ESCROW AGREEMENT
ESCROW AGREEMENT, dated __________, 1999, by and among (i) Global
Pharmaceutical Corporation, a Delaware corporation ("GLOBAL " or "Buyer"), (ii)
the persons listed on Schedule 1 hereto (the "Seller Stockholders"), (iii)
Xxxxxxx Xxxxx and Xxxxx Xxx, in the capacity of the Seller Stockholders'Agent
(as defined herein), and (iv) Continental Stock Transfer & Trust Company (the
"Escrow Agent").
B A C K G R O U N D F A C T S:
A. Pursuant to the Agreement and Plan of Merger between GLOBAL and
Impax Pharmaceuticals, Inc., a California corporation ("IMPAX") (the "Merger
Agreement"), (i) IMPAX will be merged with and into GLOBAL (the "Merger"),
with GLOBAL surviving the Merger (with the surviving corporation's name
changed to IMPAX Laboratories, Inc.) (GLOBAL following the Merger is sometimes
referred to below as the "Surviving Corporation"), (ii) each issued and
outstanding share of the common stock, Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock of IMPAX will be converted into
shares of the common stock, $.01 par value ("GLOBAL Common Stock"), of
GLOBAL, (iii) each issued and outstanding share of Series D Preferred Stock of
IMPAX will be converted into shares of Series 1 Preferred Stock of GLOBAL
("GLOBAL Series 1 Stock"), and (iv) each issued and outstanding share of
Series D Preferred Stock of GLOBAL will be converted into shares of GLOBAL
Series 1 Stock.
B. Pursuant to the Merger Agreement, the Seller Stockholders have
agreed to indemnify the Surviving Corporation for certain Damages (as defined in
the Merger Agreement), and to enter into this Agreement for the purpose of
securing such indemnification obligations.
C. Pursuant to Section 2.04 and Article IX of the Merger Agreement, the
purpose of this Agreement is to provide for the deposit of a portion of the
GLOBAL Common Stock and GLOBAL Series 1 Stock to be acquired by the Seller
Stockholders in the Merger, and the terms which will govern the holding and
distribution of shares deposited, in the escrow account.
A G R E E M E N T:
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree, as follows:
1. Certain Definitions. For all purposes of this Agreement, the
following terms shall have the following meanings:
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(A) The term "Base Amount" shall mean an aggregate of $100,000
of Losses.
(B) The term "Buyer Stock" shall collectively refer to
GLOBAL Common Stock and GLOBAL Series 1 Stock.
(C) The term "Effective Time" shall have the meaning assigned
to such term in Section 1.01 of the Merger Agreement.
(D) The term "Escrow Certificates" shall have the meaning set
forth in Section 3 hereof.
(E) The term "Escrowed Stock" shall mean the Buyer Stock at
any time represented by the Escrow Certificates delivered to the Escrow
Agent as provided in Section 3 and any other Buyer Stock received by
the Escrow Agent as provided in Section 8 as well as all other property
or cash obtained by the Escrow Agent in respect of or in exchange for
the Buyer Stock.
(F) The term "Escrow Fund" shall mean the sum of the Escrowed
Stock and additional property, if any, delivered to the Escrow Agent
pursuant to Section 8 hereof.
(G) The term "Losses" shall have the meaning set forth in
Section 2 hereof.
(H) The term "Termination Date" shall mean the date exactly 18
months after the date of the Effective Time.
(I) The term "Buyer Indemnitees" shall mean the Surviving
Corporation, and its successors and permitted assigns.
(K) The term "Final Determination" shall mean the final
decision of any court of competent jurisdiction from which no appeal
has been allowed because of lapse of time or otherwise.
(L) Capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Merger Agreement.
2. Indemnification and Escrow Fund. This Agreement has been executed
and delivered, and the Escrow Fund has been established, for the purpose of
providing funds for the indemnification of the Buyer Indemnitees in accordance
with the Merger Agreement. Any liabilities for indemnification by the Seller
Stockholders under the Merger Agreement, including, without limitation, all
Damages indemnified against under the Merger Agreement are collectively referred
to as "Losses." The provisions of the Merger Agreement shall establish the
notice requirements and mechanics of defense for all claims of indemnification
for which the Escrow Fund established hereby is available and are incorporated
by reference herein.
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3. Escrowed Stock. As of the Effective Time, GLOBAL shall deposit or
cause to be deposited with the Escrow Agent, for the account of the Seller
Stockholders, certificates issued in the name of the Escrow Agent or its nominee
(the "Escrow Certificates"), representing 1,690,274 shares of Gemstone Common
Stock and 17,000 shares of Gemstone Series 1 Stock (being 10% of the aggregate
number of shares of each of GLOBAL Common Stock and GLOBAL Series 1 Stock to
be received by the Seller Stockholders in the Merger). Except as set forth in
Section 8 hereof, Seller Stockholders shall not be required to make any
additional deposits to the Escrow Fund. The shares represented by the Escrow
Certificates shall be held by the Escrow Agent for the purpose of securing the
indemnification obligations of the Seller Stockholders set forth in the Merger
Agreement, and shall not, except as provided in Sections 5 and 7 hereof, be sold
or disposed of by the Escrow Agent. GLOBAL shall provide and the Escrow Agent
shall maintain a written record of the name and address of each Seller
Stockholder and the number and class of shares of Escrowed Stock credited to his
or her account. Shares of Escrowed Stock shall be credited in accordance with
the instructions of GLOBAL to the account of each Seller Stockholder in the
same proportion, and of the same class of security, as shares of Buyer Stock are
issued to such Seller Stockholder in the Merger. The respective interests of the
Seller Stockholders in the Escrow Fund shall not be transferable or assignable
other than (a) to executors, administrators, legatees or heirs of the Seller
Stockholders or (b) in a transaction involving no change in beneficial
ownership. Notice of any transfer permitted by clause (b) hereof shall be given
to GLOBAL and the Escrow Agent, and no such transfer shall be valid until such
notice is given. To the extent that the Escrow Fund contains cash, the Escrow
Agent may invest such cash in any Treasury Xxxx issued by the United States
having a maturity of 90 days or less.
4. Seller Stockholders' Agent.
(a) In the event that the Merger is approved, effective upon
such vote, and without further act of any Seller Stockholder, a committee (the
"Committee") consisting solely of Xxxxxxx Xxxxx and Xxxxx Xxx shall be appointed
as agents and attorneys-in-fact (collectively, the "Seller Stockholders' Agent")
for each Seller Stockholder (except such Seller Stockholders, if any, as shall
have perfected their dissenter rights under applicable law). The Seller
Stockholders' Agent, for and on behalf of Seller Stockholders, shall have the
power to take any and all actions required to be taken by the Seller
Stockholders pursuant to the Escrow Agreement or the Merger Agreement including,
without limitation, the power to give and receive notices and communications, to
enter into and perform the Escrow Agreement, to make claims for indemnification
against the Surviving Corporation, to authorize delivery to the Surviving
Corporation of Buyer Stock or other property from the Escrow Fund in
satisfaction of claims by the Surviving Corporation, to object to such
deliveries, to agree to negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of Seller Stockholders' Agent for the accomplishment
of the foregoing. The Seller Stockholders' Agent shall act by unanimous vote or
unanimous written action or consent of the members of the Committee. Effective
upon the approval of the Merger Agreement by the Seller Stockholders, the Seller
Stockholders individually shall have no power or authority to take any actions
against Buyer or otherwise pursuant to the Merger
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Agreement or the Escrow Agreement, and all actions of the Seller Stockholders,
whether pursuant to the Merger Agreement or the Escrow Agreement, must be taken
solely by the Seller Stockholders' Agent.
(b) Buyer shall have no liability of any kind to any Seller
Stockholder as a result of or arising out of any action taken or not taken by
the Seller Stockholders' Agent at any time under the Merger Agreement or the
Escrow Agreement and each Seller Stockholder hereby releases Buyer from any such
liability. Buyer may conclusively rely, without any obligation of investigation
or inquiry of any kind, on any action taken by the Seller Stockholders' Agent as
having been fully authorized and approved by all necessary action by each Seller
Stockholder (except such Seller Stockholders, if any, as shall have perfected
their dissenter rights under applicable law).
5. Claims Against Escrow Fund.
(a) Subject to the terms and conditions of this Agreement, the
Escrow Fund shall be applied to indemnify and hold harmless the Buyer
Indemnitees against and in respect of Losses as set forth in a Claim Certificate
(as defined below) duly delivered to the Escrow Agent and the Seller
Stockholders prior to the Termination Date. If the Buyer Indemnitees shall
suffer or incur Losses as to which indemnification is provided for under the
indemnification provisions of the Merger Agreement, it or they shall deliver to
the Escrow Agent and the Seller Stockholders a certificate (a "Claim
Certificate"), which shall be signed by the President, Chief Executive Officer
or Chief Operating Officer of GLOBAL to the effect that Buyer Indemnitees have
suffered or incurred Losses in the amount specified in such Claim Certificate
and setting forth the basis for such Losses. Upon receipt of any such Claim
Certificate and subject to Section 5(b), the Escrow Agent shall, as soon as
practicable (but not earlier than twelve (12) business days after the delivery
to the Escrow Agent of such Claim Certificate) pay to Buyer Indemnitees an
amount equal to the amount of Losses so suffered or incurred by Buyer
Indemnitees as set forth in such Claim Certificate out of the Escrow Fund.
Whenever the Escrow Agent is required to make a payment out of the Escrow Fund
hereunder, the Escrow Agent shall withdraw from the Escrow Fund in accordance
with a written instruction of GLOBAL (which written instruction shall include
a computation of the value of such shares of Buyer Stock and Other Property
calculated in accordance with Section 9.04(c) of the Merger Agreement and this
Escrow Agreement, and shall include a calculation which confirms that the
payment shall be made for the accounts of the Seller Stockholders pro rata in
accordance with the ratio of the original deposits of Buyer Stock which comprise
the Escrow Fund), (i) first, any cash comprising the Escrow Fund, (ii) second,
to the extent that there is insufficient cash to pay the Losses, shares of Buyer
Stock and (iii) third to the extent there is an insufficient number of shares of
Buyer Stock in the Escrow Fund to pay the Losses, any other property delivered
to, and remaining in, the Escrow Fund in accordance with Section 8 hereof
("Other Property"). The Escrow Agent shall transfer, deliver and assign to Buyer
Indemnitees such cash, number of shares of Buyer Stock (rounded to the next
highest whole share) held in the Escrow Fund and/or Other Property which shall
be indicated within the written instrument of Buyer Indemnitees referred to
hereinabove and required to be delivered to the Escrow Agent. Shares of Buyer
Stock shall be valued in accordance with the terms of Section 9.04(c) of the
Merger Agreement and Other Property, if any,
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shall be valued in good faith by the Board of Directors of GLOBAL. The
delivery by the Escrow Agent to Buyer Indemnitees of the shares of Buyer Stock
determined by GLOBAL's computation of their value as stated above and stated
in the written instruction to the Escrow Agent shall be effected by surrender to
GLOBAL, or its transfer agent, of the Escrow Certificates then in its
possession, and GLOBAL, or its transfer agent, shall promptly issue to the
Escrow Agent a new stock certificate registered in its name for the number of
shares of Buyer Stock then remaining in the Escrow Fund as reduced by the number
of shares surrendered to Buyer Indemnitees.
(b) Unless, within ten (10) business days after delivery to
the Seller Stockholders of any Claim Certificate, Seller Stockholders who
beneficially own a majority in interest of the Escrowed Stock then held in the
Escrow Fund (the "Majority Owners") give written notice to GLOBAL and the
Escrow Agent that they question the accuracy of, or matters included in, such
Claim Certificate, such Claim Certificate shall constitute full authority to the
Escrow Agent to take the action provided for in the preceding paragraph and
shall be conclusive on all parties hereto. If the Majority Owners give notice
questioning the accuracy of, or matters included in, such Claim Certificate, the
Escrow Agent shall not assign to Buyer Indemnitees any Escrowed Stock or make
any indemnification payment to Buyer Indemnitees pursuant to this Section 5
until (i) it receives the written consent of the Majority Owners or (ii) there
is a Final Determination with respect to the dispute. After notice by the
Majority Owners of disagreement with the accuracy of, or matters included in, a
Claim Certificate, either Buyer Indemnitees (on the one hand) or the Seller
Stockholders, acting jointly but not severally (on the other hand), may seek a
declaratory judgment from any court of competent jurisdiction to resolve the
disagreement. The party against whom such declaratory judgment is actually
rendered shall reimburse the other party thereto for the reasonable expenses
incurred by it in the defense, prosecution, or investigation of such claim.
(c) Notwithstanding anything herein to the contrary, no
payments shall be made out of the Escrow Fund for indemnity of Losses until such
Losses exceed the Base Amount, at which time, all Losses theretofore accrued
shall be paid.
(d) If any dispute arises as to any matter arising under this
Escrow Agreement or there arises any uncertainty as to the meaning or
applicability of any of the provisions hereof, or as to the Escrow Agent's
duties, rights or responsibilities hereunder, the Escrow Agent may, at its
option or at any time thereafter deposit the Escrowed Stock then being held by
it in escrow into a court having appropriate jurisdiction, and the Escrow Agent
shall thereby be discharged and relieved of all liability hereunder.
6. Termination. The Escrow Fund shall terminate on the Termination
Date, and upon written notice from GLOBAL and the Majority Owners to the
Escrow Agent. Any shares or other assets then held in the Escrow Fund shall be
distributed upon termination by the Escrow Agent in accordance with the
provisions of Section 7 hereof. Notwithstanding the foregoing, if on or before
the Termination Date any Buyer Indemnitees have (a) duly delivered a Claim
Certificate with respect to a claim which has not been satisfied pursuant to
this Agreement or (b) delivered to the Escrow Agent and the Seller Stockholders
written notice of the occurrence of an event which
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constitutes a breach of any representation, warranty or agreement made by the
Seller Stockholders in the Merger Agreement and may give rise to a claim for
indemnification under the Merger Agreement and this Agreement, and if such Buyer
Indemnitees have delivered to the Escrow Agent a good faith written estimate of
the maximum potential amount of Losses resulting from such claim or potential
claim, the Escrow Fund shall not terminate with respect to such claims until all
such claims have been fully satisfied or resolved or a Final Determination has
been rendered with respect thereto. Until such termination, the Escrow Agent
shall retain in the Escrow Fund that amount of Escrowed Stock as instructed in
writing by the Buyer Indemnitees and having a value allocated and determined in
accordance with the indemnification provisions of the Merger Agreement and this
Agreement, which Escrowed Stock shall equal 100% of the Buyer Indemnitees'
estimate of Losses resulting from all then outstanding claims. In the event that
the value of the shares of Buyer Stock and other assets, if any, then remaining
in the Escrow Fund is less than 100% of the Buyer Indemnitees' estimate of
Losses resulting from all then outstanding claims, then GLOBAL shall instruct
the Escrow Agent in writing to retain all remaining assets in the Escrow Fund.
Promptly after the Termination Date, any shares or other assets in the Escrow
Fund having a value in excess of that required to be retained in the Escrow Fund
pursuant to the foregoing shall be distributed to the Seller Stockholders in
accordance with Section 7 hereof and shall no longer be subject to this
Agreement.
7. Distribution of the Escrowed Stock. Upon the termination of the
Escrow Fund pursuant to Section 6 hereof, and subject to the terms of such
Section, the Escrow Agent shall, within 10 days of such Termination Date,
distribute to each of the Seller Stockholders at their last known addresses
appearing on the records of the Escrow Agent, the amount of Escrowed Stock to be
distributed to the Seller Stockholders pursuant to Section 6 hereof in the same
proportion, and of the same class, as shares of Buyer Stock were issued to any
such Seller Stockholders in the Merger. Any delivery of shares of Buyer Stock
shall be of full shares, and the Escrow Agent shall, upon instructions received
from the Majority Owners, make such adjustments for fractional share interests
as the Majority Owners in their sole discretion deem appropriate.
8. Delivery and Deposit of Additional Shares or Dividends. Any shares
of Buyer Stock or other equity securities issued or distributed by Buyer
(including shares issued upon a stock split) ("New Shares") in respect of Buyer
Stock in the Escrow which have not been released from the Escrow shall be added
to the Escrow and become a part thereof. New Shares issued in respect of Buyer
Stock which have been released from the Escrow shall not be added to the Escrow,
but shall be distributed to the holders thereof. When and if cash dividends on
Buyer Stock in the Escrow shall be declared and paid, they shall not be added to
the Escrow, but shall be paid to those on whose behalf such Buyer Stock is held
who, at the Effective Time, held Seller Stock.
9. Voting of Shares and Reports. Each Seller Stockholder shall have
voting rights with respect to the shares of Buyer Stock contributed to the
Escrow on behalf of such Seller Stockholder (and on any voting securities added
to the Escrow in respect of such shares of Buyer Stock) so long as such shares
of Buyer Stock or other voting securities are held in the Escrow. As the record
holder of such shares, the Escrow Agent shall vote such shares in accordance
with the instructions of the
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Seller Stockholders having the beneficial interest therein and shall promptly
deliver copies of all proxy solicitation materials to such Seller Stockholders.
The Escrow Agent shall not vote any shares of Escrowed Stock as to which no
voting instructions have been given.
10. Notice. Unless written designation of a different address is filed
with each of the other parties hereto, all notices and Claim Certificates
required to be given under this Agreement shall be deemed to have been properly
given if in writing and delivered or mailed by registered or certified mail,
postage prepaid. Mailed notices and Claim Certificates shall be deemed given
when duly mailed and addressed as follows:
GLOBAL:
Global Pharmaceutical Corporation
Xxxxxx & Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Seller Stockholders:
To their addresses as set forth on
Schedule 1 hereto
Seller Stockholders' Agent
[Seller Stockholders' Agent Address]
Escrow Agent:
Continental Stock Transfer & Trust Company
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
11. Liability of the Escrow Agent. The Escrow Agent may act upon any
instrument or other writing believed by it in good faith to be genuine and to be
signed or presented by the proper person and shall not be liable in connection
with the performance by it of its duties pursuant to the
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provisions of this Agreement except for its own willful misconduct or gross
negligence. The Escrow Agent may retain counsel and act with respect to this
Agreement and its obligations hereunder on the advice of such counsel. The
Escrow Agent shall be, and hereby is, jointly and severally indemnified and
saved harmless, by the parties hereto, from all losses, costs and expenses
(including reasonable attorneys' fees) which may be incurred by it as a result
of its involvement in any litigation arising from performance of its duties
hereunder, provided that such litigation or action in interpleader shall not
result from any action taken or omitted by the Escrow Agent and for which it
shall have been adjudged to have acted in bad faith or to have been grossly
negligent. GLOBAL shall be responsible for determining any requirements for
paying taxes or reporting any payments for tax purposes. GLOBAL and the
Majority Owners may give written directions to the Escrow Agent to prepare and
file tax information or to withhold any payments hereunder for tax purposes.
GLOBAL and the Seller Stockholders, jointly and severally, covenant and agree
to indemnify and hold the Escrow Agent harmless against all liability for tax
withholding and/or reporting for any payments made by the Escrow Agent pursuant
to this Agreement. The Escrow Agent shall have no duties or obligations except
those expressly set forth in this Escrow Agreement, and no implied duties or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
The Escrow Agent shall have no obligation to make any payment, investment or
disbursement of any type pursuant hereto or to incur any financial liability in
the performance of its duties hereunder unless GLOBAL shall have deposited
with the Escrow Agent sufficient funds therefor. The Escrow Agent may
conclusively rely upon and shall be protected, indemnified and held harmless by
GLOBAL and the Seller Stockholders, jointly and severally, in acting upon the
written (which shall include instructions given by telecopier or other
telecommunications device) or oral instructions of any officer or agent of
either of them or of counsel to either of them with respect to any matter
relating to its actions as Escrow Agent hereunder, and the Escrow Agent shall be
entitled to request that further instructions be given by such persons or to
request that instructions be given in writing.
12. Fees and Expenses. GLOBAL will pay to the Escrow Agent its
reasonable fees for the services rendered by it pursuant to the provisions of
this Agreement with respect to the Escrow Fund and will reimburse the Escrow
Agent for its reasonable expenses (including reasonable fees and disbursements
of its counsel) incurred in connection with the performance by it of such
services. Any transfer taxes incurred as a result of the operation of any
provision of this Agreement relating to the Escrow Fund shall be paid by
GLOBAL.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14. Binding Effect. This Agreement and all action taken hereunder in
accordance with its terms shall be binding upon and inure to the benefit of the
Seller Stockholders, the Surviving Corporation and the Escrow Agent and their
respective successors and assigns.
15. Successor Escrow Agent. The Escrow Agent, or any successor to it
hereafter appointed, may at any time resign by giving notice in writing to the
Surviving Corporation and the
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Seller Stockholders and shall be discharged of its duties hereunder upon the
appointment of a successor Escrow Agent as hereinafter provided. In the event of
any such resignation, a successor Escrow Agent, which shall be a bank or trust
company organized under the laws of the United States of America or the State of
New York having a combined capital and surplus of not less than $50,000,000,
shall be appointed by the Surviving Corporation. Any such successor Escrow Agent
shall deliver to the Surviving Corporation and the Seller Stockholders a written
instrument accepting such appointment hereunder, and thereupon it shall succeed
to all the rights and duties of the Escrow Agent hereunder and shall be entitled
to receive all the Escrow Fund.
16. Confirmation of Escrow Agent's Appointment. GLOBAL and the Seller
Stockholders hereby confirm the appointment of Continental Stock Transfer &
Trust Company to act as Escrow Agent under this Escrow Agreement, and
Continental Stock Transfer & Trust Company hereby accepts such appointment.
17. Entire Agreement. This Agreement and the Merger Agreement contain
the entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings
whether written or oral, among the parties hereto with respect to the subject
matter of this Agreement.
18. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions, and this
Agreement shall be construed in all respects as though such invalid or
unenforceable provisions were omitted.
19. Amendments. This Agreement may only be amended or modified by a
written instrument executed by GLOBAL, the Majority Owners and the Escrow
Agent.
20. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
21. Accounting Matters. GLOBAL shall show the Buyer Stock contributed
to the Escrow Fund as issued and outstanding on its balance sheet.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the day, month and year first written above.
GLOBAL PHARMACEUTICAL CORPORATION
By:________________________________
SELLER STOCKHOLDERS
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
___________________________________ ___________________________________
[Name] [Name]
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Accepted and Agreed
SELLER STOCKHOLDERS' AGENT
___________________________________
Xxxxxxx Xxxxx
___________________________________
Xxxxx Xxx
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY, as Escrow Agent
By: _______________________
Xxxxxxx Xxxxxxxxx
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ESCROW AGREEMENT
SCHEDULE 1
Names and Addresses of Seller Stockholders
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