EXHIBIT 2
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*))
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT DATED NOVEMBER 20, 1998
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BETWEEN
XXXXXX LABORATORIES
AND
ARONEX PHARMACEUTICALS, INC.
DATED AS OF NOVEMBER 12, 1998
--------------------------------------------------------------------------------
TABLE OF CONTENTS
1. Purchase and Sale of Common Stock . . . . . . . . . . . . . . . . . . . 1
1.1 Initial Purchase . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Additional Purchase. . . . . . . . . . . . . . . . . . . . . . . 2
2. Interpretation of Agreement; Definitions. . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . 6
2.3 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . 6
3. Representations and Warranties of the Company and its Subsidiaries. . . 6
3.1 Corporate Organization and Authority . . . . . . . . . . . . . . 6
3.2 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Equity Investments; Subsidiaries . . . . . . . . . . . . . . . . 7
3.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Securities and Exchange Commission Documents . . . . . . . . . . 8
3.7 Business Changes . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.9 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . .10
3.10 Title to Properties. . . . . . . . . . . . . . . . . . . . . . .10
3.11 Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . .10
3.12 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.13 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . .11
3.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.15 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . .12
3.16 Private Offering . . . . . . . . . . . . . . . . . . . . . . . .12
3.17 Employee Plans and Relations . . . . . . . . . . . . . . . . . .12
3.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . .13
3.19 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .13
3.20 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .13
4. Representations and Warranties of Abbott. . . . . . . . . . . . . . . .13
4.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . .14
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.3 Restricted Shares. . . . . . . . . . . . . . . . . . . . . . . .14
4.4 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .15
5. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . .15
5.1 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . .15
5.2 Listing of Shares. . . . . . . . . . . . . . . . . . . . . . . .15
5.3 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . .16
6. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 Conditions to Obligations of Abbott to Purchase the Initial
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.2 Conditions to Obligations of the Company for the Initial Shares.17
6.3 Conditions to Obligations of Abbott to Purchase the Additional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.4 Conditions to Obligations of the Company for the Additional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
7. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.1 Piggyback Registration . . . . . . . . . . . . . . . . . . . . .19
7.2 Demand Registration. . . . . . . . . . . . . . . . . . . . . . .20
7.3 Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . .20
7.4 Additional Covenants of the Company. . . . . . . . . . . . . . .20
7.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .22
7.6 Limitations on Registration Rights . . . . . . . . . . . . . . .23
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.1 Indemnification by the Company . . . . . . . . . . . . . . . . .23
8.2 Indemnification by Abbott. . . . . . . . . . . . . . . . . . . .24
8.3 Indemnification Procedure. . . . . . . . . . . . . . . . . . . .24
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
9.1 Powers and Rights Not Waived; Remedies Cumulative. . . . . . . .25
9.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . .26
9.4 Survival of Covenants and Representations. . . . . . . . . . . .26
9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .26
9.6 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . .26
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .27
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .27
9.9 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
9.10 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . .27
EXHIBITS
Exhibit A -- License Agreement
Exhibit B -- Form of Opinion of Counsel
Exhibit C -- Dispute Resolution
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), entered into as of the 12th
day of November, 1998, by and between XXXXXX LABORATORIES, an Illinois
corporation ("Abbott"), and ARONEX PHARMACEUTICALS, INC., a Delaware corporation
(the "Company").
RECITALS
X. Xxxxxx desires to purchase from the Company, and the Company
desires to sell to Abbott, shares of common stock, par value $0.001 per share,
of the Company (the "Common Stock"), all as more fully described below, on the
terms and conditions set forth herein.
B. The Company and Abbott desire to enter into a License Agreement
(the "License Agreement") in the form attached hereto as Exhibit A.
C. The Company and Abbott desire to make certain representations,
warranties, covenants and agreements in connection with the purchase and sale of
the Common Stock and desire to prescribe certain conditions precedent to such
purchase and sale.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of the mutual
provisions, agreements and covenants contained herein, the Company and Abbott
hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK.
1.1 INITIAL PURCHASE. Subject to the terms and conditions
hereof and on the basis of the representations, warranties, covenants and
agreements set forth herein, the Company agrees to sell to Abbott, and Abbott
agrees to purchase from the Company, on the Initial Closing Date (as defined
below), 837,989 shares of Common Stock (the "Initial Shares") for an aggregate
purchase price of $3,000,000.
The closing of the purchase and sale of the Initial Shares will occur at
Xxxxxx'x principal executive offices, against payment of the purchase price
therefor by wire transfer in immediately available funds, at 10:00 a.m., local
time, on November 30, 1998, or such later date as shall mutually be agreed upon
by the Company and Abbott (the "Initial Closing Date"). The Company shall
deliver to Abbott written wire transfer instructions for the payment of the
purchase price of the Initial Shares at least 48 hours prior to the Initial
Closing Date, which instructions shall include the Company's bank name and
address, ABA routing number and the Company's account number.
1.2 ADDITIONAL PURCHASE.
(a) At any time beginning *, the Company shall have
the right (the "Put Right") to require Abbott to purchase additional shares
of Common Stock (the "Additional Shares") for an aggregate purchase price of
up to *; provided, however, that the Put Right shall terminate if *. The
Company shall be entitled to exercise the Put Right on only one occasion.
(b) To exercise the Put Right, the Company shall
deliver to Abbott a written notice (the "Exercise Notice"), which shall be dated
as of the date the
Exercise Notice is transmitted by facsimile transmission to Abbott (with a
confirmation copy sent by mail or personal delivery), and which shall set forth
(i) the number of shares of Common Stock to be sold to and purchased by Abbott
in connection with the exercise of the Put Right (the "Additional Shares"), (ii)
the aggregate purchase price for the Additional Shares (the "Additional Purchase
Price"), and (iii) the date on which the closing of the purchase and sale of the
Additional Shares shall take place (the "Additional Closing Date"), which shall
be the tenth Business Day after the date of the Exercise Notice or such other
date as shall be agreed to in writing by Abbott and the Company. The Company
shall deliver to Abbott written wire transfer instructions (setting forth the
information specified in Section 1.1 hereof) for the payment of the Additional
Purchase Price at least 48 hours prior to the Additional Closing Date.
(b) The number of Additional Shares to be sold to and
purchased by Abbott pursuant to the Put Right shall be determined by dividing
the Additional Purchase Price by the lesser of (i) * (as adjusted to reflect
any stock splits, reverse stock splits, stock dividends, subdivisions,
combinations or similar transactions the record date for which shall occur after
the date hereof), or (ii) the Fair Market Value on the date of the Exercise
Notice.
(c) Notwithstanding any other provision of this
agreement to the contrary, (i) the Company shall not be entitled to exercise the
Put Right at any time that the Fair Market Value of the Common Stock is less
than * (as adjusted to reflect any stock splits, reverse stock splits, stock
dividends, subdivisions, combinations or similar transactions the record date
for which shall occur after the date hereof), which is the Fair Market Value of
the Common Stock on the date hereof; and (ii) the number of Additional Shares
subject to the Put Right shall be reduced to the extent that the Initial Shares
and the Additional Shares shall, in the aggregate, equal or exceed * of the
outstanding Common Stock on the Additional Closing Date (after giving effect to
the exercise of the Put Right).
2. INTERPRETATION OF AGREEMENT; DEFINITIONS.
2.1 DEFINITIONS. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings,
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Additional Closing Date" shall have the meaning specified in Section
1.2 hereof.
"Additional Purchase Price" shall have the meaning specified in Section
1.2 hereof.
"Additional Shares" shall have the meaning specified in Section 1.2
hereof.
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds ten percent (10%) or more of any class of the Voting
Stock of the Company or (iii) ten percent (10%) or more of the Voting Stock (or
in the case of a Person which is not a corporation, ten percent (10%) or more of
the equity interest) of which is beneficially owned or held by the Company or a
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise.
"Agreement" shall mean this Stock Purchase Agreement.
"Board of Directors" shall mean either the board of directors of the
Company or any duly authorized committee thereof.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of
Directors and to be in full force and effect on the date of such certification.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks located in Houston, Texas or
Chicago, Illinois are authorized or required by law to be closed.
"Change of Control" shall mean any change in control of the Company
which includes any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock), any acquisition
of at least a majority of the Voting Stock of the Company or any sale or
transfer of all or substantially all of the business or assets of the Company.
"Commission" shall mean the Securities and Exchange Commission or any
successor regulatory entity.
"Common Stock" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"Company" shall mean Aronex Pharmaceuticals, Inc., a Delaware
corporation, and any Person that, in accordance with the terms of this
Agreement, succeeds to all or substantially all of the assets or the business of
Aronex Pharmaceuticals, Inc.
"Company Balance Sheet" shall have the meaning specified in Section 3.5
hereof.
"Company Balance Sheet Date" shall have the meaning specified in Section
3.5 hereof.
"Company Financial Statements" shall have the meaning specified in
Section 3.5 hereof.
"Company SEC Documents" shall have the meaning specified in Section 3.6
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercise Notice" shall have the meaning specified in Section 1.2
hereof.
"Fair Market Value of the Common Stock" as of any day shall mean (i) the
average last sale price (or average closing bid and asked price if no sales were
reported) of the Common Stock on the Nasdaq National Market for the preceding 10
Business Days; or (ii) if the Common Stock is not included in the Nasdaq
National Market, the average closing price of the Common Stock on the principal
national securities exchange on which the Common Stock is listed for the
preceding 10 Business Days; or (iii) if the Common Stock is not listed on a
national securities exchange, the average of the high bid and the low asked
price of the Common Stock in the over-the-counter market as reported for the
preceding 10 Business Days; or (iv) if no such quotations are available, the
fair market value per share on such date as determined by an independent
investment banker or appraiser, nationally recognized to be an expert in making
such valuations, selected by mutual agreement of the Company and Abbott.
"FDA" shall mean the United States Food and Drug Administration or any
successor regulatory entity.
"GAAP" shall mean generally accepted accounting principles in effect at
the applicable time in the United States.
"Governmental Entity" shall have the meaning specified in Section 3.4
hereof.
"Holder" shall mean the registered holder of the Shares.
"Initial Closing Date" shall have the meaning specified in Section 1.1
hereof.
"Initial Shares" shall have the meaning specified in Section 1.2 hereof.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
capitalized lease or other arrangement pursuant to which title to the property
has been retained by or vested in some other Person for security purposes and
such retention or vesting shall constitute a Lien.
"NDA" shall mean an FDA New Drug Application with respect to the
Company's proprietary formulation of the compound nystatin, which as of the date
hereof is being developed under the name Nyotran-Registered Trademark-.
"NDA Acceptance Date" shall *.
"Permits" shall have the meaning specified in Section 3.9 hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"Preferred Stock" shall mean stock of the Company or a Subsidiary of any
class or series ranking prior to any other class or series of stock of the
Company or the Subsidiary with respect to the payment of dividends or the
distribution of assets upon the liquidation, dissolution or winding up of the
Company or the Subsidiary.
"Proprietary Rights" shall have the meaning specified in Section 3.13
hereof.
"Put Right" shall have the meaning specified in Section 1.2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean the Initial Shares and the Additional Shares.
"Subsidiary" shall mean a corporation, partnership or other entity at
least a majority of whose Voting Stock is owned directly or indirectly by the
Company.
"Voting Stock" shall mean securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
2.2 Accounting Principles. Where the character or amount of
any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
2.3 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
3. Representations and Warranties of the Company and its
Subsidiaries. Except as otherwise described or set forth in the Company SEC
Documents, the Company and its Subsidiaries represent and warrant to Abbott as
of the date hereof, as of the Initial Closing Date and as of the Additional
Closing Date as follows:
3.1 Corporate Organization and Authority. The Company and
each of its Subsidiaries: (a) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation; (b)
has all requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as presently proposed to be
conducted; and (c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it makes such
licensing or qualification necessary.
3.2 Capital Structure. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, par value $0.001 per share. As of the date hereof, 15,503,745
shares of Common Stock were issued and outstanding and no shares of the
Company's Preferred Stock were issued and outstanding. Except as described in
the Company SEC Documents, there are no outstanding options, warrants, rights or
other securities convertible into or exchangeable for shares of Common Stock,
other than stock options granted to employees and directors of the Company in
the ordinary course and consistent with past practice.
All of the outstanding Common Stock was issued in compliance with
applicable federal and state securities laws and regulations. All of the
outstanding shares of the Common Stock are, and when issued in accordance with
this Agreement the Shares will be, duly authorized, validly issued, fully paid
and nonassessable, free and clear of any Liens or encumbrances created by the
Company, and not subject to preemptive rights created by statute, the Company's
Certificate of Incorporation or Bylaws, or any agreement to which the Company is
a party or by which it is bound.
3.3 Equity Investments; Subsidiaries. The Company does not
own any equity stock or interest, directly or indirectly, in any corporation,
partnership, joint venture, firm or other entity other than (i) its
Subsidiaries, which are Triplex Pharmaceutical Corporation, a Delaware
corporation, Oncologix, Inc., a Delaware corporation and Aronex Europe Limited,
a company limited by shares organized under the laws of England, and (ii) a
minority interest in Targeted Genetics, Incorporated, a Delaware corporation.
The Company owns all of the outstanding capital stock of each of its
Subsidiaries, free and clear in each case of any Lien.
3.4 Authority. The Company has all requisite corporate power
and authority to enter into this Agreement and to execute, issue, sell and
deliver the Shares and, subject to satisfaction of the conditions set forth
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the certificates representing the Shares and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. Provided the conditions set forth in Section 6
hereof are satisfied, the execution and delivery of this Agreement and the
certificates representing the Shares does not or will not, and the consummation
of the transactions contemplated hereby will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under (a) any provision of the Certificate of Incorporation or
Bylaws of the Company, or (b) any material agreement or instrument, permit,
franchise, license, judgment or order applicable to the Company or its
respective properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority (a "Governmental Entity") or other Person, is
required by, or with respect to, the Company in connection with the execution
and delivery of this Agreement or the certificates representing the Shares or
the consummation by the Company of the transactions contemplated hereby, except
for such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country.
3.5 Financial Statements. The Company has furnished to
Abbott its audited consolidated statements of operations, statements of
stockholders' equity and statements of cash flows for the fiscal year ended
December 31, 1997 and the Company's audited consolidated balance sheet at
December 31, 1997; and the unaudited consolidated statement of operations and
statement of cash flows for the nine months ended September 30, 1998 and the
unaudited consolidated balance sheet at September 30, 1998. The balance sheet
at September 30, 1998 is hereinafter referred to as the "Company Balance Sheet,"
and all such financial statements are hereinafter referred to collectively as
the "Company Financial Statements." The Company Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis, except for any
change due to the adoption of an accounting principle established by the FASB,
AICPA, Commission or any other accounting standard setting board, during the
periods involved, and fairly present the consolidated financial position of the
Company and the results of its operations as of the date and for the periods
indicated thereon. At the date of the Company Balance Sheet (the "Company
Balance Sheet Date"), neither the Company nor its consolidated Subsidiaries had
any liabilities or obligations, secured or unsecured (whether accrued, absolute,
contingent or otherwise) required to be reflected on the Company Balance Sheet
or in the accompanying notes thereto that were not so reflected.
3.6 Securities and Exchange Commission Documents. The
Company has furnished to Abbott a true and complete copy of the Company's Proxy
Statement relating to the Company's 1998 annual meeting of shareholders, the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998, and the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 in the form delivered to Abbott on October 23,
1998 (the "Company SEC Documents"). As of their respective filing dates and, in
the case of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, as of the date delivered to Abbott, the Company SEC
Documents comply in all material respects with the requirements of the Exchange
Act and none of the Company SEC Documents contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except to the extent
corrected by a subsequently filed Company SEC Document.
3.7 Business Changes. Since September 30, 1998, except as
otherwise contemplated by this Agreement or as described in the Company SEC
Documents, the Company has conducted its business only in the ordinary and usual
course and, without limiting the generality of the foregoing:
(a) There have been no changes in the condition
(financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of the Company which, in the aggregate, have had or
may be reasonably expected to have a materially adverse effect on the condition,
business, net worth, assets, prospects, properties or operations of the Company.
(b) The Company has not issued, or authorized for
issuance, or entered into any commitment to issue, any equity security, bond,
note or other security of the Company other than stock options granted to
employees and directors of the Company in the ordinary course and consistent
with past practice.
(c) The Company has not incurred debt for borrowed
money, nor incurred any obligation or liability except in the ordinary and usual
course of business and in any event not in excess of $250,000 for any single
occurrence.
(d) The Company has not paid any obligation or
liability, or discharged, settled or satisfied any claim, lien or encumbrance,
except for current liabilities in the ordinary and usual course of business and
in any event not in excess of $250,000 for any single occurrence.
(e) The Company has not declared or made any dividend,
payment or other distribution on or with respect to any share of capital stock
of the Company.
(f) The Company has not purchased, redeemed or
otherwise acquired or committed itself to acquire, directly or indirectly, any
share or shares of capital stock of the Company.
(g) The Company has not mortgaged, pledged or
otherwise encumbered any of its assets or properties, other than leasehold
improvements and equipment acquired with purchase money financing or under a
capital lease, inventory sold in the normal course of business or accounts
receivable.
(h) The Company has not disposed of, or agreed to
dispose of, by sale, lease, license or otherwise, any asset or property,
tangible or intangible, except in the ordinary and usual course of business, and
in each case for a consideration believed to be at least equal to the fair value
of such asset or property and in any event not in excess of $250,000 for any
single item or $500,000 in the aggregate other than inventory sold or returned
in the normal course of business.
(i) The Company has not purchased or agreed to
purchase or otherwise acquire any securities of any corporation, partnership,
joint venture, firm or other entity; the Company has not made any expenditure or
commitment for the purchase, acquisition, construction or improvement of a
capital asset, except in the ordinary and usual course of business and in any
event not in excess of $250,000 for any single item or $500,000 in the
aggregate.
(j) The Company has not entered into any material
transaction or contract, or made any commitment to do the same, except in the
ordinary and usual course of business.
(k) The Company has not sold, assigned, transferred or
conveyed, or committed itself to sell, assign, transfer or convey, any material
Proprietary Rights (as defined in Section 3.13 hereof).
(1) The Company has not adopted or amended any
material bonus, incentive, profit-sharing, stock option, stock purchase,
pension, retirement, deferred-compensation, severance, life insurance, medical
or other benefit plan, agreement, trust, fund or arrangement for the benefit of
employees of any kind whatsoever, nor entered into or amended any material
agreement relating to employment, services as an independent contractor or
consultant, or severance or termination pay, nor agreed to do any of the
foregoing.
(m) The Company has not effected or agreed to effect
any change in its officers or key employees.
(n) The Company has not effected or committed itself
to effect any amendment or modification in its Certificate of Incorporation or
Bylaws.
(o) The Company has not modified its accounting
principles in any material respect, except for those changes required by the
adoption of an accounting principle promulgated by the FASB, the AICPA, the
Commission or any other accounting standards setting bodies.
3.8 Litigation. There is no material claim, dispute, action,
proceeding, notice, order, suit, appeal or investigation, at law or in equity,
pending against the Company, or involving any of its assets or properties,
before any court, agency, authority, arbitration panel or other tribunal (other
than those, if any, with respect to which service of process or similar notice
has not yet been made on the Company), and none have been threatened. The
Company is aware of no facts which, if known to stockholders, customers,
governmental authorities or other Persons, would result in any such claim,
dispute, action, proceeding, suit or appeal or investigation which would have a
material adverse effect on the condition (financial or otherwise), business, net
worth, assets, prospects, properties or operations of the Company. The Company
is not subject to any order, writ, injunction or decree of any court, agency,
authority, arbitration panel or other tribunal, nor is it in default with
respect to any order, writ, injunction or decree.
3.9 Compliance with Law. All material licenses, franchises,
permits, clearances, consents, certificates and other evidences of authority of
the Company which are necessary to the conduct of the Company's business
("Permits") are in full force and effect and the Company is not in violation of
any Permit in any material respect. Except for possible exceptions, the curing
or non-curing of which would not have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, prospects, properties or
operations of the Company, the business of the Company has been conducted in
accordance with all applicable laws, regulations, orders and other requirements
of governmental authorities.
3.10 Title to Properties. The Company and each of its
Subsidiaries has good title to all material items of property it purports to
own, except for items of property sold or otherwise disposed of in the ordinary
course of business.
3.11 Licenses, etc. The Company and each of its Subsidiaries
owns or possesses all material trade names, service marks, licenses,
governmental approvals, and rights with respect to the foregoing necessary for
the present conduct of its business, without any known conflict with the rights
of others.
3.12 No Default.
(a) Each of the Company's material agreements or
contracts is a legal, binding and enforceable obligation by or against the
Company, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting the
rights of creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
To the Company's knowledge, no party with whom the Company has an agreement or
contract is in default thereunder or has breached any term or provision thereof
which is material to the conduct of the Company's business.
(b) The Company has performed, or is now performing,
the obligations of, and the Company is not in material default (or would by the
lapse of time and/or the giving of notice be in material default) in respect of,
any contract, agreement or commitment binding upon it or its assets or
properties and material to the conduct of its business. No third party has
raised any claim, dispute or controversy with respect to any material contract
of the Company, whether fully performed or currently being performed, nor has
the Company received written notice or warning of alleged nonperformance, delay
in delivery or other noncompliance by the Company with
respect to its obligations under any such contract, nor to the Company's
knowledge are there any facts (other than contractual provisions allowing
parties to terminate such contract without cause) which exist indicating that
any such contract may be totally or partially terminated or suspended by the
other parties thereto.
3.13 Proprietary Rights.
(a) The Company has entered into agreements with each
officer, employee or consultant of the Company necessary to provide the Company
with title and ownership to all material patents, patent applications, trade
secrets and inventions developed or used by the Company in its business, and all
of such agreements are valid, enforceable and legally binding, subject to the
effect of applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the rights of creditors or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
(b) The Company owns or possesses licenses or other
rights to use all material patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information, or other
rights with respect thereto (collectively referred to as "Proprietary Rights"),
used in the business of the Company, and the same are sufficient to conduct the
Company's business as it has been and is now being conducted.
(c) To the Company's knowledge, the operations of the
Company do not violate or infringe, and no one has asserted to the Company that
such operations violate or infringe, on any Proprietary Rights, owned, possessed
or used by any third party. There are no claims, disputes, actions,
proceedings, suits or appeals pending against the Company with respect to any
Proprietary Rights (other than those, if any, with respect to which service of
process or similar notice may not yet have been made on the Company), and none
has been threatened against the Company. To the knowledge of the Company, there
are no facts which would reasonably serve as a basis for any claim that the
Company does not have the right to use, free of any rights or claims of others,
all Proprietary Rights in the development, manufacture, use, sale or other
disposition of any or all products or services presently being used, furnished
or sold in the conduct of the business of the Company as it has been and is now
being conducted.
(d) To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, proprietary
information and inventions agreement, non-competition agreement, or any other
contract or agreement relating to the relationship of any such employee with the
Company or any previous employer.
3.14 Taxes. All tax returns required to be filed by the
Company or its Subsidiaries in any jurisdiction have been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or its
Subsidiaries or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before December 31, 1997, the federal income tax
liability of the Company and its Subsidiaries has been satisfied. The Company
does not know of any proposed additional tax assessment against it for which
adequate reserves have not been made on its balance sheet, and no material
controversy in respect of additional federal or state income taxes due since
such date is pending or, to the knowledge of the Company, threatened. The
reserves for taxes on the books of the Company and each of its Subsidiaries are
adequate in all material respects for all open years, and for its current fiscal
period.
3.15 Use of Proceeds. The net proceeds from the sale of the
Shares will be used to make an infusion of capital into the Company and for
other corporate purposes.
3.16 Private Offering. The offering and sale of the Shares is
and will be exempt from the registration requirements of the Securities Act and
applicable state securities and blue sky laws. Neither the Company nor any
agent on its behalf has made or will make any offers to sell or solicited or
will solicit any offers to buy the Shares to any Person so as to bring the offer
or sale thereof within the registration requirements of the Securities Act.
3.17 Employee Plans and Relations.
(a) Except as disclosed in the Company SEC Documents,
the Company does not have any: (i) employee benefit plans, multi-employer plans
and employee benefit plans (as defined in section 3(2) or section 3(3) of
ERISA); (ii) material bonus, deferred compensation, incentive, restricted stock,
stock purchase, stock option, stock appreciation right, phantom stock,
debenture, supplemental pension, profit-sharing, royalty pool, commission or
similar plans or arrangements; (iii) material employment, consulting,
termination or severance agreements; or (iv) other material plans, programs,
agreements, procedures, policies, commitments, understandings or other
arrangements relating to employee benefits, executive compensation, fringe
benefits, severance pay, terms of employment or services as a director, officer,
employee or independent contractor.
(b) The Company has not been and is not a party to, or
subject to, or affected by, any collective bargaining agreement or other labor
contract. The Company has complied in all material respects with all laws,
rules and regulations relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing.
3.18 Environmental Matters. The Company is, and at all times
during the period prior to the date hereof the Company has been, in material
compliance with all applicable local, state and federal statutes, orders, rules,
ordinances and regulations relating to pollution or protection of the
environment, including, without limitation, laws relating to zoning and land use
and to emissions, discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials or wastes into or on land, ambient
air, surface water, ground water, personal property or structures (including the
protection, cleanup, removal, remediation or damage thereof), or otherwise
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of pollutants, contaminants or
hazardous or toxic substances, materials or wastes.
3.19 Brokers or Finders. The Company has not dealt with any
broker or finder in connection with the transactions contemplated by this
Agreement. The Company has not incurred, and shall not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.20 Full Disclosure. Neither the Company Financial
Statements referred to in Section 3.6 hereof, nor this Agreement or any other
written statements furnished by the Company to Xxxxxx in connection with the
negotiation of the sale of the Shares, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein, taken as a whole, not misleading. There is no fact
peculiar to the Company or the Subsidiaries which the Company has not disclosed
to Xxxxxx in writing which materially adversely affects nor, so far as the
Company can now reasonably foresee, will materially adversely affect, the
properties, business, profits or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole.
4. Representations and Warranties of Xxxxxx. Except as contemplated
by this Agreement, Xxxxxx represents and warrants to the Company as of the date
hereof as follows:
4.1 CORPORATE ORGANIZATION. Xxxxxx is a corporation duly
incorporated, validly existing and in good standing under the laws of Illinois.
Xxxxxx is duly qualified to do business and is in good standing in its state of
incorporation and in each other jurisdiction in which it owns or leases property
or conducts business, except where the failure to be so qualified would not have
a material adverse effect on the business of Xxxxxx. Xxxxxx has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and possesses all licenses, franchises, rights
and privileges material to the conduct of its business.
4.2 Authority. Xxxxxx has all requisite corporate power and
authority to enter into this Agreement and, subject to satisfaction of the
conditions set forth herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Xxxxxx. This Agreement has been duly executed
and delivered by Xxxxxx and constitutes the valid and binding obligation of
Xxxxxx enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other similar federal or
state laws affecting the rights of creditors and the effect or availability of
rules of law governing specific performance, injunctive relief or other
equitable remedies. Provided the conditions set forth in Section 6 are
satisfied, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation under (a) any provision of the Articles of
Incorporation or Bylaws of Xxxxxx, or (b) any material agreement or instrument,
permit, license, judgment, order, statute, law, ordinance, rule or regulation
applicable to Xxxxxx or its properties or assets, other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which
individually or in the aggregate would not have a material adverse effect on
Xxxxxx.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or other Person is required
by or with respect to Xxxxxx in connection with the execution and delivery of
this Agreement by Xxxxxx or the consummation by Xxxxxx of the transactions
contemplated hereby.
4.3 Restricted Shares. Xxxxxx represents and agrees, and in
entering into this Agreement the Company understands, that (a) Xxxxxx is
acquiring the Shares for Xxxxxx'x own account, and for the purpose of investment
and not with a view to the distribution thereof, and that Xxxxxx has no present
intention of selling, negotiating or otherwise disposing of the Shares, it being
understood, however, that the disposition of Xxxxxx'x property shall at all
times be and remain within its control, and (b) the Shares have not been
registered under Section 5 of the Securities Act and that Xxxxxx will only
re-offer or resell the Shares purchased by Xxxxxx under this Agreement pursuant
to an effective registration statement under the Securities Act or in accordance
with an available exemption from the requirements of Section 5 of the Securities
Act.
4.4 NO CONFLICT. The execution and delivery of this
Agreement by Xxxxxx and the performance of Xxxxxx'x obligations hereunder, (a)
are not in violation or breach of, and will not conflict with or constitute a
default under, any of the terms of the Articles of Incorporation or Bylaws of
Xxxxxx or any of its Subsidiaries, or any material contract, agreement or
commitment binding upon Xxxxxx or any of its assets or properties; (b) will not
result in the creation or imposition of any Lien, encumbrance, equity or
restriction in favor of any third party upon any of the assets or properties of
Xxxxxx; and (c) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Xxxxxx or any of its assets or
properties.
4.5 Brokers or Finders. Xxxxxx has not dealt with any broker
or finder in connection with the transactions contemplated by this Agreement.
Xxxxxx has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
5. Covenants of the Company. From and after the Initial Closing
Date and continuing so long as any Shares remain outstanding, the Company
covenants and agrees with Xxxxxx that:
5.1 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the restricted Common Stock to the public without registration, as long
as a public market exists for the Common Stock, the Company shall use its best
efforts to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act;
(c) So long as a Holder owns any restricted Common
Stock, furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
5.2 Listing of Shares.
(a) The Company shall (i) promptly following the
Initial Closing Date prepare and file with The Nasdaq Stock Market, Inc. (as
well as any national securities exchange on which the Common Stock is then
listed) an application for listing of the Initial Shares and, concurrently with
the delivery of the Exercise Notice, prepare and file with The Nasdaq Stock
Market, Inc. (as well as any national securities exchange on which the Common
Stock is then listed) an application for listing of the Additional Shares, and
(ii) take all reasonable steps necessary to cause all Shares to be approved for
listing on the Nasdaq National Market (as well as any national securities
exchange on which the Common Stock is then listed) as soon as practicable
thereafter.
(b) The Company shall use its best efforts to keep
effective the registration of the Common Stock under the Exchange Act and
maintain the listing of the Common Stock on the Nasdaq National Market or a
national securities exchange.
5.3 Press Releases. Any press release or other public
announcement concerning this Agreement or the transactions contemplated hereby
shall be mutually satisfactory to the Company and Xxxxxx, except that the
Company may issue such press releases or make such public statements as it
reasonably believes to be required by law or the rules of The Nasdaq Stock
Market.
6. Conditions Precedent.
6.1 Conditions to Obligations of Xxxxxx to Purchase the
Initial Shares. The obligations of Xxxxxx to consummate this Agreement and
purchase the Initial Shares are subject to the satisfaction on or prior to the
Initial Closing Date of all of the following conditions, unless waived by
Xxxxxx:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as if made at and as of the Initial Closing Date, and Xxxxxx shall have
received a certificate or certificates signed by the Chief Executive Officer of
the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall
have performed all obligations required to be performed by it under this
Agreement prior to the Initial Closing Date, and Xxxxxx shall have received a
certificate signed by the Chief Executive Officer of the Company to such effect.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been
no changes in the condition (financial or otherwise), business, prospects,
employees, operations, obligations or liabilities of the Company which, in the
aggregate, have had or may be reasonably expected to have a materially adverse
effect on the financial condition, business, or operations of the Company on a
consolidated basis.
(d) LICENSE AGREEMENT. The Company and Xxxxxx shall
have entered into a License Agreement in the form attached hereto as Exhibit A.
(e) OTHER DOCUMENTS. The Company shall have delivered
to Xxxxxx (i) a copy of the Certificate of Incorporation of the Company, as in
effect on the Initial Closing Date, certified by the Secretary of State of the
State of Delaware, (ii) a certificate of the Secretary of State of the State of
Delaware and of the State of Texas, as of the most recent practicable date, as
to the good standing of the Company, (iii) a certificate of the Secretary of the
Company dated as of the Initial Closing Date, certifying as to (A) the Board
Resolutions authorizing the execution and delivery of this Agreement, the
Licencing Agreement and the other transactions contemplated hereby (with a copy
attached), (B) the Bylaws of the Company as in effect on the Initial Closing
Date (with a copy attached), and (C) the incumbency of the officers executing
the Agreement and the License Agreement; and (iv) a copy of the Company
Financial Statements, certified by the Chief Executive Officer or the Chief
Financial Officer of the Company.
(f) OPINION OF COUNSEL. The Company shall have
delivered an opinion of its counsel substantially in the form of Exhibit B.
(g) CERTIFICATES FOR INITIAL SHARES. The Company
shall have delivered to Xxxxxx valid certificates for the Initial Shares,
registered in Xxxxxx'x name.
6.2 Conditions to Obligations of the Company for the Initial
Shares. The obligations of the Company to consummate the transactions
contemplated hereby are subject to the satisfaction on or prior to the Initial
Closing Date of all of the following conditions, unless waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Xxxxxx set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as if made at and as of the Initial Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF XXXXXX. Xxxxxx
shall have performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Initial Closing Date.
(c) LICENSE AGREEMENT. The Company and Xxxxxx shall
have entered into a License Agreement in the form attached hereto as Exhibit A.
(d) PAYMENT. Xxxxxx shall have tendered to the
Company $3,000,000 in payment for the Initial Shares.
6.3 Conditions to Obligations of Xxxxxx to Purchase the
Additional Shares. The obligations of Xxxxxx to purchase the Additional Shares
are subject to the satisfaction on or prior to the Additional Closing Date of
all of the following conditions, unless waived by Xxxxxx:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in
all material respects as of the date of this Agreement and as if made at and as
of the Additional Closing Date, except for such changes as are disclosed in the
Company's filings with the Commission after the date of this Agreement, and
Xxxxxx shall have received a certificate or certificates signed by the Chief
Executive Officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall
have performed all obligations required to be performed by it under this
Agreement prior to the Additional Closing Date, and Xxxxxx shall have received a
certificate signed by the Chief Executive Officer of the Company to such effect.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been
no changes in the condition (financial or otherwise), business, prospects,
employees, operations, obligations or liabilities of the Company which, in the
aggregate, have had or may be reasonably expected to have a materially adverse
effect on the financial condition, business or operations of the Company on a
consolidated basis, except for any such changes that have been publicly
disclosed for a period of at least 15 Business Days prior to the Additional
Closing Date. For purposes of this Section 6.3(c), a change shall not be deemed
to have been publicly disclosed unless it shall have been disclosed in a press
release issued by the Company and transmitted for immediate release to at least
five of the following news sources: the Associated Press; Business Wire; Dow
Xxxxx & Company, Inc.; Xxxxx'x Investors Service, Inc.; PR Newswire; Reuters
Economic Services; Standard & Poor's Corporation; and United Press
International.
(d) OTHER DOCUMENTS. The Company shall have delivered
to Xxxxxx (i) a copy of the Certificate of Incorporation of the Company, as in
effect on the Additional Closing Date, certified by the Secretary of State of
the State of Delaware, (ii) a certificate of the Secretary of State of the State
of Delaware and of the State of Texas, as of the most recent practicable date,
as to the good standing of the Company, and (iii) a certificate of the Secretary
of the Company dated as of the Additional Closing Date, certifying as to the
Board Resolutions authorizing the execution and delivery of this Agreement and
the other transactions contemplated hereby.
(e) REGISTRATION AND LISTING OF COMMON STOCK. The
Common Stock shall be registered under the Exchange Act and listed on the Nasdaq
National Market or a national securities exchange.
(f) CHANGE OF CONTROL. There shall not have occurred
or be pending a Change of Control other than a Change of Control to which Xxxxxx
has consented in writing, which consent shall not be unreasonably withheld or
delayed. Without limiting the foregoing, Xxxxxx'x refusal to consent to a
Change of Control shall not be deemed to be unreasonable where the Change of
Control involves a Person that is a competitor of Xxxxxx
(g) OPINION OF COUNSEL. The Company shall have
delivered an opinion of its counsel substantially in the form of Exhibit B.
(h) CERTIFICATES FOR THE ADDITIONAL SHARES. The
Company shall have delivered to Xxxxxx valid certificates for the Additional
Shares, registered in Xxxxxx'x name.
(i) License Agreement. The Company shall have
complied in all material respects with terms and conditions of the License
Agreement, and the License Agreement shall be in full force and effect and no
notice of termination shall have been given thereunder.
6.4 Conditions to Obligations of the Company for the
Additional Shares. The obligations of the Company to consummate the
transactions contemplated hereby in connection with the Additional Shares are
subject to the satisfaction on or prior to the Additional Closing Date of all of
the following conditions, unless waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Xxxxxx set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as if made at and as of the Additional Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF XXXXXX. Xxxxxx
shall have performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Additional Closing Date.
(c) PAYMENT. Xxxxxx shall have tendered to the
Company the Additional Purchase Price in payment for the Additional Shares.
7. Registration Rights. The Holder shall have registration rights
as provided in this Section 7 with respect to the Shares (the "Registrable
Shares").
7.1 Piggyback Registration.
(a) Whenever securities of the Company are to be
registered under the Securities Act, other than pursuant to a registration
statement on Form S-4 or Form S-8, and the registration form to be used may be
used for the registration of the Registrable Shares (a "Piggyback
Registration"), the Company will give prompt written notice to the Holder of its
intention to effect such a registration and will include in such registration
all Registrable Shares with respect to which the Company has received written
requests for inclusion therein within 21 days after the Company's notice has
been given.
(b) If a Piggyback Registration relates to an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such offering will have an adverse effect on the offering (including the
price at which the shares of Common Stock can be sold), the Company will include
in such registration (i) first, the securities the Company proposes to sell for
its own account, if any, and (ii) second, the Registrable Shares requested to be
included in such registration and the securities requested to be included
therein by any other holders of the Company's securities that have been granted
piggyback registration rights prior to the date of this Agreement and which are
applicable to such registration (all such Registrable Shares and other
securities being collectively referred to as the "Secondary Shares") which in
the opinion of such underwriters can be sold in such offering without creating
such an adverse effect, allocated pro rata among the holders of such Secondary
Shares on the basis of the number of Secondary Shares owned or deemed to be
owned by such holders.
7.2 Demand Registration.
(a) The Holder may request at any time the
registration under the Securities Act of all or part of their Registrable Shares
on Form S-3 or any similar short-form registration ("Short-Form Registration"),
if available, so as to permit the resale thereof (a "Demand Registration"). The
Holder will be entitled to request one Short-Form Registration for the Initial
Shares and one Short-Form Registration for the Additional Shares. The Company
will use its best efforts to make the Short-Form Registration available for the
sale of Registrable Shares. If the Company is unable to make the Short-Form
Registration available for the sale of the Registrable Shares within 90 days of
the Holder's request, the Company shall cause the registration of the
Registrable Shares on Form S-1 or S-2 or any similar long-form registration so
as to permit the resale thereof. The Company shall keep such registration
effective for at least 12 months or for such shorter period of time as is
necessary for the distribution of the Registrable Shares thereunder to be
completed in accordance with the Holder's intended method of distribution.
(b) The Company may postpone for a reasonable period
not to exceed 90 days the filing or the effectiveness of a registration
statement for a Demand Registration if the Board of Directors determines
reasonably and in good faith that such
filing would require disclosure of a material fact that would have a material
adverse effect on the Company or any plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or other material
transaction.
7.3 Payment of Expenses. The Company will pay all
registration expenses incurred in connection with the filing of the registration
statements provided for in this Section 7, including all registration and filing
fees, fees and expenses of compliance with federal, state and foreign securities
laws, printing expenses, and fees and disbursements of counsel for the Company
and its independent certified public accountants, underwriters, and other
Persons retained by the Company, but excluding discounts and commission
attributable to the Registrable Shares. The Holder will be responsible for the
fees and expenses of its own counsel.
7.4 Additional Covenants of the Company. The Company agrees
to use its reasonable best efforts to effect the registration of the Registrable
Shares in accordance with the intended method of disposition thereof, and
pursuant thereto, the Company agrees to:
(a) prepare and file with the Commission such
amendments and supplements to any registration statement filed pursuant hereof
and the prospectus used in connection therewith as may be necessary to keep any
such registration statement effective and available for resale of the
Registrable Shares, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by any such registration
statement during such effective period in accordance with the intended methods
of disposition by the Holder set forth in any such registration statement;
(b) furnish to the Holder such number of copies of any
registration statement filed pursuant to this Section 7, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as the Holder
may reasonably request in order to facilitate the disposition of the Registrable
Shares;
(c) use its reasonable best efforts to register or
qualify the Registrable Shares under such other securities or blue sky laws of
such states of the United States as the Holder reasonably requests and of any
and all other things which may be reasonably necessary or advisable to enable
the Holder to consummate the disposition in such jurisdictions of the
Registrable Shares owned by the Holder; provided, however, that the Company will
not be required (A) to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 7.4,
(B) to subject itself to taxation in any such jurisdiction or (C) to consent to
general service of process in any such jurisdiction;
(d) notify the Holder, at any time when a prospectus
relating to any registration statement filed pursuant to this Section 7 is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein not misleading, and, at the
request of the Holder, the Company will promptly prepare (and, when completed,
give notice to each seller of Registrable Shares) a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading; provided, however, that upon such notification by the
Company, the Holder will not offer or sell Registrable Shares until the Company
has notified the Holder that it has prepared a supplement or amendment to such
prospectus and delivered copies of such supplement or amendment to each such
seller;
(e) in the event of the issuance of any stop order
suspending the effectiveness or any registration statement filed pursuant to
this Section 7, or of any order suspending or preventing the use of any related
prospectus or suspending the
qualification of any Registrable Shares included in such registration statement
for sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order;
(f) in the event of any underwritten public offering
in which Registrable Shares are to be offered and sold, enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
with the underwriters of such offering; and
(g) use its best efforts to furnish, on the date that
such Registrable Shares are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 7 and, in the case of the letter of
the independent public accountants referred to in clause (ii) below, on the
effective date of the registration statement, if such Registrable Shares are
being sold through underwriters, or, if such Registrable Shares are not being
sold through underwriters, on the effective date of the registration statement,
(i) an opinion, dated such date, of counsel to the Company, in form and
substance as is customarily given to the underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holder, and (ii) a
letter, dated such date, from the Company's independent public accountants in
form and substance as is customarily given to the underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the
Holder.
7.5 Indemnification.
(a) The Company agrees to indemnify the Holder, its
officers and directors and each Person who controls the Holder (within the
meaning of the Securities Act) against all losses, claims, damages and
liabilities caused by any untrue or alleged untrue statement of material fact
contained in any registration statement filed pursuant to this Section 7,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are (A) caused by or contained in any information
furnished in writing to the Company by the Holder for use therein, (B) caused by
the Holders' failure to deliver a copy of any such registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished the Holder with a sufficient number of companies of the same, or (C)
caused by the Holder's sale of Registrable Shares in violation of the proviso to
Section 7.4(d) hereof.
(b) In connection with any registration statement
filed pursuant to this Section 7, the Holder will furnish to the Company in
writing such information and affidavits as the Company reasonable requests for
use in connection with any registration statement or prospectus and will
indemnify the Company, its directors and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages and liabilities resulting from any untrue or alleged untrue
statement of material fact contained in any such registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue or alleged untrue statement or omission or
alleged omission is attributable to the information furnished by the Holder to
the Company in writing expressly for use in such registration statement or
prospectus or supplement thereto.
(c) Any Person entitled to indemnification hereunder
will (A) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (B) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. Subject to the foregoing terms and provisions of this Section 7.5(c),
each indemnifying party hereunder will reimburse the person entitled to
indemnification hereunder for all legal and other expenses reasonably incurred
in connection with investigating and defending the action or claim for which
such indemnified party seeks indemnification, as such expenses are incurred.
(d) The indemnification provided for under this
Section 7.5 will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities.
7.6 Limitations on Registration Rights. The Company shall
not be obligated to register the Registrable Shares under the Securities Act (or
deliver any notice with respect to a Piggyback Registration) if, in an opinion
of counsel to the Company addressed to the Holder and the Company, reasonably
satisfactory to the Holder and its counsel, the Registrable Shares may be
offered and sold by the Holder without registration under the Securities Act
pursuant to Rule 144(k) and that following such offer and sale, such Registrable
Shares shall not be "restricted securities" within the meaning of the Securities
Act and the rules thereunder. The Company shall defend and indemnify the Holder
and its respective Affiliates, directors, officers, employees and shareholders
and their respective successors and assigns against and hold each of them
harmless from any and all losses, liabilities, claims, suits, proceedings,
demands, judgments. damages, expenses and costs, including, without limitation,
reasonable counsel fees, costs and expenses incurred in the investigation,
defense or settlement of any claims, arising out of or relating the offer and
sale of Registrable Shares in reliance on such opinion of counsel.
8. Indemnification.
8.1 Indemnification by the Company.
(a) The Company agrees to defend and indemnify Abbott,
its Subsidiaries and their respective Affiliates, directors, officers, employees
and shareholders, and their respective successors and assigns (collectively, the
"Abbott Indemnitees"), against and hold each of them harmless from any and all
losses, liabilities, taxes, claims, suits, proceedings, demands, judgments.
damages, expenses and costs, including, without limitation, reasonable counsel
fees, costs and expenses incurred in the investigation, defense or settlement of
any claims covered by this indemnity (in this Section 8 collectively, the
"Indemnifiable Damages") which any such indemnified person may suffer or incur
by reason of the inaccuracy or breach of any of the representations, warranties
and covenants of the Company contained in this Agreement or any documents,
certificate or agreement delivered pursuant hereto; provided, however, that the
total indemnity shall not exceed the consideration received by the Company.
Nothing herein shall limit in any way Xxxxxx'x remedies in the event of breach
by the Company of any of its covenants or agreements hereunder which are not
also a representation or warranty or for willful fraud or intentionally
deceptive material misrepresentation or omission by the Company in connection
herewith or with the transactions contemplated hereby.
(b) No Abbott Indemnitee shall be entitled to recovery
under the indemnities set forth herein unless and until the Indemnifiable
Damages of all Abbott Indemnitees exceed $25,000, at which point such indemnity
shall apply to all Indemnifiable Damages.
(c) No claim for indemnification may be brought by an
Abbott Indemnitee under this Section 8.1 more than 18 months (540 days)
following the later of the Initial Closing Date or, if the Put Right has been
exercised, the Additional Closing
Date.
8.2 INDEMNIFICATION BY ABBOTT. After the Initial Closing
Date, Abbott shall indemnify and hold harmless the Company and its officers and
directors from and against:
(a) any damage, deficiency, losses or costs incurred
by the Company resulting from any material misrepresentation or breach of
warranty or any non-fulfillment of any covenant or agreement on the part of
Abbott under this Agreement; and
(b) any claim, action, suit, proceeding, demand,
judgment, assessment, cost and expense, including reasonable counsel fees,
incident to the foregoing; provided that the total indemnity shall not exceed
the purchase price paid by Abbott for the Shares pursuant to this Agreement.
No claim for indemnification may be brought under this Section 8.2 more
than 18 months (540 days) following the later of the Initial Closing Date or, if
the Put Right has been exercised, the Additional Closing Date.
8.3 Indemnification Procedure. A party seeking
indemnification (the "Indemnitee") shall use its commercially reasonable best
efforts to minimize any liabilities, damages, deficiencies, claims, judgments,
assessments, costs and expenses in respect of which indemnity may be sought
under this Agreement. The Indemnitee shall give prompt written notice to the
party from whom indemnification is sought (the "Indemnitor") of the assertion of
a claim for indemnification; provided, however, that the Indemnitee's failure to
notify the Indemnitor shall not excuse the Indemnitor's obligation to indemnify
the Indemnitee except to the extent that such failure prejudices the
Indemnitor's defense of any such claim. No such notice of assertion of a claim
shall satisfy the requirements of this Section 8.3 unless it describes in
reasonable detail and in good faith the facts and circumstances upon which the
asserted claim for indemnification is based. If any action or proceeding shall
be brought in connection with any liability or claim to be indemnified
hereunder, the Indemnitee shall provide the Indemnitor 20 calendar days to
decide whether to defend such liability or claim. During such period, the
Indemnitee shall take all necessary steps to protect the interests of itself and
the Indemnitor, including the filing of any necessary responsive pleadings, the
seeking of emergency relief or other action necessary to maintain the status
quo, subject to reimbursement from the Indemnitor of its expenses in doing so.
The Indemnitor shall (with, if necessary, reservation of rights) defend such
action or proceeding at its expense, using counsel selected by the insurance
company insuring against any such claim and undertaking to defend such claim, or
by other counsel selected by it and approved by the Indemnitee, which approval
shall not be unreasonably withheld or delayed. The Indemnitor shall keep the
Indemnitee fully apprised at all times of the status of the defense and shall
consult with the Indemnitee prior to the settlement of any indemnified matter.
The Indemnitee agrees to use its reasonable best efforts to cooperate with the
Indemnitor in connection with its defense of indemnifiable claims. In the event
the Indemnitee has a claim or claims against any third party growing out of or
connected with the indemnified matter, then upon receipt of indemnification, the
Indemnitee shall fully assign to the Indemnitor the entire claim or claims to
the extent of the indemnification actually paid by the Indemnitor and the
Indemnitor shall thereupon be subrogated with respect to such claim or claims of
the Indemnitee.
9. MISCELLANEOUS.
9.1 Powers and Rights Not Waived; Remedies Cumulative.
No delay or failure on the part of Abbott in the exercise of any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
the same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of Abbott are cumulative to,
and are not exclusive of, any rights or remedies Abbott would otherwise have.
9.2 NOTICE. Except as otherwise expressly provided herein,
any notice, consent or document required or permitted hereunder shall be given
in writing and it or any certificates or other documents delivered hereunder
shall be deemed effectively given or delivered (as the case may be) upon
personal delivery (professional courier permissible) or upon facsimile
transmission (with receipt confirmed by telephone), or on the third Business Day
after being sent by United States certified or registered mail (postage prepaid,
return receipt requested). Such certificates, documents or notice may be
personally delivered to an authorized representative of the Company or Abbott
(as the case may be) at any address where such authorized representative is
present and otherwise shall be sent to the following address:
If to the Company: Aronex Pharmaceuticals, Inc.
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Chief Executive Officer
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxxx & Xxxxx L.L.P.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telecopy No.: (000) 000-0000
If to Xxxxxx: Xxxxxx Laboratories
D-960, AP30
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: President, Hospital Products
Division
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxx Laboratories
Legal Division
D-322, AP6D
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attn: Divisional Vice President,
Domestic Legal Operations
Telecopy No.: (000) 000-0000
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and assigns and
shall be binding upon and inure to the benefit of Abbott and its successors and
assigns; provided, however, that the Company shall not assign this Agreement or
any of its rights, duties or obligations hereunder without the prior written
consent of Abbott, which consent shall not be unreasonably withheld.
9.4 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All
covenants, representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Initial Closing Date or the Additional Closing Date, shall survive the closing
and the delivery of this Agreement and the Shares.
9.5 SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter
declared invalid or unenforceable.
9.6 WAIVER OF CONDITIONS. If on the Initial Closing Date or
the Additional Closing Date, either party hereto fails to fulfill each of the
conditions specified in Section 6 hereof, the other party may thereupon elect to
be relieved of all further obligations under this Agreement. Without limiting
the foregoing, if the conditions specified in Section 6 have not been fulfilled,
the other party may waive compliance by such party with any such condition to
such extent as such party may in its sole discretion determine. Nothing in this
Section 9.6 shall operate to relieve either party of any obligations hereunder
or to waive any of the other party's rights against such party.
9.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
9.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with Delaware law, without regard to the conflict of
laws provisions thereof.
9.9 CAPTIONS. The descriptive headings of the various
sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
9.10 Dispute Resolution. Disputes between the parties
relating to this Agreement shall be resolved by binding Alternative Dispute
Resolution as provided in Exhibit C hereto.
IN WITNESS WHEREOF, the Company and Abbott by their duly authorized
officers, have each caused this Agreement to be executed as of the date first
written above.
XXXXXX LABORATORIES
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ARONEX PHARMACEUTICALS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT A
EXHIBIT A TO THE STOCK PURCHASE AGREEMENT IS SUBMITTED AS THE ATTACHED EXHIBIT 3
TO THE SCHEDULE 13D.
EXHIBIT B
FORM OF OPINION OF COUNSEL
1. The Company (a) is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation,
(b) has all requisite power and authority to own and operate its
properties and to carry on its business as now conducted, and (c) is
duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it
makes such licensing or qualification necessary.
2. The Company has all requisite corporate power and authority to enter
into the Agreement and the License Agreement and to execute, issue, sell
and deliver the Shares and, subject to satisfaction of the conditions
set forth therein, to consummate the transactions contemplated thereby.
The execution and delivery of the Agreement, the License Agreement and
the certificates representing the Shares and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company. The Agreement
and the License Agreement have been duly executed and delivered by the
Company and constitute the valid and binding obligation of the Company,
enforceable in accordance with their terms, subject to (a) the effect of
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors, (b) the effect or availability of
rules of law governing specific performance, injunctive relief or other
equitable remedies, and (c) considerations of public policy, including,
without limitation, public policy that may limit rights to indemnity or
contribution for liabilities arising under federal and state securities
laws and regulations thereunder.
3. To our knowledge, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or
other Person is required by, or with respect to, the Company in
connection with the execution and delivery of the Agreement, the License
Agreement or the certificates representing the Shares or the
consummation by the Company of the transactions contemplated thereby,
except for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign
country.
4. The execution and delivery of the Agreement, the License Agreement and
the certificates representing the Shares does not or will not, and the
consummation of the transactions contemplated thereby will not, conflict
with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation under (a)
any provision of the Certificate of Incorporation or Bylaws of the
Company, or (b) any material agreement or instrument, permit, franchise,
license, judgment or order applicable to the Company or its properties
or assets that is listed as an exhibit to the Company SEC Documents.
5. The total number of shares of capital stock the Company is authorized to
issue is 35,000,000 shares, consisting of 30,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock.
6. Except as described in the Company SEC Documents, to our knowledge there
are no outstanding options, warrants, rights or other securities
convertible into or exchangeable for shares of capital stock of the
Company or any Subsidiary, other than options to purchase shares of
Common Stock reserved for issuance under the Company's stock option
plans described in the Company SEC Documents.
7. The Shares have been duly authorized and, when issued in accordance with
the
Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of the Shares is not subject to any preemptive or similar
rights created by statute, the Company's Certificate of Incorporation or
Bylaws or, to our knowledge, any agreement to which the Company is a
party or by which it is bound.
8. The offering and sale of the Shares in accordance with the terms of the
Agreement is exempt from the registration requirements of the Securities
Act.
9. The Company is not an "investment company" or a person "controlled" by
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
EXHIBIT C
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may
arise from time to time during the term of this Agreement which relates to
either party's rights and/or obligations. To have such a dispute resolved by
this Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective representatives of the affected
subsidiaries, divisions, or business units within twenty-eight (28) days after
such notice is received (all references to "days" in this ADR provision are to
calendar days).
If the matter has not been resolved within twenty-eight (28) days of he
notice of dispute, or if the parties fail to meet within such twenty-eight (28)
days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice
to the other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within the
same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, the parties shall
request the President of the Center for Public Resources ("CPR"), 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates within fourteen (14) days after receipt of the request
from the parties, along with a CURRICULUM VITAE for each candidate. No
candidate shall be an employee, director, or shareholder of either party or any
of their subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest preference) and
shall deliver the list to the CPR within seven (7) days following receipt of the
list of candidates. If a party believes a conflict of interest exists regarding
any of the candidates that party shall provide a written explanation of the
conflict to the CPR along with its list showing its order of preference for the
candidates. Any party failing to return a list of preferences on time shall be
deemed to have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR immediately shall
designate as the neutral the candidate for whom the parties collectively have
indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the parties collectively
have identified three (3) or more candidates deemed to have conflicts, the CPR
shall review the explanations regarding conflicts and, in its sole discretion,
may either (i) immediately designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference, or (ii) issue a new
list of not less than five (5) candidates, in which case the procedures set for
in subparagraphs 2(a) - 2(d) above shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principal place of business of
either party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d) above, no
discovery shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and
shall be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has
had the five (5) hours to which it is entitled.
(b) Each party shall be entitled, but not required, to make
an opening statement, to present regular and rebuttal testimony, documents or
other evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross-examination time shall be charged against the party
conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it has
raised but also any issues raised by the responding party. The responding
party, if it chooses to make an opening statement, also shall address all issues
raised in the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments shall proceed in
the same sequence.
(d) Witnesses shall be excluded from the hearing until
closing arguments.
(e) Neither affidavits nor settlement negotiations shall be
admissible under any circumstances. As to all other matters, the neutral shall
have sole discretion regarding the admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief shall not
contain or discuss any new evidence and shall not exceed ten (10) pages. This
page limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
7. The neutral shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each disputed
issue but may adopt one party's proposed rulings and remedies on some issues and
the other party's proposed rulings and remedies on other issues. The neutral
shall not issue any written opinion or otherwise explain the basis of the
ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These
fees and expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the fees and
expenses of a court reporter, and any expenses for a hearing room, shall be paid
as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay 100% of such fees and
expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate fees and expenses in a way that
bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and
expenses shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 of this Exhibit D or as
required by law, the existence of the dispute, any settlement negotiations, the
ADR hearing, any submissions (including exhibits, testimony, proposed rulings,
and briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized disclosure
of Confidential Information.
