AGREEMENT AND PLAN OF MERGER by and among AYTU BIOSCIENCE INC., AYTU ACQUISITION SUB, INC. and INNOVUS PHARMACEUTICALS, INC. Dated as of September 12, 2019
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and
among
AYTU BIOSCIENCE INC.,
AYTU ACQUISITION SUB, INC.
and
INNOVUS PHARMACEUTICALS, INC.
Dated
as of September 12, 2019
TABLE OF CONTENTS
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Article 1 THE MERGER
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2
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Section
1.01
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The Merger
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2
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Section
1.02
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Closing
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2
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Section
1.03
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Effective Timing
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2
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Section
1.04
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Effects of the Merger
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2
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Section
1.05
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Certificate of Incorporation; By-Laws
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2
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Section
1.06
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Directors and Officers
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2
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Article 2 EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES
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3
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Section
2.01
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Effect of the Merger on Capital Stock
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3
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Section
2.02
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Exchange
Procedures
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5
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Section 2.03
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Dissenting
Shares
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6
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Section 2.04
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Adjustments
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7
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Section 2.05
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Withholding Rights
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7
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Section 2.06
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Lost Certificates
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7
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Section 2.07
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Treatment of Stock Options and Other Stock-Based
Compensation
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7
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Section 2.08
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Tax Treatment
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7
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Article 3 REPRESENTATIONS AND WARRANTIES OF THE
TARGET
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8
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Section
3.01
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Organization; Standing and Power; Charter
Documents; Subsidiaries
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8
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Section 3.02
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Capital Structure
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9
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Section 3.03
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Authority; Non-Contravention; Governmental
Consents; Board Approval; Anti-Takeover
Statutes
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10
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Section 3.04
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SEC Filings; Financial Statements;
Xxxxxxxx-Xxxxx Act Compliance; Undisclosed Liabilities; Off-Balance
Sheet Arrangements
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12
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Section 3.05
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Absence of Certain Changes or
Events
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13
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Section 3.06
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Taxes
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14
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Section
3.07
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Intellectual Property
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15
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Section
3.08
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Compliance; Permits;
Restrictions
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17
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Section
3.09
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Litigation
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18
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Section
3.10
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Brokers' and Finders' Fees
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18
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Section
3.11
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Related Person Transactions
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18
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Section
3.12
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Employee Matters
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18
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Section
3.13
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Real Property and Personal Property
Matters
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21
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Section
3.14
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Environmental Matters
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22
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Section
3.15
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Material Contracts
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22
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Section
3.16
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Insurance
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24
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Section
3.17
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Information Supplied
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24
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Section
3.18
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Regulatory Matters
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25
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Section
3.19
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Anti-Corruption Matters
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26
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Section
3.20
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Fairness Opinion
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27
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Section
3.21
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No Other Representations or
Warranties
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27
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Section
3.22
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Disclaimer of Reliance
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27
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Article 4 REPRESENTATIONS AND WARRANTIES OF AYTU AND MERGER
SUB
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28
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Section
4.01
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Organization; Standing and Power; Charter
Documents; Subsidiaries
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28
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Section
4.02
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Capital Structure
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28
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Section
4.03
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Authority; Non-Contravention; Governmental
Consents; Board Approval
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30
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Section
4.04
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SEC Filings; Financial Statements;
Undisclosed Liabilities
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31
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Section
4.05
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Controlled
Substances
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32
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Section
4.06
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Absence of Certain Changes or
Events
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32
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Section 4.07
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Litigation
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32
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Section 4.08
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Brokers
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32
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Section 4.09
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Information Supplied
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33
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Section 4.10
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Ownership of Target Common Stock
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33
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Section 4.11
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Intended Tax Treatment
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33
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Section 4.12
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Merger Sub
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33
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Section 4.13
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No Other Representations or
Warranties
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33
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Section 4.14
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Disclaimer of Reliance
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33
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Article 5 COVENANTS
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34
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Section
5.01
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Conduct of Business of the
Target
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34
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Section
5.02
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Conduct of the Business of
Aytu
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36
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Section 5.03
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Right of First Refusal on Other
Financing
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37
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Section 5.04
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Access to Information;
Confidentiality
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37
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Section 5.05
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No Solicitation
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38
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Section 5.06
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Preparation of Joint Proxy Statement and
Form S-4
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39
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Section 5.07
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Target Stockholders
Meeting
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40
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Section 5.08
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Aytu Stockholders Meeting; Approval by Sole
Stockholder of Merger Sub
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40
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Section
5.09
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Notices of Certain Events; Stockholder
Litigation
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41
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Section 5.10
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Employees; Consultants; Benefit
Plans
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41
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Section 5.11
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Directors' and Officers' Indemnification and
Insurance
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42
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Section 5.12
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Reasonable Best
Efforts
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43
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Section 5.13
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Public
Announcements
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44
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Section 5.14
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Anti-Takeover
Statutes
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44
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Section
5.15
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Section 16 Matters
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44
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Section 5.16
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Stock Exchange Matters
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45
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Section 5.17
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Certain Tax Matters
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45
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Section 5.18
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Obligations of Merger Sub
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45
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Section 5.19
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Further Assurances
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45
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Article 6 CONDITIONS
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46
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Section
6.01
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Conditions to Each Party's Obligation to
Effect the Merger
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46
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Section
6.02
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Conditions to Obligations of Aytu and Merger
Sub
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47
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Section
6.03
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Conditions to Obligation of the
Target
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48
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Article 7 TERMINATION, AMENDMENT, AND
WAIVER
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49
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Section
7.01
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Termination by Mutual
Consent
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49
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Section
7.02
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Termination by Either Aytu or the
Target
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49
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Section
7.03
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Termination by
Aytu
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49
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Section
7.04
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Termination by the
Target
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50
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Section
7.05
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Notice of Termination; Effect of
Termination
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50
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Section
7.06
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Fees and Expenses Following
Termination
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50
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Section
7.07
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Amendment
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51
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Section
7.08
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Extension;
Waiver
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51
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Article 8 MISCELLANEOUS
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52
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Section 8.01
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Definitions
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52
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Section 8.02
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Interpretation; Construction
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64
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Section 8.03
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Survival
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64
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Section 8.04
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Governing Law
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64
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Section 8.05
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Submission to Jurisdiction
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65
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Section 8.06
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Waiver of Jury Trial
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65
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Section 8.07
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Notices
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66
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Section 8.08
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Entire Agreement
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67
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Section 8.09
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No Third-Party Beneficiaries
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67
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Section 8.10
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Severability
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67
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Section 8.11
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Assignment
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67
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Section 8.12
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Remedies
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67
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Section 8.13
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Specific Performance
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67
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Section 8.14
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Counterparts; Effectiveness
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67
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this
"Agreement"), is entered into as of September 12, 2019, by
and among Innovus Pharmaceuticals, Inc., a Nevada corporation (the
"Target"), Aytu Bioscience Inc., a Delaware corporation
("Aytu"), and Aytu Acquisition Sub, Inc., a Delaware
corporation and a wholly-owned Subsidiary of Aytu
("Merger
Sub"). Capitalized terms used
herein (including in the immediately preceding sentence) and not
otherwise defined herein shall have the meanings set forth
in Section 8.01
hereof.
RECITALS
WHEREAS, Aytu and the Target entered into a Mutual
Confidentiality and Standstill Agreement on August 2, 2019 (the
“Confidentiality
Agreement”) and a
Promissory Note on August 8, 2019 in the amount of $1,000,000 (the
“Promissory
Note”);
WHEREAS,
the parties intend that Merger Sub be merged with and into the
Target, with the Target surviving that merger on the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Target (the
"Target
Board") has unanimously: (a)
determined that it is in the best interests of the Target and the
holders of shares of the Target's common stock, par value $0.001
per share (the "Target Common
Stock"), and declared it
advisable, to enter into this Agreement with Aytu and Merger Sub;
(b) approved the execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated
hereby, including the Merger; (c) resolved, subject to the terms
and conditions set forth in this Agreement, to recommend adoption
of this Agreement by the stockholders of the Target; in each case,
in accordance with the Delaware General Corporation Law (the
"DGCL") and the Nevada Revised Statutes (the
“NRS”);
WHEREAS, the respective Boards of Directors of
Aytu (the "Aytu Board") and Merger Sub (the "Merger Sub
Board") have each unanimously:
(a) determined that it is in the best interests of Aytu or Merger
Sub, as applicable, and their respective stockholders, and declared
it advisable, to enter into this Agreement; and (b) approved the
execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby, including the
Merger; in each case, in accordance with their relevant corporation
law (DGCL or NRS);
WHEREAS, the Aytu Board has resolved to recommend
that the holders of shares of Aytu's common stock, par value $.0001
per share (the "Aytu Common
Stock") approve the issuance of
shares of Aytu Common Stock in connection with the Merger on the
terms and subject to the conditions set forth in this Agreement
(the "Aytu
Stock Issuance");
WHEREAS, for U.S. federal income Tax purposes, the
parties intend that the Merger qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and that this Agreement be, and is hereby,
adopted as a plan of reorganization within the meaning of Section
368(a) of the Code;.
WHEREAS,
certain Aytu and Target stockholders together holding approximately
35% and 17%, respectively, of the outstanding voting shares of such
companies have entered into voting agreements providing for their
agreement to vote in favor of the Merger, among other things;
and
WHEREAS,
the parties desire to make certain representations, warranties,
covenants, and agreements in connection with the Merger and the
other transactions contemplated by this Agreement and also to
prescribe certain terms and conditions to the Merger.
NOW,
THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, and agreements contained in
this Agreement, the parties, intending to be legally bound, agree
as follows:
1
ARTICLE I
THE
MERGER
Section 1.01 The Merger. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the
Effective Time: (a) Merger Sub will merge with and into the Target
(the "Merger"); (b) the separate corporate existence of Merger
Sub will cease; and (c) the Target will continue its corporate
existence under the DGCL as the surviving corporation in the Merger
and a Subsidiary of Aytu (sometimes referred to herein as the
"Surviving
Corporation").
Section 1.02 Closing. Upon the terms and subject to the conditions set
forth herein, the closing of the Merger (the "Closing") will take place at 9:00 AM, Salt Lake City
time, as soon as practicable (and, in any event, within three
Business Days) after the satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger set forth
in ARTICLE VI
(other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the
satisfaction or, to the extent permitted hereunder, waiver of all
such conditions), unless this Agreement has been terminated
pursuant to its terms or unless another time or date is agreed to
in writing by the parties hereto. The Closing shall be held at the
offices of Xxxxxx & Whitney LLP at 000 Xxxxx Xxxx Xxxxxx, Xxxx
Xxxx Xxxx, Xxxx 00000 unless another place is agreed to in writing
by the parties hereto, and the actual date of the Closing is
hereinafter referred to as the "Closing Date."
Section 1.03 Effective Time.
Subject to the provisions of this
Agreement, at the Closing, the Target, Aytu, and Merger Sub will
cause a certificate of merger or articles of merger, as applicable,
(collectively, the "Certificate of
Merger") to be executed,
acknowledged, and filed with the Secretary of State of the States
of Delaware and Nevada in accordance with the relevant provisions
of the DGCL and the NRS and shall make all other filings or
recordings required under the DGCL and the NRS, as applicable. The
Merger will become effective at such time as the Certificate of
Merger has been duly filed with the Secretary of State of the
States of Delaware and Nevada or at such later date or time as may
be agreed by the Target and Aytu in writing and specified in the
Certificate of Merger in accordance with the DGCL (the effective
time of the Merger being hereinafter referred to as the
"Effective
Time").
Section
1.04 Effects of the Merger.
The Merger shall have the effects set
in this Agreement and in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject
thereto, from and after the Effective Time, all property, rights,
privileges, immunities, powers, franchises, licenses, and authority
of the Target and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions,
and duties of each of the Target and Merger Sub shall become the
debts, liabilities, obligations, restrictions, and duties of the
Surviving Corporation.
Section 1.05 Certificate of Incorporation;
By-Laws. At the Effective Time:
(a) the certificate of incorporation of the Surviving Corporation
shall be amended and restated so as to read in its entirety as set
forth in Exhibit
A, and, as so amended and
restated, shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended in accordance with
the terms thereof or as provided by applicable Law; and (b) the
by-laws of Merger Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation,
except that references to Merger Sub's name shall be replaced with
references to the Surviving Corporation's name, until thereafter
amended in accordance with the terms thereof, the certificate of
incorporation of the Surviving Corporation, or as provided by
applicable Law.
Section
1.06 Directors and Officers.
The directors and officers of Merger
Sub, in each case, immediately prior to the Effective Time shall,
from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the
certificate of incorporation and by-laws of the Surviving
Corporation.
2
ARTICLE II
EFFECT
OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES
Section 2.01 Effect of the Merger on Capital
Stock. At the Effective Time,
as a result of the Merger and without any action on the part of
Aytu, Merger Sub, or the Target or the holder of any capital stock
of Aytu, Merger Sub, or the Target:
(a) Cancellation of Certain Target Common Stock. Each
share of Target Common Stock that is owned by Aytu or the Target
(as treasury stock or otherwise) or any of their respective direct
or indirect wholly-owned Subsidiaries as of immediately prior to
the Effective Time (the "Cancelled
Shares") will automatically be
cancelled and retired and will cease to exist, and no consideration
will be delivered in exchange therefor.
(b)
Conversion of Target
Common Stock. Each share of Target Common Stock issued and
outstanding immediately prior to the Effective Time (other than
Cancelled Shares and Dissenting Shares) will be converted into the
right to receive: (i) one non-transferable CVR having the rights
set forth in the Contingent Value Rights Agreement, plus the number
of shares of AYTU Common Stock equal to the Exchange Ratio (as
calculated in Section 2.01(b)(i)
below) (together, the
"Merger
Consideration"); (ii) any cash
in lieu of fractional shares of Aytu Common Stock payable pursuant
to Section
2.01(f); and (iii) any
dividends or other distributions to which the holder thereof
becomes entitled to upon the surrender of such shares of Target
Common Stock in accordance with Section
2.02(g).
(i) The
“Exchange
Ratio” shall be
determined as of the date of Closing by dividing (X) the number of
shares of Aytu Common Stock determined by dividing the
Consideration Value (as calculated below) by $1.69 by (Y) the
number of outstanding Target Common Shares.
(ii) Subject to the below adjustments, the starting
“Consideration
Value” is $8,000,000,
less the amount due under the Promissory Note and other outstanding
indebtedness owed Aytu as of the Effective Time. The Consideration
Value will then be reduced as follows:
(A) The
Consideration Value will be reduced by (i) an amount equal to the
aggregate of the following (but only to the extent such aggregate
amount exceeds $1.3 million): (i) the total value of Aytu preferred
stock issued to holders of the Terminated Warrants pursuant
to Section 2.01(d)
below in connection with the Warrant
Offer (valued on the basis set forth in such clause) plus (ii) the
Black-Scholes Value of all other warrants containing Cash Out
Rights (as defined in Section 2.01(d)
below). “Black-Scholes
Value” means value based
on the Black-Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg, L.P.
(“Bloomberg”) determined as of the day of this
Agreement for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period
equal to the time between the date of the public announcement of
the transactions contemplated by this Agreement and the Effective
Time, (B) an expected volatility equal to the greater of 100% and
the 100 day volatility obtained from the HVT function on Bloomberg
as of the Trading Day immediately following the public announcement
of the transactions contemplated by this Agreement, (C) the
underlying price per share used in such calculation shall be the
sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered at
Closing.
(B) Notwithstanding
the above, to the extent the GAAP total liabilities balance of
Target as of the end of the last completed calendar month prior to
Closing (the “Closing Liability
Balance”), exclusive of
(a) the Promissory Note and any additional notes provided by Aytu,
and exclusive of (b) the Interim Operating Loss (the
“Adjusted Closing Liability
Balance”), is greater
than the June 30 Total Liability Balance, then the Consideration
Value will be reduced by the amount by which the Adjusted Closing
Liability Balance exceeds the June 30 Total Liability Balance.
There will be no adjustment in the event the Adjusted Closing
Liability Balance is less than the June 30 Total Liability Balance.
All assumptions, estimates and other management judgments necessary
to account for the Closing Liability Balance will both be in
accordance with GAAP and will adhere to methodologies, policies and
procedures as existed at June 30, 2019. See Exhibit H
for example
calculations.
3
(C) Notwithstanding
the above, to the extent that Target’s net working capital
deficit according to GAAP as of the end of the last completed
calendar month prior to Closing (the “Closing Net Working Capital
Deficit”), exclusive of
(a) the Promissory Note and any additional notes provided by Aytu
and exclusive of (b) the Interim Operating Loss (the
“Adjusted Net Working Capital
Deficit”) than the June
30 Net Working Capital Deficit, then the value of the Consideration
Value will be reduced by the amount by which the Adjusted Net
Working Capital Balance is lower (more negative) than the June 30
Net Working Capital Balance. There will be no adjustment in the
event the Adjusted Net Working Capital Deficit is higher (less
negative) than the June 30 Net Working Capital Balance. See
Exhibit
I for example
calculations.
(D) Notwithstanding
the above, any unrecorded liabilities that arise over the
subsequent 90 days pertaining to the period prior to the Effective
Time will further adjust the (a) “Adjusted Net Working
Capital Deficit” and (b) Total Liabilities as of the Closing
for purposes of applying the above.
(iii) Target
will provide access to all books and records in advance of the
Closing Date such that there is sufficient time to allow Aytu
review of the books and records necessary to evaluate the
aforementioned adjustments to the (i) Adjusted Closing Liability
Balance and (ii) Adjusted Net Working Capital Balance. Further, if
such balances cannot be determined consistent with GAAP at the time
of the Closing due to the fact that the financial accounts for the
last completed calendar month have not yet been finalized (and Aytu
and Target cannot agree on serviceable estimates for such
balances), then, notwithstanding anything else in this Agreement to
the contrary, the Closing shall be postponed until such accounts
have been finalized; provided,
however, that if by postponing
the Closing, the effect would be that the Merger would not be
consummated on or before the End Date, then the End Date will be
extended until the date of such postponed
Closing.
(c) Cancellation of Shares. At the Effective Time, all
shares of Target Common Stock will no longer be outstanding and all
shares of Target Common Stock will be cancelled and retired and
will cease to exist, and each holder of: (i) a certificate formerly
representing any shares of Target Common Stock (each, a
"Certificate"); or (ii) any book-entry shares which
immediately prior to the Effective Time represented shares of
Target Common Stock (each, a "Book-Entry
Share") will cease to have any
rights with respect thereto, except the right to receive (A) the
Merger Consideration in accordance with Section 2.02
hereof, (B) any cash in lieu of
fractional shares of Aytu Common Stock payable pursuant to
Section
2.01(f), and (C) any
dividends or other distributions to which the holder thereof
becomes entitled to upon the surrender of such shares of Target
Common Stock in accordance with Section
2.02(g).
(d) Treatment of Warrants and other Target Securities.
All warrants and other Target Securities convertible into or
exercisable for Target Common Stock will be treated in the Merger
in accordance with their terms and provisions. In addition, prior
to the Effective Time, Aytu intends to make an offer (the
“Warrant
Offer”) to certain
holders of Target’s warrants, including those that contain a
right to receive a cash payment in connection with the Merger (the
“Cash
Out Right”). Such Warrant
Offer will provide for the exchange of such warrants for shares of
preferred stock of Aytu. The Aytu shares to be issued to them will
be valued at the greater
of (i) the last reported sale price of
Aytu Common Stock on the Nasdaq Capital Market
("Nasdaq")
on the last complete trading day prior to the date of the Effective
Time or (ii) $1.69 per share. The warrants of those holders who
accept the Warrant Offer will be terminated at the Effective Time
(the “Terminated
Warrants”).
(e) Conversion
of Merger Sub Capital Stock. Each share of common stock, par value
$0.001 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one
newly issued, fully paid, and non-assessable share of common stock,
par value $0.001 per share, of the Surviving Corporation with the
same rights, powers, and privileges as the shares so converted and
shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. From and after the Effective Time, all
certificates representing shares of Merger Sub Common Stock shall
be deemed for all purposes to represent the number of shares of
common stock of the Surviving Corporation into which they were
converted in accordance with the immediately preceding
sentence.
4
(f) Fractional Shares. No certificates or scrip
representing fractional shares of Aytu Common Stock shall be issued
upon the conversion of Target Common Stock pursuant to
Section
2.01(b) and such fractional
share interests shall not entitle the owner thereof to vote or to
any other rights of a holder of shares of Aytu Common Stock.
Notwithstanding any other provision of this Agreement, each holder
of shares of Target Common Stock converted pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a
share of Aytu Common Stock (after taking into account all shares of
Target Common Stock exchanged by such holder) shall in lieu
thereof, upon surrender of such holder's Certificates and
Book-Entry Shares, receive in cash (rounded to the nearest whole
cent), without interest, an amount equal to such fractional amount
multiplied by the last reported sale price of Aytu Common Stock on
Nasdaq on the last complete trading day prior to the date of the
Effective Time.
(a) Exchange
Agent; Exchange Fund. Prior to the Effective Time, Aytu shall
appoint an exchange agent (the "Exchange
Agent") to act as the agent for
the purpose of paying the Merger Consideration for the Certificates
and the Book-Entry Shares. At or promptly following the Effective
Time, Aytu shall deposit, or cause the Surviving Corporation to
deposit, with the Exchange Agent: (i) certificates representing the
shares of Aytu Common Stock to be issued as Merger Consideration
(or make appropriate alternative arrangements if uncertificated
shares of Aytu Common Stock represented by book-entry shares will
be issued); and (ii) cash sufficient to make payments in lieu of
fractional shares pursuant to Section
2.01(f). In addition, Aytu
shall deposit or cause to be deposited with the Exchange Agent, as
necessary from time to time after the Effective Time, any dividends
or other distributions, if any, to which the holders of Target
Common Shares may be entitled pursuant to Section
2.02(g) for distributions
or dividends, on the Aytu Common Stock to which they are entitled
to pursuant to Section
2.01(b), with both a record
and payment date after the Effective Time and prior to the
surrender of the Target Common Shares in exchange for such Aytu
Common Stock. Such cash and shares of Aytu Common Stock, together
with any dividends or other distributions deposited with the
Exchange Agent pursuant to this Section
2.02(a), are referred to
collectively in this Agreement as the "Exchange
Fund."
(b) Procedures
for Surrender; No Interest. Promptly after the Effective Time, Aytu
shall send, or shall cause the Exchange Agent to send, to each
record holder of shares of Target Common Stock at the Effective
Time, whose Target Common Stock was converted pursuant to
Section
2.01(b) into the right to
receive the Merger Consideration, a letter of transmittal and
instructions (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates or transfer of the Book-Entry Shares
to the Exchange Agent, and which letter of transmittal will be in
customary form and have such other provisions as Aytu and the
Surviving Corporation may reasonably specify) for use in such
exchange. Each holder of shares of Target Common Stock that have
been converted into the right to receive the Merger Consideration
shall be entitled to receive the Merger Consideration into which
such shares of Target Common Stock have been converted pursuant
to Section
2.01(b) in respect of the
Target Common Stock represented by a Certificate or Book-Entry
Share, any cash in lieu of fractional shares which the holder has
the right to receive pursuant to Section
2.01(f), and any dividends
or other distributions pursuant to Section
2.02(g) upon: (i) surrender
to the Exchange Agent of a Certificate; or (ii) receipt of an
"agent's message" by the Exchange Agent (or such other evidence, if
any, of transfer as the Exchange Agent may reasonably request) in
the case of Book-Entry Shares; in each case, together with a duly
completed and validly executed letter of transmittal and such other
documents as may reasonably be requested by the Exchange Agent. No
interest shall be paid or accrued upon the surrender or transfer of
any Certificate or Book-Entry Share. Upon payment of the Merger
Consideration pursuant to the provisions of this
ARTICLE
II, each Certificate or
Certificates or Book-Entry Share or Book-Entry Shares so
surrendered or transferred, as the case may be, shall immediately
be cancelled.
(c) Payments
to Non-Registered Holders. If any portion of the Merger
Consideration is to be paid to a Person other than the Person in
whose name the surrendered Certificate or the transferred
Book-Entry Share, as applicable, is registered, it shall be a
condition to such payment that: (i) such Certificate shall be
properly endorsed or shall otherwise be in proper form for transfer
or such Book-Entry Share shall be properly transferred; and (ii)
the Person requesting such payment shall pay to the Exchange Agent
any transfer or other Tax required as a result of such payment to a
Person other than the registered holder of such Certificate or
Book-Entry Share, as applicable, or establish to the reasonable
satisfaction of the Exchange Agent that such Tax has been paid or
is not payable.
5
(d) Full
Satisfaction. All Merger Consideration paid upon the surrender of
Certificates or transfer of Book-Entry Shares in accordance with
the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Target
Common Stock formerly represented by such Certificate or Book-Entry
Shares, and from and after the Effective Time, there shall be no
further registration of transfers of shares of Target Common Stock
on the stock transfer books of the Surviving Corporation. If, after
the Effective Time, Certificates or Book-Entry Shares are presented
to the Surviving Corporation, they shall be cancelled and exchanged
as provided in this ARTICLE
II.
(e) Termination
of Exchange Fund. Any portion of the Exchange Fund that remains
unclaimed by the holders of shares of Target Common Stock six
months after the Effective Time shall be returned to Aytu, upon
demand, and any such holder who has not exchanged shares of Target
Common Stock for the Merger Consideration in accordance with
this Section 2.02
prior to that time shall thereafter
look only to Aytu (subject to abandoned property, escheat, or other
similar Laws), as general creditors thereof, for payment of the
Merger Consideration without any interest. Notwithstanding the
foregoing, none of Aytu, Merger Sub, Target or the Exchange Agent
shall be liable to any holder of shares of Target Common Stock for
any amounts paid to a public official pursuant to applicable
abandoned property, escheat, or similar Laws. Any amounts remaining
unclaimed by holders of shares of Target Common Stock two years
after the Effective Time (or such earlier date, immediately prior
to such time when the amounts would otherwise escheat to or become
property of any Governmental Entity) shall become, to the extent
permitted by applicable Law, the property of Aytu free and clear of
any claims or interest of any Person previously entitled
thereto.
(f) Distributions with Respect to Unsurrendered Shares
of Target Common Stock. All shares of Aytu Common Stock to be
issued pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time and whenever a dividend or
other distribution is declared by Aytu in respect of the Aytu
Common Stock, the record date for which is after the Effective
Time, that declaration shall include dividends or other
distributions in respect of all shares issuable pursuant to this
Agreement. No dividends or other distributions in respect of the
Aytu Common Stock shall be paid to any holder of any Unsurrendered
Target Common Share until the Certificate (or affidavit of loss in
lieu of the Certificate as provided in Section
2.06) or Book-Entry Share
is surrendered for exchange in accordance with this Section
2.02. Subject to the effect
of applicable Laws, following such surrender, there shall be issued
or paid to the holder of record of the whole shares of Aytu Common
Stock issued in exchange for Target Common Shares in accordance
with this Section
2.02, without interest: (i)
at the time of such surrender, the dividends or other distributions
with a record date after the Effective Time theretofore payable
with respect to such whole shares of Aytu Common Stock and not
paid; and (ii) at the appropriate payment date, the dividends or
other distributions payable with respect to such whole shares of
Aytu Common Stock with a record date after the Effective Time but
with a payment date subsequent to surrender.
Section .03 Dissenting
Shares. Notwithstanding any
provision of this Agreement to the contrary, including Section
2.01, and subject to NRS 92A.300 through 92A.500 (the
“Dissenting
Statute”), shares of
Target Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares cancelled in accordance with
Section 2.01(a)) and held by a holder who has not voted in favor of
the Merger or consented thereto in writing, and who is entitled to
demand and has properly exercised dissenters rights of such shares
in accordance with the Dissenting Statute (such shares of Target
Common Stock being referred to collectively as the
“Dissenting
Shares”) shall not be
converted into a right to receive the Merger Consideration as
provided in Section 2.01(b), but instead shall be entitled to only
such rights as are granted by the Dissenting Statute;
provided, however, if such holder fails to perfect, or otherwise
waives, withdraws, or loses such holder’s right to dissent
pursuant to the Dissenting Statute or if a court of competent
jurisdiction shall determine that such holder is not entitled to
the relief provided by the Dissenting Statute, such shares of
Target Common Stock shall be treated as if they had been converted
as of the Effective Time into the right to receive the Merger
Consideration in accordance with Section 2.01(b), without interest
thereon, upon surrender of such Certificate formerly representing
such share or transfer of such Book-Entry Share, as the case may
be. The Target shall promptly provide Aytu with written notice of
any demands received by the Target for appraisal of shares of
Target Common Stock, any waiver or withdrawal of any such demand,
and any other demand, notice, or instrument delivered to Target
prior to the Effective Time that relates to such demand, and Aytu
shall have the opportunity and right to direct all negotiations and
proceedings with respect to such demands. Except with the prior
written consent of Aytu, the Target shall not make any payment with
respect to, or settle, or offer to settle, any such
demands.
6
Section 2.04 Adjustments.
Without limiting the other provisions
of this Agreement, if at any time during the period between the
date of this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of the Target or the Aytu
Common Stock shall occur (other than the issuance of additional
shares of capital stock of the Target or Aytu as permitted by this
Agreement), including by reason of any reclassification,
recapitalization, stock split (including a reverse stock split), or
combination, exchange, readjustment of shares, or similar
transaction, or any stock dividend or distribution paid in stock,
the Exchange Ratio and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted to reflect such
change; provided,
however, that this sentence
shall not be construed to permit Aytu or the Target to take any
action with respect to its securities that is prohibited by the
terms of this Agreement.
Section 2.05 Withholding Rights.
Each of the Exchange Agent, Aytu,
Merger Sub, and the Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable to any
Person pursuant to this ARTICLE II
such amounts as may be required to be
deducted and withheld with respect to the making of such payment
under any Tax Laws. To the extent that amounts are so deducted and
withheld by the Exchange Agent, Aytu, Merger Sub, or the Surviving
Corporation, as the case may be, such amounts shall be treated for
all purposes of this Agreement as having been paid to the Person in
respect of which the Exchange Agent, Aytu, Merger Sub, or the
Surviving Corporation, as the case may be, made such deduction and
withholding.
Section 2.06 Lost Certificates.
If any Certificate shall have been
lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen, or
destroyed and, if required by Aytu, the posting by such Person of a
bond, in such reasonable amount as Aytu may direct, as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue, in exchange for such
lost, stolen, or destroyed Certificate, the Merger Consideration to
be paid in respect of the shares of Target Common Stock formerly
represented by such Certificate as contemplated under this
ARTICLE
II.
(a) Target
Stock Options. As of the Effective Time, each unvested option to
acquire shares of Target Common Stock (each, an
"Unvested Target
Stock Option") that is
outstanding under any Target Stock Plan immediately prior to the
Effective Time shall be terminated as of the Effective Time. Each
vested and unexercised option to acquire shares of Target Common
Stock (each, a “Vested Target Stock
Option” and, together
with the Unvested Target Stock Options, the
“Target Stock
Options”) that is
outstanding under any Target Stock Plan immediately prior to the
Effective Time must be exercised as of the Effective Time. Any
Vested Target Stock Options that are not exercised as of the
Effective Time shall be cancelled as of the Effective
Time.
(b) Target
Restricted Stock Units. The Target shall take all requisite action
so that, at the Effective Time, each share of Target Common Stock
subject to vesting, repurchase, or other lapse of restrictions (a
"Target
Restricted Share") that is
outstanding under any Target Stock Plan as of immediately prior to
the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be vested and settled by
Target in accordance with the Target Stock
Plans.
(c) Resolutions
and Other Target Actions. At or prior to the Effective Time, the
Target, the Target Board, and the compensation committee of such
board, as applicable, shall adopt any resolutions and take any
actions (including obtaining any employee consents) that may be
necessary to effectuate the provisions of paragraphs
Section
2.07(a) and Section
2.07(b) of this
Section
2.07.
Section
..08 Tax Treatment.
For U.S. federal income Tax purposes,
it is intended that the Merger qualify as a "reorganization" within
the meaning of Section 368(a) of the Code, and the regulations
promulgated thereunder, that this Agreement will constitute a "plan
of reorganization" for purposes of Sections 354 and 361 of the
Code.
7
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE TARGET
Except:
(a) as disclosed in the Target SEC Documents at least three
Business Days prior to the date hereof and that is reasonably
apparent on the face of such disclosure to be applicable to the
representation and warranty set forth herein (other than any
disclosures contained or referenced therein under the captions
"Risk Factors," "Forward-Looking Statements," "Quantitative and
Qualitative Disclosures About Market Risk," and any other
disclosures contained or referenced therein of information,
factors, or risks that are predictive, cautionary, or
forward-looking in nature); or (b) as set forth in the
correspondingly numbered Section of the Target Disclosure Letter
that relates to such Section or in another Section of the Target
Disclosure Letter to the extent that it is reasonably apparent on
the face of such disclosure that such disclosure is applicable to
such Section, the Target hereby represents and warrants to Aytu and
Merger Sub as follows:
Section 3.01 Organization; Standing and
Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. The Target and
each of its Subsidiaries is a corporation, limited liability
company, or other legal entity duly organized, validly existing,
and in good standing (to the extent that the concept of "good
standing" is applicable in the case of any jurisdiction outside the
United States) under the Laws of its jurisdiction of organization,
and has the requisite corporate, limited liability company, or
other organizational, as applicable, power and authority to own,
lease, and operate its assets and to carry on its business as now
conducted. Each of the Target and its Subsidiaries is duly
qualified or licensed to do business as a foreign corporation,
limited liability company, or other legal entity and is in good
standing (to the extent that the concept of "good standing" is
applicable in the case of any jurisdiction outside the United
States) in each jurisdiction where the character of the assets and
properties owned, leased, or operated by it or the nature of its
business makes such qualification or license necessary, except
where the failure to be so qualified or licensed or to be in good
standing, would not reasonably be expected to have, individually or
in the aggregate, a Target Material Adverse
Effect.
(b) Charter
Documents. The copies of the Amended and Restated Articles of
Incorporation and the Amended and Restated Bylaws of the Target as
most recently filed with the Target SEC Documents are true,
correct, and complete copies of such documents as in effect as of
the date of this Agreement. The Target has delivered or made
available to Aytu a true and correct copy of the Charter Documents
of each of the Target's Subsidiaries. Neither the Target nor any of
its Subsidiaries is in violation of any of the provisions of its
Charter Documents.
(c) Subsidiaries.
Section 3.01(c)(i) of the Target Disclosure Letter lists each of
the Subsidiaries of the Target as of the date hereof and its place
of organization. All of the outstanding shares of capital stock of,
or other equity or voting interests in, each Subsidiary of the
Target that is owned directly or indirectly by the Target have been
validly issued, were issued free of pre-emptive rights, are fully
paid and non-assessable, and are free and clear of all Liens,
including any restriction on the right to vote, sell, or otherwise
dispose of such capital stock or other equity or voting interests,
except for any Liens: (A) imposed by applicable securities Laws; or
(B) arising pursuant to the Charter Documents of any wholly-owned
Subsidiary of the Target. Except for the capital stock of, or other
equity or voting interests in, its Subsidiaries, the Target does
not own, directly or indirectly, any capital stock of, or other
equity or voting interests in, any Person.
8
(a) Capital
Stock. The authorized capital stock of the Target consists of: (i)
292,500,000 shares of Target Common Stock; and (ii) 7,500,000
shares of preferred stock, par value $0.001 per share, of the
Target (the "Target Preferred
Stock"). As of the date of this
Agreement: (A) 2,612,379 shares of Target Common Stock were issued
and outstanding (not including shares held in treasury); (B) no
shares of Target Common Stock were issued and held by the Target in
its treasury; and (C) no shares of Target Preferred Stock were
issued and outstanding or held by the Target in its treasury. All
of the outstanding shares of capital stock of the Target are, and
all shares of capital stock of the Target which may be issued as
contemplated or permitted by this Agreement will be, when issued,
duly authorized, validly issued, fully paid, and non-assessable,
and not subject to any pre-emptive rights. No Subsidiary of the
Target owns any shares of Target Common Stock.
(b) Stock
Awards.
(i) As
of the date of this Agreement, an aggregate of 611,395 shares of
Target Common Stock were reserved for issuance pursuant to Target
Equity Awards not yet granted under the Target Stock Plans. As of
the date of this Agreement, 3,631 shares of Target Common Stock
were reserved for issuance pursuant to outstanding Target Stock
Options and 206,538 shares of Target Common Stock were reserved for
issuance pursuant to outstanding Target Restricted Stock Units.
Section 3.02(b)(i) of the Target Disclosure Letter sets forth as of
the date of this Agreement a list of each outstanding Target Equity
Award granted under the Target Stock Plans and: (A) the name of the
holder of such Target Equity Award; (B) the number of shares of
Target Common Stock subject to such outstanding Target Equity
Award; (C) if applicable, the exercise price, purchase price, or
similar pricing of such Target Equity Award; (D) the date on which
such Target Equity Award was granted or issued; (E) the applicable
vesting, repurchase, or other lapse of restrictions schedule, and
the extent to which such Target Equity Award is vested and
exercisable as of the date hereof; and (F) with respect to Target
Stock Options, the date on which such Target Stock Option expires.
All shares of Target Common Stock subject to issuance under the
Target Stock Plans, upon issuance in accordance with the terms and
conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid, and
non-assessable.
(ii) Except for the Target Stock Plans and as set
forth in Section 3.02(b)(ii) of the Target Disclosure Letter, there
are no Contracts to which the Target is a party obligating the
Target to accelerate the vesting of any Target Equity Award as a
result of the transactions contemplated by this Agreement (whether
alone or upon the occurrence of any additional or subsequent
events). Other than the Target Equity Awards, as of the date
hereof, there are no outstanding: (A) securities of the Target or
any of its Subsidiaries convertible into or exchangeable for Voting
Debt or shares of capital stock of the Target; (B) options,
warrants, or other agreements or commitments to acquire from the
Target or any of its Subsidiaries, or obligations of the Target or
any of its Subsidiaries to issue, any Voting Debt or shares of
capital stock of (or securities convertible into or exchangeable
for shares of capital stock of) the Target; or (C) restricted
shares, restricted stock units, stock appreciation rights,
performance shares, profit participation rights, contingent value
rights, "phantom" stock, or similar securities or rights that are
derivative of, or provide economic benefits based, directly or
indirectly, on the value or price of, any shares of capital stock
of the Target, in each case that have been issued by the Target or
its Subsidiaries (the items in clauses (A), (B), and (C), together
with the capital stock of the Target, being referred to
collectively as "Target
Securities"). All outstanding
shares of Target Common Stock, all outstanding Target Equity
Awards, and all outstanding shares of capital stock, voting
securities, or other ownership interests in any Subsidiary of the
Target, have been issued or granted, as applicable, in compliance
in all material respects with all applicable securities
Laws.
(iii) There
are no outstanding Contracts requiring the Target or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any Target
Securities or Target Subsidiary Securities. Neither the Target nor
any of its Subsidiaries is a party to any voting agreement with
respect to any Target Securities or Target Subsidiary
Securities.
9
(c) Warrants. Section 3.02(c) of the Target Disclosure
Letter sets forth as of the date of this Agreement a list of each
outstanding Warrant, Warrant agreement and related documentation
including: (A) the name of the holder of such Warrant; (B) the
number of shares of Target Common Stock or Target Preferred Stock,
as applicable, subject to such outstanding Warrant; (C) the
exercise price or similar pricing of such Warrant; (D) the date on
which such Warrant was issued; and (E) the date on which such
Warrant expires. Except as set forth in Section 3.02(c) of the
Target Disclosure Letter, there are no outstanding warrants, rights
or agreements, orally or in writing, to purchase or acquire from
the Target any shares of Target Common Stock or Target Preferred
Stock, or any securities convertible into or exchangeable for
shares of Target Common Stock or Target Preferred Stock. Except as
set forth in Section 3.02(c) of the Target Disclosure Letter, none
of the Warrants, Warrant agreements or related documentation
provide for cash-out right or other special rights in connection
with the Merger. Full and complete copies of the Warrants
themselves and associated Warrant agreements and related
documentation for each of the Warrants referenced in Section
3.02(c) of the Target Disclosure Letter have been provided to
Buyer. Such documentation remains in effect in accordance
with its terms.
(d) Voting
Debt. No bonds, debentures, notes, or other indebtedness issued by
the Target or any of its Subsidiaries: (i) having the right to vote
on any matters on which stockholders or equityholders of the Target
or any of its Subsidiaries may vote (or which is convertible into,
or exchangeable for, securities having such right); or (ii) the
value of which is directly based upon or derived from the capital
stock, voting securities, or other ownership interests of the
Target or any of its Subsidiaries, are issued or outstanding
(collectively, "Voting Debt").
(e) Target
Subsidiary Securities. As of the date hereof, there are no
outstanding: (i) securities of the Target or any of its
Subsidiaries convertible into or exchangeable for Voting Debt,
capital stock, voting securities, or other ownership interests in
any Subsidiary of the Target; (ii) options, warrants, or other
agreements or commitments to acquire from the Target or any of its
Subsidiaries, or obligations of the Target or any of its
Subsidiaries to issue, any Voting Debt, capital stock, voting
securities, or other ownership interests in (or securities
convertible into or exchangeable for capital stock, voting
securities, or other ownership interests in) any Subsidiary of the
Target; or (iii) restricted shares, restricted stock units, stock
appreciation rights, performance shares, profit participation
rights, contingent value rights, "phantom" stock, or similar
securities or rights that are derivative of, or provide economic
benefits based, directly or indirectly, on the value or price of,
any capital stock or voting securities of, or other ownership
interests in, any Subsidiary of the Target, in each case that have
been issued by a Subsidiary of the Target (the items in clauses
(i), (ii), and (iii), together with the capital stock, voting
securities, or other ownership interests of such Subsidiaries,
being referred to collectively as "Target Subsidiary
Securities").
Section 3.03 Authority; Non-Contravention;
Governmental Consents; Board Approval; Anti-Takeover
Statutes.
(a) Authority. The Target has all requisite corporate
power and authority to enter into and to perform its obligations
under this Agreement and, subject to, in the case of the
consummation of the Merger, adoption of this Agreement by the
affirmative vote or consent of the holders of a majority of the
outstanding shares of Target Common Stock (the "Requisite Target
Vote"), to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Target and the consummation by
the Target of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Target and no other corporate proceedings on the part of the Target
are necessary to authorize the execution and delivery of this
Agreement or to consummate the Merger and the other transactions
contemplated hereby, subject only, in the case of consummation of
the Merger, to the receipt of the Requisite Target Vote. The
Requisite Target Vote is the only vote or consent of the holders of
any class or series of the Target's capital stock necessary to
approve and adopt this Agreement, approve the Merger, and
consummate the Merger and the other transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Target and, assuming due execution and delivery by Aytu and Merger
Sub, constitutes the legal, valid, and binding obligation of the
Target, enforceable against the Target in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, and other similar Laws affecting creditors'
rights generally and by general principles of
equity.
10
(b) Non-Contravention. The execution, delivery, and
performance of this Agreement by the Target, and the consummation
by the Target of the transactions contemplated by this Agreement,
including the Merger, do not and will not: (i) subject to obtaining
the Requisite Target Vote, contravene or conflict with, or result
in any violation or breach of, the Charter Documents of the Target
or any of its Subsidiaries; (ii) assuming that all Consents
contemplated by clauses (i) through (v) of Section
3.03(c) have been obtained
or made and, in the case of the consummation of the Merger,
obtaining the Requisite Target Vote, conflict with or violate any
Law applicable to the Target, any of its Subsidiaries, or any of
their respective properties or assets; (iii) result in any breach
of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, result in the
Target's or any of its Subsidiaries' loss of any benefit or the
imposition of any additional payment or other liability under, or
alter the rights or obligations of any third party under, or give
to any third party any rights of termination, amendment,
acceleration, or cancellation, or require any Consent under, any
Contract to which the Target or any of its Subsidiaries is a party
or otherwise bound as of the date hereof; or (iv) result in the
creation of a Lien (other than Permitted Liens) on any of the
properties or assets of the Target or any of its
Subsidiaries.
(c) Governmental Consents. No consent, approval,
order, or authorization of, or registration, declaration, or filing
with, or notice to (any of the foregoing being a
"Consent"), any supranational, national, state, municipal,
local, or foreign government, any instrumentality, subdivision,
court, administrative agency or commission, or other governmental
authority, or any quasi-governmental or private body exercising any
regulatory or other governmental or quasi-governmental authority (a
"Governmental
Entity") is required to be
obtained or made by the Target in connection with the execution,
delivery, and performance by the Target of this Agreement or the
consummation by the Target of the Merger and other transactions
contemplated hereby, except for: (i) the filing of the Certificate
of Merger with the Secretary of State of the States of Delaware and
Nevada; (ii) the filing with the Securities and Exchange Commission
("SEC") of (A) the Joint Proxy Statement in definitive
form in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (B) the Form S-4, and the declaration of its
effectiveness under the Securities Act of 1933, as amended (the
"Securities
Act"), and (C) such reports
under the Exchange Act as may be required in connection with this
Agreement, the Merger, and the other transactions contemplated by
this Agreement; (iii) such Consents as may be required under (A)
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") or (B) any other Laws that are designed or
intended to prohibit, restrict, or regulate actions having the
purpose or effect of monopolization or restraint of trade or
significant impediments or lessening of competition or creation or
strengthening of a dominant position through merger or acquisition
("Foreign
Antitrust Laws" and, together
with the HSR Act, the "Antitrust
Laws"), in any case that are
applicable to the transactions contemplated by this Agreement; (iv)
such Consents as may be required under applicable state securities
or "blue sky" Laws and the securities Laws of any foreign country
or the rules and regulations of Nasdaq and the OTC; (v) the other
Consents of Governmental Entities listed in Section 3.03(c) of the
Target Disclosure Letter (the "Other Governmental
Approvals"); and (vi) such
other Consents which if not obtained or made would not reasonably
be expected to have, individually or in the aggregate, a Target
Material Adverse Effect.
(d) Board
Approval. The Target Board, by resolutions duly adopted by a
unanimous vote at a meeting of all directors of the Target duly
called and held and, not subsequently rescinded or modified in any
way, has: (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, upon the terms and
subject to the conditions set forth herein, are fair to, and in the
best interests of, the Target and the Target's stockholders; (ii)
approved and declared advisable this Agreement, including the
execution, delivery, and performance thereof, and the consummation
of the transactions contemplated by this Agreement, including the
Merger, upon the terms and subject to the conditions set forth
herein; (iii) directed that this Agreement be submitted to a vote
of the Target's stockholders for adoption at the Target
Stockholders Meeting; and (iv) resolved to recommend that Target
stockholders vote in favor of adoption of this Agreement in
accordance with the DGCL (collectively, the "Target Board
Recommendation").
(e) Anti-Takeover Statutes. No "fair price,"
"moratorium," "control share acquisition," "supermajority,"
"affiliate transactions," "business combination," or other similar
anti-takeover statute or regulation enacted under any federal,
state, local, or foreign laws applicable to the Target is
applicable to this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement.
11
Section
3.04 SEC
Filings; Financial Statements; Xxxxxxxx-Xxxxx Act Compliance;
Undisclosed Liabilities; Off-Balance Sheet
Arrangements.
(a) SEC
Filings. The Target has timely filed with or furnished to, as
applicable, the SEC all registration statements, prospectuses,
reports, schedules, forms, statements, and other documents
(including exhibits and all other information incorporated by
reference) required to be filed or furnished by it with the SEC
since January 1, 2017 (the "Target SEC
Documents"). True, correct, and
complete copies of all Target SEC Documents are publicly available
in the Electronic Data Gathering, Analysis, and Retrieval database
of the SEC ("XXXXX"). To the extent that any Target SEC Document
available on XXXXX contains redactions pursuant to a request for
confidential treatment or otherwise, the Target has made available
to Aytu the full text of all such Target SEC Documents that it has
so filed or furnished with the SEC. As of their respective filing
dates or, if amended or superseded by a subsequent filing prior to
the date hereof, as of the date of the last such amendment or
superseding filing (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of
the relevant meetings, respectively), each of the Target SEC
Documents complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act,
and the Xxxxxxxx-Xxxxx Act of 2002 (including the rules and
regulations promulgated thereunder, the "Xxxxxxxx-Xxxxx
Act"), and the rules and
regulations of the SEC thereunder applicable to such Target SEC
Documents. None of the Target SEC Documents, including any
financial statements, schedules, or exhibits included or
incorporated by reference therein at the time they were filed (or,
if amended or superseded by a subsequent filing prior to the date
hereof, as of the date of the last such amendment or superseding
filing), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the
Knowledge of the Target, none of the Target SEC Documents is the
subject of ongoing SEC review or outstanding SEC investigation and
there are no outstanding or unresolved comments received from the
SEC with respect to any of the Target SEC Documents. None of the
Target's Subsidiaries is required to file or furnish any forms,
reports, or other documents with the SEC.
(b) Financial Statements. Each of the consolidated
financial statements (including, in each case, any notes and
schedules thereto) contained in or incorporated by reference into
the Target SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC with
respect thereto as of their respective dates; (ii) was prepared in
accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto
and, in the case of unaudited interim financial statements, as may
be permitted by the SEC for Quarterly Reports on Form 10-Q); and
(iii) fairly presented in all material respects the consolidated
financial position and the results of operations, changes in
stockholders' equity, and cash flows of the Target and its
consolidated Subsidiaries as of the respective dates of and for the
periods referred to in such financial statements, subject, in the
case of unaudited interim financial statements, to normal and
year-end audit adjustments as permitted by GAAP and the applicable
rules and regulations of the SEC (but only if the effect of such
adjustments would not, individually or in the aggregate, be
material).
(c) Internal
Controls. The Target and each of its Subsidiaries has established
and maintains a system of "internal controls over financial
reporting" (as defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act) that is sufficient to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP including policies and procedures that: (i)
require the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the assets of the Target and its Subsidiaries; (ii) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP
and that receipts and expenditures of the Target and its
Subsidiaries are being made only in accordance with appropriate
authorizations of the Target's management and the Target Board; and
(iii) provide assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the assets of the
Target and its Subsidiaries.
(d) Disclosure
Controls and Procedures. The Target's "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act) are designed to ensure that all information (both
financial and non-financial) required to be disclosed by the Target
in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported within the time
periods specified in the rules and forms of the SEC, and that all
such information is accumulated and communicated to the Target's
management as appropriate to allow timely decisions regarding
required disclosure and to make the certifications of the chief
executive officer and chief financial officer of the Target
required under the Exchange Act with respect to such reports.
Neither the Target nor, to the Knowledge of the Target, the
Target's independent registered public accounting firm has
identified or been made aware of: (i) any "significant deficiency"
or "material weakness" (each as defined in Rule 12b-2 of the
Exchange Act) in the system of internal control over financial
reporting utilized by the Target and its Subsidiaries that has not
been subsequently remediated; or (ii) any fraud that involves the
Target's management or other employees who have a role in the
preparation of financial statements or the internal control over
financial reporting utilized by the Target and its
Subsidiaries.
12
(e) Undisclosed Liabilities. The audited balance sheet
of the Target dated as of December 31, 2018 contained in the Target
SEC Documents filed prior to the date hereof is hereinafter
referred to as the "Target Balance
Sheet." Neither the Target nor
any of its Subsidiaries has any Liabilities other than Liabilities
that: (i) are reflected or reserved against in the Target Balance
Sheet (including in the notes thereto); (ii) were incurred since
the date of the Target Balance Sheet in the ordinary course of
business consistent with past practice; (iii) are incurred in
connection with the transactions contemplated by this Agreement; or
(iv) would not reasonably be expected to have, individually or in
the aggregate, a Target Material Adverse
Effect.
(f) Off-Balance
Sheet Arrangements. Neither the Target nor any of its Subsidiaries
is a party to, or has any commitment to become a party to: (i) any
joint venture, off-balance sheet partnership, or any similar
Contract or arrangement (including any Contract or arrangement
relating to any transaction or relationship between or among the
Target or any of its Subsidiaries, on the one hand, and any other
Person, including any structured finance, special purpose, or
limited purpose Person, on the other hand); or (ii) any
"off-balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K under the Exchange Act).
(g) Xxxxxxxx-Xxxxx
and OTC Compliance. Each of the principal executive officer and the
principal financial officer of the Target (or each former principal
executive officer and each former principal financial officer of
the Target, as applicable) has made all certifications required by
Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and
906 of the Xxxxxxxx-Xxxxx Act with respect to the Target SEC
Documents, and the statements contained in such certifications are
true and accurate in all material respects. For purposes of this
Agreement, "principal executive officer" and "principal financial
officer" shall have the meanings given to such terms in the
Xxxxxxxx-Xxxxx Act. The Target is also in compliance with all of
the other applicable provisions of the Xxxxxxxx-Xxxxx Act and the
applicable listing and corporate governance rules of OTC, except
for any non-compliance that would not reasonably be expected to
have, individually or in the aggregate, a Target Material Adverse
Effect.
(h) Accounting,
Securities, or Other Related Complaints or Reports. Since December
31, 2018: (i) none of the Target or any of its Subsidiaries nor any
director or officer of the Target or any of its Subsidiaries has
received any oral or written complaint, allegation, assertion, or
claim regarding the financial accounting, internal accounting
controls, or auditing practices, procedures, methodologies, or
methods of the Target or any of its Subsidiaries or any oral or
written complaint, allegation, assertion, or claim from employees
of the Target or any of its Subsidiaries regarding questionable
financial accounting or auditing matters with respect to the Target
or any of its Subsidiaries; and (ii) no attorney representing the
Target or any of its Subsidiaries, whether or not employed by the
Target or any of its Subsidiaries, has reported credible evidence
of any material violation of securities Laws, breach of fiduciary
duty, or similar material violation by the Target, any of its
Subsidiaries, or any of their respective officers, directors,
employees, or agents to the Target Board or any committee thereof,
or to the chief executive officer, chief financial officer, or
general counsel of the Target.
Section 3.05 Absence of Certain Changes or
Events. Since the date of the
Target Balance Sheet, except in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, the business of the Target and each of its
Subsidiaries has been conducted in the ordinary course of business
consistent with past practice and there has not been or
occurred:
(a) any
Target Material Adverse Effect or any event, condition, change, or
effect that could reasonably be expected to have, individually or
in the aggregate, a Target Material Adverse Effect; or
(b) any
event, condition, action, or effect that, if taken during the
period from the date of this Agreement through the Effective Time,
would constitute a breach of Section
5.01.
13
Section 3.06 Taxes.
(a) Tax
Returns and Payment of Taxes. The Target and each of its
Subsidiaries have duly and timely filed or caused to be filed
(taking into account any valid extensions) all material Tax Returns
required to be filed by them. Such Tax Returns are true, complete,
and correct in all material respects. Neither Target nor any of its
Subsidiaries is currently the beneficiary of any extension of time
within which to file any Tax Return other than extensions of time
to file Tax Returns obtained in the ordinary course of business
consistent with past practice. All material Taxes due and owing by
the Target or any of its Subsidiaries (whether or not shown on any
Tax Return) have been timely paid or, where payment is not yet due,
the Target has made an adequate provision for such Taxes in the
Target's financial statements included in the Target SEC Documents
(in accordance with GAAP). The Target's most recent financial
statements included in the Target SEC Documents reflect an adequate
reserve (in accordance with GAAP) for all material Taxes payable by
the Target and its Subsidiaries through the date of such financial
statements. Neither the Target nor any of its Subsidiaries has
incurred any material Liability for Taxes since the date of the
Target's most recent financial statements included in the Target
SEC Documents outside of the ordinary course of business or
otherwise inconsistent with past practice.
(b) Availability
of Tax Returns. The Target has made available to Aytu complete and
accurate copies of all federal, state, local, and foreign income,
franchise, and other material Tax Returns filed by or on behalf of
the Target or its Subsidiaries for any Tax period ending after
December 31, 2015.
(c) Withholding.
The Target and each of its Subsidiaries have withheld and timely
paid each material Tax required to have been withheld and paid in
connection with amounts paid or owing to any Target Employee,
creditor, customer, stockholder, or other party (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442
of the Code or similar provisions under any state, local, and
foreign Laws), and materially complied with all information
reporting and backup withholding provisions of applicable
Law.
(d) Liens.
There are no Liens for material Taxes upon the assets of the Target
or any of its Subsidiaries other than for current Taxes not yet due
and payable or for Taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP has been made in the Target's most recent
financial statements included in the Target SEC
Documents.
(e) Tax
Deficiencies and Audits. No deficiency for any material amount of
Taxes which has been proposed, asserted, or assessed in writing by
any taxing authority against the Target or any of its Subsidiaries
remains unpaid. There are no waivers or extensions of any statute
of limitations currently in effect with respect to Taxes of the
Target or any of its Subsidiaries. There are no audits, suits,
proceedings, investigations, claims, examinations, or other
administrative or judicial proceedings ongoing or pending with
respect to any material Taxes of the Target or any of its
Subsidiaries.
(f) Tax
Jurisdictions. No claim has ever been made in writing by any taxing
authority in a jurisdiction where the Target and its Subsidiaries
do not file Tax Returns that the Target or any of its Subsidiaries
is or may be subject to Tax in that jurisdiction.
(g) Tax
Rulings. Neither the Target nor any of its Subsidiaries has
requested or is the subject of or bound by any private letter
ruling, technical advice memorandum, or similar ruling, memorandum,
or binding agreement with any taxing authority with respect to any
material Taxes, nor is any such request outstanding. No power of
attorney with respect to Taxes has been executed or filed with any
taxing authority by or on behalf of any of the Target nor any of
its Subsidiaries.
14
(h) Consolidated
Groups, Transferee Liability, and Tax Agreements. Neither Target
nor any of its Subsidiaries: (i) has been a member of a group
filing Tax Returns on a consolidated, combined, unitary, or similar
basis, other than the affiliated group the common parent of which
is Target; (ii) has any material liability for Taxes of any Person
(other than the Target or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any comparable provision of local,
state, or foreign Law), as a transferee or successor, by Contract,
or otherwise; or (iii) is a party to, bound by or has any material
liability under any Tax sharing, allocation, or indemnification
agreement or arrangement (other than customary Tax indemnifications
contained in credit or other commercial agreements the primary
purpose of which agreements does not relate to Taxes).
(i) Change
in Accounting Method. Neither Target nor any of its Subsidiaries
has agreed to make, nor is it required to make, any material
adjustment under Section 481(a) of the Code or any comparable
provision of state, local, or foreign Tax Laws by reason of a
change in accounting method or otherwise.
(j) Post-Closing
Tax Items. The Target and its Subsidiaries will not be required to
include any material item of income in, or exclude any material
item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any:
(i) "closing agreement" as described in Section 7121 of the Code
(or any corresponding or similar provision of state, local or
foreign income Tax Law) executed on or prior to the Closing Date;
(ii) installment sale or open transaction disposition made on or
prior to the Closing Date; (iii) prepaid, advance payment, or
deposit amount received or deferred revenue accrued on or prior to
the Closing Date; (iv) any income under Section 965(a) of the Code,
including as a result of any election under Section 965(h) of the
Code with respect thereto; (v) election under Section 108(i) of the
Code made on or prior to the Closing Date, or (vi) intercompany
transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any corresponding
provision of state, local or foreign Tax law).
(k) Section
355. Neither Target nor any of its Subsidiaries has been a
"distributing corporation" or a "controlled corporation" with
respect to any distribution described in Section 355 of the Code
preceding the Closing Date.
(l) Reportable
Transactions. Neither Target nor any of its Subsidiaries has been a
party to, or a material advisor with respect to, a "reportable
transaction" within the meaning of Section 6707A(c)(1) of the Code
and Treasury Regulations Section 1.6011-4(b).
(m) Intended
Tax Treatment. Neither the Target nor any of its Subsidiaries has
taken or agreed to take any action, and to the Knowledge of the
Target there exists no fact or circumstance, that is reasonably
likely to prevent or impede the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the
Code.
Section 3.07 Intellectual
Property.
(a) Scheduled
Target-Owned IP. Section 3.07(a) of the Target Disclosure Letter
contains a true and complete list, as of the date hereof, of all:
(i) Target-Owned IP that is the subject of any issuance,
registration, certificate, application, or other filing by, to or
with any Governmental Entity or authorized private registrar,
including patents, patent applications, trademark registrations and
pending applications for registration, copyright registrations and
pending applications for registration, and internet domain name
registrations; and (ii) material unregistered Target-Owned
IP.
(b) Right to
Use; Title. The Target or one of its Subsidiaries is the sole and
exclusive legal and beneficial owner of all right, title, and
interest in and to the Target-Owned IP, and has the valid and
enforceable right to use and practice all other Intellectual
Property used or practiced in or necessary for the conduct of the
business of the Target and its Subsidiaries as currently conducted
and as proposed to be conducted (all of the foregoing,
collectively, the "Target IP"), in each case, free and clear of all Liens
other than Permitted Liens.
15
(c) Validity
and Enforceability. The Target and its Subsidiaries' rights in the
Target-Owned IP are valid, subsisting, and enforceable. The Target
and each of its Subsidiaries have taken reasonable steps to
maintain the Target IP and to protect and preserve the
confidentiality of all trade secrets included in the Target
IP.
(d) Non-Infringement.
(i) The conduct of the businesses of the Target and any of its
Subsidiaries has not infringed, misappropriated, or otherwise
violated, and is not infringing, misappropriating, or otherwise
violating, any Intellectual Property of any other Person; and (ii)
to the Knowledge of the Target, and except as disclosed in Section
3.07(d) of the target Disclosure Letter, no third party is
infringing upon, violating, or misappropriating any Target
IP.
(e) IP
Legal Actions and Orders. Except as disclosed in Section 3.07(e) of
the Target Disclosure Letter, there are no Legal Actions pending
or, to the Knowledge of the Target, threatened: (i) alleging any
infringement, misappropriation, or violation by the Target or any
of its Subsidiaries of the Intellectual Property of any Person; or
(ii) challenging the validity, enforceability, or ownership of any
Target-Owned IP or the Target or any of its Subsidiaries' rights
with respect to any Target IP. The Target and its Subsidiaries are
not subject to any outstanding Order that restricts or impairs the
use, practicing, or enforcement of any Target-Owned
IP.
(f) Contributors.
No past or present director, officer, employee, consultant or
independent contractor of the Target or any of its Subsidiaries
owns, or has any claim or right (whether or not currently
exercisable) to any ownership interest in or to, any Target-Owned
IP. The Target and its Subsidiaries have executed valid and
enforceable written agreements with each of its and their past and
present directors, officers, employees, consultants and independent
contractors who were or are engaged in creating or developing for
the Target or its Subsidiaries any material Target-Owned IP,
pursuant to which such Person has (i) agreed to hold all
confidential information included in the Target-Owned IP in
confidence and (ii) presently assigned to the Target or its
Subsidiary all of such Person’s rights, title and interest in
and to all Intellectual Property created or developed for the
Target or its Subsidiaries or in the course of such Person’s
employment or retention thereby. There is no material uncured
breach by the Target or any of its Subsidiaries or, to the
Knowledge of the Target, the counterparty, under any such
agreement.
(g) Government
and Academic Resources. Except as disclosed in Section 3.01(g) of
the Target Disclosure Letter, no funding, facilities or personnel
of any Governmental Entity or any university, college, research
institute or other educational institution has been or is being
used in any material respect to create, in whole or in part, any
material Target-Owned IP. No current or former employee, consultant
or independent contractor of the Target or any of its Subsidiaries
who contributed to the creation or development of any material
Target-Owned IP has, to the Knowledge of the Target, performed
services for a Governmental Entity or any university, college,
research institute or other educational institution related to the
Target or any of its Subsidiaries’ business during a period
of time during which such employee, consultant or independent
contractor was also performing services for the Target or a Target
Subsidiary.
(h) Target
IT Systems. The Target IT Systems are sufficient for the conduct of
the Target’s and its Subsidiaries’ businesses. In the
past five years, there has been no malfunction, failure, continued
substandard performance, denial-of-service, or other cyber
incident, including any cyberattack, or other impairment of the
Target IT Systems, in each case except as would not reasonably be
expected to have, individually or in the aggregate, a Target
Material Adverse Effect. The Target and its Subsidiaries have taken
all reasonable best effort steps to safeguard the confidentiality,
availability, security, and integrity of the Target IT Systems,
including implementing and maintaining appropriate backup, disaster
recovery, and software and hardware support
arrangements.
(i) Privacy
and Data Security. The Target and each of its Subsidiaries have
complied with all applicable Laws and all internal or publicly
posted policies, notices, and statements concerning the collection,
use, processing, storage, transfer, and security of personal
information in the conduct of the Target's and its Subsidiaries'
businesses. In the past five years, the Target and its Subsidiaries
have not: (i) experienced any actual, alleged, or suspected data
breach or other security incident involving personal information in
their possession or control; or (ii) been subject to or received
any notice of any audit, investigation, complaint, or other Legal
Action by any Governmental Entity or other Person concerning the
Target's or any of its Subsidiaries' collection, use, processing,
storage, transfer, or protection of personal information or actual,
alleged, or suspected violation of any applicable Law concerning
privacy, data security, or data breach notification, and to the
Target's Knowledge, there are no facts or circumstances that could
reasonably be expected to give rise to any such Legal
Action.
16
Section 3.08 Compliance; Permits;
Restrictions.
(a) Compliance.
The Target and each of its Subsidiaries is and, since January 1,
2015, has been in material compliance with, all Laws or Orders
applicable to the Target or any of its Subsidiaries or by which the
Target or any of its Subsidiaries or any of their respective
businesses or properties is bound, including any Law administered
or promulgated by a Drug Regulatory Agency. Since January 1, 2015,
no Governmental Entity has issued any notice or notification
stating that the Target or any of its Subsidiaries is not in
compliance with any Law in any material respect.
(b) Permits.
The Target and its Subsidiaries hold, to the Knowledge of the
Target, to the extent necessary to operate their respective
businesses as such businesses are being operated as of the date
hereof, all permits, licenses, registrations, variances,
clearances, consents, commissions, franchises, exemptions, orders,
authorizations, and approvals from Governmental Entities
(collectively, "Permits"), except for any Permits for which the failure
to obtain or hold would not reasonably be expected to have,
individually or in the aggregate, a Target Material Adverse Effect.
No suspension, cancellation, non-renewal, or adverse modifications
of any Permits of the Target or any of its Subsidiaries is pending
or, to the Knowledge of the Target, threatened, except for any such
suspension or cancellation which would not reasonably be expected
to have, individually or in the aggregate, a Target Material
Adverse Effect. The Target and each of its Subsidiaries is and,
since January 1, 2015, has been in compliance with the terms of all
Permits, except where the failure to be in such compliance would
not reasonably be expected to have, individually or in the
aggregate, a Target Material Adverse Effect.
(c) There are no proceedings pending or, to the
Knowledge of the Target, threatened with respect to an alleged
material violation by the Target of the Federal Food, Drug, and
Cosmetic Act (“FDCA”), the Food and Drug Administration
(“FDA”) regulations adopted thereunder, or any
other similar Law administered or promulgated by the FDA or other
comparable Governmental Entity responsible for regulation of the
quality, identity, strength, purity, safety, efficacy, development,
clinical testing, manufacturing, sale, marketing, distribution and
importation or exportation of drug products (each, a
“Drug
Regulatory Agency”).
(d) The
Target holds all required Governmental Authorizations issuable by
any Drug Regulatory Agency material to the conduct of the business
of the Target as currently conducted, and, as applicable, to the
development, clinical testing, manufacturing, marketing,
distribution and importation or exportation, as currently
conducted, of any Target Products (collectively, the
“Target Regulatory
Permits”), except where
the failure to hold such Target Regulatory Permits would not
reasonably be expected to have, individually or in the aggregate, a
Target Material Adverse Effect. Section 3.08(d) of the Target
Disclosure Letter lists all Target Products and all Target
Regulatory Permits. No Target Regulatory Permit has been (i)
revoked, withdrawn, suspended, cancelled or terminated or (ii)
modified in any adverse manner, other than immaterial adverse
modifications. The Target and its Subsidiaries are in compliance in
all material respects with the Target Regulatory Permits and has
not received any written notice or other written communication from
any Drug Regulatory Agency regarding (A) any material violation of
or failure to comply materially with any term or requirement of any
Target Regulatory Permit or (B) any revocation, withdrawal,
suspension, cancellation, termination or material modification of
any Target Regulatory Permit. To the Knowledge of the Target, there
are no facts that would be reasonably likely to result in any
warning letter, untitled letter or other written notice of material
violation letter from the FDA.
(e) The
Target is the sole and exclusive owner of all Target Regulatory
Permits. The Target has not previously sold or transferred in any
manner, in whole or in part, directly or indirectly, any of the
Target Regulatory Permits.
(f) All
clinical, pre-clinical and other studies and tests conducted by or
on behalf of, or sponsored by, the Target or any of its
Subsidiaries, or in which the Target or any of its Subsidiaries or
the Target Products have participated, were and, if still pending,
are being conducted in compliance in all material respects to the
extent required by the applicable regulations of any applicable
Drug Regulatory Agency and other applicable Law, including 21
C.F.R. Parts 50, 54, 56, 58 and 312. No preclinical or clinical
trial conducted by or on behalf of the Target or any of its
Subsidiaries has been terminated or suspended prior to completion
for reasons of lack of safety or material non-compliance with
applicable Laws. Since the Target’s incorporation, the Target
and its Subsidiaries have not received any written notices or
correspondence, or other written communications from any Drug
Regulatory Agency requiring, or to the Knowledge of the Target,
threatening to initiate, the termination or suspension of any
clinical studies conducted by or on behalf of, or sponsored by, the
Target or any of its Subsidiaries or in which the Target or any of
its Subsidiaries or the Target Products have
participated.
17
Section 3.09 Litigation. Except as disclosed in Section 3.09 of the Target
Disclosure Letter, there is no Legal Action pending, or to the
Knowledge of the Target, threatened against the Target or any of
its Subsidiaries or any of their respective properties or assets
or, to the Knowledge of the Target, any officer or director of the
Target or any of its Subsidiaries in their capacities as such other
than any such Legal Action that: (a) does not involve an amount in
controversy in excess of $100,000; and (b) does not seek material
injunctive or other material non-monetary relief. None of the
Target or any of its Subsidiaries or any of their respective
properties or assets is subject to any order, writ, assessment,
decision, injunction, decree, ruling, or judgment
("Order") of a Governmental Entity or arbitrator, whether
temporary, preliminary, or permanent, which would reasonably be
expected to have, individually or in the aggregate, a Target
Material Adverse Effect. To the Knowledge of the Target, there are
no SEC inquiries or investigations, other governmental inquiries or
investigations, or internal investigations pending or, to the
Knowledge of the Target, threatened, in each case regarding any
accounting practices of the Target or any of its Subsidiaries or
any malfeasance by any officer or director of the
Target.
Section 3.10 Brokers' and Finders'
Fees. Except for fees payable
to Xxxxx Xxxxxx Xxxx, LLC (the "Target Financial
Advisor") pursuant to an
engagement letter listed in Section 3.10 of the Target Disclosure
Letter, neither the Target nor any of its Subsidiaries has
incurred, nor will it incur, directly or indirectly, any liability
for investment banker, brokerage, or finders' fees or agents'
commissions, or any similar charges in connection with this
Agreement or any transaction contemplated by this
Agreement.
Section 3.11 Related Person
Transactions. There are, and
since January 1, 2015, there have been, no Contracts, transactions,
arrangements, or understandings between the Target or any of its
Subsidiaries, on the one hand, and any Affiliate (including any
director, officer, or employee) thereof or any holder of 5% or more
of the shares of Target Common Stock, but not including any
wholly-owned Subsidiary of the Target, on the other hand, that
would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated by the SEC in the Target's Form 10-K or
proxy statement pertaining to an annual meeting of stockholders
that have not already been publicly disclosed.
Section 3.12 Employee
Matters.
(a) Schedule. Section 3.12(a) of the Target Disclosure
Letter contains a true and complete list, as of the date hereof, of
each plan, program, policy, agreement, collective bargaining
agreement, or other arrangement providing for compensation,
severance, deferred compensation, performance awards, stock or
stock-based awards, fringe, retirement, death, disability, medical,
or wellness benefits, or other employee benefits or remuneration of
any kind, including each employment, termination, severance,
retention, change in control, or consulting or independent
contractor plan, program, arrangement, or agreement, in each case
whether written or unwritten or otherwise, funded or unfunded,
insured or self-insured, including each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, whether or not subject
to ERISA, which is or has been sponsored, maintained, contributed
to, or required to be contributed to, by the Target or any of its
Subsidiaries for the benefit of any current or former employee,
independent contractor, consultant, or director of the Target or
any of its Subsidiaries (each, a "Target
Employee"), or with respect to
which the Target or any Target ERISA Affiliate has or may have any
Liability (collectively, the "Target Employee
Plans").
(b) Documents.
The Target has made available to Aytu correct and complete copies
(or, if a plan or arrangement is not written, a written
description) of all Target Employee Plans and amendments thereto,
and, to the extent applicable: (i) all related trust agreements,
funding arrangements, insurance contracts, and service provider
agreements now in effect or required in the future as a result of
the transactions contemplated by this Agreement or otherwise; (ii)
the most recent determination letter received regarding the
tax-qualified status of each Target Employee Plan; (iii) the most
recent financial statements for each Target Employee Plan; (iv) the
Form 5500 Annual Returns/Reports and Schedules for the most recent
plan year for each Target Employee Plan; (v) the current summary
plan description for each Target Employee Plan; and (vi) all
actuarial valuation reports related to any Target Employee
Plans.
18
(c) Employee
Plan Compliance. (i) Each Target Employee Plan (including any
multiemployer plans within the meaning of Section 3(37) of ERISA
(each a "Multiemployer
Plan")) has been established,
administered, and maintained in all material respects in accordance
with its terms and in material compliance with applicable Laws,
including but not limited to ERISA and the Code; (ii) all the
Target Employee Plans that are intended to be qualified under
Section 401(a) of the Code are so qualified and have received
timely determination letters from the IRS and no such determination
letter has been revoked nor, to the Knowledge of the Target, has
any such revocation been threatened, or with respect to a prototype
plan, can rely on an opinion letter from the IRS to the prototype
plan sponsor, to the effect that such qualified retirement plan and
the related trust are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and to the
Knowledge of the Target no circumstance exists that is likely to
result in the loss of such qualified status under Section 401(a) of
the Code; (iii) the Target and its Subsidiaries, where applicable,
have timely made all contributions, benefits, premiums, and other
payments required by and due under the terms of each Target
Employee Plan and applicable Law and accounting principles, and all
benefits accrued under any unfunded Target Employee Plan have been
paid, accrued, or otherwise adequately reserved to the extent
required by, and in accordance with GAAP; (iv) except to the extent
limited by applicable Law, each Target Employee Plan can be
amended, terminated, or otherwise discontinued after the Effective
Time in accordance with its terms, without material liability to
Aytu, the Target, or any of its Subsidiaries (other than ordinary
administration expenses and in respect of accrued benefits
thereunder); (v) there are no investigations, audits, inquiries,
enforcement actions, or Legal Actions pending or, to the Knowledge
of the Target, threatened by the IRS, U.S. Department of Labor,
Health and Human Services, Equal Employment Opportunity Commission,
or any similar Governmental Entity with respect to any Target
Employee Plan; (vi) there are no material Legal Actions pending,
or, to the Knowledge of the Target, threatened with respect to any
Target Employee Plan (in each case, other than routine claims for
benefits); and (vii) to the Knowledge of the Target, neither the
Target nor any of its Target ERISA Affiliates has engaged in a
transaction that could subject the Target or any Target ERISA
Affiliate to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA ; and (viii) all non-US Target
Employee Plans that are intended to be funded or book-reserved are
funded or book-reserved, as appropriate, based on reasonable
actuarial assumptions.
(d) Plan
Liabilities. Neither the Target nor any Target ERISA Affiliate has:
(i) incurred or reasonably expects to incur, either directly or
indirectly, any liability under Title I or Title IV of ERISA, or
related provisions of the Code or foreign Law relating to any
Target Employee Plan and nothing has occurred that could reasonably
be expected to constitute grounds under Title IV of ERISA to
terminate, or appoint a trustee to administer, any Target Employee
Plan; (ii) except for payments of premiums to the Pension Benefit
Guaranty Corporation ("PBGC") which have been timely paid in full, not
incurred any liability to the PBGC in connection with any Target
Employee Plan covering any active, retired, or former employees or
directors of the Target or any Target ERISA Affiliate, including,
without limitation, any liability under Sections 4069 or 4212(c) of
ERISA or any penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility, or withdrawn from any such Target
Employee Plan in a manner that could subject it to liability under
Sections 4062, 4063 or 4064 of ERISA; (iii) failed to satisfy the
health plan compliance requirements under the Affordable Care Act,
including related information reporting requirements; (iv) failed
to comply with Section 601 et. seq. of ERISA and Section 4980B of
the Code, regarding the health plan continuation coverage
requirements under COBRA; (v) failed to comply with the privacy,
security, and breach notification requirements under HIPAA; or (vi)
incurred any withdrawal liability (including any contingent or
secondary withdrawal liability) within the meaning of Sections 4201
or 4204 of ERISA to any Multiemployer Plan and nothing has occurred
that presents a material risk of the occurrence of any withdrawal
from or the partition, termination, reorganization, or insolvency
of any such Multiemployer Plan which could result in any liability
of the Target or any Target ERISA Affiliate to any such
Multiemployer Plan. No complete or partial termination of any
Target Employee Plan has occurred or is expected to
occur.
(e) Certain
Target Employee Plans. With respect to each Target Employee
Plan:
(i) no
such plan is a "multiemployer plan" within the meaning of Section
3(37) of ERISA or a "multiple employer plan" within the meaning of
Section 413(c) of the Code and neither the Target nor any of its
Target ERISA Affiliates has now or at any time within the previous
six years contributed to, sponsored, maintained, or had any
liability or obligation in respect of any such Multiemployer Plan
or multiple employer plan;
(ii) no
Legal Action has been initiated by the PBGC to terminate any such
Target Employee Plan or to appoint a trustee for any such Target
Employee Plan;
19
(iii) no
Target Employee Plan is subject to the minimum funding standards of
Section 302 of ERISA or Sections 412, 418(b), or 430 of the Code,
and none of the assets of the Target or any Target ERISA Affiliate
is, or may reasonably be expected to become, the subject of any
lien arising under Section 303 of ERISA or Sections 430 or 436 of
the Code. Except as set forth in Section 3.12(e) of the Target
Disclosure Letter, no such plan is subject to the minimum funding
standards of Section 302 of ERISA or Sections 412, 418(b), or 430
of the Code, and no plan listed in Section 3.12(e) of the Target
Disclosure Letter has failed to satisfy the minimum funding
standards of Section 302 of ERISA or Sections 412, 418(b), or 430
of the Code, and none of the assets of the Target or any Target
ERISA Affiliate is, or may reasonably be expected to become, the
subject of any lien arising under Section 303 of ERISA or Sections
430 or 436 of the Code; and
(iv) no
"reportable event," as defined in Section 4043 of ERISA, has
occurred, or is reasonably expected to occur, with respect to any
such Target Employee Plan.
(f) No
Post-Employment Obligations. Except as disclosed in Section 3.12(f)
of the Target Disclosure Letter, no Target Employee Plan provides
post-termination or retiree health benefits to any person for any
reason, except as may be required by COBRA or other applicable Law,
and neither the Target nor any Target ERISA Affiliate has any
Liability to provide post-termination or retiree health benefits to
any person or ever represented, promised, or contracted to any
Target Employee (either individually or to Target Employees as a
group) or any other person that such Target Employee(s) or other
person would be provided with post-termination or retiree health
benefits, except to the extent required by COBRA or other
applicable Law.
(g) Potential
Governmental or Lawsuit Liability. Other than routine claims for
benefits: (i) there are no pending or, to the Knowledge of the
Target, threatened claims by or on behalf of any participant in any
Target Employee Plan, or otherwise involving any Target Employee
Plan or the assets of any Target Employee Plan; and (ii) no Target
Employee Plan is presently or has within the three years prior to
the date hereof, been the subject of an examination or audit by a
Governmental Entity or is the subject of an application or filing
under, or is a participant in, an amnesty, voluntary compliance,
self-correction, or similar program sponsored by any Governmental
Entity.
(h) Section
409A Compliance. Each Target Employee Plan that is subject to
Section 409A of the Code has been operated in compliance with such
section and all applicable regulatory guidance (including, without
limitation, proposed regulations, notices, rulings, and final
regulations).
(i) Health
Plan Compliance. Each of the Target and its Subsidiaries complies
in all material respects with the applicable requirements under the
Affordable Care Act, the Code, ERISA, COBRA, HIPAA, and other
federal requirements for employer-sponsored health plans, and any
corresponding requirements under state statutes, with respect to
each Target Employee Plan that is a group health plan within the
meaning of Section 733(a) of ERISA, Section 5000(b)(1) of the Code,
or such state statute.
(j) Effect
of Transaction. Except as disclosed in Section 3.12(j) of the
Target Disclosure Letter, neither the execution or delivery of this
Agreement, the consummation of the Merger, nor any of the other
transactions contemplated by this Agreement will (either alone or
in combination with any other event): (i) entitle any current or
former director, employee, contractor, or consultant of the Target
or any of its Subsidiaries to severance pay or any other payment;
(ii) accelerate the timing of payment, funding, or vesting, or
increase the amount of compensation due to any such individual;
(iii) limit or restrict the right of the Target to merge, amend, or
terminate any Target Employee Plan; or (iv) increase the amount
payable or result in any other material obligation pursuant to any
Target Employee Plan. No amount that could be received (whether in
cash or property or the vesting of any property) as a result of the
consummation of the transactions contemplated by this Agreement by
any employee, director, or other service provider of the Target
under any Target Employee Plan or otherwise would not be deductible
by reason of Section 280G of the Code nor would be subject to an
excise tax under Section 4999 of the Code.
20
(k) Employment
Law Matters. To the Knowledge of the Target, the Target and each of
its Subsidiaries: (i) is in compliance with all applicable Laws and
agreements regarding hiring, employment, termination of employment,
plant closing and mass layoff, employment discrimination,
harassment, retaliation, and reasonable accommodation, leaves of
absence, terms and conditions of employment, wages and hours of
work, employee classification, employee health and safety, use of
genetic information, leasing and supply of temporary and contingent
staff, engagement of independent contractors, including proper
classification of same, payroll taxes, and immigration and work
authorization with respect to Target Employees, and contingent
workers; and (ii) is in compliance with all applicable Laws
relating to the relations between it and any labor organization,
trade union, work council, or other body representing Target
Employees, except, in the case of clauses (i) and (ii) immediately
above, where the failure to be in compliance with the foregoing
would not reasonably be expected to have, individually or in the
aggregate, a Target Material Adverse Effect.
(l) Labor.
Neither Target nor any of its Subsidiaries is party to, or subject
to, any collective bargaining agreement or other agreement with any
labor organization, work council, or trade union with respect to
any of its or their operations. No material work stoppage,
slowdown, or labor strike against the Target or any of its
Subsidiaries with respect to employees who are employed within the
United States is pending, threatened, or has occurred in the last
two years, and, to the Knowledge of the Target, no material work
stoppage, slowdown, or labor strike against the Target or any of
its Subsidiaries with respect to employees who are employed outside
the United States is pending, threatened, or has occurred in the
last two years. None of the Target Employees is represented by a
labor organization, work council, or trade union and, to the
Knowledge of the Target, there is no organizing activity, Legal
Action, election petition, union card signing or other union
activity, or union corporate campaigns of or by any labor
organization, trade union, or work council directed at the Target
or any of its Subsidiaries, or any Target Employees. There are no
Legal Actions, government investigations or audits, or labor
grievances pending, or, to the Knowledge of the Target, threatened
relating to any employment related matter involving any Target
Employee or applicant, including, but not limited to, charges of
unlawful discrimination, retaliation or harassment, failure to
provide reasonable accommodation, denial of a leave of absence,
failure to provide compensation or benefits, unfair labor
practices, failure to verify employee work authorization, or other
alleged violations of Law, except for any of the foregoing which
would not reasonably be expected to have, individually or in the
aggregate, a Target Material Adverse Effect.
Section 3.13 Real Property and Personal
Property Matters.
(a) Leased
Real Estate. Section 3.13(b) of the Target Disclosure Letter
contains a true and complete list of all Leases (including all
amendments, extensions, renewals, guaranties, and other agreements
with respect thereto) as of the date hereof for each such Leased
Real Estate (including the date and name of the parties to such
Lease document). The Target has delivered to Aytu a true and
complete copy of each such Lease. Except as set forth in Section
3.13(b) of the Target Disclosure Letter, with respect to each of
the Leases: (i) such Lease is legal, valid, binding, enforceable,
and in full force and effect; (ii) neither the Target nor any of
its Subsidiaries nor, to the Knowledge of the Target, any other
party to the Lease, is in breach or default under such Lease, and
no event has occurred or circumstance exists which, with or without
notice, lapse of time, or both, would constitute a breach or
default under such Lease; (iii) the Target's or its Subsidiary's
possession and quiet enjoyment of the Leased Real Estate under such
Lease has not been disturbed, and to the Knowledge of the Target,
there are no disputes with respect to such Lease; and (iv) there
are no Liens on the estate created by such Lease other than
Permitted Liens. Neither the Target nor any of its Subsidiaries has
assigned, pledged, mortgaged, hypothecated, or otherwise
transferred any Lease or any interest therein nor has the Target or
any of its Subsidiaries subleased, licensed, or otherwise granted
any Person (other than another wholly-owned Subsidiary of the
Target) a right to use or occupy such Leased Real Estate or any
portion thereof.
(b) Real
Estate Used in the Business. The Leased Real Estate identified in
Section 3.13(b) of the Target Disclosure Letter comprise all of the
real property used or intended to be used in, or otherwise related
to, the business of the Target or any of its
Subsidiaries.
(c) Personal
Property. Except as would not reasonably be expected to have,
individually or in the aggregate, a Target Material Adverse Effect,
the Target and each of its Subsidiaries are in possession of and
have good and marketable title to, or valid leasehold interests in
or valid rights under contract to use, the machinery, equipment,
furniture, fixtures, and other tangible personal property and
assets owned, leased, or used by the Target or any of its
Subsidiaries, free and clear of all Liens other than Permitted
Liens.
21
Section 3.14 Environmental Matters.
Except for such matters as would not
reasonably be expected to have, individually or in the aggregate, a
Target Material Adverse Effect:
(a) The
Target and its Subsidiaries are, and have been, in compliance with
all Environmental Laws, which compliance includes the possession,
maintenance of, compliance with, or application for, all Permits
required under applicable Environmental Laws for the operation of
the business of the Target and its Subsidiaries as currently
conducted.
(b) Neither
the Target nor any of its Subsidiaries has disposed of, released,
or discharged any Hazardous Substances on, at, under, in, or from
any real property currently or, to the Knowledge of the Target,
formerly owned, leased, or operated by it or any of its
Subsidiaries or at any other location that is: (i) currently
subject to any investigation, remediation, or monitoring; or (ii)
reasonably likely to result in liability to the Target or any of
its Subsidiaries, in either case of (i) or (ii) under any
applicable Environmental Laws.
(c) Neither
the Target nor any of its Subsidiaries has: (i) produced,
processed, manufactured, generated, transported, treated, handled,
used, or stored any Hazardous Substances, except in compliance with
Environmental Laws, at any Leased Real Estate; or (ii) exposed any
employee or any third party to any Hazardous Substances under
circumstances reasonably expected to give rise to any material
Liability or obligation under any Environmental Law.
(d) Neither
the Target nor any of its Subsidiaries has received written notice
of and there is no Legal Action pending, or to the Knowledge of the
Target, threatened against the Target or any of its Subsidiaries,
alleging any Liability or responsibility under or non-compliance
with any Environmental Law or seeking to impose any financial
responsibility for any investigation, cleanup, removal,
containment, or any other remediation or compliance under any
Environmental Law. Neither the Target nor any of its Subsidiaries
is subject to any Order, settlement agreement, or other written
agreement by or with any Governmental Entity or third party
imposing any material Liability or obligation with respect to any
of the foregoing.
(e) Neither
the Target nor any of its Subsidiaries has expressly assumed or
retained any Liabilities under any applicable Environmental Laws of
any other Person, including in any acquisition or divestiture of
any property or business.
Section 3.15 Material
Contracts.
(a) Material
Contracts. For purposes of this Agreement, "Target Material
Contract" shall mean the
following to which the Target or any of its Subsidiaries is a party
or any of the respective assets are bound (excluding any
Leases):
(i) any
"material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the Securities Act), whether or not filed by the
Target with the SEC;
(ii) any
employment or consulting Contract (in each case with respect to
which the Target has continuing obligations as of the date hereof)
with any current or former (A) officer of the Target, (B) member of
the Target Board, or (C) Target Employee providing for an annual
base salary or payment in excess of $100,000;
22
(iii) any
Contract providing for indemnification or any guaranty by the
Target or any Subsidiary thereof, in each case that is material to
the Target and its Subsidiaries, taken as a whole, other than any
guaranty by the Target or a Subsidiary thereof of any of the
obligations of (1) the Target or another wholly-owned Subsidiary
thereof or (2) any Subsidiary (other than a wholly-owned
Subsidiary) of the Target that was entered into in the ordinary
course of business pursuant to or in connection with a customer
Contract;
(iv) any
Contract that purports to limit in any material respect the right
of the Target or any of its Subsidiaries (or, at any time after the
consummation of the Merger, Aytu or any of its Subsidiaries) (A) to
engage in any line of business, (B) compete with any Person or
solicit any client or customer, or (C) operate in any geographical
location;
(v) any
Contract relating to the disposition or acquisition, directly or
indirectly (by merger, sale of stock, sale of assets, or
otherwise), by the Target or any of its Subsidiaries after the date
of this Agreement of assets or capital stock or other equity
interests of any Person, in each case with a fair market value in
excess of $100,000;
(vi) any
Contract that grants any right of first refusal, right of first
offer, or similar right with respect to any material assets,
rights, or properties of the Target or any of its
Subsidiaries;
(vii) any
Contract that contains any provision that requires the purchase of
all or a material portion of the Target's or any of its
Subsidiaries' requirements for a given product or service from a
given third party, which product or service is material to the
Target and its Subsidiaries, taken as a whole;
(viii) any
Contract that obligates the Target or any of its Subsidiaries to
conduct business on an exclusive or preferential basis or that
contains a "most favored nation" or similar covenant with any third
party or upon consummation of the Merger will obligate Aytu, the
Surviving Corporation, or any of their respective Subsidiaries to
conduct business on an exclusive or preferential basis or subject
to a "most favored nation" or similar covenant with any third
party;
(ix) any
partnership, joint venture, limited liability company agreement, or
similar Contract relating to the formation, creation, operation,
management, or control of any material joint venture, partnership,
or limited liability company, other than any such Contact solely
between the Target and its wholly-owned Subsidiaries or among the
Target's wholly-owned Subsidiaries;
(x) any
mortgages, indentures, guarantees, loans, or credit agreements,
security agreements, or other Contracts, in each case relating to
indebtedness for borrowed money, whether as borrower or lender, in
each case in excess of $100,000, other than (A) accounts
receivables and payables, and (B) loans to direct or indirect
wholly-owned Subsidiaries of the Target;
(xi) any
employee collective bargaining agreement or other Contract with any
labor union;
(xii) any
Target IP Agreement, other than licenses for shrinkwrap, clickwrap,
or other similar commercially available off-the-shelf software that
(A) can be replaced for less than $5,000 if licensed on a perpetual
basis, or less $2,500 per year otherwise, and (B) has not been
modified or customized by a third party for the Target or any of
its Subsidiaries;
23
(xiii) grants
a third party development rights or marketing or distribution
rights relating to any Target Product and provides for an upfront
payment or expected licensing fees in excess of
$100,000;
(xiv) any
other Contract under which the Target or any of its Subsidiaries is
obligated to make payment or incur costs in excess of $100,000 in
any year and which is not otherwise described in clauses
(i)–(xii) above; or
(xv) any
Contract which is not otherwise described in clauses (i)-(xiii)
above that is material to the Target and its Subsidiaries, taken as
a whole.
(b) Schedule
of Material Contracts; Documents. Section 3.15(b) of the Target
Disclosure Letter sets forth a true and complete list as of the
date hereof of all Target Material Contracts. The Target has made
available to Aytu correct and complete copies of all Target
Material Contracts, including any amendments thereto.
(c) No
Breach or Pending Termination. (i) All the Target Material
Contracts are legal, valid, and binding on the Target or its
applicable Subsidiary and, to the Knowledge of the Target, the
counterparties to such Target Material Contracts, enforceable
against it and them in accordance with their terms, and are in full
force and effect; (ii) neither the Target nor any of its
Subsidiaries nor, to the Knowledge of the Target, any third party
has violated any provision of, or failed to perform any obligation
required under the provisions of, any Target Material Contract;
(iii) neither the Target nor any of its Subsidiaries nor, to the
Knowledge of the Target, any third party is in breach, or has
received written notice of breach, of any Target Material Contract;
and (iv) to the Knowledge of the Target, none of the Target
Material Contracts are the subject of any ongoing renegotiation
discussions or pending notice of termination.
Section 3.16 Insurance. Except as would not, individually or in the
aggregate, reasonably be expected to have a Target Material Adverse
Effect, all insurance policies of the Target and its Subsidiaries
are in full force and effect and provide insurance in such amounts
and against such risks as the Target reasonably has determined to
be prudent, taking into account the industries in which the Target
and its Subsidiaries operate, and as is sufficient to comply with
applicable Law. Except as would not, individually or in the
aggregate, reasonably be expected to have a Target Material Adverse
Effect, neither the Target nor any of its Subsidiaries is in breach
or default, and neither the Target nor any of its Subsidiaries has
taken any action or failed to take any action which, with notice or
the lapse of time, would constitute such a breach or default, or
permit termination or modification of, any of such insurance
policies. Except as would not, individually or in the aggregate,
reasonably be expected to have a Target Material Adverse Effect and
to the Knowledge of the Target: (i) no insurer of any such policy
has been declared insolvent or placed in receivership,
conservatorship, or liquidation; and (ii) no notice of cancellation
or termination, other than pursuant to the expiration of a term in
accordance with the terms thereof, has been received with respect
to any such policy.
Section 3.17 Information Supplied.
None of the information supplied or to
be supplied by or on behalf of the Target for inclusion or
incorporation by reference in the registration statement on Form
S-4 to be filed with the SEC by Aytu in connection with the Aytu
Stock Issuance (the "Form S-4") will, at the time the Form S-4 is filed with
the SEC, and at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied
or to be supplied by or on behalf of the Target for inclusion or
incorporation by reference in the joint proxy statement to be filed
with the SEC and sent to the Target's stockholders in connection
with the Merger and the other transactions contemplated by this
Agreement and to the Aytu's stockholders in connection with the
Aytu Stock Issuance (including any amendments or supplements
thereto, the "Joint Proxy
Statement") will, at the date
it is first mailed to the Target's and Aytu's stockholders or at
the time of the Target Stockholders Meeting or Aytu Stockholders
Meeting or at the time of any amendment or supplement thereof,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Joint Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, no representation or warranty is
made by the Target with respect to statements made or incorporated
by reference therein based on information that was not supplied by
or on behalf of the Target.
24
Section 3.18 Regulatory
Matters.
(a) As
to each Target Product subject to the FDCA, the U.S. Public Health
Service Act (“PHS Act”), or similar Laws in any non-United States
jurisdiction that is investigated, manufactured, distributed or
marketed by Target or its Subsidiaries to be used in humans, to the
Knowledge of the Target, each such Target Product is being
manufactured, tested, distributed, marketed, sold and stored in
material compliance with all applicable requirements under the
FDCA, the PHS Act, and similar applicable Laws administered by the
applicable Drug Regulatory Agency, including (i) FDA standards for
the design, conduct, performance, monitoring, auditing, recording,
analysis and reporting of clinical trials contained in Title 21
parts 50, 54, 56, 312, 314 and 320 of the Code of Federal
Regulations and (ii) those Laws relating to good laboratory
practices, good clinical practices, investigational use, Human
Cell, Tissue and Cellular and Tissue-based Products (HCT/Ps),
pre-market clearance or marketing approval to market a Target
Product, current good manufacturing practices and quality system
requirements, labeling, advertising, record keeping, filing of
reports and security, and in material compliance with federal and
state fraud and abuse and false claims Laws, privacy Laws, Laws
governing gifts and other transfers of value to physicians, and any
equivalent applicable Laws and regulations in any non-United States
jurisdiction. Further, with regard to each such Target Product,
Target, and to the Knowledge of Target, Target’s agents are
in material compliance with all United States Laws, and similar
applicable Laws in any non-United States jurisdiction, governing
the storage, handling, shipment, transfer, import, export, or sale
of human cells or tissues. Target has not received any written
notice or other written communication from the FDA or any other
applicable Governmental Entity (x) contesting the pre-market
clearance or approval of, the uses of or the labeling and promotion
of any Target Product or (y) otherwise stating any violation
applicable to any Target Product of any applicable Law, including
but not limited to any applicable Law governing the storage,
handling, shipment, manufacturing, import, export, or sale of human
cells or tissues.
(b) With
respect to the Target Products, Target has no material applications
(including IND), registrations, licenses, waivers, accreditations,
authorizations, approvals, clinical and preclinical data in the
possession or control of Target or its Subsidiaries. There is no
material written correspondence between Target or its Subsidiaries
and the applicable Drug Regulatory Agency (including minutes and
official contact reports of communications with any applicable Drug
Regulatory Agency). Without limiting the foregoing, Target has made
available to Aytu all information about any serious adverse events
(as such term is defined in 21 C.F.R. 312.32) in the possession of
the Target or any of its Subsidiaries as of the date of this
Agreement relating to any Target Product.
(c) Except
as set forth in Section 3.18(c) of the Target Disclosure Letter, no
Target Product is under consideration by senior management of
Target or its Subsidiaries for recall, withdrawal, removal,
suspension, seizure or discontinuation, or has been recalled,
withdrawn, removed, suspended, seized or discontinued (other than
for commercial or other business reasons) by Target or its
Subsidiaries, in the United States or outside the United States
(whether voluntarily or otherwise) and, to the Knowledge of the
Target, no legal proceedings in the United States or outside of the
United States (whether completed or pending) seeking the recall,
withdrawal, suspension, seizure or discontinuation of any Target
Product are pending against Target, its agents or any licensee of
any Target Product.
(d) To
the Target’s Knowledge, no Target Product manufactured or
distributed by Target is or has been (i) adulterated within the
meaning of 21 U.S.C. § 351 (or similar Laws), including, but
not limited to, applicable requirements of 21 C.F.R. Parts 600, or
1271, (ii) misbranded within the meaning of 21 U.S.C. § 352
(or similar Laws) or (iii) a product that is in violation of 21
U.S.C. § 355, § 360, § 360e (or similar
Laws).
(e) Neither
Target, its Subsidiaries nor, to the Knowledge of Target, any of
its officers, employees or agents has made an untrue statement of a
material fact or fraudulent statement to the FDA or any other
Governmental Entity, failed to disclose a material fact required to
be disclosed to the FDA or any other Governmental Entity, or
committed an act, made a statement, or failed to make a statement
that, at the time such disclosure was made, could reasonably be
expected to provide a basis for the FDA or any other Governmental
Entity to invoke its policy respecting “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal
Gratuities,” set forth in 56 Fed. Reg. 46191 (10 September
1991) or any similar policy, Law, regulation or procedure of any
other Governmental Entity.
(f) Except
as has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Target Material Adverse Effect,
Target or its Subsidiaries have prepared, submitted and implemented
timely responses and, as applicable, any corrective action plans
required to be prepared and submitted in response to all (i)
internal or third-party audits, inspections, investigations or
examinations of the Target Product or Target’s business; (ii)
adverse event reports; (iii) material patient complaints; (iv)
medical incident reports relating to the Target Product; and (v)
material corrective and preventive actions.
25
(g) Neither
Target nor, to the Knowledge of Target, any of its officers,
employees or agents has been convicted of any crime or engaged in
any conduct for which debarment is mandated by 21 U.S.C. §
335a(a) or any similar Law or authorized by 21 U.S.C.§ 335a(b)
or any similar Law. Neither Target nor, to the Knowledge of Target,
any of its officers, employees or agents has been convicted of any
crime or engaged in any conduct for which such Person could be
excluded from participating in the federal health care programs
under Section 1128 of the U.S. Social Security Act of 1935, as
amended, or any similar Laws.
(h) Neither Target nor its Subsidiaries have
submitted, nor caused to be submitted, any claim for payment to any
government healthcare program in connection with any referrals
related to any Target Product, or engaged in any other conduct,
that violated in any material respect any applicable self-referral
Law, including the U.S. Federal Ethics in Patient Referrals Act, 42
U.S.C. §1395nn (known as the “Xxxxx Law”), any anti-kickback Law, any false claims
Law, or any other applicable similar state or non-U.S.
Law.
(i) For
each study of a Target Product controlled by and, to the Knowledge
of Target, for each study of a Target Product not controlled by but
sponsored or commissioned by, or conducted at the request of,
Target or its Subsidiaries in which human subjects participated,
Target or the party conducting the study obtained the informed
consent of such human subjects in material compliance with FDA
regulations on Protection of Human Subjects, 21 C.F.R. Part 50, the
ICH E6 Good Clinical Practice: Consolidated Guidance (1996), and in
material compliance with all applicable Laws, statutes, rules,
regulations and ordinances, and all amendments to any of the
foregoing. All clinical studies conducted by or on behalf of Target
or its Subsidiaries were conducted in material compliance with
applicable requirements of 21 C.F.R. Parts 54 and 56, and such
other Laws governing the conduct of clinical studies.
(j) Target has operated its business in compliance in
all material respects with all applicable Laws, clinical trial
protocols, and contractual or other requirements relating to
medical records and medical information privacy that regulate or
limit the maintenance, use, disclosure or transmission of medical
records, clinical trial data, patient information or other personal
information made available to or collected by Target in connection
with the operation of Target’s business, including the
Standards for Privacy of Individually Identifiable Health
Information at 45 C.F.R. Parts 160 and 164 (subparts A and E), the
Security Standards at 45 C.F.R. Parts 160 and 164 (subparts A and
C), the Standards for Electronic Transactions and Code Sets at 45
C.F.R. Parts 160 and 162 promulgated under HIPAA, the U.S. Health
Information Technology for Economic and Clinical Health Act (Pub.
L. No. 111-5) (“HITECH”) and HITECH implementing regulations,
Directive 95/46/EC and all comparable Laws relating to any of the
foregoing (the “Health Care Data
Requirements”). Target
has implemented in all material respects any confidentiality,
security and other measures required by the Health Care Data
Requirements. Target is and, to the Knowledge of the Target, has at
all times been in compliance in all material respects with the
applicable privacy and security requirements of HIPAA and HITECH in
conducting Target’s business. As of the date hereof, Target
has not, to its Knowledge, suffered any accidental, unauthorized,
or unlawful destruction, loss, alteration, or disclosure of, or
access to, personal data or suffered a security breach in relation
to any other data which it holds. As of the date hereof, no
material breach has occurred with respect to any unsecured
Protected Health Information, as that term is defined in 45 C.F.R.
§160.103, maintained by or for Target that is subject to the
notification requirements of 45 C.F.R. Part 164, Subpart D, and, as
of the date hereof, no information security or privacy breach event
has occurred that would require notification under any comparable
Laws.
Section 3.19 Anti-Corruption Matters.
Since January 1, 2015, none of the
Target, any of its Subsidiaries or any director, officer or, to the
Knowledge of the Target, employee or agent of the Target or any of
its Subsidiaries has: (i) used any funds for unlawful
contributions, gifts, entertainment, or other unlawful payments
relating to an act by any Governmental Entity; (ii) made any
unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign
or violated any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or (iii) made any other unlawful payment under
any applicable Law relating to anti-corruption, bribery, or similar
matters. Since January 1, 2015, neither the Target nor any of its
Subsidiaries has disclosed to any Governmental Entity that it
violated or may have violated any Law relating to anti-corruption,
bribery, or similar matters. To the Knowledge of the Target, no
Governmental Entity is investigating, examining, or reviewing the
Target's compliance with any applicable provisions of any Law
relating to anti-corruption, bribery, or similar
matters.
26
Section 3.20 Fairness Opinion.
The Target has received the opinion of
the Target Financial Advisor (and, if it is in writing, has
provided a copy of such opinion to Aytu) to the effect that, as of
the date of this Agreement and based upon and subject to the
qualifications and assumptions set forth therein, the Exchange
Ratio is fair, from a financial point of view, to the holders of
shares of Target Common Stock, and, as of the date of this
Agreement, such opinion has not been withdrawn, revoked, or
modified.
Section 3.21 No Other Representations or
Warranties. Except for the
representations and warranties contained in this ARTICLE III
(including the related portions of the
Target Disclosure Letter), neither the Target nor any other Person
has made or makes any other express or implied representation or
warranty, either written or oral, on behalf of the
Target.
Section 3.22 Disclaimer of Reliance.
Notwithstanding anything contained in
this Agreement to the contrary, the Target acknowledges and agrees
that none of Aytu, Merger Sub or any other Person has made or is
making, and the Target expressly disclaims reliance upon, any
representations, warranties, or statements relating to Aytu or
Merger Sub, express or implied, beyond those expressly given by
Aytu and Merger Sub in ARTICLE IV.
27
ARTICLE IV
Except:
(a) as disclosed in the Aytu SEC Documents at least three Business
Days prior to the date hereof and that is reasonably apparent on
the face of such disclosure to be applicable to the representation
and warranty set forth herein (other than any disclosures contained
or referenced therein under the captions "Risk Factors,"
"Forward-Looking Statements," "Quantitative and Qualitative
Disclosures About Market Risk," and any other disclosures contained
or referenced therein of information, factors, or risks that are
predictive, cautionary, or forward-looking in nature); or (b) as
set forth in the correspondingly numbered Section of the Aytu
Disclosure Letter that relates to such Section or in another
Section of the Aytu Disclosure Letter to the extent that it is
reasonably apparent on the face of such disclosure that such
disclosure is applicable to such Section; Aytu and Merger Sub
hereby jointly and severally represent and warrant to the Target as
follows:
Section 4.01 Organization; Standing and
Power; Charter Documents; Subsidiaries.
(a) Organization; Standing and Power. Each of Aytu and
its Subsidiaries is a corporation, limited liability company, or
other legal entity duly organized, validly existing, and in good
standing (to the extent that the concept of "good standing" is
applicable in the case of any jurisdiction outside the United
States) under the Laws of its jurisdiction of organization, and has
the requisite corporate, limited liability company, or other
organizational, as applicable, power and authority to own, lease,
and operate its assets and to carry on its business as now
conducted. Each of Aytu and its Subsidiaries is duly qualified or
licensed to do business as a foreign corporation, limited liability
company, or other legal entity and is in good standing (to the
extent that the concept of "good standing" is applicable in the
case of any jurisdiction outside the United States) in each
jurisdiction where the character of the assets and properties
owned, leased, or operated by it or the nature of its business
makes such qualification or license necessary, except where the
failure to be so qualified or licensed or to be in good standing,
would not reasonably be expected to have, individually or in the
aggregate, an Aytu Material Adverse Effect.
(b) Charter
Documents. The copies of the Certificate of Incorporation and
By-Laws of Aytu as most recently filed with the Aytu SEC Documents
are true, correct, and complete copies of such documents as in
effect as of the date of this Agreement. Aytu has delivered or made
available to the Target a true and correct copy of the Charter
Documents of Merger Sub. Neither Aytu nor Merger Sub is in
violation of any of the provisions of its Charter
Documents.
(c) Subsidiaries.
All of the outstanding shares of capital stock of, or other equity
or voting interests in, each Subsidiary of Aytu have been validly
issued and are owned by Aytu, directly or indirectly, free of
pre-emptive rights, are fully paid and non-assessable, and are free
and clear of all Liens, including any restriction on the right to
vote, sell, or otherwise dispose of such capital stock or other
equity or voting interests, except for any Liens: (i) imposed by
applicable securities Laws; or (ii) arising pursuant to the Charter
Documents of any non-wholly-owned Subsidiary of Aytu. Except for
the capital stock of, or other equity or voting interests in, its
Subsidiaries, Aytu does not own, directly or indirectly, any
capital stock of, or other equity or voting interests in, any
Person.
(a) Capital
Stock. The authorized capital stock of Aytu consists of: (i)
100,000,000 shares of Aytu Common Stock; and (ii) 50,000,000 shares
of preferred stock, par value $0.0001 per share, of Aytu (the
"Aytu
Preferred Stock"). As of the
date of this Agreement: (A) 17,688,071
shares of Aytu Common Stock were issued and outstanding (not
including shares held in treasury); (B) no shares of Aytu Common
Stock were issued and held by Aytu in its treasury; and (C)
3,444,981 shares of Aytu Preferred Stock were issued and
outstanding. All of the outstanding shares of capital stock of Aytu
are, and all shares of capital stock of Aytu which may be issued as
contemplated or permitted by this Agreement, including the shares
of Aytu Common Stock constituting the Merger Consideration, will
be, when issued, duly authorized, validly issued, fully paid, and
non-assessable, and not subject to any pre-emptive rights. No
Subsidiary of Aytu owns any shares of Aytu Common
Stock.
28
(b) Stock
Awards.
(i) As
of the date of this Agreement, an aggregate of 3,000,000 shares of
Aytu Common Stock were reserved for issuance pursuant to Aytu
Equity Awards not yet granted under the Aytu Stock Plans. As of the
date of this Agreement, 1,607 shares of Aytu Common Stock were
reserved for issuance pursuant to outstanding Aytu Stock Options
and 2,347,754 shares of Aytu Restricted Shares were issued and
outstanding. All shares of Aytu Common Stock subject to issuance
under the Aytu Stock Plans, including the Aytu Equity Awards
constituting Merger Consideration to be issued pursuant to
Section
2.07, upon issuance in
accordance with the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid, and
non-assessable.
(ii) Other
than the Aytu Equity Awards, as of the date hereof, there are no
outstanding (A) securities of Aytu or any of its Subsidiaries
convertible into or exchangeable for Aytu Voting Debt or shares of
capital stock of Aytu, (B) options, warrants, or other agreements
or commitments to acquire from Aytu or any of its Subsidiaries, or
obligations of Aytu or any of its Subsidiaries to issue, any Aytu
Voting Debt or shares of capital stock of (or securities
convertible into or exchangeable for shares of capital stock of)
Aytu, or (C) restricted shares, restricted stock units, stock
appreciation rights, performance shares, profit participation
rights, contingent value rights, "phantom" stock, or similar
securities or rights that are derivative of, or provide economic
benefits based, directly or indirectly, on the value or price of,
any shares of capital stock of Aytu, in each case that have been
issued by Aytu or its Subsidiaries (the items in clauses (A), (B),
and (C), together with the capital stock of Aytu, being referred to
collectively as "Aytu
Securities"). All outstanding
shares of Aytu Common Stock, all outstanding Aytu Equity Awards,
and all outstanding shares of capital stock, voting securities, or
other ownership interests in any Subsidiary of Aytu, have been
issued or granted, as applicable, in compliance in all material
respects with all applicable securities Laws.
(iii) As
of the date hereof, there are no outstanding Contracts requiring
Aytu or any of its Subsidiaries to repurchase, redeem, or otherwise
acquire any Aytu Securities or Aytu Subsidiary Securities. Neither
Aytu nor any of its Subsidiaries is a party to any voting agreement
with respect to any Aytu Securities or Aytu Subsidiary
Securities.
(c) Voting
Debt. No bonds, debentures, notes, or other indebtedness issued by
Aytu or any of its Subsidiaries: (i) having the right to vote on
any matters on which stockholders or equityholders of Aytu or any
of its Subsidiaries may vote (or which is convertible into, or
exchangeable for, securities having such right); or (ii) the value
of which is directly based upon or derived from the capital stock,
voting securities, or other ownership interests of Aytu or any of
its Subsidiaries, are issued or outstanding (collectively,
"Aytu Voting
Debt").
(d) Aytu
Subsidiary Securities. As of the date hereof, there are no
outstanding: (i) securities of Aytu or any of its Subsidiaries
convertible into or exchangeable for Aytu Voting Debt, capital
stock, voting securities, or other ownership interests in any
Subsidiary of Aytu; (ii) options, warrants, or other agreements or
commitments to acquire from Aytu or any of its Subsidiaries, or
obligations of Aytu or any of its Subsidiaries to issue, any Aytu
Voting Debt, capital stock, voting securities, or other ownership
interests in (or securities convertible into or exchangeable for
capital stock, voting securities, or other ownership interests in)
any Subsidiary of Aytu; or (iii) restricted shares, restricted
stock units, stock appreciation rights, performance shares, profit
participation rights, contingent value rights, "phantom" stock, or
similar securities or rights that are derivative of, or provide
economic benefits based, directly or indirectly, on the value or
price of, any capital stock or voting securities of, or other
ownership interests in, any Subsidiary of Aytu, in each case that
have been issued by a Subsidiary of Aytu (the items in clauses (i),
(ii), and (iii), together with the capital stock, voting
securities, or other ownership interests of such Subsidiaries,
being referred to collectively as "Aytu Subsidiary
Securities").
29
Section 4.03 Authority; Non-Contravention;
Governmental Consents; Board Approval.
(a) Authority. Each of Aytu and Merger Sub has all
requisite corporate power and authority to enter into and to
perform its obligations under this Agreement and, subject to, in
the case of the consummation of the Merger: (i) the adoption of
this Agreement by Aytu as the sole stockholder of Merger Sub; and
(ii) the need to obtain the affirmative vote of a majority of the
votes cast of the Aytu Common Stock to the Aytu Stock Issuance (the
"Requisite
Aytu Vote"), to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Aytu and Merger Sub and the
consummation by Aytu and Merger Sub of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Aytu and Merger Sub and
no other corporate proceedings on the part of Aytu or Merger Sub
are necessary to authorize the execution and delivery of this
Agreement or to consummate the Merger, the Aytu Stock Issuance, and
the other transactions contemplated by this Agreement, subject
only, in the case of consummation of the Merger, to: (i) the
adoption of this Agreement by Aytu as the sole stockholder of
Merger Sub; and (ii) the need to obtain the Requisite Aytu Vote.
This Agreement has been duly executed and delivered by Aytu and
Merger Sub and, assuming due execution and delivery by the Target,
constitutes the legal, valid, and binding obligation of Aytu and
Merger Sub, enforceable against Aytu and Merger Sub in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, and other similar Laws
affecting creditors' rights generally and by general principles of
equity.
(b) Non-Contravention. The execution, delivery, and
performance of this Agreement by Aytu and Merger Sub and the
consummation by Aytu and Merger Sub of the transactions
contemplated by this Agreement, do not and will not: (i) contravene
or conflict with, or result in any violation or breach of, the
Charter Documents of Aytu or Merger Sub; (ii) assuming that all of
the Consents contemplated by clauses (i) through (v) of
Section
4.03(c) have been obtained
or made, and in the case of the consummation of the Merger,
obtaining the Requisite Aytu Vote, conflict with or violate any Law
applicable to Aytu or Merger Sub or any of their respective
properties or assets; (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, result in Aytu's or any of its
Subsidiaries' loss of any benefit or the imposition of any
additional payment or other liability under, or alter the rights or
obligations of any third party under, or give to any third party
any rights of termination, amendment, acceleration, or
cancellation, or require any Consent under, any Contract to which
Aytu or any of its Subsidiaries is a party or otherwise bound as of
the date hereof; or (iv) result in the creation of a Lien (other
than Permitted Liens) on any of the properties or assets of Aytu or
any of its Subsidiaries, except, in the case of each of clauses
(ii), (iii), and (iv), for any conflicts, violations, breaches,
defaults, loss of benefits, additional payments or other
liabilities, alterations, terminations, amendments, accelerations,
cancellations, or Liens that, or where the failure to obtain any
Consents, in each case, would not reasonably be expected to have,
individually or in the aggregate, an Aytu Material Adverse
Effect.
(c) Governmental Consents. No Consent of any
Governmental Entity is required to be obtained or made by Aytu or
Merger Sub in connection with the execution, delivery, and
performance by Aytu and Merger Sub of this Agreement or the
consummation by Aytu and Merger Sub of the Merger, the Aytu Stock
Issuance, and the other transactions contemplated hereby, except
for: (i) the filing of the Certificate of Merger with the Secretary
of State of the States of Delaware and Nevada; (ii) the filing with
the SEC of (A) the Joint Proxy Statement in definitive form in
accordance with the Exchange Act, (B) the Form S-4, and the
declaration of its effectiveness under the Securities Act, and (C)
the filing of such reports under the Exchange Act as may be
required in connection with this Agreement, the Merger, the Aytu
Stock Issuance, and the other transactions contemplated by this
Agreement; (iii) such Consents as may be required under the HSR Act
and other Antitrust Laws, in any case that are applicable to the
transactions contemplated by this Agreement; (iv) such Consents as
may be required under applicable state securities or "blue sky"
Laws and the securities Laws of any foreign country or the rules
and regulations of Nasdaq; (v) the Other Governmental Approvals;
and (vi) such other Consents which if not obtained or made would
not reasonably be expected to have, individually or in the
aggregate, an Aytu Material Adverse Effect.
30
(i) The
Aytu Board by resolutions duly adopted by a unanimous vote at a
meeting of all directors of Aytu duly called and held and, not
subsequently rescinded or modified in any way, has (A) determined
that this Agreement and the transactions contemplated hereby,
including the Merger, and the Aytu Stock Issuance, upon the terms
and subject to the conditions set forth herein, are fair to, and in
the best interests of, Aytu and the Aytu's stockholders, (B)
approved and declared advisable this Agreement, including the
execution, delivery, and performance thereof, and the consummation
of the transactions contemplated by this Agreement, including the
Merger and the Aytu Stock Issuance, upon the terms and subject to
the conditions set forth herein, (C) directed that the Aytu Stock
Issuance be submitted to a vote of the Aytu's stockholders for
adoption at the Aytu Stockholders Meeting, and (D) resolved to
recommend that Aytu's stockholders vote in favor of approval of the
Aytu Stock Issuance (collectively, the "Aytu Board
Recommendation").
(ii) The
Merger Sub Board by resolutions duly adopted by a unanimous vote at
a meeting of all directors of Merger Sub duly called and held and,
not subsequently rescinded or modified in any way, has (A)
determined that this Agreement and the transactions contemplated
hereby, including the Merger, upon the terms and subject to the
conditions set forth herein, are fair to, and in the best interests
of, Merger Sub and Aytu, as the sole stockholder of Merger Sub, (B)
approved and declared advisable this Agreement, including the
execution, delivery, and performance thereof, and the consummation
of the transactions contemplated by this Agreement, including the
Merger, upon the terms and subject to the conditions set forth
herein, and (C) resolved to recommend that Aytu, as the sole
stockholder of Merger Sub, approve the adoption of this Agreement
in accordance with the DGCL.
Section 4.04 SEC
Filings; Financial Statements; Undisclosed
Liabilities.
(a) SEC
Filings. Aytu has timely filed with or furnished to, as applicable,
the SEC all registration statements, prospectuses, reports,
schedules, forms, statements, and other documents (including
exhibits and all other information incorporated by reference)
required to be filed or furnished by it with the SEC since January
1, 2017 (the "Aytu SEC
Documents"). True, correct, and
complete copies of all the Aytu SEC Documents are publicly
available on XXXXX. As of their respective filing dates or, if
amended or superseded by a subsequent filing prior to the date
hereof, as of the date of the last such amendment or superseding
filing (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of the
relevant meetings, respectively), each of the Aytu SEC Documents
complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the
Xxxxxxxx-Xxxxx Act, and the rules and regulations of the SEC
thereunder applicable to such Aytu SEC Documents. None of the Aytu
SEC Documents, including any financial statements, schedules, or
exhibits included or incorporated by reference therein at the time
they were filed (or, if amended or superseded by a subsequent
filing prior to the date hereof, as of the date of the last such
amendment or superseding filing), contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. To the Knowledge of Aytu, none of the Aytu SEC
Documents is the subject of ongoing SEC review or outstanding SEC
investigation and there are no outstanding or unresolved comments
received from the SEC with respect to any of the Aytu SEC
Documents. None of Aytu's Subsidiaries is required to file or
furnish any forms, reports, or other documents with the
SEC.
(b) Financial
Statements. Each of the consolidated financial statements
(including, in each case, any notes and schedules thereto)
contained in or incorporated by reference into the Aytu SEC
Documents: (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto
as of their respective dates; (ii) was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto and, in the case
of unaudited interim financial statements, as may be permitted by
the SEC for Quarterly Reports on Form 10-Q); and (iii) fairly
presented in all material respects the consolidated financial
position and the results of operations, changes in stockholders'
equity, and cash flows of Aytu and its consolidated Subsidiaries as
of the respective dates of and for the periods referred to in such
financial statements, subject, in the case of unaudited interim
financial statements, to normal and year-end audit adjustments as
permitted by GAAP and the applicable rules and regulations of the
SEC (but only if the effect of such adjustments would not,
individually or in the aggregate, be material).
31
(c) Undisclosed Liabilities. The audited balance sheet
of Aytu dated as of June 30, 2018 contained in the Aytu SEC
Documents filed prior to the date hereof is hereinafter referred to
as the "Aytu
Balance Sheet." Neither Aytu
nor any of its Subsidiaries has any Liabilities other than
Liabilities that: (i) are reflected or reserved against in the Aytu
Balance Sheet (including in the notes thereto); (ii) were incurred
since the date of the Aytu Balance Sheet in the ordinary course of
business consistent with past practice; (iii) are incurred in
connection with the transactions contemplated by this Agreement; or
(iv) would not reasonably be expected to have, individually or in
the aggregate, an Aytu Material Adverse Effect.
(d) Nasdaq
Compliance. Aytu is in compliance with all of the applicable
listing and corporate governance rules of Nasdaq, except for any
non-compliance that would not reasonably be expected to have,
individually or in the aggregate, an Aytu Material Adverse
Effect.
Section 4.05 Controlled Substances.
As to each Aytu product candidate
subject to the Controlled Substances Act (21 U.S.C. 801 et. seq.)
or similar state Laws regulating opiates and other controlled
substances, to the Knowledge of Aytu, each such Aytu product
candidate has been and is being manufactured, tested, distributed,
marketed, sold and stored in material compliance with all
applicable requirements under the Controlled Substances Act or
similar state Laws regulating controlled substances. Aytu has
not received any written notice or other written communication from
the Drug Enforcement Agency, Department of Justice, or any other
applicable Governmental Entity regarding any Aytu product candidate
subject to the Controlled Substances Act or similar state Laws
regulating controlled substances.
Section 4.06 Absence of Certain Changes or
Events. Since the date of the
Aytu Balance Sheet, except in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, the business of Aytu and each of its
Subsidiaries has been conducted in the ordinary course of business
consistent with past practice and there has not been or occurred
any Aytu Material Adverse Effect or any event, condition, change,
or effect that could reasonably be expected to have, individually
or in the aggregate, an Aytu Material Adverse
Effect
Section 4.07 Litigation. There is no Legal Action pending, or to the
Knowledge of Aytu, threatened against Aytu or any of its
Subsidiaries or any of their respective properties or assets or, to
the Knowledge of Aytu, any officer or director of Aytu or any of
its Subsidiaries in their capacities as such other than any such
Legal Action that: (a) does not involve an amount that would
reasonably be expected to have, individually or in the aggregate,
an Aytu Material Adverse Effect; and (b) does not seek material
injunctive or other material non-monetary relief. None of Aytu or
any of its Subsidiaries or any of their respective properties or
assets is subject to any Order of a Governmental Entity or
arbitrator, whether temporary, preliminary, or permanent, which
would reasonably be expected to have, individually or in the
aggregate, an Aytu Material Adverse Effect. To the Knowledge of
Aytu, there are no SEC inquiries or investigations, other
governmental inquiries or investigations, or internal
investigations pending or, to the Knowledge of Aytu, threatened, in
each case regarding any accounting practices of Aytu or any of its
Subsidiaries or any malfeasance by any officer or director of
Aytu.
Section 4.08 Brokers. Neither Aytu, Merger Sub, nor any of their
respective Affiliates has incurred, nor will it incur, directly or
indirectly, any liability for investment banker, brokerage, or
finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated
hereby for which the Target would be liable in connection the
Merger.
32
Section 4.09 Information Supplied.
None of the information supplied or to
be supplied by or on behalf of Aytu or Merger Sub for inclusion or
incorporation by reference in the Form S-4 will, at the time the
Form S-4 is filed with the SEC, and at any time it is amended or
supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by or on behalf of Aytu
or Merger Sub for inclusion or incorporation by reference in the
Joint Proxy Statement will, at the date it is first mailed to the
Target's and Aytu's stockholders or at the time of the Target
Stockholders Meeting or Aytu Stockholders Meeting or at the time of
any amendment or supplement thereof, contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Joint
Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act. Notwithstanding the
foregoing, no representation or warranty is made by Aytu or Merger
Sub with respect to statements made or incorporated by reference
therein based on information that was not supplied by or on behalf
of Aytu or Merger Sub.
Section 4.10 Ownership of Target Common
Stock. Neither Aytu nor any of
its Affiliates or Associates "owns" (as defined in Section
203(c)(9) of the DGCL) any shares of Target Common
Stock.
Section 4.11 Intended Tax Treatment.
Neither Aytu nor any of its
Subsidiaries has taken or agreed to take any action, and to the
Knowledge of Aytu there exists no fact or circumstance, that is
reasonably likely to prevent or impede the Merger from qualifying
as a "reorganization" within the meaning of Section 368(a) of the
Code.
Section 4.12 Merger Sub. Merger Sub: (a) has engaged in no business
activities other than those related to the transactions
contemplated by this Agreement; and (b) is a direct, wholly-owned
Subsidiary of Aytu.
Section 4.13 No Other Representations or
Warranties. Except for the
representations and warranties contained in this ARTICLE IV
(including the related portions of the
Aytu Disclosure Letter), neither Aytu nor any other Person has made
or makes any other express or implied representation or warranty,
either written or oral, on behalf of Aytu or Merger
Sub.
Section 4.14 Disclaimer of Reliance.
Notwithstanding anything contained in
this Agreement to the contrary, Aytu acknowledges and agrees that
none of the Target or any other Person has made or is making, and
Aytu and Merger Sub expressly disclaim reliance upon, any
representations, warranties, or statements relating to the Target
or its Subsidiaries whatsoever, express or implied, beyond those
expressly given by the Target in ARTICLE
III.
33
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business of the
Target. During the period from
the date of this Agreement until the Effective Time, the Target
shall, and shall cause each of its Subsidiaries, except as
expressly contemplated by this Agreement, as required by applicable
Law, or with the prior written consent of Aytu (which consent shall
not be unreasonably withheld, conditioned, or delayed), to use its
reasonable best efforts to conduct its business in the ordinary
course of business consistent with past practice. To the extent
consistent therewith, the Target shall, and shall cause each of its
Subsidiaries to, use its reasonable best efforts to preserve
substantially intact its and its Subsidiaries' business
organization, to keep available the services of its and its
Subsidiaries' current officers and employees, to preserve its and
its Subsidiaries' present relationships with customers, suppliers,
distributors, licensors, licensees, and other Persons having
business relationships with it. Without limiting the generality of
the foregoing, between the date of this Agreement and the Effective
Time, except as otherwise expressly contemplated by this Agreement,
as set forth in Section 5.01
of the Target Disclosure Letter, the
Promissory Note, or as required by applicable Law, the Target shall
not, nor shall it permit any of its Subsidiaries to, without the
prior written consent of Aytu (which consent shall not be
unreasonably withheld, conditioned, or
delayed):
(a) amend
or propose to amend its Charter Documents;
(b) (i)
split, combine, or reclassify any Target Securities or Target
Subsidiary Securities, (ii) repurchase, redeem, or otherwise
acquire, or offer to repurchase, redeem, or otherwise acquire, any
Target Securities or Target Subsidiary Securities, or (iii)
declare, set aside, or pay any dividend or distribution (whether in
cash, stock, property, or otherwise) in respect of, or enter into
any Contract with respect to the voting of, any shares of its
capital stock (other than dividends from its direct or indirect
wholly-owned Subsidiaries);
(c) issue,
sell, pledge, dispose of, or encumber any Target Securities or
Target Subsidiary Securities, other than the issuance of shares of
Target Common Stock upon the exercise of any Target Equity Award
outstanding as of the date of this Agreement in accordance with its
terms;
(d) except
as required by applicable Law or by any Target Employee Plan or
Contract in effect as of the date of this Agreement (i) increase
the compensation payable or that could become payable by the Target
or any of its Subsidiaries to directors, officers, or employees,
other than increases in compensation made to non-officer employees
in the ordinary course of business consistent with past practice,
(ii) promote any officers or employees, except in connection with
the Target's annual or quarterly compensation review cycle or as
the result of the termination or resignation of any officer or
employee, or (iii) establish, adopt, enter into, amend, terminate,
exercise any discretion under, or take any action to accelerate
rights under any Target Employee Plans or any plan, agreement,
program, policy, trust, fund, or other arrangement that would be a
Target Employee Plan if it were in existence as of the date of this
Agreement, or make any contribution to any Target Employee Plan,
other than contributions required by Law, the terms of such Target
Employee Plans as in effect on the date hereof, or that are made in
the ordinary course of business consistent with past
practice;
(e) acquire,
by merger, consolidation, acquisition of stock or assets, or
otherwise, any business or Person or division thereof or make any
loans, advances, or capital contributions to or investments in any
Person;
34
(f) (i)
transfer, license, sell, lease, or otherwise dispose of (whether by
way of merger, consolidation, sale of stock or assets, or
otherwise) or pledge, encumber, or otherwise subject to any Lien
(other than a Permitted Lien), any assets, including the capital
stock or other equity interests in any Subsidiary of the
Target; provided, that
the foregoing shall not prohibit the
Target and its Subsidiaries from transferring, selling, leasing, or
disposing of obsolete equipment or assets being replaced, or
granting of non-exclusive licenses under the Target IP, in each
case in the ordinary course of business consistent with past
practice, or (ii) adopt or effect a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization, or other
reorganization;
(g) repurchase,
prepay, or incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or options, warrants, calls, or other rights to acquire
any debt securities of the Target or any of its Subsidiaries,
guarantee any debt securities of another Person, enter into any
"keep well" or other Contract to maintain any financial statement
condition of any other Person (other than any wholly-owned
Subsidiary of it) or enter into any arrangement having the economic
effect of any of the foregoing, other than in connection with the
financing of ordinary course trade payables consistent with past
practice;
(h) enter
into or amend or modify in any material respect, or consent to the
termination of (other than at its stated expiry date), any Target
Material Contract or any Lease with respect to material Leased Real
Estate or any other Contract or Lease that, if in effect as of the
date hereof would constitute a Target Material Contract or Lease
with respect to material Leased Real Estate hereunder;
(i) institute,
settle, or compromise any Legal Action involving the payment of
monetary damages by the Target or any of its Subsidiaries of any
amount exceeding $100,000 in the aggregate, other than (i) any
Legal Action brought against Aytu or Merger Sub arising out of a
breach or alleged breach of this Agreement by Aytu or Merger Sub,
and (ii) the settlement of claims, liabilities, or obligations
reserved against on the Target Balance Sheet; provided, that
neither the Target nor any of its
Subsidiaries shall settle or agree to settle any Legal Action which
settlement involves a conduct remedy or injunctive or similar
relief or has a restrictive impact on the Target's
business;
(j) make
any material change in any method of financial accounting
principles or practices, in each case except for any such change
required by a change in GAAP or applicable Law;
(k) (i)
settle or compromise any material Tax claim, audit, or assessment
for an amount materially in excess of the amount reserved or
accrued on the Target Balance Sheet (or most recent consolidated
balance sheet included in the Target SEC Documents), (ii) make or
change any material Tax election, change any annual Tax accounting
period, or adopt or change any method of Tax accounting, (iii)
amend any material Tax Returns or file claims for material Tax
refunds, or (iv) enter into any material closing agreement,
surrender in writing any right to claim a material Tax refund,
offset or other reduction in Tax liability or consent to any
extension or waiver of the limitation period applicable to any
material Tax claim or assessment relating to the Target or its
Subsidiaries;
(l) enter
into any material agreement, agreement in principle, letter of
intent, memorandum of understanding, or similar Contract with
respect to any joint venture, strategic partnership, or
alliance;
(m) except
in connection with actions permitted by Section 5.05
hereof, take any action to exempt any
Person from, or make any acquisition of securities of the Target by
any Person not subject to, any state takeover statute or similar
statute or regulation that applies to Target with respect to a
Target Alternative Transaction or otherwise, including the
restrictions on "business combinations" set forth in Section 203 of
the DGCL, except for Aytu, Merger Sub, or any of their respective
Subsidiaries or Affiliates, or the transactions contemplated by
this Agreement;
35
(n) abandon,
allow to lapse, sell, assign, transfer, grant any security interest
in otherwise encumber or dispose of any Target IP, or grant any
right or license to any Target IP other than non-exclusive licenses
granted in the ordinary course of business consistent with past
practice;
(o) terminate
or modify in any material respect, or fail to exercise renewal
rights with respect to, any material insurance policy;
(p) except
to the extent expressly permitted by Section 5.05
or ARTICLE
VII, take any action that is
intended or that would reasonably be expected to, individually or
in the aggregate, prevent, materially delay, or materially impede
the consummation of the Merger, or the other transactions
contemplated by this Agreement; or
(q) agree
or commit to do any of the foregoing.
Section 5.02 Conduct of the Business of
Aytu. During the period from
the date of this Agreement until the Effective Time, Aytu shall,
and shall cause each of its Subsidiaries, except as expressly
contemplated by this Agreement, as required by applicable Law, or
with the prior written consent of the Target (which consent shall
not be unreasonably withheld, conditioned, or delayed), to use its
reasonable best efforts to conduct its business in the ordinary
course of business consistent with past practice. Without limiting
the generality of the foregoing, between the date of this Agreement
and the Effective Time, except as otherwise expressly contemplated
by this Agreement, as set forth in Section 5.02
of the Aytu Disclosure Letter or as
required by applicable Law, Aytu shall not, nor shall it permit any
of its Subsidiaries to, without the prior written consent of the
Target (which consent shall not be unreasonably withheld,
conditioned, or delayed):
(a) amend
its Charter Documents in a manner that would adversely affect the
Target or the holders of Target Common Stock relative to the other
holders of Aytu Common Stock;
(b) (i)
split, combine, or reclassify any Aytu Securities or Aytu
Subsidiary Securities in a manner that would adversely affect the
Target or the holders of Target Common Stock relative to the other
holders of Aytu Common Stock, (ii) repurchase, redeem, or otherwise
acquire, or offer to repurchase, redeem, or otherwise acquire, any
Aytu Securities or Aytu Subsidiary Securities, or (iii) declare,
set aside, or pay any dividend or distribution (whether in cash,
stock, property, or otherwise) in respect of, or enter into any
Contract with respect to the voting of, any shares of its capital
stock (other than dividends from its direct or indirect
wholly-owned Subsidiaries and ordinary quarterly dividends,
consistent with past practice with respect to timing of declaration
and payment);
(c) acquire,
by merger, consolidation, acquisition of stock or assets, or
otherwise, any business or Person or division thereof or make any
loans, advances, or capital contributions to or investments in any
Person, in each case that would reasonably be expected to prevent,
impede, or materially delay the consummation of the Merger or other
transactions contemplated by this Agreement;
(d) adopt
or effect a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization, or other
reorganization;
(e) except
to the extent expressly permitted by Section 5.05
or ARTICLE
VII, take any action that is
intended or that would reasonably be expected to, individually or
in the aggregate, prevent, impede, or materially delay the
consummation of the Merger, or the other transactions contemplated
by this Agreement; or
(f) agree
or commit to do any of the foregoing.
36
Section 5.03 Right of First Refusal on Other
Financing. In the event that
the Target obtains a commitment for any other financing (either
debt, equity, or a combination thereof) which is to close prior to
the Effective Time, Aytu shall be entitled to a right of first
refusal to enable it to, at Aytu’s option, either: (i) match
the terms of the other financing, or (ii) add additional principal
to the Promissory Note, in the amount of such other financing, on
the same terms and conditions as the Promissory Note. The Target
shall deliver to Aytu, at least seven (7) days prior to the
proposed closing date of such transaction, written notice
describing the proposed transaction, including the terms and
conditions thereof, and providing Aytu an option during the seven
(7) day period following delivery of such notice to either provide
the financing being offered in such transaction on the same terms
as contemplated by such transaction, or to add additional principal
to the Promissory Note, in the amount of such other financing, on
the same terms and conditions as the Promissory
Note.
Section 5.04 Access to Information;
Confidentiality.
(a) From
the date of this Agreement until the earlier to occur of the
Effective Time or the termination of this Agreement in accordance
with the terms set forth in ARTICLE
VII, the Target shall, and
shall cause its Subsidiaries to, afford to Aytu and Aytu's
Representatives reasonable access, at reasonable times and in a
manner as shall not unreasonably interfere with the business or
operations of the Target or any Subsidiary thereof, to the
officers, employees, accountants, agents, properties, offices, and
other facilities and to all books, records, contracts, and other
assets of the Target and its Subsidiaries, and the Target shall,
and shall cause its Subsidiaries to, furnish promptly to Aytu such
other information concerning the business and properties of the
Target and its Subsidiaries as Aytu may reasonably request from
time to time. Neither the Target nor any of its Subsidiaries shall
be required to provide access to or disclose information where such
access or disclosure would jeopardize the protection of
attorney-client privilege or contravene any Law (it being agreed
that the parties shall use their reasonable best efforts to cause
such information to be provided in a manner that would not result
in such jeopardy or contravention). No investigation shall affect
the Target's representations, warranties, covenants, or agreements
contained herein, or limit or otherwise affect the remedies
available to Aytu or Merger Sub pursuant to this
Agreement.
(b) Aytu and
the Target shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement, which shall survive the
termination of this Agreement in accordance with the terms set
forth therein.
(c) From
the date of this Agreement until the earlier to occur of the
Effective Time or the termination of this Agreement in accordance
with the terms set forth in ARTICLE
VII, Aytu shall, and shall
cause its Subsidiaries to, afford to the Target and its
Representatives reasonable access, at reasonable times and in a
manner as shall not unreasonably interfere with the business or
operations of Aytu or any Subsidiary thereof, to the officers,
employees, accountants, agents, properties, offices, and other
facilities and to all books, records, contracts, and other assets
of Aytu and its Subsidiaries, and Aytu shall, and shall cause its
Subsidiaries to, furnish promptly to the Target such other
information concerning the business and properties of Aytu and its
Subsidiaries as the Target may reasonably request from time to
time. Neither Aytu nor any of its Subsidiaries shall be required to
provide access to or disclose information where such access or
disclosure would jeopardize the protection of attorney-client
privilege or contravene any Law (it being agreed that the parties
shall use their reasonable best efforts to cause such information
to be provided in a manner that would not result in such jeopardy
or contravention). No investigation shall affect Aytu’s
representations, warranties, covenants, or agreements contained
herein, or limit or otherwise affect the remedies available to the
Target pursuant to this Agreement.
37
(a) The
Target shall not, and shall not cause its respective Subsidiaries
to, and shall not authorize or permit its or its respective
Subsidiaries' directors, officers, employees, investment bankers,
attorneys, accountants, consultants, or other agents or advisors
(with respect to any Person, the foregoing Persons are referred to
herein as such Person's "Representatives")
to, directly or indirectly, solicit, initiate, or knowingly take
any action to facilitate or encourage the submission of any
proposal for a Target Alternative Transaction or the making of any
proposal that could reasonably be expected to lead to any Target
Alternative Transaction, or, subject to Section
5.05(b): (i) conduct or
engage in any discussions or negotiations with, disclose any
non-public information relating to the Target or any of its
Subsidiaries to, afford access to the business, properties, assets,
books, or records of the Target or any of its Subsidiaries to, or
knowingly assist, participate in, facilitate, or encourage any
effort by, any third party that is seeking to make, or has made,
any proposal for a Target Alternative Transaction; (ii) (A) except
where the Target Board makes a good faith determination, after
consultation with outside legal counsel, that the failure to do so
would be inconsistent with its fiduciary duties, amend or grant any
waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Target or any of
its respective Subsidiaries, or (B) approve any transaction under,
or any third party becoming an "interested stockholder" under,
Section 203 of the DGCL or Section 78 of the NRS; or (iii) enter
into any agreement in principle, letter of intent, term sheet,
acquisition agreement, merger agreement, option agreement, joint
venture agreement, partnership agreement, or other Contract
relating to any Target Alternative Transaction (each, an
"Acquisition
Agreement"). Except as
expressly permitted by this Section
5.05, the Target Board
shall not effect a Target Adverse Recommendation Change. The Target
shall, and shall cause their respective Subsidiaries to cease
immediately and cause to be terminated, and shall not authorize or
knowingly permit any of its Representatives to continue, any and
all existing activities, discussions, or negotiations, if any, with
any third party conducted prior to the date hereof with respect to
any Target Alternative Transaction and shall use its reasonable
best efforts to cause any such third party (or its agents or
advisors) in possession of non-public information in respect of the
Target and any of its respective Subsidiaries that was furnished by
or on behalf of Target or its respective Subsidiaries to return or
destroy (and confirm destruction of) all such
information.
(b) Notwithstanding Section
5.05(a), prior to the
receipt of the Requisite Target Vote, the Target Board, directly or
indirectly through any Representative, may, subject to
Section
5.05(c): (i) participate in
negotiations or discussions with any third party that has made (and
not withdrawn) a bona fide, unsolicited proposal for a Target
Alternative Transaction in writing that the Target Board believes
in good faith, after consultation with outside legal counsel and
the Target Financial Advisor, constitutes a Superior Proposal; (ii)
thereafter furnish to such third party non-public information
relating to Target or any of its respective Subsidiaries pursuant
to an executed confidentiality agreement that constitutes an
Acceptable Confidentiality Agreement (a copy of which
confidentiality agreement shall be promptly (in all events within
24 hours) provided for informational purposes to Aytu); (iii)
following receipt of and on account of a Superior Proposal, make a
Target Adverse Recommendation Change; and/or (iv) take any action
that any court of competent jurisdiction orders Target to take
(which order remains unstayed), but in each case referred to in the
foregoing clauses (i) through (iv), only if the Target Board
determines in good faith, after consultation with outside legal
counsel, that the failure to take such action would cause it to be
in breach of its fiduciary duties under applicable Law. Nothing
contained herein shall prevent the Target Board from disclosing to
its stockholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act with regard to a Target
Alternative Transaction, if the party determines, after
consultation with outside legal counsel, that failure to disclose
such position would constitute a violation of applicable
Law.
(c) The
Target Board shall not take any of the actions referred to in
clauses (i) through (iv) of Section
5.05(b) unless the Target
shall have delivered to Aytu a prior written notice advising Aytu
that it intends to take such action. The Target shall notify Aytu
promptly (but in no event later than 24 hours) after it obtains
Knowledge of the receipt by the Target (or any of its
Representatives) of any proposal for a Target Alternative
Transaction, any inquiry that could reasonably be expected to lead
to a Target Alternative Transaction, any request for non-public
information relating to the Target or any of its Subsidiaries or
for access to the business, properties, assets, books, or records
of the Target or any of its Subsidiaries by any third party. In
such notice, the Target shall identify the third party making, and
details of the material terms and conditions of, any such proposal,
indication or request. Target shall keep Aytu fully informed, on a
current basis, of the status and material terms of any such
proposal, indication or request, including any material amendments
or proposed amendments as to price and other material terms
thereof. Target shall provide Aytu with at least 48 hours prior
notice of any meeting of its board of directors, or any committee
thereof (or such lesser notice as is provided to the members of its
board of directors or committee thereof) at which the
Target’s board of directors, or any committee thereof, is
reasonably expected to consider any proposal for a Target
Alternative Transaction. Target shall promptly provide Aytu with a
list of any non-public information concerning Target’s or any
of its Subsidiaries' business, present or future performance,
financial condition, or results of operations, provided to any
third party, and, to the extent such information has not been
previously provided to Aytu, copies of such
information.
38
(d) Except
as expressly permitted by this Section
5.05, the Target Board
shall not effect a Target Adverse Recommendation Change or enter
into (or permit any of its respective Subsidiaries to enter into)
an Acquisition Agreement. Notwithstanding the foregoing, at any
time prior to the receipt of: (i) the Requisite Target Vote, the
Target Board may effect a Target Adverse Recommendation Change or
enter into (or permit any Subsidiary to enter into) an Acquisition
Agreement, if (A) Target promptly notifies Aytu, in writing, at
least five Business Days (the "Superior
Proposal Notice
Period") before making a Target
Adverse Recommendation Change or entering into (or causing one of
its Subsidiaries to enter into) an Acquisition Agreement, of its
intention to take such action with respect to a Superior Proposal,
which notice shall state expressly that Target has received a
proposal for a Target Alternative Transaction that Target’s
board of directors (or a committee thereof) intends to declare a
Superior Proposal and that it intends to effect a Target Adverse
Recommendation Change and/or Target intends to enter into an
Acquisition Agreement, (B) Target attaches to such notice the most
current version of the proposed agreement (which version shall be
updated on a prompt basis) and the identity of the third party
making such Superior Proposal, (C) Target shall, and shall cause
its Representatives to, during the Superior Proposal Notice Period,
negotiate with Aytu in good faith to make such adjustments in the
terms and conditions of this Agreement so that such proposal for a
Target Alternative Transaction ceases to constitute a Superior
Proposal, if Aytu, in its discretion, proposes to make such
adjustments (it being agreed that in the event that, after
commencement of the Superior Proposal Notice Period, there is any
material revision to the terms of a Superior Proposal, including,
any revision in price, the Superior Proposal Notice Period shall be
extended, if applicable, to ensure that at least three Business
Days remains in the Superior Proposal Notice Period subsequent to
the time that Target notifies Aytu of any such material revision
(it being understood that there may be multiple extensions)), and
(D) Target’s board of directors (or a committee thereof)
determines in good faith, after consulting with outside legal
counsel and its financial advisor, that such proposal continues to
constitute a Superior Proposal after taking into account any
adjustments made by Aytu during the Superior Proposal Notice Period
in the terms and conditions of this Agreement.
Section 5.06 Preparation
of Joint Proxy Statement and Form S-4.
(a) Except
as set forth in Section 5.06 of the Aytu Disclosure Letter, in
connection with the Target Stockholders Meeting and the Aytu
Stockholders Meeting, as soon as reasonably practicable following
the date of this Agreement, the Target and Aytu shall prepare and
file with the SEC the Joint Proxy Statement and Aytu shall prepare
and file with the SEC the Form S-4 (which shall include the Joint
Proxy Statement). The Target and Aytu shall each use its reasonable
best efforts to: (i) cause the Form S-4 to be declared effective
under the Securities Act as promptly as practicable after its
filing; (ii) ensure that the Form S-4 complies in all material
respects with the applicable provisions of the Securities Act and
the Exchange Act; and (iii) keep the Form S-4 effective for so long
as necessary to complete the Merger. Aytu shall notify the Target
promptly of the time when the Form S-4 has become effective or any
supplement or amendment to the Form S-4 has been filed, and of the
issuance of any stop order or suspension of the qualification of
the shares of Aytu Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction. Each of Aytu and
the Target shall use its reasonable best efforts to: (A) cause the
Joint Proxy Statement to be mailed to the Target's stockholders and
Aytu's stockholders as promptly as practicable after the Form S-4
is declared effective under the Securities Act, and (B) ensure that
the Joint Proxy Statement complies in all material respects with
the applicable provisions of the Securities Act and Exchange Act.
Aytu shall also take any other action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified)
required to be taken under the Securities Act, the Exchange Act,
any applicable foreign or state securities or "blue sky" Laws, and
the rules and regulations thereunder in connection with the
issuance of Aytu Stock in the Merger and the CVR’s, and the
Target shall furnish to Aytu all information concerning the Target
as may be reasonably requested in connection with any such
actions.
(b) Aytu
and the Target shall furnish to the other party all information
concerning such Person and its Affiliates required by the
Securities Act or the Exchange Act to be set forth in the Form S-4
or the Joint Proxy Statement. Each of Aytu and the Target shall
promptly correct any information provided by it for use in the Form
S-4 or the Joint Proxy Statement if and to the extent that such
information shall have become false or misleading in any material
respect. Each of Aytu and the Target shall take all steps necessary
to amend or supplement the Form S-4 or the Joint Proxy Statement,
as applicable, and to cause the Form S-4 or Joint Proxy Statement,
as so amended or supplemented, to be filed with the SEC and
disseminated to the holders of Target Common Stock and/or Aytu
Common Stock, in each case as and to the extent required by
applicable Law.
39
(c) Aytu
and the Target shall promptly provide the other party and their
counsel with any comments or other communications, whether written
or oral, that Aytu or the Target, or their counsel may receive from
the SEC or its staff with respect to the Form S-4 or the Joint
Proxy Statement promptly after the receipt of such comments. Prior
to the filing of the Form S-4 or the Joint Proxy Statement with the
SEC (including in each case any amendment or supplement thereto,
except with respect to any amendments filed in connection with a
Target Adverse Recommendation Change or Aytu Adverse Recommendation
Change or in connection with any disclosures made in compliance
with Section
5.05) or the dissemination
thereof to the holders of Target Common Stock or Aytu Common Stock,
or responding to any comments of the SEC with respect to the Form
S-4 or Joint Proxy Statement, each of Aytu and the Target shall
provide the other party and their counsel a reasonable opportunity
to review and comment on such Form S-4, Joint Proxy Statement, or
response (including the proposed final version thereof), and each
of Aytu and the Target shall give reasonable and good faith
consideration to any comments made by the other party or their
counsel.
Section 5.07 Target Stockholders
Meeting. The Target shall take
all action necessary to duly call, give notice of, convene, and
hold the Target Stockholders Meeting as soon as reasonably
practicable after the Form S-4 is declared effective, and, in
connection therewith, the Target shall mail the Joint Proxy
Statement to the holders of Target Common Stock in advance of such
meeting. Except to the extent that the Target Board shall have
effected a Target Adverse Recommendation Change as permitted
by Section 5.05
hereof, the Joint Proxy Statement
shall include the Target Board Recommendation. Subject to
Section 5.05
hereof, the Target shall use
reasonable best efforts to: (a) solicit from the holders of Target
Common Stock proxies in favor of the adoption of this Agreement and
approval of the Merger; and (b) take all other actions necessary or
advisable to secure the vote or consent of the holders of Target
Common Stock required by applicable Law to obtain such approval.
The Target shall keep Aytu and Merger Sub updated with respect to
proxy solicitation results as requested by Aytu or Merger Sub. Once
the Target Stockholders Meeting has been called and noticed, the
Target shall not postpone or adjourn the Target Stockholders
Meeting without the consent of Aytu (other than: (i) in order to
obtain a quorum of its stockholders; or (ii) as reasonably
determined by the Target to comply with applicable Law). The Target
shall use its reasonable best efforts to cooperate with Aytu to
hold the Target Stockholders Meeting on the same day and at the
same time as the Aytu Stockholders Meeting as soon as reasonably
practicable after the date of this Agreement, and to set the same
record date for each such meeting. If the Target Board makes a
Target Adverse Recommendation Change, it will not alter the
obligation of the Target to submit the adoption of this Agreement
and the approval of the Merger to the holders of Target Common
Stock at the Target Stockholders Meeting to consider and vote upon,
unless this Agreement shall have been terminated in accordance with
its terms prior to the Target Stockholders
Meeting.
(a) Aytu
shall take all action necessary to duly call, give notice of,
convene, and hold the Aytu Stockholders Meeting as soon as
reasonably practicable after the Form S-4 is declared effective,
and, in connection therewith, Aytu shall mail the Joint Proxy
Statement to the holders of Aytu Common Stock in advance of the
Aytu Stockholders Meeting. Except to the extent that the Aytu Board
shall have effected an Aytu Adverse Recommendation Change (if
permitted pursuant to Section 5.08(b)
below), the Joint Proxy Statement
shall include the Aytu Board Recommendation. Aytu shall use
reasonable best efforts to: (i) solicit from the holders of Aytu
Common Stock proxies in favor of the approval of the Aytu Stock
Issuance; and (ii) take all other actions necessary or advisable to
secure the vote or consent of the holders of Aytu Common Stock
required by applicable Law to obtain such approval. Aytu shall keep
the Target updated with respect to proxy solicitation results as
requested by the Target. Once the Aytu Stockholders Meeting has
been called and noticed, Aytu shall not postpone or adjourn the
Aytu Stockholders Meeting without the consent of Target (other
than: (A) in order to obtain a quorum of its stockholders; or (B)
as reasonably determined by Aytu to comply with applicable Law).
Aytu shall use its reasonable best efforts to cooperate with Target
to hold the Aytu Stockholders Meeting on the same day and at the
same time as the Target Stockholders Meeting as soon as reasonably
practicable after the date of this Agreement, and to set the same
record date for each such meeting.
(b) Aytu may only effect an Aytu Adverse
Recommendation Change if the Aytu Board determines in good faith
(after consultation with outside legal counsel) that its fiduciary
duties would require it to do so in light of facts and
circumstances arising after the signing of this
Agreement.
(c) Immediately
following the execution and delivery of this Agreement, Aytu, as
sole stockholder of Merger Sub, shall adopt this Agreement and
approve the Merger, in accordance with the DGCL.
40
(a) Notices
of Certain Events. The Target shall notify Aytu and Merger Sub, and
Aytu and Merger Sub shall notify the Target, promptly of: (i) any
notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; (ii) any notice or
other communication from any Governmental Entity in connection with
the transactions contemplated by this Agreement; and (iii) any
event, change, or effect between the date of this Agreement and the
Effective Time which causes or is reasonably likely to cause the
failure of the conditions set forth in Section
6.02(a), Section
6.02(b), or Section
6.02(c) of this Agreement
(in the case of the Target and its Subsidiaries) or Section
6.03(a), Section
6.03(b), or Section
6.03(c) of this Agreement
(in the case of Aytu and Merger Sub), to be
satisfied.
(b) Target
Stockholder Litigation. The Target shall promptly advise Aytu in
writing after becoming aware of any Legal Action commenced, or to
the Target's Knowledge threatened, after the date hereof against
the Target or any of its directors by any stockholder of the Target
(on their own behalf or on behalf of the Target) relating to this
Agreement or the transactions contemplated hereby (including the
Merger) and shall keep Aytu reasonably informed regarding any such
Legal Proceeding. The Target shall give Aytu the opportunity to
consult with the Target regarding the defense or settlement of any
such stockholder litigation and shall consider Aytu's views with
respect to such stockholder litigation and shall not settle any
such stockholder litigation without the prior written consent of
Aytu (which consent shall not be unreasonably withheld, delayed, or
conditioned).
(c) No
Effect on Disclosure Letters. In no event shall: (i) the delivery
of any notice by a party pursuant to this Section 5.09
limit or otherwise affect the
respective rights, obligations, representations, warranties,
covenants, or agreements of the parties or the conditions to the
obligations of the parties under this Agreement; (ii) disclosure by
the Target be deemed to amend or supplement the Target Disclosure
Letter or constitute an exception to the Target's representations
or warranties; or (iii) disclosure by Aytu be deemed to amend or
supplement the Aytu Disclosure Letter or constitute an exception to
Aytu's or Merger Sub's representations or warranties. This
Section 5.09
shall not constitute a covenant or
agreement for purposes of Section
6.02(b) or Section
6.03(b).
(a) During
the period commencing at the Effective Time and ending on the date
which is twelve months from the Effective Time (or if earlier, the
date of the employee's termination of employment with Aytu and its
Subsidiaries), and to the extent consistent with the terms of the
governing plan documents, Aytu shall cause the Surviving
Corporation and each of its Subsidiaries, as applicable, to provide
the employees of the Target and its Subsidiaries who remain
employed immediately after the Effective Time (collectively, the
"Target
Continuing Employees") with
annual base salary or wage level, annual target bonus opportunities
(excluding equity-based compensation), and employee benefits
(excluding any retiree health or defined benefit retirement
benefits) that are, in the aggregate, no less favorable than the
annual base salary or wage level, annual target bonus opportunities
(excluding equity-based compensation), and employee benefits
(excluding any retiree health or defined benefit retirement
benefits) provided by the Target and its Subsidiaries on the date
of this Agreement.
(b) During
the period commencing at the Effective Time and ending on the date
which is twelve months from the Effective Time (or if earlier, the
date of the employee's termination of employment with Aytu and its
Subsidiaries), Aytu shall cause the Surviving Corporation and each
of its Subsidiaries, as applicable, to provide certain consultants
of the Target and its Subsidiaries who are considered vital to the
business of the Target and are identified on Exhibit G
hereto (collectively, the
"Target
Continuing Consultants") with
agreements or other arrangements similar to those in effect with
the Target prior to the Effective Time.
41
(c) Effective
no later than the day immediately preceding the Closing Date, the
Target shall terminate any Target Employee Plans maintained by the
Target or its Subsidiaries that Aytu has requested to be terminated
by providing a written notice to the Target at least 30 days prior
to the Closing Date; provided, that
such Target Employee Plans can be
terminated in accordance with their terms and applicable Law
without any adverse consequences with respect to any Target ERISA
Affiliate. No later than the day immediately preceding the Closing
Date, the Target shall provide Aytu with evidence that such Target
Employee Plans have been terminated.
(d) This
Section 5.10
shall be binding upon and inure solely
to the benefit of each of the parties to this Agreement, and
nothing in this Section
5.10, express or implied,
shall confer upon any Target Employee, any beneficiary, or any
other Person any rights or remedies of any nature whatsoever under
or by reason of this Section
5.10. Nothing contained
herein, express or implied: (i) shall be construed to establish,
amend, or modify any benefit plan, program, agreement, or
arrangement; (ii) shall alter or limit the ability of the Surviving
Corporation, Aytu, or any of their respective Affiliates to amend,
modify, or terminate any benefit plan, program, agreement, or
arrangement at any time assumed, established, sponsored, or
maintained by any of them; or (iii) shall prevent the Surviving
Corporation, Aytu, or any of their respective Affiliates from
terminating the employment of any Target Continuing Employee
following the Effective Time. The parties hereto acknowledge and
agree that the terms set forth in this Section 5.10
shall not create any right in any
Target Employee or any other Person to any continued employment
with the Surviving Corporation, Aytu, or any of their respective
Subsidiaries or compensation or benefits of any nature or kind
whatsoever, or otherwise alters any existing at-will employment
relationship between any Target Employee and the Surviving
Corporation.
(e) With
respect to matters described in this Section
5.10, the Target will not
send any written notices or other written communication materials
to Target Employees or the Target Continuing Consultants without
the prior written consent of Aytu.
(a) Aytu and
Merger Sub agree that all rights to indemnification, advancement of
expenses, and exculpation by the Target now existing in favor of
each Person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time an officer or
director of the Target or any of its Subsidiaries (each an
"Indemnified
Party") as provided in the
Charter Documents of the Target, in each case as in effect on the
date of this Agreement, or pursuant to any other Contracts in
effect on the date hereof and disclosed in Section
5.11 of the Target
Disclosure Letter, shall be assumed by the Surviving Corporation in
the Merger, without further action, at the Effective Time and shall
survive the Merger and shall remain in full force and effect in
accordance with their terms. For a period of six years from the
Effective Time, the Surviving Corporation shall, and Aytu shall
cause the Surviving Corporation to, maintain in effect the
exculpation, indemnification, and advancement of expenses
equivalent to the provisions of the Charter Documents of the Target
as in effect immediately prior to the Effective Time with respect
to acts or omissions by any Indemnified Party occurring prior to
the Effective Time, and shall not amend, repeal, or otherwise
modify any such provisions in any manner that would adversely
affect the rights thereunder of any Indemnified Party; provided
that all rights to indemnification in respect of any claim made for
indemnification within such period shall continue until the
disposition of such action or resolution of such
claim.
(b) The
Surviving Corporation shall, and Aytu shall cause the Surviving
Corporation to: (i) obtain as of the Effective Time "tail"
insurance policies with a claims period of six years from the
Effective Time with at least the same coverage and amounts and
containing terms and conditions that are not less advantageous to
the Indemnified Parties, in each case with respect to claims
arising out of or relating to events which occurred before or at
the Effective Time (including in connection with the transactions
contemplated by this Agreement); provided, however, that in no
event will the Surviving Corporation be required to expend a total
premium for such coverage in excess of 300%
of the last annual premium paid by the Target or any of its
Subsidiaries for such insurance prior to the date of this
Agreement, which amount is set forth in Section
5.11(b) of the
Target Disclosure Letter (the "Maximum
Premium"). If such insurance
coverage cannot be obtained at an annual premium equal to or less
than the Maximum Premium, the Surviving Corporation will obtain,
and Aytu will cause the Surviving Corporation to obtain, the
greatest coverage available for a cost not exceeding an annual
premium equal to the Maximum Premium.
42
(c) The
obligations of Aytu, Merger Sub, and the Surviving Corporation
under this Section 5.11
shall survive the consummation of the
Merger and shall not be terminated or modified in such a manner as
to adversely affect any Indemnified Party to whom this
Section 5.11
applies without the consent of such
affected Indemnified Party (it being expressly agreed that the
Indemnified Parties to whom this Section 5.11
applies shall be third party
beneficiaries of this Section
5.11, each of whom may
enforce the provisions of this Section
5.11).
(d) In
the event Aytu, the Surviving Corporation, or any of their
respective successors or assigns: (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving
corporation or entity in such consolidation or merger; or (ii)
transfers all or substantially all of its properties and assets to
any Person, then, and in either such case, proper provision shall
be made so that the successors and assigns of Aytu or the Surviving
Corporation, as the case may be, shall assume all of the
obligations set forth in this Section
5.11. The agreements and
covenants contained herein shall not be deemed to be exclusive of
any other rights to which any Indemnified Party is entitled,
whether pursuant to Law, Contract, or otherwise. Nothing in this
Agreement is intended to, shall be construed to, or shall release,
waive, or impair any rights to directors' and officers' insurance
claims under any policy that is or has been in existence with
respect to the Target or its officers, directors, and employees, it
being understood and agreed that the indemnification provided for
in this Section 5.11
is not prior to, or in substitution
for, any such claims under any such policies.
(a) Upon
the terms and subject to the conditions set forth in this Agreement
(including those contained in this Section
5.12), each of the parties
hereto shall, and shall cause its Subsidiaries to, use its
reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper, or
advisable to consummate and make effective, and to satisfy all
conditions to, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including: (i) the
obtaining of all necessary Permits, waivers, and actions or
nonactions from Governmental Entities and the making of all
necessary registrations and filings (including filings with
Governmental Entities) and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entities; (ii) the
obtaining of all necessary consents or waivers from third parties;
and (iii) the execution and delivery of the Contingent Value Rights
Agreement and any additional instruments necessary to consummate
the Merger and to fully carry out the purposes of this Agreement.
With respect to the Contingent Value Rights Agreement, prior to the
Effective Time, Target and Aytu shall use reasonable best efforts
to cooperate, including by making changes to the form of Contingent
Value Rights Agreement, as necessary to ensure that such agreement
is in a form reasonably acceptable to the rights agent and that the
CVRs will be issued and, if required, registered in a manner
compliant with all applicable securities laws. The Target and Aytu
shall, subject to applicable Law, promptly: (A) cooperate and
coordinate with the other in the taking of the actions contemplated
by clauses (i), (ii), and (iii) immediately above; and (B) supply
the other with any information that may be reasonably required in
order to effectuate the taking of such actions. Each party hereto
shall promptly inform the other party or parties hereto, as the
case may be, of any communication from any Governmental Entity
regarding any of the transactions contemplated by this Agreement.
If the Target, on the one hand, or Aytu or Merger Sub, on the other
hand, receives a request for additional information or documentary
material from any Governmental Entity with respect to the
transactions contemplated by this Agreement, then it shall use
reasonable best efforts to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party,
an appropriate response in compliance with such request, and, if
permitted by applicable Law and by any applicable Governmental
Entity, provide the other party's counsel with advance notice and
the opportunity to attend and participate in any meeting with any
Governmental Entity in respect of any filing made thereto in
connection with the transactions contemplated by this Agreement.
Neither Aytu nor the Target shall commit to or agree (or permit any
of their respective Subsidiaries to commit to or agree) with any
Governmental Entity to stay, toll, or extend any applicable waiting
period under the HSR Act or other applicable Antitrust Laws,
without the prior written consent of the other (such consent not to
be unreasonably withheld, conditioned, or
delayed).
(b) In
the event that any administrative or judicial action or proceeding
is instituted (or threatened to be instituted) by a Governmental
Entity or private party challenging the Merger or any other
transaction contemplated by this Agreement, or any other agreement
contemplated hereby, the Target, Aytu and Merger Sub shall each use
its reasonable best efforts to contest and resist any such action
or proceeding and to have vacated, lifted, reversed, or overturned
any Order, whether temporary, preliminary, or permanent, that is in
effect and that prohibits, prevents, or restricts consummation of
the transactions contemplated by this Agreement.
43
(c) Notwithstanding
anything to the contrary set forth in this Agreement, none of Aytu,
Merger Sub, or any of their respective Subsidiaries shall be
required to, and the Target may not, without the prior written
consent of Aytu, become subject to, consent to, or offer or agree
to, or otherwise take any action with respect to, any requirement,
condition, limitation, understanding, agreement, or order to: (i)
sell, license, assign, transfer, divest, hold separate, or
otherwise dispose of any assets, business, or portion of business
of the Target, the Surviving Corporation, Aytu, Merger Sub, or any
of their respective Subsidiaries; (ii) conduct, restrict, operate,
invest, or otherwise change the assets, business, or portion of
business of the Target, the Surviving Corporation, Aytu, Merger
Sub, or any of their respective Subsidiaries in any manner; or
(iii) impose any restriction, requirement, or limitation on the
operation of the business or portion of the business of the Target,
the Surviving Corporation, Aytu, Merger Sub, or any of their
respective Subsidiaries; provided, that
if requested by Aytu, the Target will
become subject to, consent to, or offer or agree to, or otherwise
take any action with respect to, any such requirement, condition,
limitation, understanding, agreement, or order so long as such
requirement, condition, limitation, understanding, agreement, or
order is only binding on the Target in the event the Closing
occurs.
Section 5.13 Public Announcements.
The initial press release with respect
to this Agreement and the transactions contemplated hereby shall be
a release mutually agreed to by the Target and Aytu. Thereafter,
each of the Target, Aytu, and Merger Sub agrees that no public
release or announcement concerning the transactions contemplated
hereby shall be issued by any party without the prior written
consent of the Target and Aytu (which consent shall not be
unreasonably withheld, conditioned, or delayed), except as may be
required by applicable Law or the rules or regulations of any
applicable United States securities exchange or other Governmental
Entity to which the relevant party is subject or submits, in which
case the party required to make the release or announcement shall
use its reasonable best efforts to allow the other party reasonable
time to comment on such release or announcement in advance of such
issuance. Notwithstanding the foregoing, the restrictions set forth
in this Section 5.13 shall not apply to any release or announcement
made or proposed to be made in connection with and related to: (a)
a Target Adverse Recommendation Change, (b) an Aytu Adverse
Recommendation Change; or (c) any disclosures made in compliance
with Section
5.05.
Section 5.14 Anti-Takeover Statutes.
If any "control share acquisition,"
"fair price," "moratorium," or other anti-takeover Law becomes or
is deemed to be applicable to Aytu, the Merger Sub, the Target, the
Merger, or any other transaction contemplated by this Agreement,
then each of the Target and the Target Board on the one hand, and
Aytu and the Aytu Board on the other hand, shall grant such
approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to
render such anti-takeover Law inapplicable to the
foregoing.
Section 5.15 Section 16 Matters.
Prior to the Effective Time, the
Target, Aytu, and Merger Sub shall each take all such steps as may
be required to cause to be exempt under Rule 16b-3 promulgated
under the Exchange Act:
(a) any
dispositions of shares of Target Common Stock (including derivative
securities with respect to such shares) that are treated as
dispositions under such rule and result from the transactions
contemplated by this Agreement by each director or officer of the
Target who is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Target immediately
prior to the Effective Time; and
(b) any
acquisitions of Aytu Common Stock (including derivative securities
with respect to such shares) that are treated as acquisitions under
such rule and result from the transactions contemplated by this
Agreement by each individual who may become or is reasonably
expected to become subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to Aytu immediately after
the Effective Time.
44
Section 5.16 Stock
Exchange Matters.
(a) Aytu
shall use its reasonable best efforts to cause the shares of Aytu
Common Stock to be issued in connection with the Merger, shares of
Aytu Common Stock to be reserved for issuance upon exercise of Aytu
Stock Options and Aytu Restricted Shares, in each case, to be
issued pursuant to Section 2.01(b) or Section 2.07, as applicable) to be listed on Nasdaq (or such
other stock exchange as may be mutually agreed upon by the Target
and Aytu), subject to official notice of issuance, prior to the
Effective Time.
(b) To
the extent requested by Aytu, prior to the Effective Time, the
Target shall cooperate with Aytu and use its reasonable best
efforts to take, or cause to be taken, all actions, and do or cause
to be done all things, reasonably necessary, proper or advisable on
its part under applicable Laws and the rules and policies of OTC to
enable the delisting by the Surviving Corporation of the shares of
Target Common Stock from the OTC markets and the deregistration of
the shares of Target Common Stock under the Exchange Act as
promptly as practicable after the Effective Time, and in any event
no more than ten days after the Effective Time.
Section 5.17 Certain Tax Matters.
Each of the Target and Aytu shall, and
shall cause each of its respective Subsidiaries to, use reasonable
best efforts to obtain the tax opinions referenced in
Section
6.01(k). Neither Target or
Aytu shall (and the Target and Aytu shall cause their respective
Subsidiaries not to) take or fail to take any action which action
(or failure to act) would reasonably be expected to prevent or
impede the Merger from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
Section 5.18 Obligations of Merger
Sub. Aytu will take all action
necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions
set forth in this Agreement.
Section 5.19 Further Assurances.
At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the
Target or Merger Sub, any deeds, bills of sale, assignments, or
assurances and to take and do, in the name and on behalf of the
Target or Merger Sub, any other actions and things to vest,
perfect, or confirm of record or otherwise in the Surviving
Corporation any and all right, title, and interest in, to and under
any of the rights, properties, or assets of the Target acquired or
to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
45
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Each Party's
Obligation to Effect the Merger. The respective obligations of each party to this
Agreement to effect the Merger is subject to the satisfaction or
waiver (where permissible pursuant to applicable Law) on or prior
to the Closing Date of each of the following
conditions:
(a) Target
Stockholder Approval. This Agreement will have been duly adopted by
the Requisite Target Vote.
(b) Aytu
Stockholder Approval. The Aytu Stock Issuance will have been
approved by the Requisite Aytu Vote.
(c) Listing.
The shares of Aytu Common Stock issuable as Merger Consideration
pursuant to this Agreement shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
(d) Form
S-4. The Form S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order.
(e) Target
and Aytu shall have entered into the Contingent Value Rights
Agreement.
(f) Regulatory
Approvals. If a filing is required, the waiting period applicable
to the consummation of the Merger under the HSR Act (or any
extension thereof) shall have expired or been terminated and all
required filings shall have been made and all required approvals
obtained (or waiting periods expired or terminated) under
applicable Antitrust Laws.
(g) No
Injunctions, Restraints, or Illegality. No Governmental Entity
having jurisdiction over any party hereto shall have enacted,
issued, promulgated, enforced, or entered any Laws or Orders,
whether temporary, preliminary, or permanent, that make illegal,
enjoin, or otherwise prohibit consummation of the Merger, the Aytu
Stock Issuance, or the other transactions contemplated by this
Agreement.
(h) Governmental
Consents. All consents, approvals and other authorizations of any
Governmental Entity set forth in Section 6.01 of the Target
Disclosure Letter and Section 6.01 of the Aytu Disclosure Letter
and required to consummate the Merger, the Aytu Stock Issuance, and
the other transactions contemplated by this Agreement (other than
the filing of the Certificate of Merger with the Secretary of State
of the States of Delaware and Nevada) shall have been obtained,
free of any condition that would reasonably be expected to have a
Target Material Adverse Effect or Aytu Material Adverse
Effect.
(i) Employment
Agreements. Aytu and each of Xxxxxx Xxxxx and Xxxx Xxxxxxx shall
have entered into an employment agreement in the form of the
agreements attached hereto as Exhibits C &
D.
46
(j) Separation
Agreement and Consulting Agreements. Aytu and Xxxxx Xxxxxxxx shall
have entered into a separation agreement and a consulting agreement
in the form of the agreements attached hereto as
Exhibits E
& F.
(k) Tax
Opinion. The Target and Aytu shall have received a written opinion
from Potomac Law Group, PLLC dated as of the Closing Date to the
effect that, on the basis of certain facts, representations, and
assumptions set forth or referred to in such opinions, the Merger
will qualify as a "reorganization" within the meaning of Section
368(a) of the Code. In rendering the opinion described in
this Section 6.01(k), such
counsel shall be entitled to receive and rely upon customary
representation letters from Aytu and the
Target.
Section 6.02 Conditions to Obligations of
Aytu and Merger Sub. The
obligations of Aytu and Merger Sub to effect the Merger are also
subject to the satisfaction or waiver (where permissible pursuant
to applicable Law) by Aytu and Merger Sub on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. (i) The
representations and warranties of the Target (other than in
Section
3.01(a), Section
3.02, Section
3.03(a), Section
3.03(b), Section
3.03(d), Section
3.03(e), and
Section
3.10) set forth in
ARTICLE
III of this Agreement shall be
true and correct in all respects (without giving effect to any
limitation indicated by the words "Target Material Adverse Effect,"
"in all material respects," "in any material respect," "material,"
or "materially") when made and as of immediately prior to the
Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as
of that date), except where the failure of such representations and
warranties to be so true and correct would not reasonably be
expected to have, individually or in the aggregate, a Target
Material Adverse Effect; (ii) the representations and warranties of
the Target contained in Section 3.02
shall be true and correct (other
than de
minimis inaccuracies) when made
and as of immediately prior to the Effective Time, as if made at
and as of such time (except those representations and warranties
that address matters only as of a particular date, which shall be
true and correct in all material respects as of that date); and
(iii) the representations and warranties contained in
Section
3.01(a), Section
3.03(a), Section
3.03(b), Section
3.03(d), Section
3.03(e), Section
3.05(a), Section 3.10
and Section
3.20 shall be true and
correct in all respects when made and as of immediately prior to
the Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as
of that date).
(b) Performance of Covenants. The Target shall have
performed in all material respects all obligations, and complied in
all material respects with the agreements and covenants, in this
Agreement required to be performed by or complied with by it at or
prior to the Closing.
(c) Target
Material Adverse Effect. Since the date of this Agreement, there
shall not have been any Target Material Adverse Effect or any
event, change, or effect that would, individually or in the
aggregate, reasonably be expected to have a Target Material Adverse
Effect.
(d) Officers
Certificate. Aytu will have received a certificate, signed by the
chief executive officer or chief financial officer of the Target,
certifying as to the matters set forth in Section
6.02(a), Section
6.02(b), and
Section
6.02(c) hereof.
47
Section 6.03 Conditions to Obligation of the
Target. The obligation of the
Target to effect the Merger is also subject to the satisfaction or
waiver by the Target on or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. (i) The
representations and warranties of Aytu and Merger Sub (other than
in Section
4.01(a), Section
4.02, Section
4.03(a), Section
4.03(b), Section
4.03(d), Section
4.06, Section
4.08, Section 4.08,
Section 4.10
and Section 4.10) set forth in
ARTICLE
IV of this Agreement shall be
true and correct in all respects (without giving effect to any
limitation indicated by the words "Aytu Material Adverse Effect,"
"in all material respects," "in any material respect," "material,"
or "materially") when made and as of immediately prior to the
Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as
of that date), except where the failure of such representations and
warranties to be so true and correct would not reasonably be
expected to have, individually or in the aggregate, an Aytu
Material Adverse Effect; (ii) the representations and warranties of
Aytu and Merger Sub contained in Section 4.02
will be true and correct (other
than de
minimis inaccuracies) when made
and as of immediately prior to the Effective Time, as if made at
and as of such time (except those representations and warranties
that address matters only as of a particular date, which shall be
true and correct in all material respects as of that date); and
(iii) the representations and warranties contained in
Section
4.01(a), Section
4.03(a), Section
4.03(b), Section
4.03(d), Section
4.06, Section
4.08, Section 4.08,
Section 4.10
and Section 4.10 shall be true and
correct in all respects when made and as of immediately prior to
the Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as
of that date).
(b) Performance of Covenants. Aytu and Merger Sub
shall have performed in all material respects all obligations, and
complied in all material respects with the agreements and
covenants, of this Agreement required to be performed by or
complied with by them at or prior to the
Closing.
(c) Aytu
Material Adverse Effect. Since the date of this Agreement, there
shall not have been any Aytu Material Adverse Effect or any event,
change, or effect that would, individually or in the aggregate,
reasonably be expected to have an Aytu Material Adverse
Effect.
(d) Officers
Certificate. The Target will have received a certificate, signed by
an officer of Aytu, certifying as to the matters set forth
in Section
6.03(a), Section
6.03(b), and
Section
6.03(c).
48
ARTICLE VII
TERMINATION,
AMENDMENT, AND WAIVER
Section 7.01 Termination by Mutual
Consent. This Agreement may be
terminated at any time prior to the Effective Time (whether before
or after the receipt of the Requisite Target Vote or the Requisite
Aytu Vote) by the mutual written consent of Aytu and the
Target.
Section 7.02 Termination by Either Aytu or
the Target. This Agreement may
be terminated by either Aytu or the Target at any time prior to the
Effective Time (whether before or after the receipt of the
Requisite Target Vote or the Requisite Aytu
Vote):
(a) if the
Merger has not been consummated on or before May 15, 2020 (the
"End
Date"), unless extended by
mutual written agreement of the parties; provided, however,
that right to terminate this Agreement
pursuant to this Section
7.02(a) shall not be
available to any party whose breach of any representation,
warranty, covenant, or agreement set forth in this Agreement has
been the cause of, or resulted in, the failure of the Merger to be
consummated on or before the End Date;
(b) if any
Governmental Entity of competent jurisdiction shall have enacted,
issued, promulgated, enforced, or entered any Law or Order making
illegal, permanently enjoining, or otherwise permanently
prohibiting the consummation of the Merger, the Aytu Stock
Issuance, or the other transactions contemplated by this Agreement,
and such Law or Order shall have become final and
nonappealable; provided, however,
that the right to terminate this
Agreement pursuant to this Section
7.02(b) shall not be
available to any party whose breach of any representation,
warranty, covenant, or agreement set forth in this Agreement has
been the cause of, or resulted in, the issuance, promulgation,
enforcement, or entry of any such Law or Order;
(c) if
this Agreement has been submitted to the stockholders of the Target
for adoption at a duly convened Target Stockholders Meeting and the
Requisite Target Vote shall not have been obtained at such meeting
(unless such Target Stockholders Meeting has been adjourned or
postponed, in which case at the final adjournment or postponement
thereof); or
(d) if
the Aytu Stock Issuance has been submitted to the stockholders of
Aytu for approval at a duly convened Aytu Stockholders Meeting and
the Requisite Aytu Vote shall not have been obtained at such
meeting (unless such Aytu Stockholders Meeting has been adjourned
or postponed, in which case at the final adjournment or
postponement thereof).
Section 7.03 Termination by Aytu.
This Agreement may be terminated by
Aytu at any time prior to the Effective Time:
(a) if: (i)
a Target Adverse Recommendation Change shall have occurred; or (ii)
the Target shall have breached or failed to perform in any material
respect any of its covenants and agreements set forth in this
Agreement; or
(b) if there
shall have been a breach of any representation, warranty, covenant,
or agreement on the part of the Target set forth in this Agreement
such that the conditions to the Closing of the Merger set forth
in Section
6.02(a) or Section
6.02(b), as applicable,
would not be satisfied and, in either such case, such breach is
incapable of being cured by the End Date; provided, that
Aytu shall have given the Target at
least 20 days written notice prior to such termination stating
Aytu's intention to terminate this Agreement pursuant to
this Section
7.03(b); provided further,
that Aytu shall not have the right to terminate this Agreement
pursuant to this Section
7.03(b) if Aytu or Merger
Sub is then in material breach of any representation, warranty,
covenant, or obligation hereunder, which breach has not been
cured.
49
Section 7.04 Termination by the
Target. This Agreement may be
terminated by the Target at any time prior to the Effective
Time:
(a) if prior
to the receipt of the Requisite Target Vote at the Target
Stockholders Meeting, the Target Board authorizes the Target, in
full compliance with the terms of this Agreement, including
Section 5.05
hereof, to enter into an Acquisition
Agreement (other than an Acceptable Confidentiality Agreement) in
respect of a Superior Proposal; provided, that
the Target shall have paid any amounts
due pursuant to Section 7.07(b) hereof in accordance with the
terms, and at the times, specified therein; and provided further,
that in the event of such termination,
the Target substantially concurrently enters into such Acquisition
Agreement; or
(b) if Aytu shall have breached or failed
to perform in any material respect any of its covenants and
agreements set forth in this Agreement; or
(c) if
there shall have been a breach of any representation, warranty,
covenant, or agreement on the part of Aytu or Merger Sub set forth
in this Agreement such that the conditions to the Closing of the
Merger set forth in Section
6.03(a) or Section
6.03(b), as applicable,
would not be satisfied and, in either such case, such breach is
incapable of being cured by the End Date; provided, that
the Target shall have given Aytu at
least 20 days written notice prior to such termination stating the
Target's intention to terminate this Agreement pursuant to
this Section
7.04(c); provided further,
that the Target shall not have the right to terminate this
Agreement pursuant to this Section
7.04(c) if the Target is
then in material breach of any representation, warranty, covenant,
or obligation hereunder, which breach has not been
cured.
Section 7.05 Notice of Termination; Effect
of Termination. The party
desiring to terminate this Agreement pursuant to this
ARTICLE
VII (other than pursuant
to Section
7.01) shall deliver written
notice of such termination to each other party hereto specifying
with particularity the reason for such termination, and any such
termination in accordance with this Section 7.05
shall be effective immediately upon
delivery of such written notice to the other party. If this
Agreement is terminated pursuant to this ARTICLE
VII, it will become void and of
no further force and effect, with no liability on the part of any
party to this Agreement (or any stockholder, director, officer,
employee, agent, or Representative of such party) to any other
party hereto, except: (a) with respect to Section
5.04(b), this
Section
7.05, Section
7.06, and
ARTICLE
VIII (and any related
definitions contained in any such Sections or Article), which shall
remain in full force and effect; and (b) with respect to any
liabilities or damages incurred or suffered by a party, to the
extent such liabilities or damages were the result of fraud or the
willful breach by another party of any of its representations,
warranties, covenants, or other agreements set forth in this
Agreement.
(a) If
this Agreement is terminated by Aytu pursuant to Section 7.03(a)
or Section
7.03(b), then the Target
shall pay to Aytu (by wire transfer of immediately available
funds), within five Business Days after such termination, a fee in
an amount equal to the Termination Fee on or prior to the
termination of this Agreement;
(b) If
this Agreement is terminated by Target pursuant to Section 7.04(a)
then the Target shall pay to Aytu (by
wire transfer of immediately available funds), within five Business
Days after such termination, a fee in an amount equal to the
Termination Fee on or prior to the termination of this Agreement.
If this Agreement is terminated by Target pursuant to
Section
7.04(b) or Section
7.04(c), then Aytu shall
pay to the Target (by wire transfer of immediately available
funds), at or prior to such termination, the Termination Fee on or
prior to the termination of this Agreement
50
(c) If
this Agreement is terminated by either Party pursuant to Section
7.02(c) and Target had effected a Target Adverse Recommendation
Change prior to the Target Stockholders Meeting (including any
adjournment or postponement thereof), Target shall pay to Aytu (by
wire transfer of immediately available funds) the Termination Fee
within five Business Days of such Termination. If this Agreement is
terminated by either Party pursuant to Section 7.02(d) and Aytu had
effected a Target Adverse Recommendation Change prior to the Aytu
Stockholders Meeting (including any adjournment or postponement
thereof), Aytu shall pay to Target (by wire transfer of immediately
available funds) the Termination Fee within five Business Days of
such Termination.
(d) If
this Agreement is terminated by Aytu or Target for any reason other
than those mentioned in Section 7.06(a) or Section 7.06(c) above, no Termination Fee shall
be payable by either Party.
(e) The
parties acknowledge and hereby agree that the provisions of
this Section 7.06
are an integral part of the
transactions contemplated by this Agreement (including the Merger),
and that, without such provisions, the parties would not have
entered into this Agreement. If the Target, on the one hand, or
Aytu and Merger Sub, on the other hand, shall fail to pay in a
timely manner the amounts due pursuant to this Section
7.06, and, in order to
obtain such payment, the other party makes a claim against the
non-paying party that results in a judgment, the non-paying party
shall pay to the other party the reasonable costs and expenses
(including its reasonable attorneys' fees and expenses) incurred or
accrued in connection with such suit, together with interest on the
amounts set forth in this Section 7.06
at the prime lending rate prevailing
during such period as published in The Wall Street
Journal. Any interest payable
hereunder shall be calculated on a daily basis from the date such
amounts were required to be paid until (but excluding) the date of
actual payment, and on the basis of a 360-day year. The parties
acknowledge and agree that in no event shall the parties be
obligated to pay the Termination Fee on more than one
occasion.
(f) Except
as expressly set forth in this Section
7.06, all Expenses incurred
in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such Expenses;
provided,
however, that Aytu and the
Target shall be equally responsible for all filing fees incurred in
connection with the HSR Act or any other Antitrust Law in
connection with the consummation of the transactions contemplated
by this Agreement.
Section 7.07 Amendment. At any time prior to the Effective Time, this
Agreement may be amended or supplemented in any and all respects,
whether before or after receipt of the Requisite Target Vote or the
Requisite Aytu Vote, by written agreement signed by each of the
parties hereto; provided, however,
that: (a) following the receipt of the
Requisite Target Vote, there shall be no amendment or supplement to
the provisions of this Agreement which by Law or in accordance with
the rules of any relevant self-regulatory organization would
require further approval by the holders of Target Common Stock
without such approval; and (b) following the receipt of the
Requisite Aytu Vote, there shall be no amendment or supplement to
the provisions of this Agreement which by Law or in accordance with
the rules of any relevant self-regulatory organization would
require further approval by the holders of Aytu Common Stock
without such approval.
Section 7.08 Extension; Waiver.
At any time prior to the Effective
Time, Aytu or Merger Sub, on the one hand, or the Target, on the
other hand, may: (a) extend the time for the performance of any of
the obligations of the other party(ies); (b) waive any inaccuracies
in the representations and warranties of the other party(ies)
contained in this Agreement or in any document delivered under this
Agreement; or (c) unless prohibited by applicable Law, waive
compliance with any of the covenants, agreements, or conditions
contained in this Agreement. Any agreement on the part of a party
to any extension or waiver will be valid only if set forth in an
instrument in writing signed by such party. The failure of any
party to assert any of its rights under this Agreement or otherwise
will not constitute a waiver of such rights.
51
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Definitions.
For purposes of this Agreement, the
following terms will have the following meanings when used herein
with initial capital letters:
"Acceptable Confidentiality
Agreement" means a
confidentiality and standstill agreement that contains
confidentiality and standstill provisions that are no less
favorable to a party hereof than those contained in the
Confidentiality Agreement.
"Acquisition
Agreement" has the meaning set
forth in Section
5.05(a).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or
is under common control with, such first Person. For the purposes
of this definition, "control" (including, the terms "controlling,"
"controlled by," and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting
securities, by Contract, or otherwise.
"Affordable Care Act"
means the Patient Protection and
Affordable Care Act (PPACA), as amended by the Health Care and
Education Reconciliation Act (HCERA).
"Agreement" has the meaning set forth in the
Preamble.
"Antitrust
Laws" has the meaning set forth
in Section
3.03(c).
"Associate" has the meaning set forth in Section 203(c)(2)
of the DGCL.
"Aytu" has the meaning set forth in the
Preamble.
"Aytu Adverse Recommendation
Change" shall mean the Aytu
Board: (a) failing to make, withdraw, amend, modify, or materially
qualify, in a manner adverse to the Target, the Aytu Board
Recommendation; (b) failing to include the Aytu Board
Recommendation in the Joint Proxy Statement that is mailed to
Aytu's stockholders; (c) recommending another transaction that is
an alternative to the Transaction; (d) failing to reaffirm
(publicly, if so requested by the Target) the Aytu Board
Recommendation within ten Business Days after the date any
transaction that is an alternative to the Transaction is first
publicly disclosed by Aytu or the Person proposing such
transaction; (e) making any public statement inconsistent with the
Aytu Board Recommendation; or (f) resolving or agreeing to take any
of the foregoing actions.
"Aytu Balance
Sheet" has the meaning set
forth in Section
4.04(c).
"Aytu Board" has the meaning set forth in the
Recitals.
52
"Aytu Board
Recommendation" has the meaning
set forth in Section
4.03(d)(i).
"Aytu Common
Stock" has the meaning set
forth in the Recitals.
"Aytu Disclosure
Letter" means the disclosure
letter, dated as of the date of this Agreement and delivered by
Aytu and Merger Sub to the Target concurrently with the execution
of this Agreement.
"Aytu Equity
Award" means an Aytu Stock
Option or an Aytu Restricted Share, as the case may
be.
"Aytu Material Adverse
Effect" means any event,
occurrence, fact, condition, or change that is, or would reasonably
be expected to become, individually or in the aggregate, materially
adverse to: (a) the business, results of operations, condition
(financial or otherwise), or assets of the Aytu and its
Subsidiaries, taken as a whole; or (b) the ability of Aytu to
consummate the transactions contemplated hereby on a timely
basis; provided, however,
that, for the purposes of clause (a),
an Aytu Material Adverse Effect shall not be deemed to include
events, occurrences, facts, conditions or changes arising out of,
relating to, or resulting from: (i) changes generally affecting the
economy, financial, or securities markets; (ii) the announcement of
the transactions contemplated by this Agreement; (iii) any outbreak
or escalation of war or any act of terrorism; or (iv) general
conditions in the industry in which Aytu and its Subsidiaries
operate; provided
further, however, that any event, change, and effect referred to
in clauses (i), (iii), or (iv) immediately above shall be taken
into account in determining whether an Aytu Material Adverse Effect
has occurred or would reasonably be expected to occur to the extent
that such event, change, or effect has a disproportionate effect on
Aytu and its Subsidiaries, taken as a whole, compared to other
participants in the industries in which Aytu and its Subsidiaries
conduct their businesses.
"Aytu Preferred
Stock" has the meaning set
forth in Section
4.02(a).
"Aytu Restricted
Share" means any Aytu Common
Stock subject to vesting, repurchase, or other lapse of
restrictions granted under any Aytu Stock Plan.
"Aytu SEC
Documents" has the meaning set
forth in Section
4.04(a).
"Aytu
Securities" has the meaning set
forth in Section
4.02(b)(ii).
"Aytu Stockholders
Meeting" means the special
meeting of the stockholders of Aytu to be held to consider the
approval of the Aytu Stock Issuance.
"Aytu Stock
Issuance" has the meaning set
forth in the Recitals.
"Aytu Stock
Option" means any option to
purchase Aytu Common Stock granted under any Aytu Stock
Plan.
"Aytu Stock
Plans" means the 2015 Stock
Option and Incentive Plan, as amended.
53
"Aytu Subsidiary
Securities" has the meaning set
forth in Section
4.02(d).
"Aytu Voting
Debt" has the meaning set forth
in Section
4.02(c).
"Black-Scholes
Value" has the meaning set
forth in Section 2.01(b)(ii).
"Bloomberg" has the meaning set forth in Section
2.01(b)(ii).
"Book-Entry
Share" has the meaning set
forth in Section
2.01(c).
"Business Day" means any day, other than Saturday, Sunday, or
any day on which banking institutions located in Denver, Colorado
are authorized or required by Law or other governmental action to
close.
"Cancelled
Shares" has the meaning set
forth in Section
2.01(a).
"Certificate" has the meaning set forth in Section
2.01(c).
"Certificate of
Merger" has the meaning set
forth in Section
1.03.
"Charter
Documents" means: (a) with
respect to a corporation, the charter, articles or certificate of
incorporation, as applicable, and bylaws thereof; (b) with respect
to a limited liability company, the certificate of formation or
organization, as applicable, and the operating or limited liability
company agreement, as applicable, thereof; (c) with respect to a
partnership, the certificate of formation and the partnership
agreement; and (d) with respect to any other Person the
organizational, constituent and/or governing documents and/or
instruments of such Person.
"Closing" has the meaning set forth in Section
1.02.
"Closing Date" has the meaning set forth in Section
1.02.
"COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and as codified in Section
4980B of the Code and Section 601 et. seq. of ERISA.
"Code" has the meaning set forth in the
Recitals.
54
"Confidentiality
Agreement" has the meaning set
forth in the Recitals.
"Consent" has the meaning set forth in Section
3.03(c).
“Consideration
Value” has the meaning
set forth in Section 2.01(b)(ii).
“Contingent Value Rights
Agreement” means an
agreement between Target, Aytu and the rights agent providing for
the terms of non-transferable contingent value rights to be issued
to Target’s stockholders in connection with the Merger and in
the form set forth on Exhibit B
hereto (subject to any reasonable
revisions that are required by such transfer
agent).
"Contracts" means any contracts, agreements, licenses,
notes, bonds, mortgages, indentures, leases, or other binding
instruments or binding commitments, whether written or
oral.
“CVR”
means a non-transferable contingent
value right having the rights set forth in the Contingent Value
Rights Agreement.
"DGCL" has the meaning set forth in the
Recitals.
“Drug Regulatory
Agency” has the meaning
set forth in Section 3.08(c).
“Dissenting
Shares” has the meaning
set forth in Section 2.03.
“Dissenting
Statute” has the meaning
set forth in Section 2.03.
"XXXXX" has the meaning set forth in Section
3.04(a).
"Effective
Time" has the meaning set forth
in Section
1.03.
"End Date" has the meaning set forth in Section
7.02(a).
55
"Environmental
Laws" means any applicable Law,
and any Order or binding agreement with any Governmental Entity:
(a) relating to pollution (or the cleanup thereof) or the
protection of natural resources, endangered or threatened species,
human health or safety, or the environment (including ambient air,
soil, surface water or groundwater, or subsurface strata); or (b)
concerning the presence of, exposure to, or the management,
manufacture, use, containment, storage, recycling, reclamation,
reuse, treatment, generation, discharge, transportation,
processing, production, disposal or remediation of any Hazardous
Materials. The term "Environmental Law" includes, without
limitation, the following (including their implementing regulations
and any state analogs): the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
§§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended by the
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
§§ 6901 et seq.; the Federal Water Pollution Control Act of 1972,
as amended by the Clean Water Act of 1977, 33 U.S.C. §§
1251 et
seq.; the Toxic Substances
Control Act of 1976, as amended, 15 U.S.C. §§ 2601
et
seq.; the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. §§
11001 et
seq.; the Clean Air Act of
1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C.
§§ 7401 et seq.; and the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. §§ 651 et seq.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" has the meaning set forth in Section
3.03(c).
"Exchange
Agent" has the meaning set
forth in Section
2.02(a).
"Exchange
Fund" has the meaning set forth
in Section
2.02(a).
"Exchange
Ratio" has the meaning set
forth in Section 2.01(b)(i).
"Expenses" means, with respect to any Person, all
reasonable and documented out-of-pocket fees and expenses
(including all fees and expenses of counsel, accountants, financial
advisors, and investment bankers of such Person and its
Affiliates), incurred by such Person or on its behalf in connection
with or related to the authorization, preparation, negotiation,
execution, and performance of this Agreement and any transactions
related thereto, any litigation with respect thereto, the
preparation, printing, filing, and mailing of the Joint Proxy
Statement and Form S-4, the filing of any required notices under
the HSR Act or Foreign Antitrust Laws, or in connection with other
regulatory approvals, and all other matters related to the Merger,
the Aytu Stock Issuance, and the other transactions contemplated by
this Agreement.
"Foreign Antitrust
Laws" has the meaning set forth
in Section
3.03(c).
"Form S-4" has the meaning set forth in Section
3.17.
“FDA” has the meaning set forth in Section
3.08(c).
“FDCA” has the meaning set forth in Section
3.08(c).
56
"GAAP" has the meaning set forth in Section
3.04(b).
"Governmental
Entity" has the meaning set
forth in Section
3.03(c).
“Governmental
Authorization” means any:
(a) permit, license, certificate, franchise, permission, variance,
exception, order, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by
or under the authority of any Governmental Entity or pursuant to
any Law; or (b) right under any Contract with any Governmental
Entity.
"Hazardous
Substance" shall mean: (a) any
material, substance, chemical, waste, product, derivative,
compound, mixture, solid, liquid, mineral, or gas, in each case,
whether naturally occurring or man-made, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect
under Environmental Laws; and (b) any petroleum or
petroleum-derived products, radon, radioactive materials or wastes,
asbestos in any form, lead or lead-containing materials, urea
formaldehyde foam insulation, and polychlorinated
biphenyls.
"Health Care Data
Requirements" has the meaning
set forth in Section 3.18(j).
"HIPAA" means the Health Insurance Portability and
Accountability Act of 1996, as amended.
"HITECH" has the meaning set forth in Section
3.18(j).
"HSR Act" has the meaning set forth in Section
3.03(c).
"Indemnified
Party" has the meaning set
forth in Section
5.11(a).
"Intellectual
Property" means any and all of
the following arising pursuant to the Laws of any jurisdiction
throughout the world: (a) trademarks, service marks, trade names,
and similar indicia of source or origin, all registrations and
applications for registration thereof, and the goodwill connected
with the use of and symbolized by the foregoing; (b) copyrights and
all registrations and applications for registration thereof, and
all works of authorship protectable by copyright law (including
computer software in any form); (c) trade secrets and know-how; (d)
patents, patent applications (including provisional patent
applications), foreign counterparts or equivalents of any of the
foregoing, and any inventions, discoveries, and other innovations
that are or may be patentable; (e) internet domain name
registrations; and (f) other intellectual property (including
databases, algorithms, designs, drawings, processes, formulations,
and chemical, biological, toxicological, pharmacological,
financial, commercial, and other types of data of a confidential or
proprietary nature, whether or not protectable under patent or
copyright law) and related proprietary rights.
“Interim Operating
Loss” operating losses of
Target between June 30, 2019 that occur in the ordinary
course.
"IRS" means the United States Internal Revenue
Service.
57
"Joint Proxy
Statement" has the meaning set
forth in Section
3.17.
“June 30 Net Working
Capital Deficit” is
negative $2,416,441.
“June 30 Total Liability
Balance” is
$10,790,892.
"Knowledge" means: (a) with respect to the Target and its
Subsidiaries, the actual knowledge of Xxxxxx Xxxxx, Xxxxx Xxxxxxxx
or Xxxx Xxxxxxx; and (b) with respect to Aytu and its Subsidiaries,
the actual knowledge of Xxxx Xxxxxxx and Xxxx Xxxxx; in each case,
after due inquiry.
"Laws" means any federal, state, local, municipal,
foreign, multi-national or other laws, common law, statutes,
constitutions, ordinances, rules, regulations, codes, Orders, or
legally enforceable requirements enacted, issued, adopted,
promulgated, enforced, ordered, or applied by any Governmental
Entity.
"Lease" shall mean all leases, subleases, licenses,
concessions, and other agreements (written or oral) under which the
Target or any of its Subsidiaries holds any Leased Real Estate,
including the right to all security deposits and other amounts and
instruments deposited by or on behalf of the Target or any of its
Subsidiaries thereunder.
"Leased Real
Estate" shall mean all
leasehold or subleasehold estates and other rights to use or occupy
any land, buildings, structures, improvements, fixtures, or other
interest in real property held by the Target or any of its
Subsidiaries.
"Legal Action" means any legal, administrative, arbitral, or
other proceedings, suits, actions, investigations, examinations,
claims, audits, hearings, charges, complaints, indictments,
litigations, or examinations.
"Liability" shall mean any liability, indebtedness, or
obligation of any kind (whether accrued, absolute, contingent,
matured, unmatured, determined, determinable, or otherwise, and
whether or not required to be recorded or reflected on a balance
sheet under GAAP).
"Liens" means, with respect to any property or asset,
all pledges, liens, mortgages, charges, encumbrances,
hypothecations, options, rights of first refusal, rights of first
offer, and security interests of any kind or nature
whatsoever.
"Maximum
Premium" has the meaning set
forth in Section 5.11(b).
"Merger" has the meaning set forth in Section
1.01.
"Merger
Consideration" has the meaning
set forth in Section
2.01(b).
58
"Merger Sub" has the meaning set forth in the
Preamble.
"Merger Sub
Board" has the meaning set
forth in the Recitals.
"Multiemployer
Plan" has the meaning set forth
in Section
3.12(c).
"Nasdaq" has the meaning set forth in Section
2.01(d).
"NRS" has the meaning set forth in the
Recitals.
"Order" has the meaning set forth in Section
3.09.
"Other Governmental
Approvals" has the meaning set
forth in Section
3.03(c).
“OTC” means the OTC Markets Group, including the
OTCQB Venture Market on which Target’s shares are
traded.
"PBGC" has the meaning set forth in Section
3.12(d).
"Permits" has the meaning set forth in Section
3.08(b).
"Permitted
Liens" means: (a) statutory
Liens for current Taxes or other governmental charges not yet due
and payable or the amount or validity of which is being contested
in good faith (provided appropriate reserves required pursuant to
GAAP have been made in respect thereof); (b) mechanics', carriers',
workers', repairers', and similar statutory Liens arising or
incurred in the ordinary course of business for amounts which are
not delinquent or which are being contested by appropriate
proceedings (provided appropriate reserves required pursuant to
GAAP have been made in respect thereof); (c) zoning, entitlement,
building, and other land use regulations imposed by Governmental
Entities having jurisdiction over such Person's owned or leased
real property, which are not violated by the current use and
operation of such real property; (d) covenants, conditions,
restrictions, easements, and other similar non-monetary matters of
record affecting title to such Person's owned or leased real
property, which do not materially impair the occupancy or use of
such real property for the purposes for which it is currently used
in connection with such Person's businesses; (e) any right of way
or easement related to public roads and highways, which do not
materially impair the occupancy or use of such real property for
the purposes for which it is currently used in connection with such
Person's businesses; and (f) Liens arising under workers'
compensation, unemployment insurance, social security, retirement,
and similar legislation.
59
"Person" means any individual, corporation, limited or
general partnership, limited liability company, limited liability
partnership, trust, association, joint venture, Governmental
Entity, or other entity or group (which term will include a "group"
as such term is defined in Section 13(d)(3) of the Exchange
Act).
"PHS Act" has the meaning set forth in Section
3.18(a).
“Promissory
Note” has the meaning set
forth in the Recitals.
"Representatives"
has the meaning set forth in Section
5.05(a).
"Requisite Target
Vote" has the meaning set forth
in Section
3.03(a).
"Requisite Aytu
Vote" has the meaning set forth
in Section
4.03(a).
"Xxxxxxxx-Xxxxx
Act" has the meaning set forth
in Section
3.04(a).
"SEC" has the meaning set forth in Section
3.03(c).
"Securities
Act" has the meaning set forth
in Section
3.03(c).
"Xxxxx Law" has the meaning set forth in Section
3.18(h).
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other business entity of which a
majority of the shares of voting securities is at the time
beneficially owned, or the management of which is otherwise
controlled, directly or indirectly, through one or more
intermediaries, or both, by such Person.
"Superior
Proposal" means a bona fide
written proposal for a Target Alternative Transaction with respect
to the Target or its Subsidiaries that Target’s board
determines in good faith (after consultation with outside legal
counsel and Target’s financial advisor) is more favorable
from a financial point of view to the holders of Target’s
common stock than the transactions contemplated by this Agreement,
taking into account: (a) all financial considerations; (b) the
identity of the third party making such proposal; (c) the
anticipated timing, conditions (including any financing condition
or the reliability of any debt or equity funding commitments) and
prospects for completion of such Target Alternative Transaction;
(d) the other terms and conditions of such proposal and the
implications thereof on Target, including relevant legal,
regulatory, and other aspects of such proposal deemed relevant by
Target; and (e) any revisions to the terms of this Agreement and
the Merger proposed by Aytu during the Superior Proposal Notice
Period set forth in Section 5.05(d).
60
"Superior Proposal Notice
Period" has the meaning set
forth in Section
5.05(d).
"Surviving
Corporation" has the meaning
set forth in Section
1.01.
"Target" has the meaning set forth in the
Preamble.
"Target Adverse Recommendation
Change" shall mean the Target
Board: (a) failing to make, withdraw, amend, modify, or materially
qualify, in a manner adverse to Aytu, the Target Board
Recommendation; (b) failing to include the Target Board
Recommendation in the Joint Proxy Statement that is mailed to the
Target's stockholders; (c) recommending a Target Alternative
Transaction; (d) failing to recommend against acceptance of any
tender offer or exchange offer for the shares of Target Common
Stock within ten Business Days after the commencement of such offer
for a Target Alternative Transaction; (e) failing to reaffirm
(publicly, if so requested by Aytu) the Target Board Recommendation
within ten (10) Business Days after the date any proposed Target
Alternative Transaction (or material modification thereto) is first
publicly disclosed by the Target or the Person entering into such
Target Alternative Transaction; (f) making any public statement
inconsistent with the Target Board Recommendation; or (g) resolving
or agreeing to take any of the foregoing
actions.
"Target Alternative
Transaction" means a
transaction in which (i) the Target issues securities representing
40% or more of its total fully diluted voting power
post-transaction by way of merger or other business combination
with Target or any of its Subsidiaries or (ii) Target engages in a
merger or other business combination such that the holders of
voting securities of Target immediately after the transaction do
not own more than 60% of the voting power of securities of the
resulting entity on a fully diluted basis.
"Target Balance
Sheet" has the meaning set
forth in Section
3.04(e).
"Target Board" has the meaning set forth in the
Recitals.
"Target Board
Recommendation" has the meaning
set forth in Section
3.03(d).
"Target Common
Stock" has the meaning set
forth in the Recitals.
"Target Continuing
Employees" has the meaning set
forth in Section
5.10(a).
"Target Disclosure
Letter" means the disclosure
letter, dated as of the date of this Agreement and delivered by the
Target to Aytu concurrently with the execution of this
Agreement.
"Target
Employee" has the meaning set
forth in Section
3.12(a).
"Target Employee
Plans" has the meaning set
forth in Section
3.12(a).
61
"Target Equity
Award" means a Target Stock
Option or a Target Restricted Share granted under one of the Target
Stock Plans, as the case may be.
"Target ERISA
Affiliate" means all employers,
trades, or businesses (whether or not incorporated) that would be
treated together with the Target or any of its Affiliates as a
"single employer" within the meaning of Section 414 of the
Code.
"Target Financial
Advisor" has the meaning set
forth in Section
3.10.
"Target IP" has the meaning set forth in Section
3.07(b).
"Target IP
Agreements" means all
assignments, licenses, sublicenses, consent to use agreements,
settlements, coexistence agreements, covenants not to xxx, waivers,
releases, permissions, and other Contracts, whether written or
oral, relating to Intellectual Property and to which the Target or
any of its Subsidiaries is a party, beneficiary, or otherwise
bound.
"Target IT
Systems" means all software,
computer hardware, servers, networks, platforms, peripherals, and
similar or related items of automated, computerized, or other
information technology networks and systems (including
telecommunications networks and systems for voice, data, and video)
owned, leased, licensed, or used (including through cloud-based or
other third-party service providers) by the Target or any of its
Subsidiaries.
"Target Material Adverse
Effect" means any event,
occurrence, fact, condition, or change that is, or would reasonably
be expected to become, individually or in the aggregate, materially
adverse to: (a) the business, results of operations, condition
(financial or otherwise), or assets of the Target and its
Subsidiaries, taken as a whole; or (b) the ability of the Target to
consummate the transactions contemplated hereby on a timely
basis; provided, however,
that, for the purposes of clause (a),
a Target Material Adverse Effect shall not be deemed to include
events, occurrences, facts, conditions or changes arising out of,
relating to, or resulting from: (i) changes generally affecting the
economy, financial, or securities markets; (ii) the announcement of
the transactions contemplated by this Agreement; (iii) any outbreak
or escalation of war or any act of terrorism; or (iv) general
conditions in the industry in which the Target and its Subsidiaries
operate; provided
further, however, that any event, change, and effect referred to
in clauses (i), (iii), or (iv) immediately above shall be taken
into account in determining whether a Target Material Adverse
Effect has occurred or would reasonably be expected to occur to the
extent that such event, change, or effect has a disproportionate
effect on the Target and its Subsidiaries, taken as a whole,
compared to other participants in the industries in which the
Target and its Subsidiaries conduct their
businesses.
"Target Material
Contract" has the meaning set
forth in Section
3.15(a).
"Target-Owned
IP" means: (a) all Intellectual
Property that the Target or any of its Subsidiaries owns or
purports to own; and (b) all Intellectual Property for which the
Target or any of its Subsidiaries has or purports to have any
exclusive license rights.
"Target Preferred
Stock" has the meaning set
forth in Section
3.02(a).
"Target
Product" means Target’s
and its Subsidiaries’ current products and product
candidates.
62
"Target Regulatory
Permits" has the meaning set
forth in Section 3.08(d).
"Target Restricted
Share" has the meaning set
forth in Section
2.07(b).
"Target SEC
Documents" has the meaning set
forth in Section
3.04(a).
"Target
Securities" has the meaning set
forth in Section
3.02(b)(ii).
"Target Stock
Option" has the meaning set
forth in Section
2.07(a).
"Target Stock
Plans" means the following
plans, in each case as amended: Innovus Pharmaceuticals, Inc. 2019
Equity Incentive Plan.
"Target Stockholders
Meeting" means the special
meeting of the stockholders of the Target to be held to consider
the adoption of this Agreement.
"Target Subsidiary
Securities" has the meaning set
forth in Section
3.02(e).
"Termination
Fee" means
$250,000.
"Taxes" means all federal, state, local, foreign and
other income, gross receipts, sales, use, production, ad valorem,
transfer, franchise, registration, profits, license, lease,
service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp,
occupation, premium, property (real or personal), real property
gains, windfall profits, customs, duties or other taxes,
fees, assessments, or charges
of any kind whatsoever, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner,
whether disputed or not and including any obligation to indemnify
or otherwise assume or succeed to the tax liability of any other
Person, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or
penalties.
"Tax Returns" means any return, declaration, report, claim for
refund, information return or statement, or other document relating
to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
“Terminated
Warrants” has the meaning
set forth in Section 2.01(d).
"Treasury
Regulations" means the Treasury
regulations promulgated under the Code.
"Unvested Target Stock
Option" has the meaning set
forth in Section
2.07(a).
63
"Vested Target Stock
Option" has the meaning set
forth in Section
2.07(a).
"Voting Debt" has the meaning set forth in Section
3.02(c).
Section 8.02 Interpretation;
Construction.
(a) The
table of contents and headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall
not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a Section,
Exhibit, Article, or Schedule, such reference shall be to a Section
of, Exhibit to, Article of, or Schedule of this Agreement unless
otherwise indicated. Unless the context otherwise requires,
references herein: (i) to an agreement, instrument, or other
document means such agreement, instrument, or other document as
amended, supplemented, and modified from time to time to the extent
permitted by the provisions thereof; and (ii) to a statute means
such statute as amended from time to time and includes any
successor legislation thereto and any regulations promulgated
thereunder. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation," and the word "or" is
not exclusive. The word "extent" in the phrase "to the extent"
means the degree to which a subject or other thing extends and does
not simply mean "if." A reference in this Agreement to $ or dollars
is to U.S. dollars. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. The
words "hereof," "herein," "hereby," "hereto," and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. References to "this Agreement" shall include the
Target Disclosure Letter and Aytu Disclosure Letter.
(b) The
parties have participated jointly in negotiating and drafting this
Agreement. In the event that an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provision of this Agreement.
Section 8.03 Survival. None of the representations and warranties
contained in this Agreement or in any instrument delivered under
this Agreement will survive the Effective Time. This
Section 8.03
does not limit any covenant or
agreement of the parties contained in this Agreement which, by its
terms, contemplates performance after the Effective Time. The
Confidentiality Agreement will survive termination of this
Agreement in accordance with its terms.
Section 8.04 Governing
Law. This Agreement and all
Legal Actions (whether based on contract, tort, or statute) arising
out of or relating to this Agreement or the actions of any of the
parties hereto in the negotiation, administration, performance, or
enforcement hereof, shall be governed by and construed in
accordance with the internal laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that
would cause the application of Laws of any jurisdiction other than
those of the State of Delaware.
64
Section 8.05 Submission to
Jurisdiction. Each of the
parties hereto irrevocably agrees that any Legal Action with
respect to this Agreement and the rights and obligations arising
hereunder, or for recognition and enforcement of any judgment in
respect of this Agreement and the rights and obligations arising
hereunder brought by any other party hereto or its successors or
assigns shall be brought and determined exclusively in the Delaware
Court of Chancery, or in the event (but only in the event) that
such court does not have subject matter jurisdiction over such
Legal Action, in any federal court within the State of Delaware.
Each of the parties hereto agrees that mailing of process or other
papers in connection with any such Legal Action in the manner
provided in Section 8.07
or in such other manner as may be
permitted by applicable Laws, will be valid and sufficient service
thereof. Each of the parties hereto hereby irrevocably submits with
regard to any such Legal Action for itself and in respect of its
property, generally and unconditionally, to the personal
jurisdiction of the aforesaid courts and agrees that it will not
bring any Legal Action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court or
tribunal other than the aforesaid courts. Each of the parties
hereto hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim, or otherwise, in any Legal
Action with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and enforcement
of any judgment in respect of this Agreement and the rights and
obligations arising hereunder: (a) any claim that it is not
personally subject to the jurisdiction of the above named courts
for any reason other than the failure to serve process in
accordance with this Section
8.05; (b) any claim that it
or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment
in aid of execution of judgment, execution of judgment or
otherwise); and (c) to the fullest extent permitted by the
applicable Law, any claim that (i) the suit, action, or proceeding
in such court is brought in an inconvenient forum, (ii) the venue
of such suit, action, or proceeding is improper, or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or
by such courts.
Section 8.06 Waiver of Jury Trial.
EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH
SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND
ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL
ACTION; (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER; (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (D) SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
Section
8.06.
65
Section 8.07 Notices. All notices, requests, consents, claims, demands,
waivers, and other communications hereunder shall be in writing and
shall be deemed to have been given: (a) when delivered by hand
(with written confirmation of receipt); (b) when received by the
addressee if sent by a nationally recognized overnight courier
(receipt requested); (c) on the date sent by facsimile or email of
a PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business
Day if sent after normal business hours of the recipient; or (d) on
the third day after the date mailed, by certified or registered
mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall
be specified in a notice given in accordance with this
Section
8.07):
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If to Aytu or Merger Sub, to:
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000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
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with a copy (which will not constitute notice to Aytu or Merger
Sub) to:
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Xxxxxx & Whitney LLP
000 X. Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx
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If to the Target, to:
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Innovus Pharmaceuticals
0000 Xxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxx, PhD
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with a copy (which will not constitute notice to the Target)
to:
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Disclosure Law Group
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
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or to such other Persons,
addresses or facsimile numbers as may be designated in writing by
the Person entitled to receive such communication as provided
above.
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Section 8.08 Entire Agreement.
This Agreement (including the Exhibits
to this Agreement), the Target Disclosure Letter, the Aytu
Disclosure Letter, and the Confidentiality Agreement constitute the
entire agreement among the parties with respect to the subject
matter of this Agreement and supersede all other prior agreements
and understandings, both written and oral, among the parties to
this Agreement with respect to the subject matter of this
Agreement. In the event of any inconsistency between the statements
in the body of this Agreement, the Confidentiality Agreement, the
Aytu Disclosure Letter, and the Target Disclosure Letter (other
than an exception expressly set forth as such in the Aytu
Disclosure Letter or Target Disclosure Letter), the statements in
the body of this Agreement will control.
Section 8.09 No Third-Party
Beneficiaries. Except as
provided in Section 5.11
hereof (which shall be to the benefit
of the parties referred to in such section), this Agreement is for
the sole benefit of the parties hereto and their permitted assigns
and respective successors and nothing herein, express or implied,
is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit, or remedy of any nature
whatsoever under or by reason of this
Agreement.
Section 8.10 Severability.
If any term or provision of this
Agreement is invalid, illegal, or unenforceable in any
jurisdiction, such invalidity, illegality, or unenforceability
shall not affect any other term or provision of this Agreement or
invalidate or render unenforceable such term or provision in any
other jurisdiction. Upon such determination that any term or other
provision is invalid, illegal, or unenforceable, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in
a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
Section 8.11 Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither Aytu or Merger Sub, on
the one hand, nor the Target on the other hand, may assign its
rights or obligations hereunder without the prior written consent
of the other party (Aytu in the case of Aytu and Merger Sub), which
consent shall not be unreasonably withheld, conditioned, or
delayed; provided, however,
that prior to the Effective Time,
Merger Sub may, without the prior written consent of the Target,
assign all or any portion of its rights under this Agreement to
Aytu or to one or more of Aytu's direct or indirect wholly-owned
subsidiaries. No assignment shall relieve the assigning party of
any of its obligations hereunder.
Section 8.12 Remedies. Except as otherwise provided in this Agreement,
any and all remedies expressly conferred upon a party to this
Agreement will be cumulative with, and not exclusive of, any other
remedy contained in this Agreement, at Law, or in equity. The
exercise by a party to this Agreement of any one remedy will not
preclude the exercise by it of any other
remedy.
Section 8.13 Specific Performance.
The parties hereto agree that
irreparable damage would occur if any provision of this Agreement
were not performed in accordance with the terms hereof and that the
parties shall be entitled to an injunction or injunctions to
prevent breaches or threatened breaches of this Agreement or to
enforce specifically the performance of the terms and provisions
hereof in any federal court located in the State of Delaware or any
Delaware state court, in addition to any other remedy to which they
are entitled at Law or in equity.
Section 8.14 Counterparts;
Effectiveness. This Agreement
may be executed in any number of counterparts, all of which will be
one and the same agreement. This Agreement will become effective
when each party to this Agreement will have received counterparts
signed by all of the other parties.
[SIGNATURE
PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first written above by their
respective officers thereunto duly authorized.
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TARGET COMPANY
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Date:
September 18,
2019
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By:
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/s/
Xxxxxx
Xxxxx
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Xxxxxx Xxxxx
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President
& Chief Executive Officer
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AYTU
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Date:
September 18,
2019
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By:
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/s/
Xxxx Xxxxxxx
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Xxxx
Xxxxxxx
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Chairman & Chief Executive Officer
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MERGER SUB
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Date:
September 18,
2019
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By:
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/s/
Xxxx Xxxxxxx
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Xxxx
Xxxxxxx
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President
& Chief Executive Officer
|
|
68
EXHIBIT
A
Certificate of Incorporation
SURVIVING CORPORATION CERTIFICATE OF INCORPORATION
69
EXHIBIT
B
Contingent Value Rights Agreement
70
EXHIBIT
C
Form of Employment Agreement for Xxxxxx Xxxxx
71
EXHIBIT
D
Form of Employment Agreement for Xxxx Xxxxxxx
72
EXHIBIT
E
Form of Separation Agreement for Xxxxx Xxxxxxxx
73
EXHIBIT
F
Form of Consulting Agreement for Xxxxx Xxxxxxxx
74
EXHIBIT
G
Target Continuing Consultants
L.B. Resources Limited
Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxxx
Xxxxxx X Xxxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxx Xxxxxxx
Xxxx XxXxxx
75
EXHIBIT
H
Calculation of (i) Closing Total Liability Balance and (ii)
Adjustment Closing Total Liability Balance (*)
76
EXHIBIT
I
Calculation of (i) Closing Net Working Capital Deficit and (ii)
Adjusted Net Working Capital Deficit (*)
77
