or (ii) a copy of a written memorandum signed by an Acquiror Indemnified Party and the Stockholder Representative setting forth the Claim Amount, if any, that the Acquiror Indemnified Parties are entitled to receive out of the Special Escrow Fund with respect to the Parker/Hunter Dispute; (b) Sections 5(d) and 5(e) of the Indemnification Escrow Agreement shall be modified to provide for distributions from the Special Escrow Fund to be made with a combination of Special Escrowed Cash and Special Escrowed Shares determined as follows: (i) a pro rata portion of any Claim Amount to be disbursed in connection with the Parker/Hunter Dispute shall be settled from each Subaccount (as defined in the Indemnification Escrow Agreement) established under the Special Escrow Fund based upon the relative proportional value of the Special Escrow Fund then deposited in such Subaccount, provided that, for the purposes of such valuation, the value of each Special Escrow Share shall be $7.47 (the "Pre-Announcement Share Price"); (ii) to the extent that any Subaccount established under the Special Escrow Fund contains any Special Escrowed Cash, such disbursable portion of such Claim Amount shall be paid in cash and the balance of such disbursable portion shall be paid in Special Escrowed Shares valued at the Pre-Announcement Share Price; and (iii) to the extent that any Subaccount established under the Special Escrow Fund only contains Special Escrowed Shares, such disbursable portion of such Claim Amount shall be paid solely in Special Escrowed Shares valued at the Pre-Announcement Share Price. -5- 8. Effect on Merger Agreement. Except as set forth in this Amendment, the terms and provisions of the Merger Agreement are hereby ratified and declared to be in full force and effect. 9. Acknowledgement of No Company Material Adverse Effect. Each of the parties hereto hereby acknowledges and agrees that no breach or alleged breach by the Company of any representation and warranty, covenant or agreement contained in the Merger Agreement which relates to or arises out of the Parker/Hunter Dispute shall individually, or when taken together with any other breach or alleged breach by the Company of any representation and warranty, covenant or agreement, be deemed to constitute a Company Material Adverse Effect. 10. General Provisions. This Amendment shall become effective upon its execution, which may occur in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed and to be performed wholly within such State. Captions and paragraph headings are used herein for convenience only, are not a part of this Amendment or the Merger Agreement as amended by this Amendment and shall not be used in construing either document. Other than the reference to the Merger Agreement contained in the first recital of this Amendment, each reference to the Merger Agreement and any agreement contemplated thereby or executed in connection therewith, whether or not accompanied by reference to this Amendment, shall be deemed a reference to the Merger Agreement as amended by this Amendment. -6- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Agreement and Plan of Merger to be duly executed as of the day and year first written above. North American Scientific, Inc. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer NOMOS Corporation By: /s/ John W. Manzetti -------------------------------------------- Name: John W. Manzetti Title: President and Chief Executive Officer AM Capital I, Inc. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer EX-2.1(C) 4 ci691907-ex2_1c.txt SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER Exhibit 2.1(c) SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is made and entered into as of March 2, 2004, by and among NOMOS Corporation, a Delaware corporation (the "Company"), North American Scientific, Inc., a Delaware corporation ("Acquiror"), and AM Capital I, Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"). RECITALS WHEREAS, the Company, Acquiror and Merger Sub entered into the Agreement and Plan of Merger, dated as of October 26, 2003, as amended by the First Amendment to Agreement and Plan of Merger, dated as of November 25, 2003 (the "Merger Agreement"); WHEREAS, the Company, Acquiror and Merger Sub desire to amend the Merger Agreement as set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants contained in this Amendment, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Certain Definitions. All capitalized terms used but not defined herein are used herein as defined in the Merger Agreement. 2. Amendment; Termination Date. Section 9.2 of the Merger Agreement is hereby amended by deleting "April 16, 2004" from the third line thereof and substituting "June 18, 2004" therefor. 3. Effect on Merger Agreement. Except as set forth in this Amendment, the terms and provisions of the Merger Agreement are hereby ratified and declared to be in full force and effect. 4. General Provisions. This Amendment shall become effective upon its execution, which may occur in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed and to be performed wholly within such State. Captions and paragraph headings are used herein for convenience only, are not a part of this Amendment or the Merger Agreement as amended by this Amendment and shall not be used in construing either document. Other than the reference to the Merger Agreement contained in the first recital of this Amendment, each reference to the Merger Agreement and any agreement contemplated thereby or executed in connection therewith, whether or not accompanied by reference to this Amendment, shall be deemed a reference to the Merger Agreement as amended by this Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Agreement and Plan of Merger to be duly executed as of the day and year first written above. North American Scientific, Inc. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer NOMOS Corporation By: /s/ John W. Manzetti -------------------------------------------- Name: John W. Manzetti Title: President and Chief Executive Officer AM Capital I, Inc. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer -2- EX-9.1 5 ci691907-ex9_1.txt VOTING TRUST AGREEMENT Exhibit 9.1 VOTING TRUST AGREEMENT This VOTING TRUST AGREEMENT (this "Agreement") is made as of May 4, 2004, among John A. Friede ("Company Chairman") and the other stockholders of North American Scientific, Inc., a corporation organized and existing under the laws of Delaware (the "Corporation"), who shall join in and become parties to this Agreement (collectively, the "Depositors") and L. Michael Cutrer and David King as Trustees (collectively, the "Trustees"). WHEREAS, the Corporation entered into an Agreement and Plan of Merger, dated as of October 26, 2003, as amended (the "Merger Agreement"), with NOMOS Corporation, a Delaware corporation ("Target"), and AM Capital, Inc., a Delaware corporation ("Merger Sub"), pursuant to which Target will merge with and into Merger Sub and the Merger Sub shall continue as the surviving corporation and a wholly-owned subsidiary of the Corporation (the "Merger"); WHEREAS, as a result of the Merger, Company Chairman the largest stockholder of Target, will become the largest stockholder of the Corporation; WHEREAS, Company Chairman has entered into that certain Voting Agreement, dated as of October 26, 2003 (the "Voting Agreement"), with the Corporation, which prohibits Company Chairman from acquiring "beneficial ownership" (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of any Acquiror Shares, as defined in Voting Agreement (such Acquiror Shares being referred to herein, collectively, as the "New Shares"), unless such New Shares are (a) acquired in connection with the transactions contemplated by the Merger Agreement (collectively, the "Merger Shares"), (b) acquired as a result of the exercise of stock options (i) held by Company Chairman as of the effective date of the Merger or (ii) granted to Company Chairman by the Corporation in connection with the services provided by Company Chairman as a member of the Board of Directors of the Corporation (collectively, the "Option Shares") or (c) deposited into the voting trust created hereunder (the "Trust"); WHEREAS, with a view to the safe and competent management of the Corporation in the best interests of all the stockholders thereof, the Corporation and the Depositors desire to create the Trust in the manner set forth in; WHEREAS, the Depositors desire to enter into this Agreement to achieve the aforementioned objectives; and WHEREAS, the Trustees have consented to act as trustees hereunder upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Transfer of Stock to the Trustees. (a) Each Depositor shall deposit with the Trustees the certificates representing all New Shares that are not Merger Shares or Option Shares now or at any time hereafter owned by such Depositor and hereby authorizes and empowers the Trustees to cause the transfer of such deposited New Shares to be made and to do all things necessary for the transfer of such New Shares to the Trustees on the books of the Corporation, and to make or cause to be made any further transfer of such New Shares that may become necessary through the occurrence of any change in the Trustees to be held on behalf of such Depositor or as requested by such Depositor in accordance with subsection (b) of this Section 1. (b) Notwithstanding anything contained herein to the contrary, at any time and from time to time during the term of this Agreement, (i) each Depositor may cause the Trustees to offer to sell, contract to sell, or sell, dispose of, loan, pledge, grant any rights with respect to, or otherwise transfer for value or otherwise (any such transaction or action being referred to herein as a "Disposition"), any New Shares held by the Trustee on behalf of such Depositor (i) on the open market, (ii) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound in writing by the restrictions and other terms set forth herein, (iii) to members of the undersigned's immediate family or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the transferees thereof agree to be bound in writing by the restrictions and other terms set forth herein or (iv) with the prior consent of the Corporation; provided, however, that in the event that a Depositor desires to cause the Trustees to engage in any such Disposition of New Shares, such Depositor shall notify the Trustee in writing of such request and deliver to the Trustee the Voting Trust Certificates representing the New Shares intended to be so transferred, and, subject to the limitations set forth in this subsection (b)(i), the Trustee shall cause to be made such Disposition with respect to such New Shares in the manner so requested; and (ii) each Depositor may engage in a Disposition of any Voting Trust Certificates held by such Depositor (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree in writing to be bound by the restrictions and other terms set forth herein, (iii) to members of the undersigned's immediate family or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the transferees thereof agree to be bound in writing by the restrictions and other terms set forth herein or (iv) with the prior consent of the Corporation; provided, however, that in the event that a Depositor desires to engage in any such Disposition with respect to any Voting Trust Certicates, such Depositor shall notify the Trustee in writing of such Disposition. (c) For purposes of this Agreement, "immediate family" of any Depositor shall mean (i) such Depositor, (ii) any spouse, lineal descendant or antecedent, father, mother, brother or sister of such Depositor or (iii) any estate, trust, guardianship, custodianship or other fiduciary arrangement for the primary benefit of any one or more individuals named or described in (i) or (ii) above. 2. Trustees to Hold Subject to Agreement. The Trustees shall hold the New Shares so transferred to them upon the terms and conditions set forth herein. 2 3. Issuance of Stock Certificates to Trustees. Each Trustee shall surrender to the proper officers of the Corporation for cancellation all stock certificates evidencing New Shares which shall be assigned and delivered to such Trustee to be held on behalf of the Depositor pursuant to this Agreement, and in their stead shall procure new stock certificates to be issued to them as Trustees under this Agreement. On each certificate so issued, it shall be stated that it is issued pursuant to this Agreement, and that fact shall also be stated in the stock ledger or other appropriate records of the Corporation. 4. Voting Trust Certificates. The Trustees shall issue to each Depositor a Voting Trust Certificate, substantially in the form of Exhibit A attached hereto (a "Voting Trust Certificate"), for the number of New Shares evidenced by the stock certificates transferred hereunder by such Depositor to the Trustees. Each such Voting Trust Certificate shall state that it is issued under this Agreement and shall set forth the number of New Shares represented by the beneficial interest thereunder of the person to whom it is issued. The Trustees shall keep a list of all New Shares transferred to them, and shall also keep a record of all Voting Trust Certificates issued or transferred on their books, which records shall contain the names and addresses of the Voting Trust Certificate holders and the number of shares represented by each such certificate. Such list and record shall be open at all reasonable times to the inspection upon the books of the Trustees. 5. Initial Trustees. The Initial Trustees shall be L. Michael Cutrer and David King. 6. Restriction on Transfer of New Shares and Voting Trust Certificates. The Trustees shall not sell or transfer any New Shares or interest therein except in accordance herewith, unless otherwise permitted under Section 1. Each Depositor agrees that during the term of this Agreement, he or it not sell or transfer any Voting Trust Certificates or interest therein. 7. Trustees to Vote Stock. The Trustees shall have full power and authority, and are hereby fully empowered and authorized to represent and act in the name and stead of, the holders of the Voting Trust Certificates evidencing the New Shares transferred to the Trustee hereunder, including (without limitation) such Trustee having the right to vote in person or proxy or to act by written consent or waiver with respect to the said New Shares at all meetings of the stockholders of the Corporation, in the election of directors and upon any and all matters in question, as fully as any stockholder might do if personally present, and to vote such New Shares, as in the judgment of the Trustees or a majority of them may be for the best interest of the Corporation. 8. Trustees' Liability. The Trustees shall use their best judgment in voting the New Shares transferred to such Trustee, but shall not be liable for any vote cast or not cast, or consent given or not given by him, in good faith, and in the absence of gross negligence or willful misconduct. 9. Dividends and Distributions. The Trustees shall collect and receive all dividends or other distributions that may accrue or be paid upon the New Shares and shall divide and pay the same among the Voting Trust Certificate holders in proportion to the number of New 3 Shares respectively represented by their Voting Trust Certificates, except that any such dividends or other distributions that are evidenced by instruments carrying the right to vote shall be retained in the Trust by the Trustees and Voting Trust Certificates therefor issued by the Trustees. 10. Trustees' Compensation and Indemnity. The Trustees shall not be entitled to compensation for their services hereunder, but the Trustees shall be entitled to be indemnified fully by the Depositors against all costs, charges, expenses and other liabilities, including (without limitation) reasonable attorney's fees, properly incurred by the Trustees in the exercise of any power conferred upon them by this Agreement, and the Depositors shall, jointly and severally, hold the Trustees harmless and keep them indemnified from and against any and all costs, charges, expenses, and other liabilities, including reasonable attorney's fees, the Trustee of and from all loss or damage which he may sustain or be put to by reason of anything he may lawfully do in the execution of his duties under the Trust, unless such Trustee has acted in bad faith, gross negligence or willful misconduct. 11. Appointment of Additional and Successor Trustees. The Trustees may appoint one or more additional persons to act as Trustees under the Trust, and any person or persons so appointed shall thereupon be vested with all the duties, powers and authority of a Trustee as if originally named in this Agreement; provided that if there are two or more Trustees of the Trust at any one time, such Trustees shall act by the vote of a majority of them. Each Trustee may revocably designate the person to succeed him as Trustee in the future in the event of his death, resignation, inability or refusal to act as Trustee by notifying the Corporation in writing of such designation. In the event of the death, resignation, inability or refusal to act of all (i) persons serving hereunder as Trustees, and (ii) persons designated as successor Trustees, at any time, the Depositors who hold a majority of the outstanding Stock shall appoint one and may appoint two, Trustees to fill the vacancy(ies) thereby created, and any person or persons so appointed shall thereupon be vested with all the duties, powers and authority of a Trustee as if originally named in this Agreement. The Depositors hereby direct, and consent to, such action by the Trustees. 12. Continuance and Termination of Trust. The Trust created by this Agreement shall be continued until the second anniversary of the Closing Date, at which time it will immediately terminate. Upon the termination of the Trust, the Trustees shall (i) promptly surrender to the proper officers of the Corporation for cancellation all stock certificates evidencing New Shares held by such Trustee on behalf of the Depositors, (ii) procure new stock certificates evidencing such number of New Shares represented by the Voting Trust Certificates (subject to stock split, reclassifications, stock dividend and the like) held by such Depositors to be issued to and in the name of such Depositors and (iii) upon delivery to the Trustees of such Voting Trust Certificates, deliver or cause to be delivered to such Depositor such stock certificates, together with any dividends or distributions that accrued but remained unpaid upon such New Shares. 13. Notice. All notices to be given to the Voting Trust Certificate holders may be given by ordinary mail, or may be delivered personally, to the registered holders at the addresses appearing on the books kept by the Trustees. 4 14. Loss or Destruction of Trust Certificates. In case any Voting Trust Certificate issued under this Agreement shall become mutilated, destroyed, stolen or lost, the Trustee, in his discretion, may issue a new Voting Trust Certificate in exchange therefor for a like number and class of New Shares. The applicant for such substituted Voting Trust Certificate shall furnish to the Trustees evidence to his satisfaction of the mutilation, destruction, theft, or loss of such Voting Trust Certificate, together with such indemnity as the Trustee in his discretion may require. 15. Legend on Voting Trust Certificates. All Voting Trust Certificates issued by the Trustee hereunder shall have endorsed thereon the following legend: THE SALE, TRANSFER OR ENCUMBRANCE OF THIS CERTIFICATE IS SUBJECT TO AND RESTRICTED BY THE VOTING TRUST AGREEMENT, DATED AS OF MAY __, 2004. A COPY OF THE VOTING TRUST AGREEMENT IS ON FILE IN THE OFFICE OF THE CORPORATION. BY ACCEPTING THE INTEREST IN SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THE VOTING TRUST AGREEMENT. 16. Miscellaneous Provisions. (a) Inspection. A counterpart of this Agreement and of any amendment hereto shall be deposited with the Corporation at its registered office in Delaware where it shall be open to the inspection of any Voting Trust Certificate holder or any stockholder of the Corporation, in person or by agent or attorney, daily during business hours for any proper purpose. (b) Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. (c) Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto, their respective heirs, executors, administrators, successors and assigns. (d) Headings. The headings of the sections are inserted for convenience only and shall not be deemed to constitute a part of this Agreement. 5 IN WITNESS WHEREOF, the Depositors have hereunto set their hand and seal, and the Trustees, in token of their acceptance hereby created, have hereunto set their hand as of the date first written above. DEPOSITORS: /s/ John A. Friede ---------------------------------------- John A. Friede TRUSTEES: /s/ L. Michael Cutrer ---------------------------------------- L. Michael Cutrer /s/ David King ---------------------------------------- David King 6 RECEIPT FOR VOTING TRUST AGREEMENT THE UNDERSIGNED CORPORATION HAS RECEIVED A COUNTERPART OF THE WITHIN AGREEMENT, WHICH HAS BEEN DEPOSITED WITH THE UNDERSIGNED THIS ____ DAY OF MAY, 2004. NORTH AMERICAN SCIENTIFIC, INC. By: _______________________________ Its: ______________________________ 7 EXHIBIT A TRUST CERTIFICATE NO. _______ _____ Shares Common Stock, $0.01 per share par value VOTING TRUST CERTIFICATE THIS IS TO CERTIFY, that John A. Friede (hereinafter referred to as the "Depositor") has deposited under the Voting Trust Agreement described below a certificate or certificates for ____ shares (hereinafter referred to as "Shares") of Common Stock, $0.01 per share par value, of North American Scientific, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"). THE SALE, TRANSFER OR ENCUMBRANCE OF THIS CERTIFICATE IS SUBJECT TO AND RESTRICTED BY THE VOTING TRUST AGREEMENT DATED ___________ __, 2003. A COPY OF THE VOTING TRUST AGREEMENT IS ON FILE IN THE OFFICE OF THE CORPORATION. BY ACCEPTING THE INTEREST IN SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THE VOTING TRUST AGREEMENT. This certificate (this "Certificate") is issued under and pursuant to, and the rights of the Depositor are subject to and limited by, the terms and conditions of a Voting Trust Agreement dated as of the ___ day of ________, 2003 (the "Voting Trust Agreement"), by and among the owners and holders of certain securities of the Corporation and the Trustees named therein and their successors thereunder (the "Trustees"). A duplicate original of the Voting Trust Agreement has been filed in and will be found at the registered office of the Corporation in Delaware and is and will be open to the inspection of any Voting Trust Certificate holder or any stockholder of the Corporation, in person or by agent or attorney, daily during business hours for any proper purpose. Upon the termination of the Voting Trust Agreement, the Depositor, or his registered assigns, shall be entitled to receive a certificate or certificates for the number and class of Shares deposited pursuant to this Voting Trust Certificate (subject to stock split, reclassifications, stock dividend and the like). Until the actual delivery to the Depositor of the certificate or certificates represented or called for hereby, the Trustees shall possess, and shall be entitled to exercise, all rights and powers of absolute owners and holders of record of the Shares deposited hereunder, including the right to vote for every purpose and to consent to or waive any corporate act of the Corporation of any kind, it being expressly stipulated that no voting right, or right to give consents or waivers in respect of such Shares, passes to the Depositor or its assigns by or under this Certificate or by or under any agreement, express or implied. IN WITNESS WHEREOF, the Trustees have signed this certificate this ____ day of _______, 2003. ________________________________________ _____________, Trustee ________________________________________ _____________, Trustee ________________________________________ _____________, Trustee 8 EX-10.1(A) 6 ci691907-ex10_1a.txt VOTING AGREEMENT Exhibit 10.1(a) VOTING AGREEMENT This VOTING AGREEMENT (this "Agreement") is made and entered into as of October 26, 2003 by and among North American Scientific, Inc., a Delaware corporation ("Acquiror"), and John A. Friede (the "Company Chairman"). RECITALS A. Acquiror, AM Capital I, Inc. ("Merger Sub"), a Delaware corporation and wholly-owned subsidiary of Acquiror, and NOMOS Corporation, a Delaware corporation ("Company"), have entered into an Agreement and Plan of Merger (the "Merger Agreement") as of the date hereof, which provides for the merger (the "Merger") of Company with and into Merger Sub, which shall continue as surviving corporation in the Merger. B. As of the date hereof, the Company Chairman is the "beneficial owner" (as defined below) of such number of Company Shares (as defined below) as is set forth on the signature page of this Agreement. C. As an inducement and condition to entering into the Merger Agreement, Acquiror has required that Company Chairman agree, and Company Chairman has agreed, to enter into this Agreement. D. In consideration of the execution of the Merger Agreement by Acquiror, Company Chairman is hereby agreeing, from and after the date hereof until the Company Shares Expiration Date (as defined below) to vote, or cause to be voted the Company Shares (as defined below) and other such shares of capital stock of Company over which Company Chairman has voting power in favor of, and otherwise support, the adoption of the Merger Agreement (as the same may be amended from time to time), and each of the transactions contemplated by the Merger Agreement. E. In consideration of the execution of the Merger Agreement by Acquiror, Company Chairman is hereby agreeing, from and after the Closing Date until the Acquiror Shares Expiration Date: (i) to vote, or cause to be voted, the Acquiror Shares (as defined below) over which Company Chairman has voting power so as to elect the individuals nominated by a majority of the Acquiror Board Designees to the Acquiror Board, (ii) not to acquire beneficial ownership or enter into any written or unwritten agreement or arrangement to acquire any securities of Acquiror other than (x) Acquiror Shares acquired in connection with the Merger, (y) Acquiror Shares acquired as a result of the exercise of stock options (A) held by Company Chairman as of the Closing Date of the Merger or (B) granted to the Company Chairman by the Acquiror in connection with the services provided by Company Chairman as a member of the Board of Directors of the Acquiror and (z) securities of Acquiror that are subject to the Voting Trust (as defined below), and (iii) not to vote, or cause not to be voted, all Acquiror Shares over which Company Chairman has voting power in favor of any Unapproved Transaction (as defined below). NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Certain Definitions. All capitalized terms used but not defined herein are used herein as defined in the Merger Agreement. For purposes of this Agreement, the following terms shall have the following respective meanings: (a) "Acquiror Shares" shall mean all securities of Acquiror (including all shares of Acquiror Common Stock and all additional options, warrants and other rights to acquire shares of Acquiror Common Stock) of which Company Chairman acquires beneficial ownership during the period commencing on the date of this Agreement through the Acquiror Shares Expiration Date, including, without limitation, through the exchange of Company Shares for Acquiror Shares pursuant to the terms of the Merger Agreement, exercise of options, warrants or other rights to acquire such securities of Acquiror, or the conversion of other securities of Acquiror into such securities of Acquiror. In the event of a stock dividend or distribution or any change in the Acquiror Shares by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or similar action or transaction, the term "Acquiror Shares" shall be deemed to refer to and include the Acquiror Shares as well as all Acquiror Shares issued in such stock dividends and distributions and any shares or other securities into which or for which any or all of the Acquiror Shares may be changed or exchanged in such split-up, recapitalization, combination, exchange of shares or similar action or transaction. The term "Acquiror Shares" as used in this Agreement shall exclude all Acquiror Shares that are subject to the Voting Trust. (b) "Acquiror Shares Expiration Date" shall mean the earlier to occur of (i) the date that the Merger Agreement shall have been validly terminated pursuant to Article IX thereof or (ii) the second anniversary of the Closing Date. (c) "beneficial owner" and "beneficial ownership" shall have the meaning provided therefore in Rule 13d-3 promulgated under the Securities Exchange Act of 1934. (d) "Company Shares" shall mean: (i) all securities of Company (including all shares of Company Common Stock and all options, warrants and other rights to acquire shares of Company Common Stock) beneficially owned by Company Chairman as of the date of this Agreement, as indicated on the signature page of this Agreement and (ii) all additional securities of Company (including all additional shares of Company Common Stock and all additional options, warrants and other rights to acquire shares of Company Common Stock) of which Company Chairman acquires beneficial ownership during the period from the date of this Agreement through the Closing Date, including, without limitation, through the exercise of options, warrants or other rights to acquire such securities of Company, or the conversion of other securities of Company into such securities of Company. In the event of a stock dividend or distribution or any change in the Company Shares by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or similar action or transaction, the term "Company Shares" shall be deemed to refer to and include the Company Shares as well as all Company Shares issued in such stock dividends and distributions and any shares or other securities into which or for which any or all of the Company Shares may be changed or exchanged in such split-up, recapitalization, combination, exchange of shares or similar action or transaction. (e) "Company Shares Expiration Date" shall mean the earlier to occur of (ii) the Closing Date or (ii) the date that the Merger Agreement shall have been validly terminated pursuant to Article IX thereof. (f) "Change of Control Transaction" shall mean any of the following transactions to which the Acquiror is a party: (i) a merger or consolidation as a result of which stockholders of the Acquiror immediately prior to such merger or consolidation hold less than a majority of the voting power of the surviving corporation of such merger or consolidation; (ii) the sale or transfer of at least a majority of the voting power of the Acquiror in a single transaction or a series of related transactions or (iii) the sale, transfer or other disposition of all or substantially all of the assets of the Acquiror as a going concern in a single transaction or series of related transactions. (g) "Family Member" shall mean (i) Company Chairman; (ii) any spouse, lineal descendant or antecedent, father, mother, brother or sister of Company Chairman and (iii) any estate, trust, guardianship, custodianship or other fiduciary arrangement for the primary benefit of any one or more individuals named or described in (i) and (ii) above. (h) "Person" shall mean any individual, corporation, limited liability company, partnership, association, trust or any other entity or organization. (i) "Unapproved Transaction" shall mean any Change of Control Transaction which is not approved by a majority of the Acquiror Board Designees (or the successors thereto). (j) "Voting Trust" shall mean that certain Voting Trust Agreement, dated as of the Closing Date, between Acquiror and Company Chairman. 2. Agreement as to Company Shares. (a) Vote of Company Shares. Until the Company Shares Expiration Date, at every meeting of the stockholders of Company called and at every adjournment or postponement thereof, and on every proposed action or approval by written consent of the stockholders of Company, Company Chairman shall cause all Company Shares of which Company Chairman is the beneficial owner to be voted (i) in favor of, and otherwise support, the adoption of the Merger Agreement (as the same may be amended from time to time), and each of the transactions contemplated by the Merger Agreement (as the same may be amended from time to time), (ii) against any matter that is intended, or could reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the consummation of the Merger and other transactions contemplated by the Merger Agreement (as the same may be amended from time to time) and (iii) against any proposals or offers from any Person, other than Acquiror or any affiliate of Acquiror, concerning an Acquisition Proposal involving Company. (b) No Other Agreement or Sale of Company Shares. Prior to the Company Shares Expiration Date, Company Chairman shall not (i) enter into any agreement or understanding with any Person to vote or give instructions in any manner inconsistent with the terms of this Section 2 or (ii) sell, transfer, convey or allow to be sold, transferred or conveyed any Company Shares of which Company Chairman is the beneficial owner except to a Family Member that has delivered to the Acquiror a duly executed Voting Agreement in substantially the same form as this Voting Agreement. 3. Agreement as to Acquiror Shares. (a) Vote of Acquiror Shares. Until the Acquiror Shares Expiration Date, at every meeting of the stockholders of Acquiror called and at every adjournment or postponement thereof, and on every proposed action or approval by written consent of the stockholders of Acquiror, Company Chairman shall cause all Acquiror Shares of which Company Chairman is the beneficial owner to be voted in favor of, and otherwise support, the election of the individuals nominated by a majority of the Acquiror Board Designees (or the successors thereto) to the Acquiror Board so long as (i) Company Chairman or, if the Company Chairman is no longer serving on the Acquiror Board, an individual nominated by the Company Chairman (the "Chairman Nominee"), is among the individuals nominated by a majority of the Acquiror Board Designees (provided, however, that the condition set forth in this clause (i) shall no longer be required to be satisfied, and Company Chairman shall be required to vote, or cause to be voted, the Acquiror Shares held hereby in accordance with this Section 3(a), with respect to such election if a majority of the Acquiror Board Designees has reasonably determined that each of the individuals that have been timely nominated by the Company Chairman to be the Chairman Nominee for such election (which shall not number more than three) are not qualified or suitable to be a director of the Acquiror) and (ii) John Manzetti or, if John Manzetti is no longer serving on the Acquiror Board, an individual nominated by Company Chairman (the "Manzetti Nominee"), is among the individuals nominated by a majority of the Acquiror Board Designees (provided, however, that the condition set forth in this clause (ii) shall no longer be required to be satisfied, Company Chairman shall be required to vote, or cause to be voted, the Acquiror Shares held hereby in accordance with this Section 3(a), with respect to such election if a majority of the Acquiror Board Designees has reasonably determined that each of the individuals that have been timely nominated by Company Chairman to be the Manzetti Nominee for such election (which shall not number more than three) are not qualified or suitable to be a director of the Acquiror). (b) Acquisition of Acquiror Shares. Until the Acquiror Shares Expiration Date, Company Chairman shall not acquire beneficial ownership of any Acquiror Shares, other than (x) Acquiror Shares acquired in connection with the Merger, (y) Acquiror Shares acquired as a result of the exercise of stock options (A) held by Company Chairman as of the Closing Date of the Merger or (B) granted to the Company Chairman by the Acquiror in connection with the services provided by Company Chairman as a member of the Board of Directors of the Acquiror and (z) securities of Acquiror that are subject to the Voting Trust. (c) Prohibition Against Voting for Unapproved Transaction. Company Chairman shall not vote, and shall prevent any Acquiror Shares (as defined below) over which Company Chairman has voting power from otherwise being voted, in favor of any Unapproved Transaction. (d) No Other Agreement. Company Chairman shall not enter into any agreement or understanding with any Person to vote, or give instructions to vote, any Acquiror Shares in any manner inconsistent with the terms of this Section 3. 4. Irrevocable Proxy. As security for the agreements of Company Chairman provided for herein, Company Chairman hereby grants and delivers to Acquiror concurrently with the execution and delivery of this Agreement: (a) a proxy in the form attached hereto as Exhibit A ( the "Company Shares Proxy"), which shall be irrevocable to the fullest extent permitted by applicable law, with respect to all Company Shares of which Company Chairman is the beneficial owner as of and subsequent to the date hereof until the Company Shares Expiration Date; and (b) a proxy in the form attached hereto as Exhibit B ( the "Acquiror Shares Proxy"), which shall be irrevocable to the fullest extent permitted by applicable law, with respect to all Acquiror Shares of which Company Chairman is the beneficial owner as of and subsequent to the date hereof until the Acquiror Shares Expiration Date. 5. Representations and Warranties of Company Chairman. Company Chairman hereby represents and warrants to Acquiror that: (a) as of the date hereof and at all times until the Company Shares Expiration Date (unless indicated otherwise), with respect to the Company Shares, Company Chairman (i) is the beneficial owner of, and has good and valid title to, the Company Shares at such time owned by him as of and subsequent to the date hereof, free and clear of any liens, claims, options, rights of first refusal, co-sale rights, charges or other encumbrances, except as set forth on Schedule 5.2(a) attached hereto or as provided in Section 2(b) above, (ii) as of the date hereof, does not beneficially own or have any written or unwritten agreement or arrangement to acquire any securities of Company other than the shares of Company Common Stock and options and warrants to purchase shares of Company Common Stock indicated on the signature page of this Agreement, except as set forth on Schedule 5.2(a) and (iii) has sole voting power, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Section 2 hereof, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Company Shares at such time owned by him as of and subsequent to the date hereof, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement; and (b) as of the date hereof, Company Chairman does not beneficially own, or have any written or unwritten agreement or arrangement to acquire, any securities of Acquiror other than the agreement to acquire Acquiror Shares in connection with the Merger or except as set forth on Schedule 5.2(b). 6. Covenants of Company Chairman. Company Chairman hereby covenants to Acquiror, that, with respect to the Acquiror Shares, Company Chairman will have sole voting power, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Section 3 hereof, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Acquiror Shares at such time owned by him as of and subsequent to the date hereof, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. 7. No Solicitation of Proxies. Prior to the Company Shares Expiration Date, Company Chairman agrees (solely in his capacity as a stockholder and/or option holder of Company) that neither he nor any of his representatives (including any investment banker, attorney or accountant retained by him) shall, and that he shall use his reasonable best efforts to cause his representatives not to (and shall not authorize any of them to) directly or indirectly, engage in any solicitation (as defined in Regulation 14A of the Rules and Regulations of the Exchange Act) of other stockholders of Company to vote or take any other action against the Merger Agreement (as the same may be amended from time to time) or the Merger or any of the other transactions contemplated by the Merger Agreement (as the same may be amended from time to time). 8. Further Assurances. From time to time, at Acquiror's request and without further consideration, Company Chairman shall execute and deliver such additional documents and take all such further action as may be reasonably deemed necessary or appropriate by Acquiror to consummate the transactions contemplated by this Agreement. 9. Termination. This Agreement shall terminate and shall have no further force or effect as of the Acquiror Shares Expiration Date. 10. Miscellaneous. (a) Waiver. No waiver by an party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by each party hereto. The waiver of a condition or any breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement. (b) Severability. In the event that any term, provision, covenant or restriction set forth in this Agreement, or the application of any such term, provision, covenant or restriction to any person or entity or set of circumstances, shall be determined by a court of competent jurisdiction to be invalid, unlawful, void or unenforceable to any extent, the remainder of the terms, provisions, covenants and restrictions set forth in this Agreement, and the application of such terms, provisions, covenants and restrictions to persons or entities or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall remain in full force and effect, shall not be impaired, invalidated or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable. (c) Binding Effect; Assignment. This Agreement and all of the terms and provisions hereof shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns, but neither his Agreement nor any of the rights, interests or obligations of Company Chairman hereunder may be assigned to any other Person without the prior written consent of Acquiror; provided, however, that the Company Chairman may assign his rights, interests or obligations to another Person without the prior written consent of Acquiror with respect to any Company Shares sold, transferred or conveyed to a Family Member in accordance with Section 2(b) of this Agreement. (d) Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by each of the parties hereto. (e) Specific Performance; Injunctive Relief. Each of the parties hereto hereby acknowledges that (i) the representations, warranties, covenants and restrictions set forth in this Agreement are necessary, fundamental and required for the protection of Acquiror and to preserve for Acquiror the benefits of the Merger, (ii) the representations, warranties, covenants and restrictions set forth in this Agreement relate to matters which are of a special, unique and extraordinary character that gives each such representation, warranty, covenant and restriction a special, unique and extraordinary value and (iii) a breach of any representation, warranty, covenant or restriction set forth in this Agreement, or any other term or provision of this Agreement, will result in irreparable harm and damage to Acquiror which cannot be adequately compensated by a monetary award. Accordingly, Acquiror and Company Chairman hereby expressly agree that in addition to any and all other remedies available at law or in equity, Acquiror shall be entitled to the immediate remedy of specific performance, a temporary or permanent restraining order or preliminary injunction or such other form of injunctive or equitable relief as may be used by any court of competent jurisdiction to restrain or enjoin any of the parties hereto from breaching any representations, warranties, covenants or restrictions set forth in this Agreement or to specifically enforce the terms and provisions hereof. (f) Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision, rule or principle (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. (g) Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by telecopy or facsimile or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as follows, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (i) If to Acquiror: North American Scientific, Inc. 20200 Sunburst Street Chatsworth, California 91311 Attention: L. Michael Cutrer, President Fax: (818) 734-5837 with a copy to: McDermott, Will & Emery 2049 Century Park East Suite 3400 Los Angeles, CA 90067-3208 Attention: Mark J. Mihanovic, Esq. Fax: (310) 277-4730 (ii) If to Company Chairman: To the address for notice set forth on the signature page hereof. with a copy to: Cohen & Grigsby 11 Stanwix Street, 15th Floor Pittsburgh, PA 15222 Attention: Mark I. Baseman, Esq. Fax: (412) 209-0672 (h) Enforcement; Consent to Jurisdiction; Waiver of Jury Trial. (i) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREON. (ii) All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any such rights, powers or remedies by any party hereto shall not preclude the simultaneous or later exercise of any other right, power or remedy by such party. (i) Entire Agreement. This Agreement, the Company Shares Proxy, the Acquiror Shares Proxy, the Merger Agreement contain the entire understanding of the parties in respect of the subject matter hereof supersede all prior negotiations and understandings between the parties with respect to such subject matter. (j) Headings. The section headings set forth in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement in any manner. (k) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and both of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first above written. NORTH AMERICAN SCIENTIFIC, INC. COMPANY CHAIRMAN By: /s/ L. Michael Cutrer /s/ John A. Friede ---------------------------------------- -------------------------------- Signature of Authorized Signatory Signature Name: L. Michael Cutrer Print Address: -------------------------------------- Title: President and Chief Executive Officer ________________________________ ------------------------------------- ________________________________ ________________________________ Telephone Number ________________________________ Facsimile Number ________________________________ Shares Beneficially Owned: 1,510,574.61 shares of Company Common Stock 164,975 shares of Company Common Stock issuable upon exercise of outstanding options or warrants 40,101.52 shares of Company Series A Preferred Stock 1,481,035.40 shares of Company Series A Preferred Stock [SIGNATURE PAGE TO VOTING AGREEMENT] EX-10.1(B) 7 ci691907-ex10_1b.txt ACQUIROR SHARES PROXY Exhibit 10.1(b) ACQUIROR SHARES PROXY IRREVOCABLE PROXY The undersigned hereby irrevocably (to the fullest extent permitted by law) appoints Michael Cutrer, President and Chief Executive Officer and Alan Edrick, Vice President and Chief Financial Officer, respectively, of National American Scientific, Inc., a Delaware corporation ("Acquiror"), and each of them, as the sole and exclusive attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the full extent that the undersigned is entitled to do so) with respect to all of the shares of capital stock of Acquiror that are owned of record by the undersigned as of the date of any meeting of stockholders of Acquiror called (and at every adjournment or postponement thereof), and as of the date that any proposed action or approval by written consent of the stockholders of Acquiror solicited, for the purpose of the election of directors of Acquiror (collectively, the "Acquiror Shares") in accordance with the terms of this Irrevocable Proxy. As used herein, the "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of October 26, 2003, among Acquiror, AM Capital I, Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"), and NOMOS Corporation, a Delaware corporation ("Company"), which provides for the merger (the "Merger") of Company with and into Merger Sub and the other transactions contemplated by the Merger Agreement. Upon the undersigned's execution of this Irrevocable Proxy, any and all prior proxies provided by the undersigned with respect to any Acquiror Shares are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Acquiror Shares until after the Expiration Date (as such term is hereinafter defined). This Irrevocable Proxy is irrevocable (to the fullest extent permitted by applicable law), is coupled with an interest and is granted pursuant to the Voting Agreement of even date herewith between Acquiror and the undersigned (the "Voting Agreement") and is granted in consideration of Acquiror entering into the Merger Agreement. As used herein, the term "Expiration Date" shall mean the earlier to occur of (i) such date and time as the Merger Agreement shall have been validly terminated pursuant to Article IX thereof or (ii) the second anniversary of the date on which the consummation of the Merger (pursuant to the terms of the Merger Agreement) occurs. The attorneys and proxies named herein are, and each of them hereby is, authorized and empowered by the undersigned, at any time prior to the Expiration Date, to act as the undersigned's attorney and proxy to vote the Acquiror Shares, and to exercise all voting consent and similar rights of the undersigned with respect to the Acquiror Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special or adjourned meeting of stockholders of Acquiror and in every proposed written consent in lieu of any such meeting in favor of the election of the individuals nominated by a majority of the Acquiror Board Designees (as such term is defined herein) (or the successors thereto) to the board of directors of Acquiror (the "Acquiror Board") so long as (i) the undersigned or an individual nominated by the undersigned, provided that the undersigned has timely presented such individual to the Acquiror Board Designees (the "Chairman Nominee"), is among the individuals nominated by a majority of the Acquiror Board Designees (unless a majority of the Acquiror Board Designees has reasonably determined that each of the first three individuals nominated by the undersigned to be the Chairman Nominee for such election are not qualified or suitable to be a director of the Acquiror) and (ii) John Manzetti or an individual nominated by the undersigned, provided that the undersigned has timely presented such individual to the Acquiror Board Designees (the "Manzetti Nominee"), is among the individuals nominated by a majority of the Acquiror Board Designees (unless a majority of the Acquiror Board Designees has reasonably determined that each of the first three individuals nominated by the undersigned to be the Manzetti Nominee for such election are not qualified or suitable to be a director of the Acquiror). As used herein, the "Acquiror Board Designees" shall mean the seven members of the Acquiror Board (or their successors) after the Effective Time (as such term is defined herein) that were also members of the Acquiror Board immediately prior to the Effective Time. As used herein, the "Effective Time" shall mean the effective time of the Merger which is the time of filing of the Certificate of Merger for the Merger with the Secretary of State of the State of Delaware in accordance with the General Corporation Law of the State of Delaware or at such later time which the parties to the Merger Agreement shall have agreed upon and designated in the Certificate of Merger for the Merger as the effective time of the Merger. The attorneys and proxies named herein may not exercise this Irrevocable Proxy on any other matter except as provided herein. The undersigned may vote the Acquiror Shares on all other matters so long as such vote is not inconsistent with any matters specifically covered by this Irrevocable Proxy. Any obligation of the undersigned hereunder shall be binding upon the successors and assigns of the undersigned. [Remainder of Page Intentionally Left Blank] This Irrevocable Proxy is irrevocable (to the fullest extent permitted by law). This Irrevocable Proxy shall terminate, and be of no further force and effect, automatically upon the Expiration Date. Dated: October 26, 2003 JOHN A. FRIEDE /s/ John A. Friede ---------------------------------------- Signature [IRREVOCABLE PROXY] EX-10.2 8 ci691907-ex10_2.txt PUT AGREEMENT Exhibit 10.2 PUT AGREEMENT This PUT AGREEMENT ("Agreement") dated as of February 9, 2001, between MR. JOHN A. FRIEDE ("Friede") and MR. ROBERT W. HILL (the "Employee"). RECITALS WHEREAS, NOMOS Corporation, a Delaware corporation ("NOMOS"), and Employee have entered into an Employment Agreement of even date herewith (the "Employment Agreement"), pursuant to which NOMOS grants to Employee 350,000 stock options under the NOMOS 1999 Stock Option Plan (the "Options"); WHEREAS, in return for NOMOS entering into the Employment Agreement, Employee has agreed to remain an employee of NOMOS for a period of not less than two years from the date hereof, in accordance with the terms and conditions of the Employment Agreement; and WHEREAS, Friede, who is Chairman of the Board of Directors and a principal shareholder of NOMOS, desires (upon the terms and subject to the conditions of this Agreement) to grant a put option to Employee whereby Employee shall be permitted to sell to Friede shares of common stock of NOMOS held by Employee which have vested in accordance with the terms of the Employment Agreement (the "Shares"). The parties, intending to be legally bound, agree as follows: AGREEMENT 1. RECITALS The foregoing Recitals are an integral part of this Agreement and all references herein to this Agreement shall include such Recitals. 2. PUT OPTION OF EMPLOYEE (a) At any time, or from time to time, beginning on or after the first anniversary of the date of this Agreement, Employee may require Friede to purchase all or any part of the Shares in accordance with the following schedule: Maximum No. of Shares Time Period Subject to Put - ----------------------------------- ------------------------------------------ On or after the first anniversary Up to 116,666.66 Shares hereof (less any put rights previously exercised) On or after the second anniversary Up to 233,333.33 Shares hereof (less any put rights previously exercised) On or after the third anniversary Up to 350,000 Shares hereof until the Termination Date (less any put rights previously exercised) (b) Upon completion of an initial public offering of the shares of NOMOS at not less than $4.786 per share (an "Initial Public Offering"), this Agreement shall terminate and be of no further force or effect. (c) The purchase price to be paid by Friede to Employee for the Shares for which a put right pursuant to this Section 2 is being exercised (the "Put Price") shall be equal to $ 4.786 cash for each of the Shares being put, with such $ 4.786 purchase price being adjusted from time to time as mutually agreed in writing to properly account for any recapitalization, stock split, or similar transaction. (d) Employee may exercise such put right by delivering to Friede (with a copy to NOMOS) a written notice (a "Put Notice") stating that such put right is being exercised and specifying the number of Shares held by Employee for which the put right is being exercised. Friede shall purchase the Shares specified in the applicable Put Notice for the Put Price no later than 90 days after receipt of the applicable Put Notice. 3. TERMINATION OF EMPLOYMENT If Employee's employment with NOMOS is terminated for "Cause" (as defined below) at any time prior to the second anniversary of the date hereof, then the put rights granted in this Agreement shall be void and of no further force or effect, Employee shall reimburse Friede for the aggregate Put Price paid by Friede for Shares under this Agreement (if any), and Friede shall transfer to Employee all shares purchased by Friede. If Employee's employment with NOMOS is terminated without Cause at any time prior to the second anniversary of the date hereof, then Employee's put rights for the time periods set forth in Section 2 shall remain in effect, but such rights shall be limited to those Shares existing on the date of termination or Shares acquired by means of Employee exercising his vested options within 30 days after such termination. "Cause" shall mean (i) the commission of a crime involving moral turpitude, theft, fraud or deceit; (ii) conduct which brings NOMOS or any of its related entities into public disgrace or disrepute, (iii) substantial or continued unwillingness to perform duties as reasonably directed by Employee's supervisors pursuant to his Employment Agreement; (iv) gross negligence or deliberate misconduct; (v) any material breach of paragraphs 6 or 7 of the Employment Agreement; or (vi) Employee's own voluntary separation from employment with NOMOS. 4. TERM This Agreement shall terminate thirty (30) days after the third anniversary of the date hereof (the "Termination Date"), unless extended by written agreement of the parties. 5. SUCCESSORS AND ASSIGNS This Agreement will be binding upon and inure to the benefit of Friede and Employee, and each of their respective assigns, heirs and legal representatives. The obligations of Friede hereunder shall survive the death or disability of Mr. Friede and be a continuing obligation of his estate. 6. WAIVER 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 will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any 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 right arising out of 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. 7. GOVERNING LAW This Agreement will be governed by the laws of the Commonwealth of Pennsylvania without regard to conflicts of laws principles. 8. SEVERABILITY Whenever possible each provision and term of this Agreement will be interpreted in a manner to be effective and valid but if any provision or term of this Agreement is held to be prohibited by or invalid, then such provision or term will be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement. 9. COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 10. SECTION HEADINGS, CONSTRUCTION The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 11. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior written and oral agreements and understandings between Friede and Employee with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. By: /s/ John A. Friede ----------------------------------- Mr. John A. Friede By: /s/ Robert W. Hill ----------------------------------- Mr. Robert W. Hill EX-10.3 9 ci691907-ex10_3.txt INDEMNIFICATION ESCROW AGREEMENT Exhibit 10.3 INDEMNIFICATION ESCROW AGREEMENT This INDEMNIFICATION ESCROW AGREEMENT, dated as of May 4, 2004 (this "Agreement"), is made and entered into by and among NOMOS Corporation, a Delaware corporation (the "Company"), John A. Friede, on behalf of the Company's stockholders (the "Stockholder Representative"), North American Scientific, Inc., a Delaware corporation ("Acquiror"), and U.S. Bank National Association, a national banking association ("Escrow Agent"), in connection with the Agreement and Plan of Merger, dated as of October 26, 2003, as amended by the First Amendment to Agreement and Plan of Merger, dated as of November 25, 2003, and the Second Amendment to Agreement and Plan of Merger, dated as of March 2, 2004 (the "Merger Agreement"), among the Company, Acquiror and AM Capital I, Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"). W I T N E S S E T H: WHEREAS, pursuant to Section 3.6 of the Merger Agreement, the Company, on behalf of its stockholders (collectively, the "Stockholders"), has agreed to make available to Acquiror and the Merger Sub two separate escrow funds to compensate such parties for certain Indemnified Losses (as such term is defined in the Merger Agreement); NOW, THEREFORE, in consideration of the foregoing premises and the mutual obligations herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. All capitalized terms used but not defined herein are used herein as defined in the Merger Agreement. 2. ESTABLISHMENT OF ESCROW. As of the Closing, Acquiror shall deliver, or cause its transfer agent to deliver, to the Escrow Agent for deposit into escrow hereunder: (a) the following items (collectively, the "General Escrow Fund"): (i) a certificate evidencing 10 percent of the shares of Acquiror Common Stock to be issued in the Merger as required by Section 3.6 of the Merger Agreement (collectively, the "General Escrowed Shares"), registered in the name of the Escrow Agent as nominee for the Stockholders; and (ii) an aggregate amount of cash equal to 10 percent of the aggregate amount of cash to be paid in the Merger pursuant to Section 3.3 of the Merger Agreement as required by Section 3.6 of the Merger Agreement (the "General Escrowed Cash"); and (b) the following items (collectively, the "Special Escrow Fund", and together with the General Escrow Fund, collectively, the "Escrow Fund"): (i) a certificate evidencing 307,617 shares of Acquiror Common Stock to be issued in the Merger as required by Section 3.6 of the Merger Agreement (collectively, the "Special Escrowed Shares", and together with the General Escrowed Shares, the "Escrowed Shares"), registered in the name of the Escrow Agent as nominee for the Stockholders; and (ii) an aggregate amount of cash equal to $700,800 to be paid in the Merger pursuant to Section 3.3 of the Merger Agreement as required by Section 3.6 of the Merger Agreement (the "Special Escrowed Cash", and together with the General Escrowed Cash, collectively, the "Escrowed Cash"). The Escrow Agent agrees to establish and maintain the General Escrow Fund and the Special Escrow Fund in the manner set forth herein. The Escrow Agent shall have no duty to confirm or verify the accuracy or correctness of the amount of any Escrowed Shares or Escrowed Cash deposited with it hereunder. 3. MAINTENANCE OF THE ESCROW. (a) With respect to each Escrow Fund, the Escrow Agent shall establish a separate account (each, a "Subaccount") for each Stockholder for the number of Escrowed Shares and the amount of Escrowed Cash set forth opposite such Stockholder's name in the column identified for each Escrow Fund on Annex A attached hereto (the "Stockholder List"). The ratio of the total number of Escrowed Shares listed opposite a given Stockholder's name on the Stockholder List to the total number of Escrowed Shares set forth on the Stockholder List, as of the date hereof, is referred to herein as such Stockholder's "Proportional Interest in Shares." The ratio of the amount of Escrowed Cash listed opposite a given Stockholder's name on the Stockholder List to the total amount of Escrowed Cash set forth on the Stockholder List, as of the date hereof, is referred to herein as such Stockholder's "Proportional Interest in Cash." A Stockholder's Proportional Interest in Shares and Proportional Interest in Cash shall collectively be referred to herein as such Stockholder's "Proportional Interest." (b) The Escrow Agent shall invest the Escrowed Cash at the written direction of the Stockholder Representative in any of the following (collectively the "Permitted Investments"): (i) United States Treasury Bills maturing within ninety-one (91) days of the date of purchase, (ii) demand deposit accounts, money market deposit accounts and certificates of deposit with a term not greater than ninety (90) days with a United States depository having a reported capital and surplus of not less than $50 million and (iii) commercial paper which is rated on the date of purchase in one of the two highest rating categories by both Standard and Poor's Ratings Group and Moody's Investors Service, Inc. and matures not more than ninety (90) days from the date of purchase. In the absence of duly authorized and complete directions regarding investment of Escrowed Cash from the Stockholder Representative, Escrow Agent shall automatically invest and reinvest the same in units of the money market mutual funds identified on Annex C attached hereto and incorporated herein, which funds may be managed by an affiliate of the Escrow Agent. Any income earned or accrued with respect to the applicable Escrowed Cash amount shall become a part of the applicable Escrow Fund (but shall not be used to satisfy any claims by Acquiror Indemnified Parties pursuant to Section 5 hereof) and credited proportionately to the Subaccounts into which the applicable Escrowed Cash was initially deposited on the date hereof. The Escrow Agent shall have no liability for any loss incurred as a -2- result of investments made or liquidated by it in accordance with the provisions of this Agreement. (c) Any distributions in respect of the Escrowed Shares for stock splits, stock combinations, recapitalizations and similar transactions received by the Escrow Agent shall become a part of the applicable Escrow Fund, credited proportionately to the applicable Subaccounts in accordance with the Proportional Interest in Shares and shall be considered Escrowed Shares of each Stockholder for all purposes hereof. In the event the Escrowed Shares are reclassified or otherwise changed into or exchanged for other securities, property or cash pursuant to any merger, consolidation, sale of assets or liquidation or other transaction, the securities, cash or other property received by the Escrow Agent in respect of the Escrowed Shares shall become a part of the applicable Escrow Fund, credited proportionately to the Subaccounts in accordance with the Proportional Interest in Shares of each Stockholder and shall be considered Escrowed Shares for all purposes hereof. All other distributions in respect of the Escrowed Shares received by the Escrow Agent shall become a part of the applicable Escrow Fund (but shall not be used to satisfy any claims by Acquiror Indemnified Parties pursuant to Section 5 hereof) and credited proportionately to the Subaccounts of the Stockholders in accordance with the Proportional Interest in Shares. (d) The Escrow Agent shall maintain records reflecting each Stockholder's Proportional Interest in the applicable Escrow Fund and shall adjust each Subaccount to reflect distributions from, and additions or substitutions to, the applicable Escrow Fund. The Escrow Agent is hereby granted the power to effect any transfer or distribution of all or any portion of the applicable Escrow Fund required by this Agreement. Acquiror shall cooperate with the Escrow Agent in promptly issuing, or causing its transfer agent to promptly issue, such stock certificates as shall be required to effect transfers of Escrowed Shares required by this Agreement. All Escrowed Shares and other securities held in the Escrow Fund shall be registered in the name of the Escrow Agent as nominee for the Stockholders in the respective amounts set forth on the Stockholder List. Notwithstanding the above, upon the determination by Acquiror that a Stockholder has perfected its dissenter's right of appraisal under applicable Delaware law, Acquiror shall deliver to the Escrow Agent a revised Stockholder List that removes such Stockholder from the Stockholder List and reflects such removal in calculating the Proportional Interest of all other Stockholders, which shall replace, in its entirety, Annex A attached hereto. (e) All dividends, distributions, interest and gains earned or realized on the applicable Escrow Fund (collectively "Earnings") and credited to each Subaccount shall be treated as having been received by the Stockholders to whose Subaccount the Earnings are credited for tax purposes. The Stockholder List sets forth each Stockholder's address and Taxpayer Identification Number. The Escrow Agent shall file information returns with the United States Internal Revenue Service and distribute payee statements to the Stockholders, documenting such Earnings. Stockholder Representative shall provide to the Escrow Agent all forms and information necessary to complete such information returns and payee statements. In the event the Escrow Agent becomes liable for the payment of taxes, including withholding taxes, relating to any Earnings or any payment made hereunder, the Escrow Agent may deduct such taxes from the Escrow Fund. -3- 4. ADMINISTRATION OF ESCROW FUND. (a) Subject to the provisions of Article XII of the Merger Agreement and Sections 5 of this Agreement, (i) the General Escrow Fund shall be available to compensate the Acquiror Indemnified Parties for any General Indemnified Losses and (ii) the Special Escrow Fund shall be available to compensate the Acquiror Indemnified Parties for any Special Indemnified Losses. (b) No Escrowed Shares or any beneficial interest therein or any other portion of the applicable Escrow Fund may be pledged, sold, assigned or transferred, including by operation of law, by any Stockholder or be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of any such Stockholder, prior to the delivery and transfer to such Stockholder of such Stockholder's Proportional Interest of the applicable Escrow Fund by the Escrow Agent as provided herein. (c) The Escrow Agent shall hold and safeguard the Escrow Fund during the term of this Agreement, shall not treat the Escrow Fund as the property of Acquiror and shall hold and dispose of the Escrow Fund only in accordance with the terms hereof. Any distributions declared in respect of Escrowed Shares, but unpaid prior to the dates such Escrowed Shares are distributed from the Escrow Fund shall not be added to the Escrow Fund pursuant to Section 5 hereof but shall be distributed to the record holders of such Escrowed Shares immediately prior to the date of such distribution. (d) Each Stockholder shall be deemed the record holder of, and shall have voting, dividend, distribution and all other rights in respect of, the shares of Acquiror Common Stock held in the Escrow Fund on behalf of such Stockholder in accordance with the Stockholder List. The Escrow Agent shall promptly forward, or cause to be forwarded, copies of any proxies, proxy statements and other soliciting materials which it receives to the Stockholders, and shall vote the applicable portion of the Escrowed Shares in accordance with any written instructions timely received from the Stockholders. Absent any such written instructions, the Escrow Agent shall not vote any Escrowed Shares. (e) Within 10 days following the second anniversary of the Effective Time (the "General Escrow Termination Date"), the Escrow Agent shall deliver to the Stockholders, in accordance with their respective Proportional Interest in Cash and Proportional Interest in Shares, all remaining amounts in the General Escrow Fund (collectively, the "Escrow Assets Available for Release") that are not then subject to any unsatisfied Claims specified in any Claim Certificate delivered to the Stockholder Representative and the Escrow Agent before the General Escrow Termination Date with respect to facts and circumstances existing prior to the General Escrow Termination Date ("Pending Claims"); provided, however, that (i) a Claim Certificate shall be deemed to have been given hereunder with respect to any General Indemnified Loss sought to be collected from an insurance company by an Acquiror Indemnified Party under Section 12.4 of the Merger Agreement if such General Indemnified Loss was incurred within six months prior to the General Escrow Termination Date, and notwithstanding such collection efforts the Acquiror shall deliver such Claim Certificate prior to the General Escrow Termination Date and (ii) promptly upon the resolution of all of such Pending Claims in accordance with the provisions of Article XII of the Merger Agreement and Section 5 of this -4- Agreement, Escrow Agent shall deliver to the Stockholders, in accordance with their respective Proportional Interests, all remaining amounts in the General Escrow Fund not required to satisfy the Pending Claims. (f) Within 10 days after delivery to the Escrow Agent of either of the following documents (the "Special Escrow Termination Date"), the Escrow Agent shall deliver to the Stockholders, in accordance with their respective Proportional Interest in Cash and Proportional Interest in Shares, all remaining amounts in the Special Escrow Fund after payment in full of all claims relating to the Parker/Hunter Dispute: (i) a certified copy of a final non-appealable judicial order or judgment setting forth the Claim Amount (as defined in Section 5(a) below), if any, that the Acquiror Indemnified Parties are entitled to receive out of the Special Escrow Fund with respect to the Parker/Hunter Dispute or (ii) a copy of a written memorandum signed by an Acquiror Indemnified Party and the Stockholder Representative setting forth the Claim Amount, if any, that the Acquiror Indemnified Parties are entitled to receive out of the Special Escrow Fund with respect to the Parker/Hunter Dispute. 5. CLAIMS FOR INDEMNIFICATION AGAINST THE ESCROW FUND. (a) The Acquiror Indemnified Parties shall make any claims for Indemnified Losses to be satisfied from the applicable Escrow Fund by delivering a Claim Certificate (as defined below) to the Escrow Agent and, concurrently, a copy of such Claim Certificate to the Stockholder Representative. For purposes hereof, "Claim Certificate" shall mean a certificate signed by any officer of Acquiror or the Surviving Corporation, as the case may be. Such Claim Certificate shall (i) state that the Acquiror Indemnified Party claiming indemnification has paid, incurred or properly accrued or reasonably anticipates that it will have to pay, incur or accrue Indemnified Losses and the amount of such Indemnified Losses ("Claim Amount") and (ii) specify in reasonable detail the individual items of Indemnified Losses included in the amount so stated, the date each such item was paid, incurred or properly accrued or the basis for such anticipated liability and the nature of the misrepresentation, breach of warranty or covenant to which such Indemnified Losses are related. Unless the Stockholder Representative shall have delivered an Objection (as defined below) in accordance with Section 5(b) hereof, the Escrow Agent shall, on the 30th day (or such earlier day as the Stockholder Representative shall authorize in writing to the Escrow Agent) after receipt of a Claim Certificate, deliver to the Acquiror Indemnified Party (in accordance with Sections 5(d) and 5(e) below) the portion of the applicable Escrow Fund equal to Claim Amount. (b) If the Stockholder Representative objects to any claim or claims made in any Claim Certificate to recover Indemnified Losses, the Stockholder Representative must deliver to the Escrow Agent a writing setting forth the basis for such objection within 30 days after delivery of the Claim Certificate to the Stockholder Representative (an "Objection"). Within 10 days of receipt of an Objection properly made, the Escrow Agent shall deliver to the Acquiror Indemnified Party from the applicable Escrow Fund such portion of the Claim Amount, if any, which is not subject to such Objection. Thereafter, the Escrow Agent shall not distribute to the Acquiror Indemnified Party any further portion of the Claim Amount stated in the Claim Certificate which is subject to such Objection out of the applicable Escrow Fund until the Escrow Agent shall have received (A) a certified copy of any final non-appealable judicial order or judgment determining the dispute and setting forth the portion of the Claim Amount, if any, -5- which such Acquiror Indemnified Party is entitled to receive out of the applicable Escrow Fund with respect to such Objection or (B) a copy of a written memorandum signed by the applicable Acquiror Indemnified Party and the Stockholder Representative resolving such dispute and setting forth the amount of the Claim Amount, if any, which such Acquiror Indemnified Party is entitled to receive out of the applicable Escrow Fund with respect to such Objection, in either case, in accordance with Section 5(c) below. The Escrow Agent will deliver such portion of the Claim Amount from the applicable Escrow Fund to the Acquiror Indemnified Party within ten (10) days after the receipt of such final non-appealable judicial order, judgment or signed memorandum, as the case may be. (c) If the Stockholder Representative has delivered an Objection and the Stockholder Representative and the Acquiror Indemnified Parties have agreed upon the rights of the respective parties with respect to each claim for indemnification hereunder subject to such Objection, then a memorandum setting forth such agreement shall be prepared and signed by the Stockholder Representative and the applicable Acquiror Indemnified Parties and furnished to the Escrow Agent. Such memorandum shall state the portion of the Claim Amount to be distributed to the Acquiror Indemnified Party out of the applicable Escrow Fund in connection with such Objection. The Escrow Agent shall be entitled to rely on any such memorandum and distribute such portion of the Claim Amount out of the applicable Escrow Fund in accordance with the terms thereof. If no agreement is reached by the parties, then Acquiror or the Surviving Corporation or the Stockholder Representative, on behalf of the Stockholders, may commence legal action either to obtain a judicial determination of the dispute (unless the amount of the Indemnified Losses at issue is pending litigation with a third party, in which event the action shall not be commenced until the amount of such Indemnified Losses is ascertained or such parties agree to the commencement of such action). (d) (i) All distributions of the General Escrow Fund pursuant to this Section 5 shall be made with a combination of General Escrowed Shares and General Escrowed Cash in such respective amounts determined as follows: (A) a number of General Escrowed Shares with an aggregate Acquiror Stock Price (as defined below) equal to the General Escrowed Shares Percentage (as defined below) multiplied by the amount of the payable portion of the Claim Amount and (B) an amount of General Escrowed Cash equal to the General Escrowed Cash Percentage (as defined below) multiplied by the amount of the payable portion of the Claim Amount. For purposes hereof, "General Escrowed Shares Percentage" shall mean 80 percent and "General Escrowed Cash Percentage" shall mean 20 percent. (ii) All distributions of the Special Escrow Fund pursuant to this Section 5 shall be settled from a Pro Rata Portion (as defined below) of each Subaccount established under the Special Escrow Fund as follows: (A) to the extent that any such Subaccount contains any Special Escrowed Cash, the distribution in respect thereof shall be paid solely in cash until such time as the Special Escrowed Cash contained therein is depleted, at which time the balance of such distribution shall be paid in Special Escrowed Shares valued at the Pre-Announcement Share Price (as defined below) and (B) to the extent any such Subaccount only contains Special Escrowed Shares, the distribution in respect thereof shall be paid in Special Escrowed Shares valued at the Pre-Announcement Share Price. -6- For purposes of this Agreement, the term "Pre-Announcement Share Price" shall mean a value of $7.47 for each Special Escrowed Share; and "Pro Rata Portion" shall mean the relative value of the combination of Special Escrowed Shares (valued at the Pre-Announcement Share Price) and Special Escrowed Cash contained in each Subaccount established under the Special Escrow Fund to the aggregate value of all the Special Escrowed Shares (valued at the Pre-Announcement Share Price) and all the Special Escrowed Cash deposited in the Special Escrowed Fund, measured as of the date hereof. (e) (i) For the purposes of determining the number of General Escrowed Shares to be delivered to an Acquiror Indemnified Party out of the General Escrow Fund pursuant to this Section 5, each share of Acquiror Common Stock shall be valued at the Acquiror Stock Price (as adjusted, as applicable, for any stock splits, stock combinations, recapitalizations and similar actions or transactions). For purposes of this Agreement, "Acquiror Stock Price" shall mean the average closing price of the Acquiror Common Stock on the Nasdaq National Market as reported in The Wall Street Journal for the five (5) trading days ending one (1) business day prior to date that the General Escrowed Shares are distributed out of the General Escrow Fund by the Escrow Agent; provided, however, in the event that an Objection is made with respect to a Claim then the Acquiror Stock Price shall mean the average closing price of the Acquiror Common Stock on the Nasdaq National Market as reported in The Wall Street Journal for the five (5) consecutive trading days ending (1) business day prior to the date that the Claim is delivered to the Stockholder Representative. (ii) For the purposes of determining the number of Special Escrowed Shares to be delivered to an Acquiror Indemnified Party out of the Special Escrow Fund pursuant to this Section 5, each share of Acquiror Common Stock shall be valued at the Pre-Announcement Share Price. (f) Whenever this Agreement provides that the Escrow Agent shall disburse Escrowed Shares to an Acquiror Indemnified Party, the Escrow Agent shall deliver to the transfer agent for the Acquiror the stock certificate representing such Escrowed Shares and the transfer agent shall deliver to the Escrow Agent one stock certificate representing the number of shares to be delivered to the Acquiror Indemnified Party and another stock certificate representing the balance of Escrowed Shares remaining. The Escrow Agent shall then deliver to the Acquiror Indemnified Party a stock certificate representing the appropriate number of General Escrowed Shares determined in accordance with Sections 5(d) and 5(e). Distributions of General Escrowed Shares pursuant to Section 5(d)(i) shall be debited to the Subaccounts established from the applicable Escrow Fund in accordance with the Stockholders' respective Proportional Interests in Shares. Distributions of Special Escrowed Shares pursuant to Section 5(d)(ii) shall be debited to such Subaccounts in accordance with Section 5(b)(ii). 6. LIMITATIONS ON CLAIMS FROM ESCROW FUND. The rights of the Acquiror Indemnified Parties to make any claims against the applicable Escrow Fund shall be subject to all of the limitations set forth in the Merger Agreement, including, without limitation, the limitations set forth in Section 12.4 thereof. -7- 7. STOCKHOLDER REPRESENTATIVE. (a) By virtue of the approval of the Merger Agreement by the holders of Company Common Stock and Company Preferred Stock (as such terms are defined in the Merger Agreement), John A. Friede shall (subject to Section 7(e) hereof) be the Stockholder Representative hereunder and shall be constituted and appointed as agent and attorney-in-fact for and on behalf of each of the Stockholders. The Stockholder Representative shall have full power and authority to represent all of the Stockholders and their successors with respect to all matters arising under this Agreement and all actions taken by the Stockholder Representative hereunder and thereunder shall be binding upon all Stockholders and their successors as if expressly confirmed and ratified in writing by each of them, including, without limitation, resolving all claims relating to the Escrow Fund and any indemnification claims and obligations. The Stockholder Representative shall take any and all actions which such Stockholder Representative believes are necessary or appropriate under this Agreement for and on behalf of the Stockholders, as fully as if such Stockholder Representative were acting on his own behalf, including (without limitation) consenting to, compromising or settling issues with respect to the Escrow Fund and all such indemnity claims with Acquiror Indemnified Parties under this Agreement, taking any and all other actions specified in or contemplated by this Agreement, and engaging counsel or accountants in connection with the foregoing matters. Without limiting the generality of the foregoing, the Stockholder Representative shall have full power and authority to interpret all the terms and provisions, and to consent to any amendment, of this Agreement on behalf of all Stockholders and such successors. No bond shall be required of the Stockholder Representative and the Stockholder Representative shall receive no compensation for services hereunder; provided, however, that Stockholder Representative shall be entitled to reimbursement for reasonable expenses incurred by Stockholder Representative in performing his duties hereunder (including reasonable attorneys' fees), which reimbursement shall be made solely out of the Escrow Assets Available for Release after the General Escrow Termination Date. (b) The Stockholder Representative shall not be liable to Stockholders for any act done or omitted hereunder as Stockholder Representative while acting in good faith and in the exercise of reasonable judgment, and any act done or omitted pursuant to the written advice of counsel shall be conclusive evidence of such good faith. (c) Solely to the extent of the Escrow Assets Available for Release after the General Escrow Termination Date, the Stockholder Representative shall be indemnified and held harmless from and against any and all losses, claims, damages, liabilities and expenses, including reasonable costs of investigation, outside counsel fees, and disbursements that may be imposed on or incurred by the Stockholder Representative in connection with the performance of its duties under this Agreement, including but not limited to any arbitration or litigation arising from this Agreement or involving the subject matter hereof, unless such losses, claims, damages, liabilities or expenses shall be caused by the negligence or willful misconduct on the part of the Stockholder Representative. (d) The Stockholder Representative shall treat confidentially and not disclose any nonpublic information from or about Acquiror or the Merger Sub to anyone, except as may be necessary in connection with any legal proceeding to enforce the Stockholder's rights -8- under this Agreement or the Merger Agreement or as otherwise required by law. (e) The Stockholder Representative may resign, and may be removed and a successor named by Stockholders having, in the aggregate, Subaccounts containing at least 50 percent or more of the total fair market value of the Escrow Fund. The Escrow Agent shall be promptly notified in writing of any such change in the Stockholder Representative. Upon any such replacement, the replacement Stockholder Representative shall be deemed the "Stockholder Representative" for all purposes hereunder. 8. ACTIONS OF THE STOCKHOLDER REPRESENTATIVE. A decision, act, consent or instruction of the Stockholder Representative shall be deemed to constitute a decision of all the Stockholders and shall be final, binding and conclusive upon each such Stockholder of the Company, and Acquiror may rely upon any decision, act, consent or instruction of the Stockholder Representative as being the decision, act, consent or instruction of each and every such Stockholder. The Escrow Agent, the Acquiror and the Surviving Corporation are hereby relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Stockholder Representative. 9. FEES OF THE ESCROW AGENT. The fees of the Escrow Agent, including the normal costs of administering the Escrow Fund as set forth on the Fee Schedule attached hereto as Annex B, any expenses incurred by the Escrow Agent in performing its obligations pursuant to Section 4(d) herein and all fees and costs associated with the Escrow Agent's administration of Indemnified Losses, shall be paid (i) 50 percent by the Acquiror (out of its own funds), and (ii) fifty percent by the Stockholders (which shall be paid solely out of the Escrow Fund). 10. ESCROW AGENT'S DUTIES (a) The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein (and no implied duties). (b) In the event the Escrow Agent reasonably believes any ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document received by the Escrow Agent hereunder, the Escrow Agent may refrain from taking any action and shall be fully protected and shall not be liable in any way to Acquiror, the Surviving Corporation, the Stockholder Representative or any Stockholder or other Person for refraining from taking such action, unless the Escrow Agent receives written instructions signed by Acquiror and the Stockholder Representative which eliminates such ambiguity or uncertainty to the reasonable satisfaction of Escrow Agent. 11. LIABILITY OF THE ESCROW AGENT. In performing any of its duties under this Agreement, the Escrow Agent shall not be liable to any party for damages, losses or expenses, except in the event of gross negligence or willful misconduct on the part of the Escrow Agent. The Escrow Agent shall not incur any such liability for any action taken or omitted in reliance upon any instrument, including any written statement or affidavit provided for in this Agreement that the Escrow Agent shall reasonably and in good faith believe to be genuine. In addition, the Escrow Agent may consult with independent legal counsel in connection with its -9- duties under this Agreement and shall be fully protected in any act taken, suffered or permitted by it in good faith and reasonable reliance on the advice of counsel. The Escrow Agent shall not be responsible for good faith mistakes with respect to determining and verifying the authority of any Person acting or purporting to act on behalf of any party to this Agreement to the extent the Escrow Agent is not grossly negligent. 12. SUCCESSOR ESCROW AGENTS. Any Person that is the successor of Escrow Agent, by merger, consolidation or transfer of substantially all the business of the Escrow Agent, shall be the Escrow Agent under this Escrow Agreement without further act. 13. DISPUTE RESOLUTION. If any controversy arises between the parties to this Agreement, or with any other party, concerning the subject matter of the Escrow Fund or the terms and conditions hereof, the Escrow Agent will not be required to determine the controversy or to take any action regarding it. The Escrow Agent may hold all documents and funds and may wait for settlement of any such controversy by final appropriate legal proceedings or other means as, in the Escrow Agent's reasonable discretion, it may require, despite what may be set forth elsewhere in this Agreement. 14. INDEMNIFICATION OF ESCROW AGENT. Acquiror (but only to the extent of the amount available from the Escrow Fund) and the Stockholder Representative, on behalf of the Stockholders (but only out of, and only to the extent of the amount available from, the Escrow Fund) jointly and severally agree to indemnify and hold the Escrow Agent harmless against any and all losses, claims, damages, liabilities and expenses, including reasonable costs of investigation, outside counsel fees, and disbursements that may be imposed on the Escrow Agent, or incurred by it in connection with the performance of its duties under this Agreement, including but not limited to any arbitration or litigation arising from this Agreement or involving the subject matter hereof, unless such loss, claim, damage, liability or expense shall be caused by the negligence or willful misconduct on the part of the Escrow Agent. Nothing contained in this Section 14 shall impair the respective rights of the Stockholder Representative, on behalf of the Stockholders, and the Acquiror against the other. 15. RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign at any time upon giving at least 30 days written notice to the other parties; provided, however, that no such resignation shall become effective until the appointment of a successor Escrow Agent which shall be accomplished as follows: Acquiror and the Stockholder Representative shall use all reasonable efforts to agree on a successor Escrow Agent within 30 days after receiving such notice. If the parties fail to agree on a successor Escrow Agent within such time, then the Escrow Agent shall have the right to appoint a successor Escrow Agent, provided that the successor so chosen shall have capital, surplus and undivided profits of at least $200,000,000. The successor Escrow Agent shall execute and deliver to the Escrow Agent an instrument accepting such appointment, and the successor Escrow Agent shall, without further acts, be vested with all the property rights, powers and duties of the predecessor Escrow Agent as if originally named as Escrow Agent herein. The predecessor Escrow Agent then shall be discharged from any further duties and liability under this Agreement. -10- 16. MISCELLANEOUS. (a) Assignment; Binding Upon Successors and Assigns. None of the parties hereto may assign any of its rights or obligations hereunder without the prior written consent of the other parties; provided, however, that the Stockholders' interest in this Agreement and the Escrow Fund (prior to the disbursement thereof) may be transferred by operation of law, intestacy, devise or descent. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (b) Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable (c) Entire Agreement. This Agreement, the Merger Agreement, the Annexes hereto, the documents referenced herein, and the exhibits thereto, constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto. The express terms hereof control and supersede any course of performance or trade usage inconsistent with any of the terms hereof. (d) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, mailed by registered or certified mail (return receipt requested) or sent via facsimile to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to Acquiror to: North American Scientific, Inc. 20200 Sunburst Street Chatsworth, California 91311 Attention: L. Michael Cutrer, President Facsimile: (818) 734-5837 with a copy to: McDermott, Will & Emery 2049 Century Park East Suite 3400 Los Angeles, CA 90067-3208 Attention: Mark J. Mihanovic, Esq. Facsimile: (310) 277-4730 -11- If to the Company, to: NOMOS Corporation 200 West Kensinger Drive, Suite 100 Cranberry Township, Pennsylvania 16006 Attention: John W. Manzetti, President Facsimile: (724) 741-8600 If to the Stockholder Representative, to: John A. Friede One Shore Road Rye, New York 10580 Attention: John A. Friede Facsimile: (914) 698-1034 with a copy to: Cohen & Grigsby 11 Stanwix Street, 15th Floor Pittsburgh, PA 15222 Attention: Mark I. Baseman, Esq. Facsimile: (412) 209-0672 If to the Escrow Agent, to: U.S. Bank National Association Corporate Trust Services 60 Livingston Ave. EP-MN-WS3C St. Paul, MN 55107 Attention: Thomas H. Caruth Facsimile: 651-495-8096 (e) Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law on such party, and the exercise of any one remedy shall not preclude the exercise of any other. (f) Amendment and Waivers. Any term or provision of this Agreement may be amended only by an instrument in writing signed on behalf of each of the parties hereto. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the party to be bound thereby. The waiver by a party of any breach hereof for default in payment of any amount due hereunder or default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. -12- (g) Further Assurances. Each party agrees to reasonably cooperate with the other parties and to execute such further instruments, documents and agreements and to give such further written assurances, as may be reasonably requested by any other party to better evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. (h) Absence of Third Party Beneficiary Rights. No provisions of this Agreement are intended, nor shall be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any client, customer, affiliate, shareholder, partner of any party hereto or any other Person unless specifically provided otherwise herein and except for the Stockholders, and, except as so provided, all provisions hereof shall be solely between the parties to this Agreement. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. (j) Facsimile. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be one and the same instrument. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -13- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above. NORTH AMERICAN SCIENTIFIC, INC. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer NOMOS CORPORATION By: /s/ John W. Manzetti -------------------------------------------- Name: John W. Manzetti Title: President and Chief Executive Officer STOCKHOLDER REPRESENTATIVE /s/ John A. Friede -------------------------------------------- Name: John A. Friede U.S. BANK NATIONAL ASSOCIATION By: /s/ Thomas H. Caruth -------------------------------------------- Name: Thomas H. Caruth Title: Vice President -14- ANNEX A STOCKHOLDER LIST
General Escrow Fund Special Escrow Fund ------------------------------- ------------------------------- Stockholder Name, General General Special Special Address and Tax ID Number Escrowed Shares Escrowed Cash Escrowed Shares Escrowed Cash - ------------------------- --------------- ------------- --------------- -------------
-15- ANNEX B ESCROW AGENT FEES Annual fee of $15,000.00 -16- ANNEX C U.S. BANK TRUST NATIONAL ASSOCIATION U.S. BANK MONEY MARKET ACCOUNTS U.S. BANK NATIONAL ASSOCIATION ACCOUNT DESCRIPTION AND TERMS The U.S. Bank money market accounts are U.S. Bank National Association ("U.S. Bank") deposit accounts designed to meet the needs of Global Escrow and other Corporate Trust customers of U.S. Bank Trust National Association. The accounts pay competitive variable interest rates, which are determined based upon the customer's aggregated balance. These accounts are insured by the Federal Deposit Insurance Corporation. Interest rates currently offered on the accounts are determined at U.S. Bank's discretion and may change daily. U.S. Bank uses the daily balance method to calculate interest on these accounts. This method applies a daily periodic rate to the principal in the accounts each day. The average daily balance is calculated by adding the principal in an account for each day of the month and dividing that figure by the number of days in the period. Interest is compounded on a monthly basis. The owner of the accounts is U.S. Bank Trust National Association as Agent for its customers. All account deposits and withdrawals are performed by U.S. Bank Trust National Association. U.S. Bank Trust National Association is an affiliate of U.S. Bank. For further information, call your account representative at U.S. Bank Trust National Association. -17- EX-10.4 10 ci691907-ex10_4.txt LOCK-UP AGREEMENT Exhibit 10.4 Lock-Up Agreement North American Scientific, Inc. 20200 Sunburst Avenue Chatworth, California Re: NOMOS Corporation Ladies and Gentlemen: The undersigned is an owner of record of certain shares of capital stock of NOMOS Corporation, a Delaware corporation (the "Company"), or securities convertible into or exercisable for shares of capital stock of the Company ("Company Capital Stock"). North American Scientific, Inc., a Delaware corporation (the "Acquiror"), and the Company are parties to an Agreement and Plan of Merger, dated as of October 26, 2003 (as amended from time to time, the "Merger Agreement"), pursuant to which the shares of Company Capital Stock held by the undersigned are to be converted into the right to receive, as consideration or a portion of the consideration for such shares of Company Capital Stock, shares of common stock, par value $0.01 per share, of the Acquiror (the "Acquiror Common Stock"), in accordance with the terms of the Merger Agreement. Capitalized terms that are used but not defined in this Agreement are used herein as defined in the Merger Agreement. In connection with and in consideration of the foregoing, the undersigned hereby agrees that the undersigned will not offer to sell, contract to sell, or sell, dispose of, loan, pledge or grant any rights with respect to any shares of Acquiror Common Stock (any such transaction or action being referred to herein as a "Disposition") acquired in connection with the transactions contemplated by the Merger Agreement or any options or warrants to purchase any shares of Acquiror Common Stock acquired in connection with the transactions contemplated by the Merger Agreement (collectively, "Securities") without the prior written consent of Acquiror, for a period commencing on the Closing Date and continuing until the date that is 545 days after the Closing Date (the "Lock-Up Period"); provided, that, the undersigned may engage in any Disposition with respect to any Securities held by the undersigned which have been registered under the Securities Act of 1933, as amended, pursuant to that certain Registration Rights Agreement by and among the Acquiror and the other parties thereto. In addition, the undersigned expressly agrees that the undersigned may not, during the Lock-Up Period, engage in any hedging or other transaction which is designed to or could reasonably be expected to lead to or result in a Disposition of Securities, irrespective of whether such Securities would be disposed of by someone other than the undersigned. Such prohibited hedging or other transaction would include, without limitation, any short sale (whether or not against the box) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any Securities or with respect to any security (other than a broad-based market basket or index) that included, relates to or derives any significant part of its value from Securities. Notwithstanding anything contain in the foregoing to the contrary, the undersigned may sell, contract to sell, or sell, dispose of, or otherwise transfer for value or otherwise, the Securities (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound by the restrictions set forth herein or (ii) to members of the undersigned's immediate family or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the transferees thereof agree to be bound by the restrictions set forth herein. For purposes of this Lock-Up Agreement, "immediate family" shall mean (i) the undersigned; (ii) any spouse, lineal descendant or antecedent, father, mother, brother or sister of the undersigned and (iii) any estate, trust, guardianship, custodianship or other fiduciary arrangement for the primary benefit of any one or more individuals named or described in (i) and (ii) above. The undersigned also agrees and consents to the entry of stop transfer instructions with the Acquiror's transfer agent and registrar against the transfer of shares of Acquiror Common Stock or other Securities acquired in connection with the transactions contemplated by the Merger Agreement held by the undersigned except in compliance with the foregoing restrictions. Acquiror, acting alone and in its sole discretion, may waive any provisions of this Lock-Up Agreement without notice to any third party. This Lock-Up Agreement is irrevocable and will be binding on the undersigned and the respective successors, heirs, personal representatives and assigns of the undersigned. This Lock-Up Agreement shall automatically terminate on the earlier of (i) the expiration of the Lock-Up Period or (ii) such time as the Merger Agreement is terminated in accordance with its terms. Very truly yours, /s/ John A. Friede ---------------------------------------- John A. Friede EX-10.5 11 ci691907-ex10_5.txt AFFILIATE LETTER Exhibit 10.5 Affiliate Letter April 22, 2004 North American Scientific, Inc. 20200 Sunburst Avenue Chatsworth, California 91311 Ladies and Gentlemen: The undersigned has been advised that, as of the date of this letter agreement, the undersigned may be deemed to be an "affiliate" of NOMOS Corporation, a Delaware corporation (the "Company"), as the term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Pursuant to the terms of the Agreement and Plan of Merger, dated as of October 26, 2003 (as amended from time to time, the "Merger Agreement"), among the Company, North American Scientific, Inc., a Delaware corporation ("Acquiror") and AM Capital I, Inc., a Delaware corporation and wholly owned subsidiary of Acquiror ("Merger Sub"), the Company will merge with and into the Merger Sub (the "Merger"). All capitalized terms used but not defined herein shall be used herein as defined in the Merger Agreement. As a result of the Merger, the undersigned will receive Common Stock, par value $0.01 per share, of Acquiror (the "Acquiror Common Stock") in exchange for the undersigned's shares of Common Stock, par value $0.0001 per share, of the Company (the "Company Common Stock"), Series A Preferred Stock, par value $0.0001 per share, of the Company, Series B Preferred Stock, par value $0.0001 per share, of the Company and Series C Preferred Stock, par value $0.0001 per share, of the Company (the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock of the Company referred to herein, collectively, as the "Company Preferred Stock"). In connection therewith, the undersigned represents, warrants and covenants to Acquiror as follows: 1. The undersigned will not make any sale, transfer, encumbrance, pledge or other disposition of any Acquiror Common Stock the undersigned receives in the Merger in violation of the Securities Act, the Rules and Regulations or the terms of this letter agreement. 2. The undersigned has carefully read this letter agreement and the Merger Agreement and discussed with counsel, to the extent the undersigned felt necessary, the requirements of this letter agreement and the Merger Agreement and other applicable limitations upon the undersigned's ability to sell, transfer, encumber, pledge or otherwise dispose of the Acquiror Common Stock. 3. The undersigned has been advised that the issuance of Acquiror Common Stock to the undersigned in connection with the Merger will be registered with the Commission pursuant to an effective registration statement on Form S-4. The undersigned has also been advised that, because the undersigned may be deemed to be an affiliate of the Company at the time the Merger is submitted for a vote of the stockholders of the Company, the undersigned may not sell, transfer, encumber, pledge or otherwise dispose of any Acquiror Common Stock issued to the undersigned pursuant to the Merger unless (i) such sale, transfer or other disposition has been registered under the Securities Act, (ii) such sale, transfer or other disposition is made in conformity with Rule 145 under the Securities Act, (iii) in the written opinion of counsel reasonably acceptable to Acquiror, such sale, transfer or other disposition is exempt from registration under the Securities Act, (iv) such sale, transfer or other disposition is made to a trust that is an "accredited investor" as such term is defined in Rule 501 promulgated under the Securities Act in a transaction that is exempt from registration under the Securities Act pursuant to the so-called Section 4(1 1/2) exemption or (v) an authorized representative of the Commission takes a position in writing to the effect that the Commission would take no action, or that the staff of the Commission would not recommend that the Commission take action, with respect to such sale, transfer, encumbrance, pledge or other disposition and a copy of such written position is delivered to Acquiror. 4. I also understand that stop transfer instructions may be given to Acquiror's transfer agent with respect to the Acquiror Common Stock to be issued to me and that there will be placed on the certificates evidencing the Acquiror Common Stock to be issued to me (as well as all securities of Acquiror issued as a stock dividend or distribution and any shares or other securities into which or for which any or all of the Acquiror Common Stock may be changed or exchanged in a split-up, recapitalization, combination, exchange of shares or similar action or transaction) a legend stating in substance: "The shares evidenced by this certificate were issued in a transaction to which Rule 145 promulgated under the Securities Act of 1933, as amended, applies. The shares evidenced by this certificate may only be transferred in accordance with the terms of a letter agreement, dated March 10, 2004, between the registered holder hereof and [Acquiror], a copy of which agreement is on file at the principal offices of [Acquiror]." The legend set forth above shall be removed (by delivery of a substitute certificate without such legend) if the affiliate delivers to Acquiror (i) written evidence satisfactory to Acquiror that the shares will be sold in compliance with Rule 145 (in which case, the substitute certificate shall be issued in the name of the transferee) or (ii) an opinion of counsel, in form and substance reasonably satisfactory to Acquiror, to the effect that public sale of the shares by the holder thereof is no longer subject to Rule 145 and is exempt from registration under the Securities Act. 5. This letter agreement shall be terminated, and be of no further force and effect, automatically upon the termination of the Merger Agreement if the Merger Agreement terminates without the Merger becoming effective. The undersigned's execution of this letter agreement should not be considered to be an admission on the undersigned's part that the undersigned is an "affiliate" of the Company as described in the first paragraph of this letter agreement or to be a waiver of any rights the undersigned may have to object to any claim that the undersigned is such an affiliate on or after the date of this letter agreement. Very truly yours, /s/ John A. Friede ---------------------------------------- John A. Friede Agreed to and accepted this 4th day of May, 2004 NORTH AMERICAN SCIENTIFIC, INC. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer EX-10.6 12 ci691907-ex10_6.txt REGISTRATION RIGHTS AGREEMENT Exhibit 10.6 ================================================================================ REGISTRATION RIGHTS AGREEMENT by and between NORTH AMERICAN SCIENTIFIC, INC. AND THE INDIVIDUALS AND ENTITIES LISTED ON THE SIGNATURE PAGES HERETO ----------------------------------------------- Dated as of May 4, 2004 ----------------------------------------------- ================================================================================ This REGISTRATION RIGHTS AGREEMENT, dated as of May 4, 2004 (this "Agreement"), is entered into by and between North American Scientific, Inc., a Delaware corporation (the "Acquiror"), and the individuals and entities listed on the signature page hereto (individually, a "Holder" and collectively, the "Holders"). RECITALS WHEREAS, the Acquiror and AM Capital I, Inc., a Delaware corporation and wholly-owned subsidiary of the Acquiror ("AM Capital"), and NOMOS Corporation, a Delaware corporation ("NOMOS"), have entered into an Agreement and Plan of Merger dated as of October 26, 2003 (as amended from time to time, the "Merger Agreement"), pursuant to which NOMOS will be merged with and into AM Capital; and WHEREAS, the parties desire to set forth herein their agreements as to the piggyback registration rights of each of the Holders with respect to such Holder's shares of Common Stock, as part of and as consideration for the transactions contemplated by the Merger Agreement; WHEREAS, the execution and delivery of this Agreement by the Acquiror with the Holders is a condition to closing the transactions contemplated by the Merger Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: "Acquiror" has the meaning set forth in the preamble hereof. "Agreement" has the meaning set forth in the preamble hereof. "Business Day" means any day except Saturday and Sunday and any day that shall be a U.S. federal legal holiday or a day on which banking institutions in the State of Delaware generally are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange Commission or any other federal agency which shall at some future point in time be administering the Securities Act. "Common Stock" means the common stock, par value $.01 per share, of the Acquiror. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Indemnified Party" has the meaning set forth in Section 7(c). "Indemnifying Party" has the meaning set forth in Section 7(c). "Initial Period" means (i) 18 months from the date hereof with respect to the Holder, John A. Friede, and (ii) six months from the date hereof with respect to all other Holders. "Holder" or "Holders" has the meaning set forth in the preamble hereof. "Losses" has the meaning set forth in Section 7(a). "Maximum Offering Size" has the meaning set forth in Section 3. "Merger Agreement" has the meaning set forth in the Recitals hereof. "Person" means any individual, corporation, limited liability company, association, partnership, trust or any other entity or organization, including any government entity. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Securities Act), as amended or as supplemented by any and all prospectus and all other amendments and supplements to the prospectus, including supplements and as amended by any and all post-effective amendments and including all material incorporated by reference or deemed to be included by reference in such prospectus. "Registrable Securities" means (i) the shares of Common Stock or (ii) any security into or for which such Common Stock has been converted or exchanged in connection with a combination of shares, recapitalization, merger, consolidation or otherwise; provided, however, that Registrable Securities shall not include any securities (A) the sale of which shall have been registered pursuant to the Securities Act and which shares have been sold pursuant to such registration or (B) that shall have been sold pursuant to Rule 144. "Registration Expenses" means all expenses incurred in effecting any registration pursuant to this Agreement including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company and one special counsel for the Holders, blue sky fees and expenses and expenses of any regular or special audits incident to or required by any such registration, qualification and filing. -2- "Registration Statement" means any registration statement under the Securities Act on an appropriate form (which form shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof and shall include all financial statements required by the Commission to be filed herewith) which covers Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement. "Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Selling Expenses" means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of one special counsel to the Holders included in Registration Expenses). "Selling Holders" means Holders offering Registrable Securities for sale pursuant to a registration effected under this Agreement. "Shelf Registration Statement" means any shelf Registration Statement pursuant to Rule 415 under the Securities Act, or any similar rule or regulation hereafter adopted by the Commission, on Form S-3 (or any substitute form that may be adopted by the Commission). "Underwritten Registration" or "Underwritten Offering" means a registration in connection with which securities of the Acquiror are sold to an underwriter for reoffering to the public pursuant to an effective registration statement. 2. Piggyback Registration. (a) If the Acquiror proposes to file a Registration Statement (other than on a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission)) with respect to an offering of Common Stock for its own account pursuant to an Underwritten Offering, then the Acquiror shall provide written notice of such proposed filing to each Holder as soon as practicable (but in no event less than 20 days before the anticipated filing date of such Registration Statement). If within 15 days after receipt of such notice, any Holder requests the inclusion in such Registration Statement of some or all of the Registrable Securities held by such Holder, the Acquiror shall use its reasonable best efforts to include such Registrable Securities in such Registration Statement; provided, however, that during the Initial Period (i) each Holder shall only be permitted to participate in such registration if the Acquiror proposes to include the securities of another Person in such Registration Statement and (ii) each Holder shall only be permitted to request the inclusion in such Registration Statement of, and the Acquiror -3- shall only be required to use its reasonable best efforts to include, up to 25 percent of the Registrable Securities held by each such Holder. (b) If the Acquiror acquires another Person pursuant to a merger, asset sale, stock transfer or other acquisition transaction and, in connection with such transaction, the Acquiror proposes to file a Shelf Registration Statement related to the resale of any restricted securities of the Acquiror received by any Person in connection with such transaction, then the Acquiror shall provide written notice of such proposed filing to each Holder as soon as practicable (but in no event less than 20 days before the anticipated filing date of such Shelf Registration Statement). If within 15 days after receipt of such notice, any Holder requests the inclusion in such Shelf Registration Statement of some or all of the Registrable Securities held by such Holder, the Acquiror shall use its reasonable best efforts to include such Registrable Securities in such Shelf Registration Statement; provided, however, that during the Initial Period, each Holder shall only be permitted to request the inclusion in such Shelf Registration Statement of, and the Acquiror shall only be required to use its reasonable best efforts to include, up to 25 percent of the Registrable Securities held by each such Holder. 3. Reduction of Offering. If the managing underwriters of an Underwritten Offering advise the Acquiror in writing that, in their opinion, the amount of securities of the Acquiror proposed to be sold in such offering, together with the Registrable Securities requested to be sold by the Holders under Section 2 hereof and any securities requested to be sold by any other Person, exceeds the amount of securities of the Acquiror which can be sold in such offering without adversely impacting the marketing of the securities being sold by the Acquiror in such offering or otherwise materially and adversely impacting the success of such offering, there shall be included in such offering, in the following listed priority, only the amount of such securities of the Acquiror which, in the opinion of such managing underwriters, can be sold (the "Maximum Offering Size") without materially and adversely impacting the marketing of the securities being sold by the Acquiror in such offering or otherwise materially and adversely impacting the success of such offering: (i) first, all the shares of Common Stock which the Acquiror proposes to sell for its own account in such offering; (ii) second, all Registrable Securities requested to be included in such offering pursuant to Section 2 and any securities requested to be included in such offering by any other Person that is entitled to piggyback registration rights (allocated, if necessary for such offering not to exceed the Maximum Offering Size, pro rata among the Holders and such other Persons on the basis of the relative number of shares so requested to be included in such Underwritten Offering by each such Holder and other Person); and (iii) thereafter, any other securities requested to be included in such offering. -4- 4. Registration Expenses. All Registration Fees incident to the performance of or compliance with this Agreement by the Acquiror shall be borne by the Acquiror. All Selling Expenses relating to the securities registered on behalf of the Holders shall be borne by the Holders included in such registration pro rata among each other on the basis of the number of Registrable Securities so registered. 5. Registration Procedures. In the case of each Shelf Registration Statement effected by the Company, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will do each of the following with respect to such Shelf Registration Statement: (a) Keep such registration effective for a period of ending on the earlier of the date which is sixty (60) days from the effective date of the Shelf Registration Statement or such time as the Holder or Holders have completed the distribution described in the Shelf Registration Statement relating thereto. (b) Prepare and file with the Commission such amendments and supplements to such Shelf Registration Statement and the Prospectus used in connection with such Shelf Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Shelf Registration Statement for the period set forth in subsection (a) above; (c) Furnish such number of Prospectuses, including any preliminary prospectuses, and other documents incident thereto, including any amendment of or supplement to the Prospectus, as a Holder from time to time may reasonably request; (d) Notify each seller of Registrable Securities covered by such Shelf Registration Statement at any time when a Prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the Prospectus included in such Shelf Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing, and following such notification promptly prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing; (e) Provide a transfer agent and registrar for all Registrable Securities pursuant to such Shelf Registration Statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and -5- (f) Notwithstanding anything contained herein to the contrary, in connection with any registration contemplated hereunder, the Acquiror may require the Selling Holders and the underwriters, if any, to furnish the Acquiror such information regarding the Selling Holders and the underwriters, if any, and the distribution of the Selling Holders' Registrable Securities as the Acquiror may from time to time reasonably request. 6. Holdback Agreement. In the event any registration of equity securities of the Acquiror shall be made in connection with an Underwritten Offering, upon the written request of the Acquiror and an underwriter of Common Stock or other securities of the Acquiror, each Holder agrees not to effect any sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Registrable Securities, and not to effect any such sale or distribution of any other equity security of the Acquiror or of any security convertible into or exchangeable or exercisable for any equity security of the Acquiror (in each case, other than as part of such Underwritten Offering) during the 15 days prior to, and during the 90-day period beginning on, the effective date of the registration statement for such Underwritten Offering; provided that the Holders have such written request at least 15 days prior to the filing date of the Registration Statement and provided, further, that all officers and directors of the Acquiror (other than those participating in the Underwritten Offering) also agree not to effect any such sale or distribution during such period. 7. Indemnification. (a) Indemnification by the Acquiror. The Acquiror shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Selling Holder and each of its officers, directors, agents and employees, each Person who controls the Acquiror (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of investigation and reasonable attorneys' fees and expenses) and expenses (collectively, "Losses"), as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, any state securities laws or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any offering covered by such registration, qualification or compliance, except to the extent that any such untrue statement or omission is based solely upon information regarding such Selling Holder furnished to the Acquiror in writing by such Selling Holder stated specifically for use therein. (b) Indemnification by the Selling Holders. Each Selling Holder shall, severally and not jointly, indemnify and hold harmless the Acquiror, its officers, directors, agents and employees, each Person who controls the Acquiror (within the meaning of Section 15 of the -6- Securities Act and Section 20 of the Exchange Act), and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against all Losses as incurred, arising out of or relating to (i) any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or (ii) any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent that such untrue statement or omission is contained in any information so furnished by such Selling Holder to the Acquiror in writing specifically for inclusion in the Registration Statement, such Prospectus or such form of prospectus, or in any amendment or supplement thereto; provided, however that in no event shall any indemnity under this Section 7(b) exceed the net proceeds from the offering received by such Holder. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify the Person from which indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party may assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with the defense thereof; provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except to the extent that such failure shall have proximately and adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the Indemnified Party and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement (i) includes an unconditional written release of such Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party, from all liability on claims that are the subject matter of such Proceeding and (ii) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Indemnified Party. (d) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, -7- liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 8. Miscellaneous. (a) Termination. Except for Section 7 hereof, this Agreement and the rights and obligations of the Acquiror and the Holders hereunder shall terminate on the earlier of (a) the first date on which no Registrable Securities remain outstanding or (b) such time as all of such remaining Registrable Securities may be sold in any consecutive three-month period in accordance with Rule 144. (b) No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. (c) Entire Agreement. This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and shall not be assigned by operation of law or otherwise. (d) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement and, when executed, shall be binding on the other parties hereto. (e) Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless a contrary intention appears (i) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision and (ii) reference to any Article or Section means such Article or Section hereof. No provision of this Agreement shall be interpreted or construed against any party hereto solely because such party or its legal representative drafted such provision. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party, whether under any rule of construction or otherwise. No party to this Agreement shall be considered the draftsman. The parties hereto acknowledge and agree that this Agreement has been reviewed, negotiated and accepted by all parties and their attorneys and shall be construed and interpreted according to the ordinary -8- meaning of the words used so as fairly to accomplish the purposes and intentions of the parties hereto. (f) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, mailed by registered or certified mail (return receipt requested) or sent via facsimile to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Acquiror: North American Scientific, Inc. 20200 Sunburst Street Chatsworth, California 91311 Attention: L. Michael Cutrer, President Facsimile: (818) 734-5837 with a copy to: McDermott Will & Emery 2049 Century Park East Suite 3400 Los Angeles, CA 90067-3208 Attention: Mark J. Mihanovic Fax: (310) 277-4730 If to the Holders To such address(es) as may be set forth in the books and records of NOMOS or the Acquiror. with a copy to: Cohen & Grigsby 11 Stanwix Street, 15th Floor Pittsburgh, PA 15222 Attention: Mark Baseman, Esq. Fax: (412) 209-0672 (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. (h) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless such amendment shall be in writing and signed by the Acquiror -9- and the Holders of not less than 66 2/3% of the Registrable Securities then outstanding. No waiver by any party hereto of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (i) Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. (j) Expenses. Except as provided in Section 4 above, each of the parties hereto shall bear such party's own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement. (k) Construction. (i) 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 parties hereto intend that each representation, warranty and covenant contained herein shall have independent significance. If any party hereto has breached any representation, warranty or covenant relating to the same subject matter as any other representation, warranty or covenant (regardless of the relative levels of specificity) which the party has not breached, it shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. (ii) Any of the defined terms in this Agreement, unless the context otherwise requires, may be used in the singular or the plural, depending on the reference. In this Agreement, unless clearly indicated otherwise, references to dollar amounts are to the lawful money of the United States of America. (l) Equitable Relief. The parties hereto agree that the remedies at law for any breach of the terms of this Agreement are inadequate. Accordingly, the parties hereto consent and agree that an injunction may be issued to restrain any breach or alleged breach of such provisions. The parties hereto agree that terms of this Agreement shall be enforceable by a decree of specific performance. Such remedies shall be cumulative and not exclusive, and shall be in addition to any other remedies which the parties may have at law or in equity. (m) Recapitalizations, Etc. In the event that any capital stock or other securities are issued in respect of, in exchange for, or in substitution of, any Registrable Securities by reason of any reorganization, recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, stock dividend, split-up, sale of assets, distribution to stockholders or combination of the Registrable Securities or any other change in the Acquiror's capital structure, appropriate adjustments shall be made in this Agreement so as to -10- fairly and equitably preserve, to the extent practicable, the original rights and obligations of the parties hereto under this Agreement. (n) Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. [Signatures follow] -11- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. NORTH AMERICAN SCIENTIFIC, INC. By: /s/ L. Michael Cutrer -------------------------------------------- Name: L. Michael Cutrer Title: President and Chief Executive Officer Holders: /s/ John A. Friede ------------------------------------------------ John A. Friede CORPORATE OPPORTUNITIES FUND, L.P. By: SMM Corporate Management, LLC, General Partner By: /s/ James C. Gale -------------------------------------------- Name: James C. Gale Title: Chief Investment Officer CORPORATE OPPORTUNITIES FUND (INSTITUTIONAL), L.P. By: SMM Corporate Management, LLC, General Partner By: /s/ James C. Gale -------------------------------------------- Name: James C. Gale Title: Chief Investment Officer CROSS ATLANTIC PARTNERS, INC. By: /s/ John L. Cassis -------------------------------------------- Name: John L. Cassis Title: Partner CROSS ATLANTIC PARTNERS I, K/S By: /s/ John L. Cassis -------------------------------------------- Name: John L. Cassis Title: Partner CROSS ATLANTIC PARTNERS II By: /s/ John L. Cassis -------------------------------------------- Name: John L. Cassis Title: Partner CROSS ATLANTIC PARTNERS III By: /s/ John L. Cassis -------------------------------------------- Name: John L. Cassis Title: Partner CROSS ATLANTIC PARTNERS IV, K/S By: /s/ John L. Cassis -------------------------------------------- Name: John L. Cassis Title: Partner SMH NOMOS LLC By: /s/ Bruce R. McMaken -------------------------------------------- Name: Bruce R. McMaken Title: President CITY OF MILFORD PENSION & RETIREMENT PLAN NORWALK EMPLOYEE PENSION PLAN NFIB EMPLOYEE PENSION TRUST NFIB CORPORATE ACCOUNT STATE OF OREGON PERS/ZCG BREARLEY SCHOOL GENERAL INVESTMENT FUND ASPHALT GREEN ESTATE OF ANDREW HEISKELL E.H. MANDELL TRUST F/B/O OLIVIA MANDELL E.H. MANDELL TRUST F/B/O PETER MANDELL JEANNE MORENCY WILLIAM B. LAZAR HBL CHARITABLE UNITRUST ESTATE OF GRACE WILLENS C/O RONALD WILLENS, ADMINISTRATOR MURRAY CAPITAL LLC ALBERT J. ZESIGER BARRIE RAMSAY ZESIGER ALEXA ZESIGER CARVER WOLFSON INVESTMENT PARTNERS LP PUBLIC EMPLOYEE RETIREMENT SYSTEM OF IDAHO SUSAN URIS HALPERN WELLS FAMILY LLC A. CAREY ZESIGER CITY OF STAMFORD FIREMEN'S PENSION FUND NICOLA ZESIGER MULLEN ROANOKE COLLEGE THE FERRIS F. HAMILTON FAMILY TRUST MARY ANN S. HAMILTON TRUST FOR SELF THE LAZAR FOUNDATION MORGAN TRUST CO. OF THE BAHAMAS LTD. AS TRUSTEE U/A/D 11/30/93 PLANNED PARENTHOOD OF NYC THE JENIFER ALTMAN FOUNDATION By: ZESIGER CAPITAL GROUP LLC as agent and attorney in fact By: /s/ James Cleary ---------------------------------------- Name: James Cleary Title: Managing Director EX-10.7 13 ci691907-ex10_7.txt AMENDED AND RESTATED STOCK PURCHASE AGREEMENT Exhibit 10.7 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of May 12, 2004 (this "Agreement"), is by and between John A. Friede ("Friede"), Karen F. Holden ("Holden" and together with Friede, the "Sellers") and the Trust U/W Moses L. Annenberg (the "Purchaser"). RECITALS WHEREAS, Friede and Holden acquired the Shares (as defined below) pursuant to an acquisition of NOMOS Corporation, a Delaware corporation ("NOMOS"), by North American Scientific, Inc., a Delaware corporation ("NASI" and such acquisition, the "Acquisition"); and WHEREAS, Friede is a party to a Lock-Up Agreement, between NASI and Friede entered into in connection with the Acquisition (the "Lock-Up Agreement") and Voting Agreement, dated as of October 26, 2003, between NASI and Friede (the "Voting Agreement"); WHEREAS, Friede owns and desires to sell 1,100,000 shares of common stock of NASI (the "Friede Shares"), under the conditions of, and as permitted by, the Lock-Up Agreement; WHEREAS, Holden owns and desires to sell 81,529 shares of common stock of NASI (the "Holden Shares" and together with Friede Shares, the "Shares"); and WHEREAS, the Purchaser desires to purchase the Shares on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: I. PURCHASE; PAYMENT 1.1 Purchase. Subject to the terms and conditions hereof, the Purchaser hereby agrees to purchase from (i) Friede, the Friede Shares and (ii) Holden, the Holden Shares, for the purchase price per Share equal to the closing market price on the NASDAQ National Market on the trading day immediately preceding the Delivery (as defined below) (the "Closing Market Price" and the aggregate purchase price, the "Purchase Price"). 1.2 Delivery. As soon as practicable after the closing date of the Acquisition (the "Delivery Date"), Friede and Holden shall deliver to the Purchaser at 153 East 53rd Street, 23rd Floor, New York, NY 10022, Attention: Marjorie Nesbitt, the Friede Shares and the Holden Shares, respectively, each duly endorsed in blank or accompanied by executed stock power in blank (such delivery of the Shares, the "Delivery"), and the Purchaser shall pay the Purchase Price in accordance with Section 1.3 against the Delivery. 1.3 Payment. The Purchase Price shall be paid by the Purchaser by wire transfer of immediately available funds to such accounts as shall be designated in writing by the Sellers, as follows: (a) to Friede in respect of the Friede Shares, in an amount equal to the product of 1,100,000 and the Closing Market Price; and (b) to Holden in respect of the Holden Shares, in an amount equal to the product of 81,529 and the Closing Market Price. If the Sellers have not provided the account information in writing by the Delivery, payments under this Section 1.3 shall be made by check. 1.4 Further Actions. (a) The Purchaser hereby agrees to be bound by the terms and provisions of the (i) Lock-Up Agreement in respect of the Friede Shares and (ii) the Voting Agreement, provided, however, the Trust shall be permitted to acquire beneficial ownership of any Acquiror Shares (as defined therein) from Friede, which Friede acquired in connection with the Acquisition, free of the requirements of Section 3(b) thereof, to the extent that the Trust agrees to be bound by the other terms and provisions of the Voting Agreement in respect of such shares, and to execute and deliver any document or other instrument to effectuate the same reasonably requested by Friede. (b) The Sellers agree to take all actions requested by the Purchaser in connection with effectuating the transfer or registration of the Shares in the name of the Purchaser or such other nominee as the Purchaser may designate, including, if applicable, payment of any transfer taxes or fees of the transfer agent or the registrar. (c) Upon receipt of written notice from NASI of a proposed filing of a registration statement with respect to an offering of its common stock as set forth in the Registration Rights Agreement to be entered into between the Holders thereunder and NASI, Friede agrees to use his best efforts to extend such registration rights in respect of the Friede Shares. II. REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of the Sellers. Each Seller, jointly and severally, represents and warrants as of the date hereof and as of the Delivery: (a) This Agreement has been duly executed and delivered by such Seller, and constitutes a legal, valid and binding obligation of such Seller enforceable in accordance with its terms. (b) As of the closing date of the Acquisition, such Seller shall own of record and beneficially the Friede Shares or Holden Shares, as the case may be. At the Delivery, the Shares shall be free and clear of all Encumbrances, including, without limitation, any agreement, understanding or restriction affecting the voting rights, transfer or other incidents of record or beneficial ownership pertaining to the Shares, except with respect to the Friede Shares, the Lock-Up Agreement and the Voting Agreement, to the extent as set forth in Section 1.4(a)(ii) above. As used herein, "Encumbrances" shall mean any claim, lien, pledge, option, charge, easement, -2- security interest, encumbrance, restriction (other than in respect of federal and state securities laws) or other right of a third party. (c) The execution and delivery of this Agreement and such Seller's performance of its obligations hereunder will not (i) conflict with or result in a breach of the terms and conditions of, or constitute any default under, any contract, agreement or instrument to which such Seller is a party, (ii) violate any statute, rule, regulation, order, judgment, writ, injunction decree or award, or (iii) require the consent, approval, authorization or other action by any governmental or regulatory authority or other third party. (d) To the best knowledge of such Seller, the disclosure with respect to NASI and NOMOS in the Joint Proxy Statement/Prospectus prepared in connection with the Acquisition does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Sellers agree to indemnify and hold harmless the Purchaser in respect of any losses, costs, damages and expenses incurred as a consequence of any breach or alleged breach by the Sellers or either of them of any representation or warranty contained this Section 2.1. 2.2 Representations and Warranties of the Purchaser. The Purchaser represents and warrants as of the date hereof and as of the Delivery: (a) The Purchaser is a trust validly exiting under the laws of the jurisdiction of its formation. Each person executing this Agreement, on behalf of the Purchaser, in a representative or fiduciary capacity has full power and authority to execute and deliver this Agreement in such capacity and on behalf of the Purchaser. The Purchaser has all necessary right and power to perform its obligations pursuant to this Agreement. (b) The Purchaser is an "accredited investor" as defined in Regulation D and understands that its acquisition of the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state. The Purchaser is acquiring the Shares for its own account and not with a view to the distribution or resale of the Shares except pursuant to a registration statement declared effective under, or an exemption from the registration requirements of, the Securities Act. (c) The Purchaser acknowledges that the certificates representing the Shares may bear a legend to the effect that the Shares are subject to restrictions on transfer, sale or assignment under the Securities Act or any state securities laws and, with respect to the Friede Shares, under the Lock-Up Agreement and Voting Agreement. III. CONDITIONS PRECEDENT 3.1 Conditions Precedent to Delivery. The Purchaser's obligation to purchase the Shares is subject to the satisfaction of the following conditions at the Delivery: -3- (a) The representations and warranties of the Sellers contained in this Agreement shall be correct and complete on and as of the Delivery Date with the same effect as though made on and as of the Delivery Date (after giving effect to the transactions contemplated by this Agreement). (b) The purchase of and payment for the Shares shall not be prohibited by any law or governmental order, rule, ruling, regulation, release, interpretation or opinion applicable to the Purchaser and shall not subject the Purchaser to any penalty, tax, liability, or other onerous condition. IV. MISCELLANEOUS 4.1 Expenses. Each Seller and Purchaser shall each be liable for its own costs and expenses incurred in connection with the negotiation, preparation, execution or performance of this Agreement. 4.2 Entire Agreement; Amendment and Waiver. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by all parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 4.3 Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 4.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (OTHER THAN ANY CONFLICT OF LAWS RULE WHICH MAY RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION). 4.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document. 4.6 Existing Agreement. This Agreement amends and restates the Stock Purchase Agreement, dated as of May 4, 2004, between the parties hereto, in its entirety. [SIGNATURE PAGE FOLLOWS] -4- IN WITNESS WHEREOF, the parties have each executed this Agreement as of the day first above written. PURCHASER: TRUST U/W MOSES L. ANNENBERG By: /s/ John A. Friede -------------------------------------- Name: John A. Friede, as Co-Trustee CITICORP TRUST BANK, FSB, as Co-Trustee By: /s/ Marjorie E. Nesbitt ----------------------------------- Name: Marjorie E. Nesbitt Title: Vice President, Citibank SELLERS: /s/ John A. Friede -------------------------------------------- Name: John A. Friede /s/ Karen F. Holden -------------------------------------------- Name: Karen F. Holden -----END PRIVACY-ENHANCED MESSAGE-----