EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February 1,
2005 (the "Agreement Date"), among XCEL PHARMACEUTICALS, INC., a Delaware
corporation (the "Company"), VALEANT PHARMACEUTICALS INTERNATIONAL, a Delaware
corporation ("Acquiror"), and BW ACQUISITION SUB, INC., a Delaware corporation
and a direct wholly owned subsidiary of Acquiror ("Merger Sub").
RECITALS
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the DGCL, Acquiror and the Company will enter into a
business combination transaction pursuant to which Merger Sub will merge with
and into the Company (the "Merger");
WHEREAS, the respective Boards of Directors of the Company, Acquiror and
Merger Sub have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their respective
business strategies and goals;
WHEREAS, the Company, Acquiror and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, the Board of Directors of the Company has resolved to recommend
the Merger to the holders of the Company Capital Stock, has determined that the
Merger Consideration is fair to the holders of such Company Capital Stock, and
has resolved to recommend that the holders of each class and series of Company
Capital Stock accept the Merger Consideration and approve the Merger upon the
terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement,
as an inducement to Acquiror's and Merger Sub's willingness to enter into this
Agreement, certain stockholders of the Company (the "Principal Stockholders")
have entered into a Voting Agreement, dated as of the Agreement Date, in the
form attached hereto as Exhibit A (the "Voting Agreement"), pursuant to which
each such Principal Stockholder has, among other things, agreed to (i) vote the
shares of Company Capital Stock held by such Principal Stockholder in favor of
the approval of this Agreement and the transactions contemplated hereby
(including the Merger), the Merger Liquidation Exemption and the Dividend
Waiver, and (ii) tender to Acquiror, concurrent with the execution of such
Voting Agreement, an executed Accredited Investor's Certificate (and thus, in
the instance of Principal Stockholders holding Company Common Stock, become an
Electing Common Holder as contemplated by Section 2.5(b)(i)); and
WHEREAS, certain capitalized terms used but not defined herein shall have
the meanings referred to or set forth in Appendix 1 hereto.
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NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, mutual covenants and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows.
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with
and into the Company at the Effective Time and the separate corporate existence
of Merger Sub shall thereupon cease. Following the Effective Time, the Company
shall be the surviving corporation (the "Surviving Corporation").
1.2 Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m., Pacific Standard Time, on a date to be specified by the Parties,
which shall be no later than the second (2nd) Business Day after satisfaction or
waiver of the conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing) set forth in Article 7, unless another time or date
is agreed to by the Parties (the "Closing Date"). The Closing will be held at
the offices of Pillsbury Winthrop LLP, 000 Xxxx Xxxxxx Xxxxx, Xxxxx Xxxx,
Xxxxxxxxxx 00000, or such other location as the Parties hereto shall agree to in
writing.
1.3 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable after the satisfaction or, if applicable, the waiver of the
conditions set forth in Article 7, the Parties shall file a Certificate of
Merger (the "Certificate of Merger") in such form as is required by and executed
in accordance with the relevant provisions of the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such later date or time as
the Company and Merger Sub shall agree and specify in the Certificate of Merger
(the date and time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall be vested in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.5 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of Merger Sub shall be the certificate of incorporation
and bylaws, respectively, of the Surviving Corporation until thereafter changed
or amended as provided therein; provided, however, that the name of the
Surviving Corporation shall be "Xcel Pharmaceuticals, Inc." until thereafter
changed.
1.6 Directors and Officers of the Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the
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officers of the Surviving Corporation, in each case, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualify, as the case may be.
ARTICLE 2
CANCELLATION AND CONVERSION OF SHARES
2.1 Approval of Merger and Conversion Arrangements.
(a) Exemption and Waiver. As part of their consideration of the
approval and adoption of this Agreement and the transactions contemplated
hereby (including the Merger), the Company Stockholders will be asked to
consider an amendment of the Company Charter, in the form attached hereto
as Exhibit B (the "Charter Amendment"), to: (i) exempt the Merger from
inclusion and treatment as a "Liquidation" for purposes of the Company
Charter (including for purposes of Section 2(d) of Article IV.B. of the
Company Charter) (the "Merger Liquidation Exemption"); and (ii) eliminate
any and all dividends that have accrued with respect to the Series A-1
Preferred Stock, the Series B-1 Preferred Stock and the Series C-1
Preferred Stock so long as the Effective Time occurs prior to any
termination of this Agreement (the "Dividend Waiver").
(b) Required Company Stockholder Approval. Approval and adoption
of this Agreement and the transactions contemplated hereby (including the
Merger), the Merger Liquidation Exemption and the Dividend Waiver (each of
which shall be conditioned upon approval of all the others) will require
the approval of holders of the following (the "Company Stockholder
Approval"): (i) a majority of the issued and outstanding shares of Company
Common Stock (voting as a separate class); (ii) a majority of the issued
and outstanding shares of Series A-1 Preferred Stock (voting as a separate
class); (iii) a majority of the issued and outstanding shares of Series
B-1 Preferred Stock (voting as a separate class); (iv) a majority of the
issued and outstanding shares of Series C-1 Preferred Stock (voting as a
separate class); and (v) a majority of the issued and outstanding shares
of Series A-1 Preferred Stock, Series B-1 Preferred Stock and Series C-1
Preferred Stock (voting together as a single class).
2.2 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of Company
Capital Stock or shares of the capital stock of Merger Sub:
(a) Cancellation of Treasury Stock. Each share of Company Capital
Stock that is held in the treasury of the Company shall automatically be
cancelled and retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor.
(b) Conversion of Company Capital Stock. Subject to Section 2.7
and Section 2.8, at the Effective Time, by virtue of the Merger and
without any action on the part of Acquiror, Merger Sub, or the Company:
(i) Series A-1 Preferred Stock. Each share of Series A-1 Preferred
Stock issued and outstanding as of the Effective Time (other than
Dissenting Shares) shall be converted into the right to receive from the
Merger Consideration the Series A-1 Per
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Share Amount, payable in the manner and form and at such times as
expressly set forth herein;
(ii) Series B-1 Preferred Stock. Each share of Series B-1 Preferred
Stock issued and outstanding as of the Effective Time (other than
Dissenting Shares) shall be converted into the right to receive from the
Merger Consideration the Series B-1 Per Share Amount, payable in the
manner and form and at such times as expressly set forth herein;
(iii) Series C-1 Preferred Stock. Each share of Series C-1 Preferred
Stock issued and outstanding as of the Effective Time (other than
Dissenting Shares) shall be converted into the right to receive from the
Merger Consideration the Series C-1 Per Share Amount, payable in the
manner and form and at such times as expressly set forth herein; and
(iv) Company Common Stock. Each share of Company Common Stock
issued and outstanding as of the Effective Time (other than Dissenting
Shares) shall be converted into the right to receive from the Merger
Consideration the Common Per Share Amount, payable in the manner and form
and at such times as expressly set forth herein (and, as applicable, a
portion of any Working Capital Price Increase as set forth in Section
2.11(f)).
(c) Capital Stock of Merger Sub. Each share of common stock,
$0.001 par value, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall be converted into one (1) share of common
stock of the Surviving Corporation.
(d) Cancellation and Retirement of Company Capital Stock. Subject
to Section 2.7 and Section 2.8, upon the Effective Time each holder of a
certificate representing any shares of Company Capital Stock shall cease
to have any rights with respect thereto, except the right to receive, in
accordance with the terms and conditions of this Agreement, a portion of
the Merger Consideration (and, as applicable with respect to Company
Common Stock, a portion of any Working Capital Price Increase as set forth
in Section 2.11(f)), without interest (except such interest with respect
to amounts which may be released from the Escrow Fund), upon surrender of
such certificate in accordance with Section 2.5.
2.3 Company Stock Options; Vesting and Rights of Repurchase.
(a) In-the-Money Options. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder thereof, each
Company Stock Option with an exercise price per share of underlying
Company Common Stock which is less than the Common Per Share Amount (each
an "In-the-Money Option") shall be converted into the right to receive an
aggregate amount equal to the Common Per Share Amount otherwise payable in
respect of all shares of Company Common Stock subject to such In-the-Money
Option (assuming, for this purpose, full acceleration of vesting as of
immediately prior to the Effective Time) and, as applicable, a portion of
any Working Capital Price Increase as set forth in Section 2.11(f).
Payment of the applicable portion
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of the Merger Consideration to each holder of an In-the-Money Option (and,
as applicable, a portion of any Working Capital Price Increase as set
forth in Section 2.11(f)) shall be conditioned on and remain subject to
payment of the applicable exercise price for such In-the-Money Option,
which in all instances shall be deducted from the aggregate amount of the
Merger Consideration otherwise payable to such holder (such that the right
of each holder of an In-the-Money Option to receive such holder's portion
of the Merger Consideration, as contemplated by Section 2.5(b)(iii), and,
as applicable, a portion of any Working Capital Price Increase as set
forth in Section 2.11(f) will be "cashless" to such holder).
(b) Other Options. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof, each
Company Stock Option which is not an In-the-Money Option shall be
terminated and cancelled, and no payment or distribution shall be made
with respect thereto.
(c) Provisions for Options. The Company shall take all actions
necessary to ensure that (i) the Company Stock Options are, as of the
Effective Time, modified as provided in the foregoing subsections (a) and
(b) and the following subsection (d), (ii) except with respect to the
In-the-Money Options, the Company Stock Plan is terminated as of the
Effective Time, (iii) the provisions in any other plan, program or
arrangement of the Company providing for the issuance or grant of any
other interest in respect of the capital stock of the Company shall be
terminated as of the Effective Time, (iv) following the Effective Time, no
participant in any other plans, programs or arrangements of the Company
shall have any right thereunder to acquire or participate in changes in
value of equity securities of the Company, the Surviving Corporation,
Merger Sub or any of their respective subsidiaries and (v) all such other
plans, programs or arrangements of the Company are terminated effective as
of the Effective Time.
(d) Acceleration of Vesting; Termination of Right of Repurchase.
The Parties acknowledge and agree that, with respect to any and all shares
of Company Capital Stock (including shares which may be issued upon the
exercise of In-the-Money Options) and all Company Stock Options, all
vesting conditions with respect thereto shall be deemed to have fully
accelerated, and any rights of repurchase or other similar restrictions or
limitations with respect thereto shall be deemed to have fully lapsed, as
of immediately prior to the Effective Time.
2.4 Escrow Account.
(a) Escrow Fund. Acquiror will, prior to the Closing and pursuant
to the terms of the Escrow Agreement in the form attached hereto as
Exhibit C, with such changes as may be requested or required by the Escrow
Agent (the "Escrow Agreement"), deposit Fourteen Million Dollars
($14,000,000) (the "Initial Escrow Amount") with Bank of New York (the
"Escrow Agent") to be held in an interest-bearing escrow account (the
"Escrow Account"). All amounts held in the Escrow Account shall be known
collectively as the "Escrow Fund."
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(b) Retention and Release. The Escrow Fund shall be held in the
Escrow Account for the benefit of Acquiror and all Eligible Company
Holders pursuant to the terms of this Agreement pertaining thereto and the
Escrow Agreement. Any amounts to be distributed from the Escrow Fund to
the Eligible Company Holders will be distributable to such Eligible
Company Holders on a pro rata basis (among all former holders of Company
Capital Stock, assuming the exercise immediately prior to the Effective
Time of all In-the-Money Options on a fully vested basis, based upon their
relative entitlement or assumed entitlement to receive Merger
Consideration as contemplated by Sections 2.2(b) and 2.5(b)(i) through
(vi) (excepting Section 2.5(b)(iii) inasmuch as holders of In-the-Money
Options will, for this purpose, be assumed to have exercised such options
immediately prior to the Effective Time)), all as more specifically set
forth in the Spreadsheet. Subject to the indemnification rights of
Acquiror described in Article 9, the Escrow Fund shall be distributable as
follows:
(i) the amount by which the Available Escrow Amount (immediately
prior to such distribution), exceeds Ten Million Dollars ($10,000,000)
shall be distributed to the Eligible Company Holders on the date which is
ninety (90) days after the Closing Date (the "First Escrow Release Date");
(ii) the amount by which the Available Escrow Amount (immediately
prior to such distribution), exceeds Five Million Dollars ($5,000,000)
shall be distributed to the Eligible Company Holders on the date which is
six (6) months after the Closing Date (the "Second Escrow Release Date");
(iii) all remaining Available Escrow Amount and any other amounts
which shall have been delivered into the Escrow Account shall be
distributed to the Eligible Company Holders on the date which is the first
(1st) anniversary of the Closing Date (the "Final Escrow Release Date");
and
(iv) any further amounts which, following the Final Escrow Release
Date, shall be delivered into the Escrow Account or otherwise become
available for distribution to the Eligible Company Holders (including
amounts which may previously have been withheld due to a Pending Claim
Holdback where final resolution of the related Pending Claim yields less
than a full payment of the amount at issue to Acquiror), together with all
interest which has accrued thereon, shall be distributed to the Eligible
Company Holders immediately following the date any such amount shall be so
delivered or otherwise become so available.
(c) Non-assignable Interest. The interests of an Eligible Company
Holder in the Escrow Fund will not be assignable or transferable by such
Eligible Company Holder unless and until released pursuant to the terms of
the Escrow Agreement.
(d) Pending Claim Holdbacks. In the event Acquiror has made, in
accordance with Section 9.2, a claim for indemnification in an Acquiror
Claim Notice, and such claim has not been finally determined or has
otherwise been objected to as provided in Article 9 (a "Pending Claim"),
the Escrow Agent shall withhold from distribution a portion of the Escrow
Fund equal to the Damages at issue (such amount being a "Pending
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Claim Holdback") until such time as either the Pending Claim has been
finally determined or the objection resolved, as applicable, in which case
the appropriate amounts will be either distributed to Acquiror or returned
to the Escrow Account (for distribution to the Eligible Company Holders as
provided in Section 2.4(b)), or both, as the case may be.
(e) Inability to Deliver. If the Escrow Agent is not able to
deliver any portion of the Escrow Fund to the proper recipient within one
(1) year of the date that final distribution of any remaining amount of
the Escrow Fund should otherwise have been made pursuant to Section 2.4(b)
(or immediately prior to such earlier date on which any payment in respect
thereof would otherwise escheat to or become the property of any
Governmental Entity), such portion of the Escrow Fund shall be delivered
to Acquiror and the proper recipient shall thereafter look only to
Acquiror, and only as a general creditor, for payment of such recipient's
claim for such portion of the Escrow Fund, subject to applicable abandoned
property, escheat and similar laws.
2.5 Exchange of Certificates and In-the-Money Options.
(a) Exchange Agent. Acquiror shall, subject to the Company's
approval (not to be unreasonably withheld), designate any nationally
recognized commercial bank to act as agent (the "Exchange Agent") of
Acquiror for purposes of, among other things, mailing and receiving
transmittal letters and distributing to the Eligible Company Holders the
portion of the Merger Consideration payable to such Eligible Company
Holders (other than the portion represented by the Escrow Fund, which
shall be deposited with the Escrow Agent). Prior to the Closing (expected
to be on the morning of the Closing Date), Acquiror shall deposit, or
shall cause to be deposited, with or for the account of the Exchange
Agent, for the benefit of the Eligible Company Holders, (i) cash in an
aggregate amount equal to the Net Cash Consideration, plus (ii)
certificates representing the Stock Consideration (the "Exchange Fund").
Acquiror agrees to provide to the Exchange Agent, from time to time as
needed, immediately available funds sufficient to pay cash in lieu of
fractional shares of Valeant Common Stock pursuant to Section 2.5(i).
(b) Exchange Procedures. Promptly after the Effective Time (and in
any event within two (2) Business Days after the Effective Time), Acquiror
shall direct the Exchange Agent to mail or deliver to each Eligible
Company Holder whose shares or In-the-Money Options were converted into
the right to receive a portion of the Merger Consideration, (i) a letter
of transmittal in substantially the form attached hereto as Exhibit D,
with such changes as may be requested or required by the Exchange Agent
(the "Letter of Transmittal") and (ii) instructions for use in
redelivering the Letter of Transmittal (including, as applicable,
surrendering such Eligible Company Holder's Certificates) in exchange for
the portion of the applicable Merger Consideration. Upon redelivery of
each Letter of Transmittal (including, as applicable, surrender of any
Certificate for cancellation), duly executed, to the Exchange Agent,
together with such other documents as may reasonably be required by the
Exchange Agent (such as a lost share certificate affidavit, where
applicable), the Certificate(s) so surrendered shall be cancelled and the
In-the-Money Option(s) at issue shall be deemed exercised and the
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holder of such Certificate(s) or In-the-Money Option(s) shall be entitled
to receive in exchange therefor:
(i) Electing Common Holders. Each holder of Company Common Stock
who has delivered an executed Accredited Investor's Certificate to
Acquiror at least fifteen (15) days prior to the Closing Date (each an
"Electing Common Holder") shall be entitled to receive the following: (w)
a check or, if requested, a wire transfer of immediately available funds,
representing the amount of cash equal to the product of (A) the Cash
Percentage of the Common Per Share Amount, minus the Common Per Share
Escrow Amount, and (B) the number of shares represented by the
Certificate(s) for Company Common Stock so surrendered; (x) shares of
Valeant Common Stock with an aggregate value (based on the Closing Value)
equal to the Stock Percentage of the Common Per Share Amount multiplied by
the number of shares represented by the Certificate(s) for Company Common
Stock so surrendered; (y) a pro rata share (among all former holders of
Company Capital Stock, assuming the exercise immediately prior to the
Effective Time of all In-the-Money Options on a fully vested basis, based
upon their relative entitlement to receive Merger Consideration as
contemplated by Sections 2.2(b) and 2.5(b)(i) through (vi) (excepting
Section 2.5(b)(iii) inasmuch as holders of In-the-Money Options will, for
this purpose, be assumed to have exercised such options immediately prior
to the Effective Time)), when released as provided in Section 2.4(b), of
any portion of the Escrow Fund (such pro rata share being more
specifically set forth in the Spreadsheet); and (z) as applicable, a
portion of any Working Capital Price Increase as set forth in Section
2.11(f).
(ii) Other Common Holders. Each holder of Company Common Stock who
is not an Electing Common Holder shall be entitled to receive the
following: (x) a check or, if requested, a wire transfer of immediately
available funds, representing the amount of cash equal to the product of
(A) the Common Per Share Amount minus the Common Per Share Escrow Amount,
and (B) the number of shares represented by the Certificate(s) for Company
Common Stock so surrendered; (y) a pro rata share (among all former
holders of Company Capital Stock, assuming the exercise immediately prior
to the Effective Time of all In-the-Money Options on a fully vested basis,
based upon their relative entitlement to receive Merger Consideration as
contemplated by Sections 2.2(b) and 2.5(b)(i) through (vi) (excepting
Section 2.5(b)(iii) inasmuch as holders of In-the-Money Options will, for
this purpose, be assumed to have exercised such options immediately prior
to the Effective Time)), when released as provided in Section 2.4(b), of
any portion of the Escrow Fund (such pro rata share being more
specifically set forth in the Spreadsheet); and (z) as applicable, a
portion of any Working Capital Price Increase as set forth in Section
2.11(f)
(iii) In-the-Money Option Holders. Each holder of an In-the-Money
Option shall be entitled to receive the following: (x) a check or, if
requested, a wire transfer of immediately available funds, representing
the amount of cash equal to the product of (A) the Common Per Share Amount
minus (I) the exercise price (per share of Company Common Stock)
applicable to the In-the-Money Option at issue minus (II) the Common Per
Share Escrow Amount, multiplied by (B) the number of shares of Company
Common
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Stock exercisable under the In-the-Money Option at issue (assuming full
vesting); (y) a pro rata share (among all former holders of Company
Capital Stock, assuming the exercise immediately prior to the Effective
Time of all In-the-Money Options on a fully vested basis, based upon their
relative entitlement to receive Merger Consideration as contemplated by
Sections 2.2(b) and 2.5(b)(i) through (vi) (excepting Section 2.5(b)(iii)
inasmuch as holders of In-the-Money Options will, for this purpose, be
assumed to have exercised such options immediately prior to the Effective
Time)), when released as provided in Section 2.4(b), of any portion of the
Escrow Fund (such pro rata share being more specifically set forth in the
Spreadsheet); and (z) as applicable, a portion of any Working Capital
Price Increase as set forth in Section 2.11(f).
(iv) Series A-1 Preferred Holders. Each holder of Series A-1
Preferred Stock shall be entitled to receive the following: (x) a check
or, if requested, a wire transfer of immediately available funds,
representing the amount of cash equal to the product of (A) the Cash
Percentage of the Series A-1 Per Share Amount, minus the Series A-1 Per
Share Escrow Amount, and (B) the number of shares represented by the
Certificate(s) for Series A-1 Preferred Stock so surrendered; (y) shares
of Valeant Common Stock with an aggregate value (based on the Closing
Value) equal to the Stock Percentage of the Series A-1 Per Share Amount
multiplied by the number of shares represented by the Certificate(s) for
Series A-1 Preferred Stock so surrendered; and (z) a pro rata share (among
all former holders of Company Capital Stock, assuming the exercise
immediately prior to the Effective Time of all In-the-Money Options on a
fully vested basis, based upon their relative entitlement to receive
Merger Consideration as contemplated by Sections 2.2(b) and 2.5(b)(i)
through (vi) (excepting Section 2.5(b)(iii) inasmuch as holders of
In-the-Money Options will, for this purpose, be assumed to have exercised
such options immediately prior to the Effective Time)), when released as
provided in Section 2.4(b), of any portion of the Escrow Fund (such pro
rata share being more specifically set forth in the Spreadsheet).
(v) Series B-1 Preferred Holders. Each holder of Series B-1
Preferred Stock shall be entitled to receive the following: (x) a check
or, if requested, a wire transfer of immediately available funds,
representing the amount of cash equal to the product of (A) the Cash
Percentage of the Series B-1 Per Share Amount, minus the Series B-1 Per
Share Escrow Amount, and (B) the number of shares represented by the
Certificate(s) for Series B-1 Preferred Stock so surrendered; (y) shares
of Valeant Common Stock with an aggregate value (based on the Closing
Value) equal to the Stock Percentage of the Series B-1 Per Share Amount
multiplied by the number of shares represented by the Certificate(s) for
Series B-1 Preferred Stock so surrendered; and (z) a pro rata share (among
all former holders of Company Capital Stock, assuming the exercise
immediately prior to the Effective Time of all In-the-Money Options on a
fully vested basis, based upon their relative entitlement to receive
Merger Consideration as contemplated by Sections 2.2(b) and 2.5(b)(i)
through (vi) (excepting Section 2.5(b)(iii) inasmuch as holders of
In-the-Money Options will, for this purpose, be assumed to have exercised
such options immediately prior to the Effective Time)), when released as
provided in Section 2.4(b), of any portion of the Escrow Fund (such pro
rata share being more specifically set forth in the Spreadsheet).
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(vi) Series C-1 Preferred Holders. Each holder of Series C-1
Preferred Stock shall be entitled to receive the following: (x) a check
or, if requested, a wire transfer of immediately available funds,
representing the amount of cash equal to the product of (A) the Cash
Percentage of the Series C-1 Per Share Amount, minus the Series C-1 Per
Share Escrow Amount, and (B) the number of shares represented by the
Certificate(s) for Series C-1 Preferred Stock so surrendered; (y) shares
of Valeant Common Stock with an aggregate value (based on the Closing
Value) equal to the Stock Percentage of the Series C-1 Per Share Amount
multiplied by the number of shares represented by the Certificate(s) for
Series C-1 Preferred Stock so surrendered; and (z) a pro rata share (among
all former holders of Company Capital Stock, assuming the exercise
immediately prior to the Effective Time of all In-the-Money Options on a
fully vested basis, based upon their relative entitlement to receive
Merger Consideration as contemplated by Sections 2.2(b) and 2.5(b)(i)
through (vi) (excepting Section 2.5(b)(iii) inasmuch as holders of
In-the-Money Options will, for this purpose, be assumed to have exercised
such options immediately prior to the Effective Time)), when released as
provided in Section 2.4(b), of any portion of the Escrow Fund (such pro
rata share being more specifically set forth in the Spreadsheet).
All shares of Valeant Common Stock distributable pursuant to this
Agreement shall be in uncertificated book-entry form unless a physical
certificate is requested in writing.
(c) Limited Right; Dividends after the Effective Time. Each
In-the-Money Option and, until surrendered as contemplated by this Section
2.5, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive the Merger Consideration that the
holder thereof has the right to receive pursuant to the provisions of this
Article 2. Except with respect to amounts that may be released from the
Escrow Fund to Eligible Company Holders, no interest shall be paid or will
accrue on any cash payable to Eligible Company Holders pursuant to the
provisions of this Article 2. In the event that any dividends accrue or
become payable from and after the Effective Time with respect to any
shares of Valeant Common Stock to be issued as part of the Merger
Consideration, then any recipient of such shares as contemplated by this
Article 2 shall be entitled thereto as though such recipient had been the
holder of record of such shares as of the Effective Time. No dividends or
other distributions declared or made with respect to Valeant Common Stock
with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Valeant Common
Stock that such holder has the right to receive in the Merger until such
holder surrenders such Certificate in accordance with this Section 2.5, at
which time such holder shall be entitled, subject to the effect of
applicable escheat or similar laws, to receive all such dividends and
distributions, without interest.
(d) No Further Ownership Rights in Company Capital Stock. The
Merger Consideration shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Capital
Stock theretofore represented by such Certificates, subject, however, to
Acquiror's obligation to pay the Merger Consideration pursuant to the
terms of this Article 2 (and, as applicable with respect to Company Common
Stock, a portion of any Working Capital Price Increase as set forth in
Section
10
2.11 (f)), and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Capital Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article 2, except as otherwise
provided by law.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed (except for interest or other income, which
shall be handled as set forth in Section 2.5(g)) to the Eligible Company
Holders for six (6) months after the Effective Time shall, to the extent
permitted by law, be delivered to Acquiror. Any Eligible Company Holders
who have not theretofore complied with this Article 2 shall thereafter
look only to Acquiror, and only as a general creditor, for payment of
their claim for their portion of the Merger Consideration without interest
(except such interest actually accrued on such delivered amount through
the date delivered to Acquiror). Neither Acquiror nor the Surviving
Corporation shall be liable to any holder or former holder of Company
Capital Stock or In-the-Money Options with respect to any cash amounts or
shares of Valeant Common Stock (or dividends or distributions with respect
thereto), properly delivered to any public official pursuant to any
applicable abandoned property law, escheat law or similar Legal
Requirement.
(f) No Liability. None of the Parties shall be liable to any
Person in respect of any Merger Consideration from the Exchange Fund or
the Escrow Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Acquiror, on a
daily basis; provided, however, that such investments shall be limited to
marketable securities issued or guaranteed by the federal government of
the United States. Any interest and other income resulting from such
investments shall be added to the Escrow Fund (and, thus, the Available
Escrow Amount) upon termination of the Exchange Fund and distributed as a
portion thereof as otherwise provided herein.
(h) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon (i) the delivery of a letter of transmittal, in
form and substance reasonably acceptable to Acquiror, the Surviving
Corporation, and the Exchange Agent, stating such fact, (ii) the making of
an affidavit, in form and substance reasonably acceptable to Acquiror, the
Surviving Corporation, and the Exchange Agent, of such fact by the Person
claiming such Certificate to be lost, stolen or destroyed, (iii) evidence,
in form and substance reasonably acceptable to Acquiror, the Surviving
Corporation, and the Exchange Agent, that such Person is the beneficial
owner of the Certificate claimed to be lost, stolen or destroyed, and,
(iv) if required by the Acquiror or the Surviving Corporation following
the Effective Time, the making of an indemnity by such Person against any
claim, or posting of a customary bond in such reasonable amount as the
Acquiror may require as indemnity against any claim, that may be made
against the Exchange Agent, Acquiror or the Surviving Corporation with
respect to such Certificate, the Exchange Agent shall, pursuant to the
terms and conditions of this Agreement, issue
11
in exchange for such lost, stolen or destroyed Certificate the portion of
the Merger Consideration into which such Certificate has been converted.
(i) Fractional Shares. No certificates or scrip representing
fractional shares of Valeant Common Stock, or book-entry credit of the
same, shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to Valeant Common Stock shall be
payable on or with respect to any fractional share and such fractional
share interests shall not entitle the owner thereof to any rights of a
stockholder of Acquiror. In lieu of any such fractional shares of Valeant
Common Stock, each holder of Company Capital Stock otherwise entitled to a
fraction of a share of Valeant Common Stock will be entitled to receive
from the Exchange Agent a cash payment in an amount equal to the product
of the Closing Value multiplied by such fractional part of a share of
Valeant Common Stock.
2.6 Withholding Rights. Acquiror shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable pursuant to this Agreement to
any Eligible Company Holder such amounts as the Surviving Corporation or
Acquiror is required to deduct and withhold with respect to the making of such
payment under the Code, or any applicable provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving Corporation
or Acquiror, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder in respect of which such deduction
and withholding was made.
2.7 Certain Stock Adjustments. If, after the Agreement Date and on or
prior to the Effective Time, the outstanding shares of Company Capital Stock
shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, or any similar event shall occur, the
distribution of the Merger Consideration shall be adjusted accordingly to
provide to the Eligible Company Holders the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend or similar event.
2.8 Appraisal Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary, shares of Company Capital Stock that are outstanding immediately
prior to the Effective Time and which are held by stockholders who have
exercised and perfected appraisal rights for such shares of Company
Capital Stock in accordance with the DGCL (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
per share amount of the Merger Consideration attributable to such
Dissenting Shares. Such stockholders shall be entitled to receive payment
of the appraised value of such shares of Company Capital Stock held by
them in accordance with the DGCL, unless and until such stockholders fail
to perfect or effectively withdraw or otherwise lose their appraisal
rights under the DGCL. All Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or
lost their right to appraisal of such shares of Company Capital Stock
under the DGCL shall thereupon be deemed to be converted into and to have
become exchangeable for, as of the Effective Time, the right
12
to receive the per share amount of the Merger Consideration attributable
to such Dissenting Shares upon their surrender in the manner provided in
Section 2.5.
(b) The Company or the Surviving Corporation shall give Acquiror
prompt written notice of any demands by dissenting stockholders received
by the Surviving Corporation or the Company, withdrawals of such demands
and any other instruments served on the Company or the Surviving
Corporation and any material correspondence received by the Surviving
Corporation or the Company in connection with such demands, and Acquiror
shall have the right to direct all negotiations and proceedings with
respect to such demands. Neither the Company nor the Surviving Corporation
shall, except with the prior written consent of Acquiror, make any payment
with respect to any demands for appraisal or offer to settle or settle any
such demands.
(c) Notwithstanding any provision of Section 2.4 or Article 9 to
the contrary, in the event that any payment is made to a holder of
Dissenting Shares by the Surviving Corporation or Acquiror in respect of
appraisal rights as contemplated by this Section 2.8(c), then (i) the
portion of the Escrow Fund which would have represented the potential
distribution to such holder shall instead be distributed to Acquiror and
(ii) such holder's former shares of Company Capital Stock shall be removed
from any calculation to determine the pro rata right of such holder to
participate in any distribution of the Escrow Fund.
2.9 Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized (i) to execute and
deliver, in the name and on behalf of the Company or Merger Sub, any deeds,
bills of sale, assignments or assurances and (ii) to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
2.10 Payment of Regiment Debt. Simultaneously with the Closing, Acquiror
shall pay, or cause to be paid, to Regiment an amount equal to the outstanding
Regiment Debt.
2.11 Arrangements Relating to Closing Date Working Capital Calculation.
(a) For the purposes of this Agreement, "Net Working Capital"
means the Company's current assets minus its current liabilities accrued
and actually payable determined in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements.
(b) For purposes of this Agreement, "Closing Date Working Capital
Calculation" shall be the Net Working Capital for the Company as of
immediately prior to the Effective Time, with the following adjustments:
(i) excluding from current liabilities any current portion of
long-term debt; and
13
(ii) excluding from current liabilities any interest payable on
long term debt.
(c) Prior to the Agreement Date, the Company has prepared and
delivered to Acquiror a calculation of September-End Working Capital
Calculation, which is the Net Working Capital for the Company as of the
close of business on September 30, 2004, with the following adjustments:
(i) excluding from current liabilities the current portion of
long-term debt; and
(ii) excluding from current liabilities interest payable on long
term debt; and
(iii) including in current liabilities $4.0 million in respect of
certain milestone payments made in January 2005; and
(iv) deducting from current assets $2.0 million that for purposes
of this calculation is assumed to be excess cash.
The September-End Working Capital Calculation is attached hereto as
Exhibit E.
(d) Within twenty (20) days following the Closing Date, Acquiror
will prepare and deliver to the Working Capital Stockholder Representative
a calculation of Closing Date Working Capital Calculation, which
calculation shall be determined consistent with the definition set forth
in Section 2.11 (b) above (the "Acquiror-Determined Closing Date Working
Capital Calculation"). Acquiror will make the work papers and back-up
materials used in preparing the Acquiror-Determined Closing Date Working
Capital Calculation, as well as the personnel of Acquiror and the
Surviving Corporation with knowledge regarding any underlying matters,
available to the Working Capital Stockholders Representative (and his
advisors) at reasonable times and upon reasonable notice.
(e) If the Working Capital Stockholder Representative shall fail
to deliver to Acquiror a statement describing any objections to the
Acquiror-Determined Closing Date Working Capital Calculation within ten
(10) Business Days after receipt, then such Acquiror-Determined Closing
Date Working Capital Calculation shall be deemed to be the "Stipulated
Closing Date Working Capital Calculation." However, if the Working Capital
Stockholder Representative shall deliver to Acquiror a statement
describing any objections to the Acquiror-Determined Closing Date Working
Capital Calculation within such ten (10) Business Day period, then
Acquiror will exercise commercially reasonable efforts to resolve, in good
faith, any such objections with the Working Capital Stockholders
Representative. If Acquiror and the Working Capital Stockholders
Representative reach a resolution of all such objections, then the
Acquiror-Determined Closing Date Working Capital Calculation as modified
by such resolution shall be deemed to be the "Stipulated Closing Date
Working Capital Calculation." If such a resolution is not reached within
ten (10) Business Days after Acquiror has received a
14
statement describing the Working Capital Stockholder Representative's
objections to the Acquiror-Determined Closing Date Working Capital
Calculation, then any disputes regarding any accounting-related aspects of
the calculation or computation of such Stipulated Closing Date Working
Capital Calculation will be submitted promptly to a mutually acceptable
independent accounting firm for resolution. Acquiror, on the one hand, and
the Working Capital Stockholder Representative, on the other hand, may
provide the accounting firm, within five (5) Business Days of its
selection, with a definitive statement of their position with respect to
each unresolved objection. The accounting firm will be provided with
access to the books and records of Acquiror and the Company germane to the
Acquiror-Determined Closing Date Working Capital Calculation. The
accounting firm will be asked to resolve any objections on an expedited
basis, and shall in any event have no more than twenty (20) Business Days
to carry out a review of the unresolved objections. The accounting firm
will be asked to prepare a written statement of its determination
regarding each unresolved objection, and the Acquiror-Determined Closing
Date Working Capital Calculation as modified by the accounting firm's
determination of the Working Capital Stockholder Representative's
unresolved objections shall be deemed to be the "Stipulated Closing Date
Working Capital Calculation." The determination of the accounting firm
will be conclusive and binding, absent manifest error. If objections are
submitted to the accounting firm for resolution as provided in this
Section 2.11(e) and Acquiror does not prevail, by dollar amount, as to a
majority of the objections asserted, then Acquiror shall pay all of the
fees and expenses of the accounting firm. If Acquiror does prevail, by
dollar amount, as to a majority of the objections asserted, then the fees
and expenses of the accounting firm shall, for purposes of the Stipulated
Closing Date Working Capital Calculation, be treated as a current
liability of the Company accrued and actually payable as of the Closing
Date, and the Stipulated Closing Date Working Capital Calculation shall be
determined accordingly.
(f) In the event that the Stipulated Closing Date Working Capital
Calculation is greater than the September-End Working Capital Calculation,
then an amount equal to such difference (the "Working Capital Price
Increase") shall be immediately distributed by Acquiror among all former
holders of Company Common Stock, assuming for this purpose the exercise
immediately prior to the Effective Time of all In-the-Money Options on a
fully vested basis, based upon their relative entitlement or assumed
entitlement to receive Merger Consideration as contemplated by Sections
2.2(b) and 2.5(b)(i) through (ii), all as more specifically set forth in
the Spreadsheet (with reference to the distribution of a "Working Capital
Price Increase Distribution"). For the avoidance of doubt, the
distribution of the Working Capital Price Increase shall occur so as to
replicate, in terms of the distribution among the former holders of
Company Common Stock (assuming for this purpose the exercise immediately
prior to the Effective Time of all In-the-Money Options on a fully vested
basis), the result that would otherwise have obtained had the Working
Capital Price Increase been a stipulated increase in the Merger
Consideration (without making allowances for the Escrow Fund) prior to the
Effective Time. In the event that the Stipulated Closing Date Working
Capital Calculation is less than the September-End Working Capital
Calculation, then an amount equal to such difference shall be
15
immediately paid out of the Escrow Fund to Acquiror (the "Working Capital
Price Decrease").
2.12 Arrangements Relating to Pre-Closing Inventory Levels.
(a) If Acquiror so elects, Acquiror may undertake, upon notice to
the Company and as of a date which is reasonably expected to be within ten
(10) Business Days prior to the Closing Date, a determination of (i) the
amount of inventory then maintained for the Company's Products by the
Company's three (3) main wholesalers and (ii) historical sales of the
Company's Products for the prior four (4) week period by such wholesalers
to their customers. Following delivery of such notice to the Company,
Acquiror and the Company shall exercise their respective commercially
reasonable efforts to work together, in good faith and as promptly as
possible, to (x) determine the available inventory then maintained by such
wholesalers for the Company's Products (including contacting such
wholesalers for current inventory information as contemplated by Section
6.9) and (y) develop (drawing upon such calculation of available inventory
and the historical sales of the Company's Products for the prior four (4)
week period by such wholesalers to their customers) a mutually agreed-upon
composite figure representing, on a dollar-weighted average basis (based
upon the expected gross margin contribution to the Company from each
Product), the expected duration in the supply (expressed in weeks) of such
Products then maintained by such wholesalers (the "Pre-Closing Wholesaler
Inventory Level"). An example of the derivation of such a composite figure
(including presentation of underlying information) is attached hereto as
Exhibit F (the "Example Inventory Calculation"). Any Pre-Closing
Wholesaler Inventory Level will be determined consistent with the Example
Inventory Calculation.
(b) In the event that the Pre-Closing Wholesaler Inventory Level
is greater than seven (7) weeks, then the Company and Acquiror shall
exercise their respective commercially reasonably efforts to agree, in
good faith and as promptly as possible, upon an amount which represents
the excess gross margin contribution to the Company which has occurred, as
of the date of determining the Pre-Closing Wholesale Inventory Level, as
compared with the situation where the Pre-Closing Wholesale Inventory
Level were exactly seven (7) weeks (such amount being the "Excess
Contribution Price Decrease"), which Excess Contribution Price Decrease
shall then be reflected in, and constitute a reduction to, Net Merger
Consideration.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company disclosure schedules delivered by the
Company to Acquiror simultaneously with the execution of this Agreement, which
disclosure schedules are incorporated herein by reference (the "Company
Disclosure Schedules") (each section thereof qualifying only the representation
and warranty in the correspondingly numbered section of this Agreement to which
it relates, unless the disclosure or exception contains information which, on
its face, is clearly applicable to one or more other sections, in which case
such disclosure or exception shall be deemed to relate to such other sections as
well), the Company hereby
16
represents and warrants to Acquiror, as of the Agreement Date and the Closing
Date, as set forth below in this Article 3:
3.1 Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. The Company is duly authorized to
conduct its business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those jurisdictions
where the failure to be so qualified or licensed or to be in good standing
individually or in the aggregate would not have a Material Adverse Effect.
Section 3.1(a) of the Company Disclosure Schedules sets forth each jurisdiction
in which the Company is qualified or licensed to do business. The Company has
delivered to Acquiror prior to the execution of this Agreement complete and
correct copies of its certificate of incorporation and bylaws, each as amended
to date.
3.2 Subsidiaries. The Company: (a) has no Subsidiaries, (b) does not own,
directly or indirectly, any capital stock or other voting or non-voting equity
interest, partnership interest, membership interest or debt security of or in
any other entity (except investments made by the Company in marketable
securities issued or guaranteed by the United States, commercial paper,
certificates of deposit and tax exempt securities) and (c) is not obligated to
purchase any such capital stock, equity interest, partnership interest,
membership interest or debt security.
3.3 Capital Structure.
(a) As of the date hereof (the "Stock Reference Date") the number
of shares of each class and series of Company Capital Stock listed below
were authorized, issued and outstanding:
Class Total Authorized Total Outstanding
-------------------------- ---------------- -----------------
Common Stock 62,200,000 4,800,033
Series A-1 Preferred Stock 14,000,000 11,000,000
Series A-2 Preferred Stock 2,800,000 0
Series A-3 Preferred Stock 14,000,000 0
Series A-4 Preferred Stock 2,800,000 0
Series B-1 Preferred Stock 3,750,000 3,750,000
Series B-2 Preferred Stock 750,000 0
Series B-3 Preferred Stock 3,750,000 0
Series B-4 Preferred Stock 750,000 0
Series C-1 Preferred Stock 4,000,000 4,000,000
Series C-2 Preferred Stock 800,000 0
Series C-3 Preferred Stock 4,000,000 0
Series C-4 Preferred Stock 800,000 0
As of the Stock Reference Date, no shares of Company Capital Stock were
held by the Company in its treasury.
17
(b) As of the Stock Reference Date, 1,366,994 shares of Company
Common Stock were subject to outstanding Company Stock Options granted to
the Company's employees, consultants and directors. Other than the Company
Stock Options and Preferred Stock, no securities of the Company
convertible into or exchangeable or exercisable for shares of capital
stock or voting securities were outstanding as of the Stock Reference
Date, and no warrants, calls, options or other rights to acquire shares of
capital stock or voting securities were outstanding as of the Stock
Reference Date, and no Person has asserted a claim against the Company or
any of its Affiliates alleging that such Person has any preferential right
to acquire shares of the Company Capital Stock, nor, to the Knowledge of
the Company, are there any facts that are reasonably likely to give rise
to such a claim. The treatment of the Company Stock Options as provided in
Section 2.3 is expressly permitted under, and does not violate, the
Company Stock Plan.
(c) All outstanding shares of Company Capital Stock are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and were not issued, and will not be
issued, in violation of any preemptive or similar rights of any Person,
and were issued, and will be issued, in accordance with the registration
and qualification requirements of the Securities Act and all Legal
Requirements applicable to the offer and sale of such securities or
pursuant to valid exemptions therefrom.
(d) There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Company Capital
Stock.
(e) The Company is not a party to any voting agreement with
respect to the voting of any shares of Company Capital Stock and there are
no outstanding obligations of the Company to register under the Securities
Act any shares of Company Capital Stock or to include in any registration
of Company Capital Stock any shares held by others.
3.4 Authority; No Conflict. The Company has all requisite power and
authority to enter into this Agreement and each agreement or instrument required
hereby to be executed and delivered by it at the Closing, and, subject to
obtaining the Company Stockholder Approval, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated thereby and
hereby. The execution and delivery by the Company of this Agreement and each
agreement or instrument required hereby to be executed and delivered by it at
the Closing, and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Company, subject to obtaining the Company Stockholder Approval. This
Agreement has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by Acquiror and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting the rights of creditors and to general
principles of equity. The execution and delivery of this Agreement by the
Company does not, and the consummation by the Company of the transactions
contemplated by this Agreement and compliance by the Company with the provisions
of this Agreement will not, (a) conflict with, or result in any violation of, or
default (with or without notice or passage of time, or both) under, or give rise
to a right of termination,
18
cancellation or acceleration of any Company obligation or loss of a Company
benefit under (i) the certificate of incorporation or bylaws of the Company,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to the Company or its properties or assets, or (iii)
subject to the governmental filings and other matters referred to in Section
3.5, any Legal Requirement applicable to the Company or its properties or
assets, other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, terminations, cancellations, accelerations or
losses that, individually or in the aggregate, would not (x) have, or be
reasonably likely to have, a Material Adverse Effect or (y) materially impair or
delay, or reasonably be expected to materially impair or delay, the ability of
the Company to perform its obligations under this Agreement, or (b) result in
the creation of any Lien upon any of the properties or assets of the Company,
except for Permitted Encumbrances and Liens that would not, individually or in
the aggregate, have a Material Adverse Effect.
3.5 Consents. Except for obtaining the Company Stockholder Approval and as
expressly set forth in this Section 3.5, no Consent or approval of any third
Person is required in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby. No consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any non-governmental U.S.
or foreign self-regulatory organization, agency, commission or authority or any
arbitral tribunal (each, a "Governmental Entity") or other Legal Requirement is
required by the Company in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except for: (1) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware; (2) the filing of a
pre-merger notification and report form by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR Act");
and (3) such filings, consents, approvals, orders or authorizations the failure
of which to be made or obtained individually or in the aggregate would not have,
or reasonably be expected to have, a Material Adverse Effect.
3.6 Financial Statements; Undisclosed Liabilities; Internal Controls.
(a) True and complete copies of (i) the audited balance sheets of
the Company as of December 31, 2003, and December 31, 2002, and the
related audited statements of operations, stockholders' equity and cash
flows for the years then ended, together with all related notes thereto
(collectively referred to herein as the "Initial Financial Statements");
(ii) the unaudited balance sheet of the Company as of September 30, 2004,
and the related statements of operations, stockholders' equity and cash
flows for the nine (9) months ended September 30, 2004 (collectively
referred to herein as the "September 30th Financial Statements"); and
(iii) the unaudited balance sheet of the Company as of December 31, 2004
(the "Reference Balance Sheet"), and the related statements of operations,
stockholders' equity and cash flows for the twelve (12) months ended
December 31, 2004 (collectively referred to herein as the "Interim
Financial Statements, and, with the Initial Financial Statements and the
September 30th Financial Statements, the "Financial Statements"), are
attached to Section 3.6(a) of the Company Disclosure
19
Schedules. The Financial Statements were prepared in accordance with
accounting principles generally accepted in the United States ("GAAP")
applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by GAAP), are based upon the information
contained in the books and records of the Company and present fairly, in
all material respects, the financial condition and results of operation of
the Company as at the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein; provided,
however, that the September 30th Financial Statements and the Interim
Financial Statements are subject to normal year-end adjustments (which
will not be material individually or in the aggregate) and a lack of
footnotes and other presentation items.
(b) The Company does not have any liabilities or obligations of
any nature, whether absolute, accrued, unmatured, contingent or otherwise,
and whether due or to become due, known or unknown, or any unsatisfied
judgments or any leases of personal or real property or unusual or
extraordinary commitments ("Liabilities") that, in each case, are required
to be reflected on a balance sheet or the related notes in accordance with
GAAP, except (i) the Liabilities recorded on the Reference Balance Sheet,
(ii) the Liabilities referenced in the notes included with the Initial
Financial Statements in respect of December 31, 2003 and the year then
ended, (iii) Liabilities incurred since December 31, 2004 in the Ordinary
Course of Business or that would not, individually or in the aggregate,
have, or reasonably be expected to have, a Material Adverse Effect, (iv)
Liabilities incurred in connection with the negotiation, execution and
delivery of this Agreement and the other documents contemplated by this
Agreement, or (v) Liabilities that would not be required by GAAP to be
disclosed in financial statements or in the notes thereto and that would
not, individually or in the aggregate, have, or reasonably be expected to
have, a Material Adverse Effect.
(c) The Company has established proper and adequate internal
accounting controls which provide reasonable assurance that (i)
transactions are executed with management's authorization; (ii)
transactions are recorded as necessary to permit preparation of the
financial statements of the Company and to maintain accountability for the
Company's assets; (iii) access to the Company's assets is permitted only
in accordance with management's authorization; (iv) the reporting of the
Company's assets is compared with existing assets at regular intervals;
and (v) accounts, notes and other receivables and inventory are recorded
accurately, and proper and adequate procedures are implemented to effect
the collection thereof on a current and timely basis.
(d) As of the Agreement Date, the amount of outstanding principal
and interest and other amounts owed in connection with the Regiment Debt
are as set forth on Section 3.6(d) of the Company Disclosure Schedules.
3.7 Books and Records. The minute books and stock record books of the
Company, all of which have been made available to Acquiror, are complete and
correct in all material respects and have been maintained in accordance with
sound business practices. The minute book of the Company contains accurate
records of all meetings held of, and all corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Board of Directors
of the Company, and no meeting of any such stockholders, Board of Directors, or
committee has
20
been held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Company.
3.8 Absence of Certain Changes or Events. Since December 31, 2004, except
for liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, the Company has conducted its business only in the ordinary
course, and there has not been (1) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock, (2) any split, combination or
reclassification of any of the Company's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of the Company's capital stock, except for
issuances of Company Common Stock upon the exercise of Company Stock Options
outstanding on December 31, 2004, (3) (A) any increase in compensation, bonus or
other benefits to any current or former director, executive officer or employee,
except for normal increases in the Ordinary Course of Business, (B) any increase
in severance or termination pay to any current or former director, executive
officer or employee, or (C) any entry by the Company into, or any amendment of,
any employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director, executive
officer or employee, (4) any change in accounting methods, principles or
practices by the Company affecting its assets, liabilities or business, (5) any
tax election that individually or in the aggregate would have, or reasonably be
expected to have, a Material Adverse Effect or any settlement or compromise of
any material income tax liability, (6) any change in the business, assets,
financial condition or results of operations of the Company or any other event
which in any such case has had, or could reasonably be expected to have, a
Material Adverse Effect, (7) damage, destruction or loss adversely affecting any
material assets of the Company, whether covered by insurance or not, (8) the
entry into any agreement, commitment or transaction by the Company which is
material to the Company, (9) any change in the terms and conditions of the
Company Stock Plan, (10) any cancellation or compromise by the Company of any
material debt or claim, except for adjustments made in the Ordinary Course of
Business which, either individually or in the aggregate, would not have a
Material Adverse Effect, (11) any waiver or release by the Company of any right
of any material value to the Company, (12) any revaluation by the Company of any
asset (including any writing down of the value of inventory), other than in the
Ordinary Course of Business, (13) any transaction that if taken after the date
hereof would constitute a violation of Section 5.1 hereof, or (14) any agreement
or commitment, whether in writing or otherwise, to take any action described in
this Section 3.8.
3.9 Compliance With Applicable Laws; Litigation.
(a) The Company holds all permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental
Entities which are required for the operation of the business of the
Company (collectively, the "Company Permits") as currently conducted. The
Company is in compliance with the terms of the Company Permits and all
applicable Legal Requirements, and all Company Permits are valid and in
full force and effect, except where the failure to be valid and in full
force and effect would not, individually or in the aggregate, have a
Material Adverse Effect.
21
(b) The Company has made available or furnished to Acquiror copies
of (a) all attorney responses to the request of the independent auditors
for the Company with respect to loss contingencies in connection with the
preparation of the Initial Financial Statements, and (b) a written list of
legal, arbitration and regulatory proceedings filed by or against the
Company which are pending (including matters which are on appeal or have
not been fully funded, and administrative matters that may be closed but
with respect to which the applicable statute of limitations has not run)
as of the Agreement Date. There are no actions, suits, investigations,
complaints or proceedings (including any proceedings in arbitration)
pending (including matters which are on appeal or have not been fully
funded, and administrative matters that may be closed but with respect to
which the applicable statute of limitations has not run) or, to the
Knowledge of the Company, threatened against the Company or, with respect
to matters relating to the Company, any of its officers, directors,
employees or agents, at law or in equity, in any court or before any
Governmental Entity, including whistleblower claims. Neither the Company,
its officers or employees, nor, to the Knowledge of the Company and with
respect to matters relating to the Company, its contractors,
subcontractors or agents, have knowingly, with the intent to retaliate,
taken any action harmful to any person, including interference with the
lawful employment or livelihood of any person, for providing to a law
enforcement officer or supervisor any truthful information relating to the
commission or possible commission of any federal offense. There are no
actions, suits, investigations, complaints or proceedings (including any
proceedings in arbitration) pending or, to the Knowledge of the Company,
threatened against the Company or, with respect to matters relating to the
Company, any of its officers, directors or employees, at law or in equity,
in any court or before any Governmental Entity, by persons alleging
violations of federal or state laws respecting employment, including but
not limited to, gender, race, disability, national origin or age
discrimination, violations of the Occupational Safety and Health Act of
1970, as amended, Family and Medical Leave Act of 1993, as amended, terms
and conditions of employment or applicable federal or state Legal
Requirements regarding wages and hours.
3.10 Labor Matters.
(a) The Company is not a party to any collective bargaining
agreement or other labor union contract applicable to Persons employed by
the Company or in its business.
(b) (i) The Company has complied in all material respects with all
applicable Legal Requirements relating to the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of Taxes; (ii) the Company has no
material labor relations problem pending and its labor relations are, to
the Knowledge of the Company, satisfactory; (iii) there are no workers'
compensation claims pending nor, to the Knowledge of the Company,
threatened against the Company, nor, to the Knowledge of the Company, are
there any facts that are reasonably likely to give rise to a material
workers' compensation claim; (iv) no employee of the Company or its
subsidiaries is subject to any secrecy or noncompetition agreement or any
other agreement or restriction of any kind that would impede in any
22
way the ability of such employee to carry out fully all activities of such
employee in furtherance of the Company's business activities; and (v) no
employee, former employee, director or stockholder of the Company has any
claim with respect to the ownership of any Owned Intellectual Property of
the Company.
(c) The employment of each former employee of the Company has been
terminated in accordance with any applicable contractual terms and
applicable Legal Requirements; the Company does not have any material
liability under any contract or applicable Legal Requirement toward any
such terminated employee; and, to the Knowledge of the Company, there are
no facts that are reasonably likely to give rise to any material liability
under any contract or applicable Legal Requirement toward any such
terminated employee.
(d) No labor representatives hold bargaining rights with respect
to any employees of the Company, and there are no current or, to the
Knowledge of the Company, threatened attempts to organize or establish any
trade union or employee association with respect to the Company. The
Company has paid in full to all employees all wages, salaries and
commissions due and payable to such employees and has fully reserved on
the Company's accounts all amounts for wages, salaries and commissions due
but not yet payable to such employees. The Company has paid in full all
social security, social welfare, payroll, national insurance or similar
contributions or Taxes, and other contributions or Taxes due on wages,
salaries, commissions and all other amounts paid to past or present
employees.
3.11 ERISA Matters.
(a) Section 3.11 of the Company Disclosure Schedules lists all
"employee benefit plans" as defined by Section 3(3) of ERISA, all
specified fringe benefit plans as defined in Section 6039D of the Code,
and each other material employee benefit plan, fund, program, contract,
agreement or arrangement (whether qualified or nonqualified, currently
effective or terminated, written or unwritten), in each case, that is
sponsored, maintained or contributed to or required to be contributed to
by the Company or has been maintained or contributed to by the Company, or
with respect to which the Company has or may have any liability which
provides benefits to any current or former director, officer, employee or
service provider, or the dependents of any thereof, of the Company
(collectively the "Benefit Plans").
(b) The Company has made available or delivered to Acquiror true,
accurate and complete copies of (i) the documents comprising each Benefit
Plan (or, with respect to any Benefit Plan which is unwritten, a detailed
written description of eligibility, participation, benefits, funding
arrangements, assets and any other matters which relate to the obligations
of the Company), (ii) any related trust or other funding vehicle, (iii)
any reports or summaries required under ERISA or the Code, (iv) the
Internal Revenue Service ("IRS") determination letter with respect to any
Benefit Plan intended to be qualified under Section 401 of the Code, (v)
all summary plan descriptions and material employee communications, (vi)
the most recent annual report (including any schedules thereto), (vii) the
most recent audited financial statements, and (viii) all material
23
communication with any Governmental entity (including the Department of
Labor ("DOL") or the IRS).
(c) The Company (i) does not participate in, (ii) has never
participated and (iii) has never had a contribution obligation to (A) a
"Multiemployer Plan" as defined in Section 3(37)(A) or Section 4000(a)(3)
of ERISA, (B) any "Multiple Employer Plan" as defined in Sections 4063 or
4064 of ERISA or Section 413 of the Code, or (C) any "Defined Benefit
Plan" within the meaning of Section 3(35) of ERISA, whether or not
terminated.
(d) There are no Benefit Plans with "change in control" or similar
provisions and, except as contemplated by this Agreement, the consummation
of the Merger, this Agreement and the transactions contemplated thereby
and hereby will not result in any payments (whether of separation or
severance pay, unemployment pay or otherwise) (i) becoming due from the
Company to any current or former employee, director or consultant or
result in the vesting, acceleration of payment or increase in the amount
of any benefit payable to or in respect of any such current or former
employee, director or consultant of the Company, (ii) that would
constitute "parachute payments" as defined in Section 280G of the Code or
that would require the payment of an excise tax under Section 4999 of the
Code, or (iii) that would accelerate the time of payment or vesting of, or
increase the amount of any compensation due to, any current or former
employee, excluding Company Stock Options which will all accelerate and
vest in full in connection with consummation of the Merger.
(e) Section 162(m) of the Code does not limit the deduction for
employee remuneration for the Company.
(f) Each Benefit Plan that is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA and each related trust agreement, annuity
contract or other funding instrument is qualified and tax exempt under the
provisions of Sections 401(a) and 501(a) of the Code, and each has been so
determined by the IRS pursuant to a favorable determination letter that
takes into account all changes in the law for which determination letters
are currently being issued which are applicable to such Benefit Plans or
application for such determination has been made and is currently pending.
(g) Any Benefit Plan which is a "group health plan" as defined in
Section 607(1) of ERISA or Section 5000(b)(1) of the Code is not required
to provide benefits to a current or former Employee beyond the end of the
month in which the Employee retires or is otherwise terminated other than
as required by the provisions of Part 6 of Title I, Subtitle B of ERISA
and Sections 4980(B) of the Code or applicable state law.
(h) All required contributions to all Benefit Plans and all
premiums, fees, or other payments required to be made in connection with
any Benefit Plan have either been timely made or are reflected in the
financial statements on an accrual basis.
(i) Each Benefit Plan sponsored by the Company is in material
compliance with its terms and, both as to form and operation, with the
requirements prescribed by
24
any and all laws that are applicable to such Benefit Plan, including ERISA
and the Code. No Benefit Plan is currently under audit by the IRS or the
DOL.
(j) Other than routine claims for benefits, there are no actions,
suits, claims or investigations pending, or to the Company's or any ERISA
affiliate's knowledge, threatened against or with respect to any of the
Benefit Plans or their assets.
(k) No Benefit Plan is a self-insured "multiple employer welfare
arrangements" as such term is defined in Section 3(40) of ERISA.
(l) No Benefit Plan has participated in, engaged in or been a party
to any prohibited transaction (pursuant to Section 4975 of the Code or
Section 406 of ERISA and which is not exempt under Section 4975 of the
Code or Section 408 of ERISA) and the Company has not had asserted against
it any claim for any excise tax or penalty imposed under ERISA or the Code
with respect to any Benefit Plan, nor is there any basis for any such
claim. No officer, director or employee of the Company has committed a
material breach of any responsibilities or obligations imposed upon
fiduciaries by Title I of ERISA with respect to any Benefit Plan.
3.12 Taxes. The Company has timely filed all Tax returns and reports
required to be filed by it and all such returns and reports are complete and
correct in all material respects, or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file, to be complete or correct or to have
extensions granted that remain in effect individually or in the aggregate would
not have a Material Adverse Effect. The Company has paid all Taxes shown as due
on returns that have been filed, and the Financial Statements and Interim
Financial Statements reflect an adequate reserve for all Taxes payable by the
Company for all taxable periods and portions thereof accrued through the date of
such financial statements.
(a) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company that are not adequately reserved for.
(b) No claim has ever been made or is expected to be made by any
Governmental Entity in a jurisdiction where the Company does not file Tax
returns that it is or may be subject to taxation by that jurisdiction.
(c) Section 3.12 of the Company Disclosure Schedules contains a
complete and accurate list of all Tax returns of the Company that have
been audited or are currently under audit and accurately describes any
deficiencies or other amounts that were paid or are currently being
contested. To the Knowledge of the Company, no undisclosed deficiencies
are expected to be asserted with respect to any such audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled or are being contested in good faith by appropriate
proceedings as described in Section 3.12 of the Company Disclosure
Schedules. The Company has delivered, or made available to Acquiror,
copies of any examination reports, statements or deficiencies or similar
items with respect to such audits. The Company has no Knowledge that any
Governmental Entity is likely to assess any additional taxes for any
period for which Tax returns have
25
been filed. There is no dispute or claim concerning any taxes of the
Company either (i) claimed or raised by any Governmental Entity in writing
or (ii) as to which the Company has Knowledge. Section 3.12 of the Company
Disclosure Schedules contains a list of all Tax returns for which the
applicable statute of limitations has not run. The Company has not given
or been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for which
the Company may be liable.
(d) All Taxes that the Company is or was required by applicable
Legal Requirements to withhold, deduct or collect have been duly withheld,
deducted and collected and, to the extent required, have been paid to the
proper Governmental Entity or other Person.
(e) There is no tax sharing agreement, tax allocation agreement, tax
indemnity obligation or similar written or unwritten agreement,
arrangement, understanding or practice with respect to Taxes (including
any advance pricing agreement, closing agreement or other agreement
relating to Taxes) that will require any payment by the Company.
(f) The Company (A) has not been a member of an affiliated group
within the meaning of the Code Section 1504(a) (or any similar group
defined under a similar provision of state, local or foreign law) and (B)
has no liability for Taxes of any Person (other than the Company) under
Treas. Reg. Sect. 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor by contract or otherwise.
(g) The Company has disclosed on its federal income Tax returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662.
(h) The Company has not participated in or been a party to any
"listed transactions" as determined under the Code and all regulations and
interpretations issued thereunder.
3.13 Environmental Matters.
(a) The Company (i) is in compliance in all material respects with
all applicable Environmental Laws; (ii) holds all material Environmental
Permits necessary to conduct the Company's business; (iii) is in
compliance in all material respects with its Environmental Permits; and
(iv) has filed all material reports and notifications required to be filed
under and pursuant to all applicable Environmental Laws. The Company has
not received any notice of any violation of or delinquency with respect to
any applicable Environmental Laws.
(b) The Company has not released, generated, treated, contained,
handled, used, processed, buried or stored, and, to the Knowledge of the
Company, no other Person has released, generated, treated, contained,
handled, used, processed, buried or stored Hazardous Materials in
violation of any applicable Environmental Law on any real
26
property currently or formerly owned or leased by the Company during its
ownership or occupancy of such property. To the Knowledge of the Company,
no aboveground or underground storage tanks are located on, under or about
any real property owned or leased, or previously owned or leased, by the
Company.
(c) There are no Environmental Claims pending or, to the Knowledge
of the Company, threatened against the Company and the Company has not
received any written notice alleging in any manner that it is, or would
reasonably be expected to be, responsible for any Environmental Claim. The
Company has not entered into any environmental indemnity or environmental
shared liability agreement with respect to another Person's actions or
inactions, and, to the Company's Knowledge, there has occurred no event
that may result in the Company being liable under any Environmental Law
for the actions or inactions of another Person.
(d) The Company has disclosed and delivered or made available to
Acquiror all environmental reports and investigations that the Company has
obtained or ordered with respect to the Company's business activities and
the real property owned or leased by the Company; provided, however, the
Company has not and does not make any warranties regarding (i) the truth
or accuracy of any such environmental report or investigation; or (ii) the
qualifications or expertise of the respective parties conducting such
environmental reports and investigations.
3.14 Takeover Statutes. The Board of Directors of the Company has taken
all action necessary to ensure that any restrictions on business combinations
contained in the DGCL will not apply to the Merger. No "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation or any anti-takeover provision in the Company's certificate of
incorporation or bylaws is, or at the Effective Time will be, applicable to the
Company, the shares of Company Capital Stock, the Merger or the other
transactions contemplated by this Agreement.
3.15 Broker, Finders' or Advisors' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of the Company, or which was previously retained by or
authorized to act on behalf of the Company, who is or might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.
3.16 Intellectual Property.
(a) Section 3.16(a) of the Company Disclosure Schedules sets forth a
true and complete list of all of the following (in each case if included
in Owned Intellectual Property):
(i) Patents and patent applications issued to the Company,
including: (A) issued Patents and for each, its number, issue date, title,
priority information and current legal status, for each jurisdiction in
which such Patent has been issued; (B) Patent applications (including
provisional applications, divisional applications, continuation
applications, continuation-in-part applications, re-examination
applications and reissue
27
applications) and for each, the application number, date of filing, title,
priority information and current legal status for each jurisdiction in
which such Patent application is pending; (C) a summary description of all
Patents and Patent applications (including provisional patent
applications) that the Company has abandoned; and (D) a summary
description of all issued Patents and Patent applications (including
provisional patent applications) that have been rejected by the patenting
authority in any jurisdiction;
(ii) trademarks, trade names, brand names and service marks
registered by the Company (each a "Registered Proprietary Name"), the
registration number thereof, and, if applicable, the class of goods or the
description of goods or services covered thereby, the jurisdictions in
which such Registered Proprietary Name is registered, the current legal
status and the expiration date for each jurisdiction in which such
Registered Proprietary Name has been registered;
(iii) trademarks, trade names, brand names and service marks used by
the Company but not registered (each an "Unregistered Proprietary Name"),
the application serial number thereof (if any), the date of filing, the
jurisdictions in which such application was filed and, if applicable, the
class of goods or the description of goods or services sought to be
covered thereby;
(iv) copyright registrations, the number, date of registration
thereof for each jurisdiction in which such copyright has been registered
and the current legal status of the registration;
(v) applications for registration of copyrights and the date and
jurisdictions in which such application was filed; and
(vi) domain names and applications for registration of domain names,
and the current legal status of the registration.
(b) Section 3.16(b) of the Company Disclosure Schedules lists each
License for Licensed Intellectual Property and, to the extent set forth in
such Licenses, the U.S. and foreign patents and patent applications and
their respective patent numbers, issue dates and titles relating to such
Licensed Intellectual Property.
(c) (i) The development, manufacture, marketing, use, sale,
distribution, import, export or other commercial exploitation of any of
the Products by the Company, in each case in connection with the operation
of the business of the Company as currently conducted, does not infringe
upon, misappropriate, violate, dilute (with respect to any trademarks,
trade names, brand names and service marks) or otherwise constitute the
unauthorized use of, the Intellectual Property rights of any third party;
(ii) no claim is pending or, to the Knowledge of the Company, threatened
against the Company alleging any of the foregoing; and (iii) to the
Knowledge of the Company, no right, license, lease, consent or other
agreement is required with respect to any Intellectual Property for the
conduct of the business of the Company. None of the Patents listed in
Section 3.16(a) of the Company Disclosure Schedules is involved in any
interference, reexamination, conflict or (to the Company's Knowledge)
opposition proceeding, and to the Knowledge
28
of the Company there has been no threat or other indication that any such
proceeding will hereafter be commenced. None of the Registered Proprietary
Names, Unregistered Proprietary Names or registrations or applications to
use or register such Registered Proprietary Names or Unregistered
Proprietary Names listed in Section 3.16(a) of the Company Disclosure
Schedules is involved in any cancellation, nullification, interference,
conflict, concurrent use or (to the Company's Knowledge) opposition
proceeding, and to the Knowledge of the Company, there has been no threat
or other indication that any such proceeding will hereafter be commenced.
(d) The Company is the sole owner of the entire right, title and
interest in and to each item of the Owned Intellectual Property, free and
clear of any Liens. The Company is entitled to use the Owned Intellectual
Property and Licensed Intellectual Property in the Ordinary Course of
Business.
(e) The Owned Intellectual Property and Licensed Intellectual
Property include all of the Intellectual Property used in the conduct of
the business of the Company as currently conducted. The Patents (excluding
patent applications) included in the Owned Intellectual Property and, to
the Knowledge of the Company, the Licensed Intellectual Property are in
good standing, all without challenge (to the Knowledge of the Company) of
any kind, and are valid and enforceable, and have not been adjudged
invalid or unenforceable in whole or part.
(f) No legal proceedings are pending, or to the Knowledge of the
Company are overtly threatened, against the Company (i) based upon,
challenging or seeking to deny or restrict the use of any of the Owned
Intellectual Property or Licensed Intellectual Property, (ii) alleging
that any services provided by, processes used by, or products manufactured
or sold or to be manufactured or sold by the Company infringe or
misappropriate any Intellectual Property right of any third party, or
(iii) alleging that the Licenses conflict with the terms of any third
party license or other agreement.
(g) Maintenance fee(s), annuity fee(s) or renewal fee payment(s) for
each jurisdiction in which each Patent, Patent application, trademark,
trademark application, trade name, trade name registration, brand name,
brand name registration, service xxxx, service xxxx registration,
copyright, copyright application, domain name or domain name application
included within the Owned Intellectual Property has issued or is pending
have been timely paid.
(h) To the Knowledge of the Company, no third party is engaging in
any activity that infringes or misappropriates the Owned Intellectual
Property or Licensed Intellectual Property. The Company is not a party to
any agreement granting rights by the Company to any third party with
respect to the Owned Intellectual Property or Licensed Intellectual
Property.
(i) The Company has delivered or made available to Acquiror true and
complete copies of the issued Patents and all applications therefor and
all applications and registrations for Proprietary Names, copyrights and
domain names listed or described in Section 3.16(a) of the Company
Disclosure Schedules.
29
(j) To the Knowledge of the Company, all software used in the
business of the Company is free of all viruses, worms and Trojan horses,
and does not contain any bugs, errors, or problems that materially disrupt
its operation or have a material adverse impact on the operation of other
software programs or operating systems as used in the Company's business.
(k) The Company has a license to use all software development tools,
library functions, compilers and other third-party software that are used
in the business of the Company or that are required to operate or modify
the Company's software as used in the Company's business.
(l) The Company has used commercially reasonable efforts to maintain
its trade secrets in confidence, including entering into licenses and
contracts that generally require licensees, contractors and other third
persons with access to such trade secrets to keep such trade secrets
confidential.
(m) To the Knowledge of the Company, (i) there has been no
misappropriation of any trade secrets or other confidential information of
the Company by any Person, (ii) no employee, independent contractor or
agent of the Company has misappropriated any trade secrets of any other
Person, in the course of such performance as an employee, independent
contractor or agent, and (iii) no employee, independent contractor or
agent of the Company is in default or breach of any term of any employment
agreement, nondisclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the protection,
ownership, development, use or transfer of Owned Intellectual Property or
Licensed Intellectual Property.
(n) The Company has secured valid written assignments from all
current and former consultants and employees who contributed to the
creation or development of Owned Intellectual Property of such Person's
ownership interest therein. To the Knowledge of the Company, none of the
employees or consultants of the Company is in violation thereof. All
employees of, consultants to or vendors of the Company with access to
confidential information of the Company are parties to written agreements
under which each such employee, consultant or vendor is obligated to
maintain the confidentiality of confidential information of the Company.
To the Knowledge of the Company, none of the employees, consultants or
vendors of the Company or any of its subsidiaries is in violation of such
agreements.
(o) The execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, will not result
in or give rise to any right of termination or other right to impair or
limit, or otherwise result in a breach of, any of the Company's rights to
own or retain a license to any of the Owned Intellectual Property or
Licensed Intellectual Property.
3.17 Major Suppliers.
(a) Section 3.17(a) of the Company Disclosure Schedules lists each
of the Company's vendors or suppliers with whom the Company has expended
an aggregate
30
amount for purchases during the twelve (12) month period ended December
31, 2004 in excess of five percent (5%) of the Company's gross revenue for
such period (each, a "Major Supplier"), and sets forth the dollar amount
of Company expenditures with each Major Supplier during such period. The
Company has furnished Acquiror with complete and accurate copies of all
current written agreements or written summaries of unwritten agreements
with such Major Suppliers. The Company is not engaged in a material
dispute with any Major Supplier. There has been no material change in the
business relationship of the Company and any Major Supplier since January
1, 2004. No Major Supplier has indicated to the Company in writing or
otherwise any demand for a material modification or change in its business
relationship with the Company.
(b) Since January 1, 2004: (i) no supplier of the Company has
canceled or otherwise terminated its relationship with the Company, except
for such cancellations and terminations that, individually or in the
aggregate, have not had, or are not reasonably expected to have, a
Material Adverse Effect; (ii) no supplier of the Company has provided
written notice to the Company of its intent either to terminate or
materially reduce its relationship with the Company or to cancel any
Material Contract with the Company, except for such terminations and
cancellations that would not, individually or in the aggregate, have, or
be reasonably likely to have, a Material Adverse Effect; (iii) to the
Knowledge of the Company, none of the suppliers of the Company is unable
to continue to supply the products or services supplied to the Company by
such supplier, except for such inabilities that, individually or in the
aggregate, have not had, or are not reasonably likely to have, a Material
Adverse Effect; and (iv) the Company has no direct or indirect ownership
interest in any supplier of the Company.
(c) To the Knowledge of the Company, there are no facts or
circumstances that have caused a material adverse effect, or are
reasonably likely to cause a material adverse effect, on the continued
supply (either for clinical purposes or in bulk) of the active ingredients
of any compound, product candidate or product of the Company currently
used.
3.18 Regulatory Compliance. To the extent applicable to the Company:
(a) All products currently being manufactured, distributed or
developed by the Company, or by any other person (a "Collaborative
Partner") pursuant to a collaboration arrangement (other than an
arrangement that is solely a license to market, distribute or sell
products in a specified territory) with the Company (a "Collaboration"),
that are subject to the jurisdiction of the United States Food and Drug
Administration (the "FDA") are, or in the case of such manufacture,
distribution or development by a Collaborative Partner pursuant to a
Collaboration, to the Knowledge of the Company are, being developed,
labeled, stored, tested and distributed in compliance with all applicable
requirements under the Federal Food Drug and Cosmetic Act 21 U.S.C.
Sections 301 et. seq. ("FDCA"), its implementing regulations, and all
applicable similar Legal Requirements of any Governmental Entity,
including those relating to investigational use, premarket clearance and
applications or abbreviated applications to market a new product, except
for noncompliance which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
31
(b) All preclinical trials and clinical trials conducted by or on
behalf of the Company have been, and are being, conducted in compliance
with the applicable requirements of Good Laboratory Practice and Good
Clinical Practice requirements contained in 21 C.F.R. Part 58 and Part 312
and all applicable requirements relating to protection of human subjects
contained in 21 C.F.R. Parts 50, 54, and 56, except for noncompliance
which, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
(c) To the Knowledge of the Company, (i) all manufacturing
operations conducted for the benefit of the Company have been and are
being conducted in material compliance with the FDA's current Good
Manufacturing Practice regulations for drug products, including 21 C.F.R.
Parts 210 and 211, except for noncompliance which, individually or in the
aggregate, would not have, or be reasonably likely to have, a Material
Adverse Effect; and (ii) the Company is in compliance with all
registration and listing requirements set forth in 21 U.S.C. Section 360
and 21 C.F.R. Part 207, except for noncompliance which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(d) Since the date of acquisition of any such product (or rights
thereto) by the Company, none of the Company's products, and no products
of a Collaboration, have been recalled, suspended or discontinued as a
result of any action by the FDA or any other foreign Governmental Entity,
by the Company, a Collaborative Partner, or by any licensee, distributor
or marketer of any such products, in the United States or, to the
Knowledge of the Company, outside of the United States.
(e) The Company and, to the Knowledge of the Company, its
Collaborative Partners, have not received any notice that the FDA or any
other Governmental Entity has commenced, or threatened to initiate, any
action to withdraw approval or request the recall of any of the Company's
products or the products of a Collaboration, or commenced, or threatened
to initiate, any action to enjoin or place restrictions on the production
of any of the Company's products or the products of a Collaboration.
(f) To the Knowledge of the Company, there are no facts,
circumstances or conditions that would be sufficient to presently, or
solely with the passage of time in the Ordinary Course of Business,
provide a reasonable basis for a recall, suspension or discontinuance of
any of its products or the products of a Collaboration.
(g) As to the products of the Company, and the products of a
Collaboration, for which a new drug application, investigational new drug
application or similar state or foreign regulatory application has been
approved, the Company, and to the Knowledge of the Company, its
Collaborative Partners, are in compliance with 21 U.S.C. Sections 355 or
21 C.F.R. Parts 312 or 314, respectively, and all terms and conditions of
such licenses or applications, except for any such failure or failures to
be in compliance which individually or in the aggregate has not had and
would not reasonably be expected to have a Material Adverse Effect. As to
each such drug, the Company and, to the Knowledge of the Company, any
relevant Collaborative Partner, and the officers, employees or agents of
the Company and any relevant Collaborative Partner, have
32
included in the application for such drug, where required, the
certification described in 21 U.S.C. Section 335a(k)(l) and each such
certification was true, complete and correct in all material respects when
made.
(h) The Company and, to the Knowledge of the Company, its
Collaborative Partners have not committed any act, made any statement or
failed to make any statement that would reasonably be expected to provide
a basis for the FDA to invoke its policy with respect to "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities" set forth
in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto.
Additionally, none of Company or, to the Knowledge of the Company, its
Collaborative Partners or any officers, key employees or agents of the
Company or its Collaborative Partners, have been convicted of any crime or
engaged in any conduct that has resulted, or would reasonably be expected
to result, in debarment under 21 U.S.C. Section 335a or any similar state
law or regulation under 42 U.S.C. Section 1320a-7.
3.19 Products.
(a) Set forth in Section 3.19 of the Company Disclosure Schedules is
a complete and accurate list of all of the Company's compounds, product
candidates, and products (collectively, the "Products") noting, where
applicable, those Products where FDA approval has been applied for and/or
received, and listing the approval obtained and application made. For
those Products listed in Section 3.19 to the Company Disclosure Schedules
for which an NDA or an sNDA has been filed with the FDA, the Company owns
the NDA or the sNDA, as the case may be, and no other party has any rights
thereto. For those Products listed in Section 3.19 to the Company
Disclosure Schedules as receiving FDA approval, such approval is in good
standing, has not been revoked, rescinded, amended or modified, and to the
Company's Knowledge, no event has occurred or notification been received
by the Company from the FDA, a notified body or any other party that would
materially adversely affect or otherwise jeopardize the FDA approval
status of such Products. To the Knowledge of the Company, no applications
made or other materials submitted by the Company to the FDA or a notified
body contained an untrue statement of material fact when submitted, or
omitted to state a material fact within the Company's Knowledge when
submitted which was required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
(b) The Product registration files of the Company have been
maintained in accordance with reasonable industry standards. The Company
has in its possession or control, or has access to, copies of all the
material documentation filed in connection with filings made by the
Company for regulatory approval or registration of the Products of the
Company, including the complete regulatory chronology for each NDA or sNDA
for each Product for which an NDA or sNDA has been filed.
(c) The Company has not received any Paragraph IV Notification under
U.S.C. 355(j)(2)(B) relative to any patents listed in any NDA held by the
Company. In addition, the Company has not received any notice regarding,
and otherwise has no
33
Knowledge of, any plans by any third party to file an ANDA relative to an
NDA held by the Company.
(d) All material documents in the possession of the Company with
respect to pre-clinical and clinical data relating to the compound
referred to as retigabine have been furnished or made available to
Acquiror.
3.20 Inventory.
(a) The Product inventory reflected in the Reference Balance Sheet
(the "Product Inventory") consists of Products of a quality and quantity
usable and salable in the Ordinary Course of Business. Each item of
Product Inventory has, as of the Agreement Date, at least 18 months
remaining until its expiry date. All other inventory reflected in the
Reference Balance Sheet, including active pharmaceutical ingredient
inventory, other Product components, packaging materials, labels, and
other non-Product inventory items, have, as of the Agreement Date, a
remaining shelf life of at least four (4) years.
(b) Since September 30, 2004, the Company has not (i) materially
altered its distribution practices or terms with respect to the Products,
or (ii) caused or effected a material increase in the inventory level of
the Products in the wholesale channel.
(c) The Company's three (3) main wholesalers have provided to the
Company information which, to the Knowledge of the Company, reflects the
inventory level of the Products maintained by such wholesalers as of
December 31, 2004, and the Company has delivered or made available to
Acquiror copies of such information.
3.21 Material Contracts. Section 3.21 of the Company Disclosure Schedules
contains a true and complete list of the Material Contracts of the Company. The
Company has delivered to or made available to Acquiror true and complete copies
of all of the Material Contracts and any other contracts or agreements
identified in any section of the Company Disclosure Schedules. All Material
Contracts to which the Company is a party are, as to the Company (and, as to the
other parties thereto, to the Knowledge of the Company), valid and binding
agreements in full force and effect. The Company is not in material breach or
default, and no event has occurred that with notice or lapse of time would
constitute a material breach or default by the Company permitting termination,
modification, or acceleration, under any Material Contract. To the Knowledge of
the Company, no other party to any Material Contract is in material breach or
default under, or has repudiated any material provision of, any Material
Contract.
3.22 Certain Business Practices. Within the past three (3) years, neither
the Company nor, to the Company's Knowledge, any director, officer, agent or
employee of the Company has used any Company funds for (i) unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, (ii) unlawful payments to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns,
or for making any payments which violate any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) any other unlawful payment.
34
3.23 Voting Requirements. The only votes of the Company Stockholders
necessary to approve this Agreement, the Merger and the other transactions
contemplated by this Agreement are represented by the Company Stockholder
Approval.
3.24 Board Recommendation. The Board of Directors of the Company has (i)
approved of the transactions contemplated by this Agreement; and (ii)
recommended that the stockholders of the Company vote in favor of the approval
of this Agreement and the Merger.
3.25 Property. The Company does not own any real property. The real
property covered by the lease (the "Lease") described in Section 3.25 of the
Company Disclosure Schedules constitutes all of the real property rented or
occupied by the Company. The Lease is in full force and effect, and the Company
holds a valid and existing leasehold interest under the Lease. The Company has
delivered to Acquiror a complete and accurate copy of the Lease, and the Lease
has not been modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered to Acquiror. The Company is
not in material default under the Lease, and, to the Knowledge of the Company,
no circumstances exist which, if unremedied, would result in such material
default under the Lease; nor, to the Knowledge of the Company, is any other
party to the Lease in material default under the Lease.
3.26 Vehicles and Equipment. All vehicles and items of equipment owned or
utilized by the Company are (i) mechanically sound and in a condition to perform
in the manner needed for the operation of the Company, ordinary wear and tear
excepted, (ii) in good cosmetic condition, ordinary wear and tear excepted, and
(iii) in compliance in all material respects with all applicable Legal
Requirements, including those related to safety.
3.27 Insurance. Section 3.27 to the Company Disclosure Schedules lists
each insurance policy maintained by the Company, with respect to the Company's
properties, assets and operations and sets forth the date of expiration of each
such insurance policy. To the Knowledge of the Company, each such insurance
policy: (a) is in full force and effect; (b) is sufficient for compliance, in
all material respects, with all requirements of applicable law and of any
contract or agreement to which the Company is subject; and (c) is issued by an
insurer that is financially sound and reputable. The Company is not in default
with respect to its obligations under any of such insurance policies. Section
3.27 of the Company Disclosure Schedules lists the Company's obligations to
third parties with regard to the maintenance of insurance policies. The Company
is in compliance with all such obligations.
3.28 Loans to Insiders. The Company has not, since January 1, 2004,
extended or maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) of the Company.
3.29 Affiliate Transactions. Other than pursuant to this Agreement, no
officer, director, employee or affiliate of the Company or, to the Knowledge of
the Company, any member of the immediate family of any such officer, director or
employee, or any entity in which any of such Persons owns any beneficial
interest (other than any corporation whose stock is listed on a national
securities exchange or is traded in the over-the-counter market and less than
one percent of the stock of which is beneficially owned by any of such Persons)
35
(collectively "Insiders"), has any agreement with the Company (other than
employment or service-related compensation arrangements) or any interest in any
property, real, personal or mixed, tangible, or intangible, used in or
pertaining to the Company's business activities (other than ownership of Company
Capital Stock). To the Knowledge of the Company and except with respect to any
directors of the Company, none of the Insiders has any direct interest in any
competitor, supplier or customer of the Company or in any Person from whom or to
whom the Company leases or licenses any property, or in any other Person with
whom the Company transacts business of any nature (other than any corporation
whose stock is listed on a national securities exchange or is traded in the
over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such Persons). For purposes of this Section 3.29,
the members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law, and brothers- and sisters-in-law of such officer,
director or employee.
3.30 Assets; Absence of Encumbrances. The Company owns, leases or has the
legal right to use all of the equipment, machinery and other tangible assets
used by the Company in the conduct of the business of the Company or otherwise
owned or leased by the Company. The Company owns good and marketable title to
each of the tangible properties and tangible assets reflected on the Reference
Balance Sheet or acquired since the date thereof, free and clear of all
Encumbrances, except for (i) liens for current taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with applicable GAAP; (ii)
liens incurred in connection with workers' compensation, unemployment insurance
and other types of social security; (iii) liens in favor of customs authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods to the extent accrued on the relevant Reference
Balance Sheet; (the Encumbrances set forth in (i)-(iii), collectively,
"Permitted Encumbrances"); and (iv) assets disposed of since the date of the
Reference Balance Sheet in the Ordinary Course of Business.
3.31 Merger Consideration Spreadsheet. The information set forth in the
Spreadsheet contemplated by Section 5.5 to be delivered by the Company shall be
true, complete and correct in all respects and Acquiror, the Exchange Agent and
the Escrow Agent shall be entitled to rely on the information contained in the
Spreadsheet for all purposes contemplated by this Agreement, the Escrow
Agreement and the Registration Rights Agreement.
3.32 Disclosure. The representations and warranties of the Company
contained in this Article 3, together with the Company Disclosure Schedules,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND MERGER SUB
Except as set forth in the Acquiror disclosure schedules delivered by the
Acquiror to the Company simultaneously with the execution of this Agreement,
which disclosure schedules are incorporated herein by reference (the "Acquiror
Disclosure Schedules") (each section thereof
36
qualifying only the representation and warranty in the correspondingly numbered
section of this Agreement to which it relates, unless the disclosure or
exception contains information which, on its face, is clearly applicable to one
or more sections, in which case such disclosure or exception shall be deemed to
relate to such other sections as well), Acquiror and Merger Sub each hereby
represents and warrants to the Company, which representations and warranties are
true, correct and complete as of the Agreement Date and the Closing Date, that:
4.1 No Prior Activities of Merger Sub. Merger Sub has not conducted any
business prior to the date hereof and has no, and prior to the Effective Time
will have no, assets, liabilities or obligations of any nature other than those
incident to its formation and required pursuant to this Agreement and the Merger
and the other transactions contemplated by this Agreement.
4.2 Organization, Standing and Corporate Power. Each of Acquiror and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may be, and authority to carry
on its business as now being conducted.
4.3 Authority; No Conflict. Each of Acquiror and Merger Sub has all
requisite corporate power and authority to enter into this Agreement and, as
applicable, the Registration Rights Agreement, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and, as applicable, the Registration Rights Agreement, by Acquiror and
Merger Sub and the consummation by Acquiror and Merger Sub of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Acquiror and Merger Sub. This Agreement and, as
applicable, the Registration Rights Agreement, have been duly executed and
delivered by Acquiror and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitute legal, valid and binding
obligations of Acquiror and, as applicable, Merger Sub, enforceable against
Acquiror and, as applicable, Merger Sub in accordance with their terms subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting the rights of
creditors and general principles of equity. The execution and delivery of this
Agreement and the Registration Rights Agreement does not, and the consummation
of the transactions contemplated hereby and thereby and compliance with the
provisions of this Agreement and the Registration Rights Agreement 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 or loss of a benefit under, (i)
the certificate of incorporation or bylaws of Acquiror or the certificate of
incorporation or bylaws of Merger Sub, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Acquiror
or Merger Sub or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any Legal Requirement applicable to Acquiror or Merger Sub or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not reasonably be expected to materially impair or
delay the ability of Acquiror or Merger Sub to perform their obligations under
this Agreement.
37
4.4 Consents. Except as set forth on Section 4.4 of the Acquiror
Disclosure Schedules, no consent, approval, order or authorization of, action
by, or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by Acquiror or Merger Sub in connection with the
execution and delivery of this Agreement or the Registration Rights Agreement by
Acquiror or Merger Sub, as applicable, or the consummation by Acquiror or Merger
Sub of the transactions contemplated hereby or thereby, except: (1) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware; (2) the filing of a pre-merger notification and report form by
Acquiror under the HSR Act; and (3) such consents, approvals, orders or
authorizations the failure of which to be made or obtained individually or in
the aggregate would not reasonably be expected to materially impair or delay the
ability of Acquiror or Merger Sub to perform their respective obligations under
this Agreement and the Registration Rights Agreement.
4.5 Brokers. Except for Bear Xxxxxxx & Co. Inc., no broker, investment
banker, financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror or Merger Sub.
4.6 Financial Capability. Acquiror and Merger Sub have, and at the
Effective Time will have, the funds necessary to finance the transactions
contemplated hereby and pay related fees and expenses.
4.7 Authorization of Shares. All shares of Valeant Common Stock to be
issued in connection with the Merger, when issued pursuant to and in accordance
with this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and not subject to any preemptive rights.
4.8 SEC Filings; Financial Statements.
(a) Acquiror has timely filed all registration statements,
prospectuses, forms, reports, definitive proxy statements, schedules and
documents required to be filed by it under the Securities Act or the
Exchange Act, as the case may be, since January 1, 2003 (collectively, the
"Acquiror SEC Filings"). Each Acquiror SEC Filing, (i) as of its date,
complied in all material respects with the requirements of the Securities
Act or Exchange Act, as the case may be, and (ii) did not, at the time it
was filed, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the consolidated financial statements (including in each
case, any notes thereto) contained in any Acquiror SEC Filings was
prepared in accordance with GAAP applied (except as may be indicated in
the notes thereto and, in the case of unaudited quarterly financial
statements, as permitted by Form 10-Q under the Exchange Act) on a
consistent basis throughout the periods indicated, and each presented
fairly the consolidated financial position, results of operations and cash
flows of Acquiror as of the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which did not
38
and would not, individually or in the aggregate, reasonably be expected to
have a material and adverse effect to the business, condition (financial
or other), results of operations, performance or properties of the
Acquiror, taken as a whole).
4.9 Absence of Certain Changes or Events. Except as disclosed in Acquiror
SEC Filings filed with the SEC prior to the Agreement Date, since October 1,
2004, Acquiror has conducted its business only in the ordinary course and there
has not been: (i) any change in or effect on the assets, liabilities, financial
condition, operating results or business of Acquiror, except changes or effects
which (x) have not been, in the aggregate, materially adverse, (y) relate, in
general, to the economy or securities markets of the United States or any other
region or (z) relate to the industry in which Acquiror operates generally; (ii)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Acquiror's capital
stock; (iii) any split, combination or reclassification of any of Acquiror's
capital stock or any issuance (or the authorization of any issuance) of any
other securities in respect of, in lieu of or in substitution for shares of
Acquiror's capital stock; (iv) any damage, destruction or loss, whether or not
covered by insurance, which would have a material adverse effect on the assets,
liabilities, financial condition, operating results or prospects of Acquiror; or
(v) any change in accounting methods, principles or practices by Acquiror
materially affecting its assets, liabilities, financial condition or operating
results, except insofar as may have been required by a change in GAAP.
4.10 Acquiror Information. As to the information provided by Acquiror as
contemplated by Section 6.1(b) for use in solicitation materials for the vote or
action of the holders of Preferred Stock and Company Common Stock as
contemplated by Section 6.1(a), such information shall not, on the date upon
which any such information is provided to the Company or on the date upon which
the approval and adoption of this Agreement and the transactions contemplated
hereby (including the Merger) is obtained as contemplated by Section 2.1(b)
(which is expected to be on the Agreement Date), contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS
5.1 Conduct of Business. Except as (i) expressly contemplated by this
Agreement, (ii) set forth in Section 5.1 of the Company Disclosure Schedules, or
(iii) consented to in writing by Acquiror, during the period from the Agreement
Date to the Effective Time, the Company shall exercise all reasonable efforts to
carry on in the Ordinary Course of Business and in compliance in all material
respects with all applicable Legal Requirements and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current business
organizations (other than internal organizational realignments), to keep
available the services of its current officers and other key employees and to
preserve its relationships with those Persons having business dealings with the
Company to the end that its goodwill and ongoing business shall not be
materially impaired at the Effective Time. Without limiting the generality of
the foregoing, during the period from the Agreement Date to the Effective Time
or earlier termination of this Agreement, the Company shall not, without the
prior written consent of the
39
Acquiror or except as expressly contemplated by this Agreement or as set forth
in Section 5.1 of the Company Disclosure Schedules:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock except as
required by the terms of the Preferred Stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, except for issuances of the Company Common
Stock upon the exercise of the Company Stock Options under the Company
Stock Plan outstanding as of the Stock Reference Date, and only in
accordance with their present terms or except as required by the terms of
the Preferred Stock, or (iii) except pursuant to agreements entered into
with respect to the Company Stock Plan that are in effect as of the close
of business on the Stock Reference Date, purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
(b) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
other than the issuance of Company Common Stock upon the exercise of the
Company Stock Options outstanding as of the Stock Reference Date and in
accordance with their present terms or except as required by the terms of
the Preferred Stock;
(c) amend its certificate of incorporation or bylaws or merge or
consolidate with any Person;
(d) acquire or agree to acquire, or dispose of or agree to dispose
of, any capital assets (with aggregate value in excess of $50,000) or,
other than in the Ordinary Course of Business, any other assets;
(e) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien abandon or otherwise dispose of any of its properties or
assets (other than, in the Ordinary Course of Business, (i) inventory or
(ii) other assets with aggregate value of no more than $50,000);
(f) make any change in accounting methods or cash management;
(g) (i) grant any increase in the compensation payable or to become
payable by the Company to any of its officers, directors or employees,
except in the case of employees (who are not officers or directors),
increases in the Ordinary Course of Business or pursuant to contracts in
effect as of the Agreement Date and set forth in Section 5.1 of the
Company Disclosure Schedules; (ii) (A) adopt any new Benefit Plan, (B)
grant any award under any existing Benefit Plan, or (C) except as required
by applicable Legal Requirements, amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become
payable under any existing Benefit Plan; (iii) enter into or modify or
amend any employment or severance agreement with or,
40
except as required by applicable Legal Requirements, grant any severance
or termination rights to any officer, director or employee of the Company;
(iv) enter into any collective bargaining agreement or (v) make any loan
to, or enter into any material transaction of any other nature with, any
director, executive officer or employee of the Company;
(h) modify or amend in any material respect, enter into or terminate
any Material Contracts or waive, release or assign any material rights,
benefits or claims;
(i) (i) incur or assume any Indebtedness; (ii) other than in the
Ordinary Course of Business, materially modify the terms of any
Indebtedness or other Liability; (iii) assume, guaranty, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, other than immaterial
amounts in the Ordinary Course of Business, and other than the endorsement
of negotiable instruments for collection in the Ordinary Course of
Business; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than customary advances to
employees in accordance with past practice); or (v) enter into any
commitment or transaction, other than in the Ordinary Course of Business;
(j) make any material Tax election (unless required by law) or
settle or compromise any material income Tax liability;
(k) (i) take action to waive the benefits of, or agree to modify in
any material manner, any confidentiality, standstill or similar agreement
to which the Company is a party, or (ii) pay, discharge or satisfy any
proceeding, other than (A) a payment, discharge or satisfaction for which
Liabilities are reflected on or are reserved against in the Reference
Balance Sheet (or the notes thereto), but not to exceed the reserve
therefor, in each case in complete satisfaction, or (B) a payment,
discharge or satisfaction for an amount no greater than $25,000
individually and $100,000 in the aggregate, and, in either case, with a
complete release, of such matter with respect to all parties to such
matter, of actions, suits, proceedings or claims; provided, however, that
this prohibition shall not preclude the Company from amending any
confidentiality or other agreement that is deemed necessary by the Board
of Directors of the Company in the exercise of its fiduciary duties under
Section 5.4 hereof;
(l) make any payment or incur any liability or obligation (excluding
amounts of less than $25,000 in the aggregate) for the purpose of
obtaining any consent from any third party to the transactions
contemplated hereby;
(m) form any directly or indirectly wholly-owned Subsidiary;
(n) enter into any collaboration, partnership, joint venture or
similar agreement related to profit or expense sharing with a third
Person;
(o) introduce any new product lines or engage in any lines of
business other than those conducted by the Company on the Agreement Date;
41
(p) enter into an agreement, contract, commitment or arrangement
with any clinical research organization;
(q) ship units of Product at a rate greater than 120% of the Normal
Demand for such Product. Normal Demand, with respect to each Product, is
defined as the average weekly unit sales for such Product during the 8
weeks prior to the Agreement Date; and
(r) enter into an agreement, contract, commitment or arrangement to
do any of the foregoing, or to authorize, recommend, propose or announce
an intention to do any of the foregoing.
Without limiting the generality of the foregoing, and subject thereto, from and
after the Agreement Date and prior to the Effective Time, the Company shall
maintain insurance coverage and its books and records in substantially the same
manner as heretofore maintained, comply with all applicable Legal Requirements,
maintain and keep all of its properties and equipment in good repair, working
order and condition, ordinary wear and tear excepted, and perform all of its
duties and obligations under all contracts, agreements, understandings and
commitments applicable thereto, except in each case where the failure to
maintain, comply or perform, individually or in the aggregate, would not have or
be reasonably likely to have a Material Adverse Effect on the Company.
5.2 Other Actions. Except as required by law, the Company and Acquiror
shall, from and after the Agreement Date and prior to the Effective Time, not,
and neither shall permit any of their respective Affiliates to, voluntarily take
any action that would reasonably be expected to result in any of the conditions
to the Merger set forth in Article 7 (Conditions Precedent) not being satisfied.
5.3 Advice of Changes. The Company and Acquiror shall promptly advise the
other Party orally and in writing to the extent it has Knowledge of any change
or event having, or which, insofar as can reasonably be foreseen, would
reasonably be expected to have (i) a material adverse effect on the truth of
their respective representations and warranties or the ability of the conditions
set forth in Article 7 to be satisfied, or (ii) in the instance of the Company,
a Material Adverse Effect; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the Parties
(or remedies with respect thereto) or the conditions to the obligations of the
Parties under this Agreement.
5.4 No Solicitation of Transactions.
(a) The Company shall not, nor shall it authorize or permit any of
its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or
any of its other Affiliates to, directly or indirectly through another
Person, (i) solicit, initiate or encourage (including by way of furnishing
any information or assistance), or take any other action to facilitate or
to cause, any inquiries or the making of any proposal from any Person
which constitutes a Competing Transaction or (ii) participate in any
discussions or negotiations regarding a Competing Transaction.
42
(b) Notwithstanding the foregoing, prior to the Effective Time, the
Company may furnish information concerning its business, properties or
assets to any Person pursuant to appropriate confidentiality agreements,
and may participate in negotiations and discussions with any such Person
who makes an offer to enter into a Competing Transaction (provided that
the Company shall not agree to any exclusive right to negotiate with such
Person) if (i) such Person, without any breach of Section 5.4(a), submits
a bona fide, unsolicited written proposal to the Company with respect to
any such transaction that the Company's board of directors determines, in
good faith after receiving written advice from a financial advisor of a
nationally recognized reputation, is more favorable (both quantitatively
and qualitatively) to the Company and its stockholders than the
transactions contemplated hereby, and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the
Company's board of directors, is reasonably capable of being properly
obtained by such Person, and (ii) in the reasonable opinion of the
Company's board of directors in good faith, after consultation with
outside legal counsel, the failure to provide such information or access
to engage in such discussions or negotiations would cause the Company's
board of directors to breach its fiduciary duties to the Company's
stockholders under applicable Legal Requirements (a Competing Transaction
which satisfies clauses (i) and (ii) of this Section 5.4(b) being
hereinafter referred to as a "Superior Proposal"). The Company shall,
following the determination that such Competing Transaction is a Superior
Proposal, notify Acquiror in writing of the receipt of the same (a
"Proposal Notice"). Such Proposal Notice shall indicate the name of the
Person who made such Superior Proposal, all the terms and conditions of
such proposal and that the Company's board of directors intends to make a
Subsequent Determination, and shall contain a certification signed by the
chief executive officer of the Company to the effect that such proposal is
a Superior Proposal in accordance with the terms thereof, and be
accompanied by immediate access to all nonpublic information provided by
the Company to the Person who made the Superior Proposal of which Acquiror
had not been previously furnished. If, after consultation with outside
legal counsel, the Company's board of directors determines that its
fiduciary duties to the Company and its stockholders so require, the
Company's board of directors may (subject to this sentence and the
following sentences of this Section 5.4(b)) inform the Company's
stockholders that it no longer believes that the transactions contemplated
hereby are advisable, and that it no longer recommends approval of the
Merger (a "Subsequent Determination"), but only at a time that is after
the fifth (5th) Business Day following Acquiror's receipt of the relevant
Proposal Notice. After delivering such Proposal Notice, the Company shall
provide a reasonable opportunity to Acquiror to make such adjustments to
the terms and conditions of this Agreement as would enable the Company's
board of directors to proceed with its recommendation to the Company's
stockholders without a Subsequent Determination. At any time after the
fifth (5th) Business Day following Acquiror's receipt of the Proposal
Notice and if the Company has otherwise complied with the provisions of
this Section 5.4(b), the Company's board of directors may terminate this
Agreement pursuant to Section 8.1(d) hereof and enter into an agreement
with respect to the relevant Superior Proposal, provided that the Company
shall, concurrently with terminating this Agreement pursuant to such
section, pay or cause to be paid to Acquiror the termination fee and
expenses as set forth in Section 8.3(a) hereof.
43
(c) Except as set forth in Section 5.4(b), neither the Company's
Board of Directors nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in any manner adverse to Acquiror, the
approval or recommendation by the Company's Board of Directors or any
committee thereof of this Agreement and the transactions contemplated
hereby, (ii) approve or recommend, or propose to approve or recommend, any
Competing Transaction, or (iii) enter into any agreement, commitment,
understanding or other arrangement with respect to any Competing
Transaction.
5.5 Merger Consideration Spreadsheet. The Company shall deliver to
Acquiror, the Escrow Agent and the Exchange Agent a spreadsheet (the
"Spreadsheet"), which spreadsheet shall be certified as complete and correct by
the Chief Executive Officer and the Chief Financial Officer of the Company as of
the Closing and which shall separately list, as of the Closing, (i) all holders
of Company Common Stock and Preferred Stock and their respective addresses, the
number of shares of Company Capital Stock held by such Persons (including
whether such shares are Company Common Stock, Series A-1 Preferred Stock, Series
B-1 Preferred Stock or Series C-1 Preferred Stock), the total amount of Merger
Consideration to be paid to such Persons in respect of each class of Company
Capital Stock held by such holders (including the portion of the Net Cash
Consideration to be paid to such Persons as of the Closing, the portion of the
Stock Consideration (if applicable) to be paid to such Persons as of the Closing
and the amount to be deposited on such Persons' behalves (if applicable) as part
of the Initial Escrow Amount (and such Persons' respective pro rata entitlements
(if applicable) to (x) the Escrow Fund and (y) in the instance of former holders
of Company Common Stock, as applicable, a portion of any Working Capital Price
Increase as set forth in Section 2.11(f)), as well as such other information
relevant thereto or which Acquiror, the Escrow Agent or the Exchange Agent may
reasonably request, and (ii) all holders of In-the-Money Options and their
respective addresses, the number of shares of Company Common Stock underlying
such In-the-Money Options, the exercise prices applicable to such In-the-Money
Options as of immediately prior to the Effective Time, the total amount of
Merger Consideration to be paid to such Persons (including the portion of the
Net Cash Consideration to be paid to such Persons as of the Closing and the
amount to be deposited on such Persons' behalves as part of the Initial Escrow
Amount (and such Persons' respective pro rata entitlements to (x) the Escrow
Fund and (y) as applicable, a portion of any Working Capital Price Increase as
set forth in Section 2.11(f)), as well as such other information relevant
thereto or which Acquiror, the Escrow Agent or the Exchange Agent may reasonably
request. The Company shall deliver the Spreadsheet to Acquiror, the Escrow Agent
and the Exchange Agent no later than the later of (i) five (5) Business Days
prior to the expected Closing Date or (ii) two (2) Business Days after the first
(1st) Business Day upon which the Net Cash Consideration can be determined
(i.e., because the components thereof are known).
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Stockholders Meeting and Approval.
(a) Company Action. The Company will take all action necessary in
accordance with applicable law and its governing documents to duly call,
give notice of, and convene meetings of its holders of Preferred Stock and
Company Common Stock, or
44
to otherwise take such necessary action to consider and vote upon or
consent to the approval of (i) this Agreement and the transactions
contemplated hereby (including the Merger), (ii) the Merger Liquidation
Exemption and (iii) the Dividend Waiver. The Board of Directors of the
Company shall recommend such approval, and subject to fiduciary
obligations under applicable law, shall not withdraw or modify such
recommendation other than in compliance with Section 5.4(b), and shall
take all lawful action necessary to obtain such stockholder approval.
(b) Solicitation Material. Each of Acquiror and the Company shall
promptly provide all information reasonably required for use in
solicitation materials for the vote or action of the holders of Preferred
Stock and Company Common Stock as contemplated by the foregoing subsection
(a), and such information shall not, with respect to the information
supplied by either such Party, on the date upon which such information is
provided for use in such solicitation materials or upon the date which the
Company advised Acquiror is likely to be the date when approval of this
Agreement and the transactions contemplated hereby (including the Merger)
is obtained, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of Acquiror and the Company
agrees to correct promptly any such information provided by it that shall
become false or misleading in any material respect and to take all steps
necessary to amend or supplement the solicitation materials so as to
correct the same and to cause the solicitation materials as so corrected
to be disseminated to the holders of Preferred Stock and Company Common
Stock as appropriate or to the extent required by applicable law. The
solicitation materials shall comply as to form in all material respects
with the provisions of the DGCL and other applicable law.
6.2 Access To Information; Confidentiality(a)
(a) The Confidentiality Agreement dated June 18, 2004 between
Acquiror and the Company (the "Confidentiality Agreement"), together with
each of that certain Supplemental Exclusivity Agreement dated October 26,
2004, that certain Extension of Exclusivity Agreement dated November 24,
2004, and that certain Supplemental Letter Agreement date January 12, 2005
(collectively, the "Exclusivity Agreements"), shall be deemed to have
terminated upon the execution of this Agreement; provided, however, that
if this Agreement is terminated prior to Closing, this Section 6.2(a)
shall be deemed to have no effect, and the Confidentiality Agreement and
the Exclusivity Agreements shall survive in full force and effect in
accordance with their respective terms.
(b) Each of the Company and the Acquiror will, and will cause their
respective officers, directors, employees, agents and representatives to
(i) hold in confidence, unless compelled to disclose by judicial or
administrative process or by other Legal Requirements, all nonpublic
information concerning the other Party furnished in connection with the
transactions contemplated by this Agreement until such time as such
information becomes publicly available (otherwise than through the
wrongful act of such person) and (ii) not release or disclose such
information to any other person, except in connection with this Agreement
to its auditors, attorneys, financial advisors, other
45
consultants and advisors. In the event of termination of this Agreement
for any reason, the Parties hereto will promptly return or destroy all
documents containing nonpublic information so obtained from any other
Party hereto and any copies made of such documents and any summaries,
analyses or compilations made therefrom.
(c) The Company shall, and shall cause its Affiliates and together
with its agents and representatives to, afford to Acquiror and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of Acquiror, reasonable access during normal business
hours during the period prior to the Effective Time to make such
inspections as Acquiror may reasonably require of all of the Company's
offices, properties and facilities, and to all books, contracts,
commitments, personnel and records and, during such period, the Company
shall, and shall cause its Affiliates and together with its agents and
representatives to, furnish promptly to Acquiror (i) a copy of each
report, schedule, registration statement and other document filed by the
Company during such period pursuant to the requirements of federal or
state securities laws and (ii) all other information concerning the
Company's business, properties and personnel as Acquiror may reasonably
request.
(d) Between the Agreement Date and the Effective Time, the Company
shall furnish to the Acquiror within five (5) Business Days after the
delivery thereof to management, such monthly financial statements and data
(financial, operational, compliance or otherwise) as are regularly
prepared for distribution to Company management.
6.3 Commercially Reasonable Efforts; Cooperation.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Parties agrees to use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (i) obtaining of
all necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings and the taking of all steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) obtaining of all necessary consents, approvals
or waivers from third parties, (iii) defending any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed, and (iv)
executing and delivering any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. Nothing set forth in this Section 6.3(a) will
limit or affect actions permitted to be taken pursuant to Section 5.4.
(b) Each of Acquiror and the Company shall (i) make the filings
required of such Party under the HSR Act with respect to the Merger and
the other transactions
46
contemplated by this Agreement within two (2) Business Days after the
Agreement Date; (ii) comply at the earliest practicable date with any
request under the HSR Act for additional information, documents or other
materials received by such Party from the Federal Trade Commission or the
Department of Justice or any other Governmental Entity in respect of such
filings or the Merger and the other transactions contemplated by this
Agreement, (iii) cooperate with the other Party in connection with making
any filing under the HSR Act and in connection with any filings,
conferences or other submissions related to resolving any investigation or
other inquiry by any such Governmental Entity under the HSR Act with
respect to the Merger and the other transactions contemplated by this
Agreement; and (iv) keep the other Party apprised of the status of any
inquiries made by a Governmental Entity, provided, however, that nothing
contained in this Agreement shall require either Party or its Affiliates
to enter into a divestiture, hold-separate, business limitation or similar
agreement or undertaking which would individually or in the aggregate, in
the reasonable judgment of the board of directors of Acquiror, materially
and adversely impact the economic or business benefits to Acquiror and its
Affiliates of the transactions contemplated by this Agreement or the
ability of Acquiror or the Surviving Corporation to conduct its business
substantially in the manner such business is being conducted as of the
Agreement Date. Any and all fees required in connection with the filing of
the notices required under the HSR Act shall be borne by Acquiror.
6.4 Public Announcements. As soon as possible after the signing of this
Agreement, but in any event no more than one (1) Business Day thereafter,
Acquiror and the Company will jointly produce a mutually acceptable press
release announcing the signing of this Agreement. Unless consented to in writing
in advance by Acquiror or the Company, as the case may be, or required by
applicable Legal Requirements, neither Acquiror nor the Company shall issue any
other press releases or public statements with respect to the transactions
contemplated by this Agreement, including the Merger, except as may be required
by Acquiror pursuant to its listing agreement with the New York Stock Exchange.
6.5 Employees. Nothing in this Agreement will be construed to create a
right in any employee of the Company to employment with Acquiror, the Surviving
Corporation or Merger Sub, and, subject to any agreement between an employee and
Acquiror, the Surviving Corporation or Merger Sub, the employment of each
employee of the Company who continues employment with Acquiror, the Surviving
Corporation or Merger Sub after the Closing Date will be "at will" employment.
Notwithstanding the foregoing, simultaneously with the execution of this
Agreement, the persons identified in writing by Acquiror to the Company at least
two (2) Business Days prior to the Agreement Date as "Key Employees" will
execute and deliver to Acquiror copies of employment agreements in form and
substance reasonably acceptable to Acquiror (the "Employment Agreements"), each
of which will become effective only if and when the Closing occurs.
6.6 Employee Benefits.
(a) Acquiror agrees that, from and after the Effective Time, the
employees of the Company who are retained by Acquiror or the Surviving
Corporation will be entitled to participate in the employee benefit plans
of the Acquiror or the Surviving Corporation,
47
and will otherwise be afforded employee benefits on the same basis as
similarly situated employees of the Acquiror or the Surviving Corporation.
To the extent reasonably possible, employees of the Company will be
credited for their years of service to the Company in connection with
rights under, or eligibility, vesting or participation in, any employee
benefit plans of Acquiror (including vacation plans).
(b) Effective as of the Effective Time, Acquiror shall adopt a
retention and severance plan for the employees of the Company in the form
delivered to the Company's chief executive officer prior to the Agreement
Date (the "Retention Plan"). The Retention Plan shall be implemented for
the benefit of the pre-Closing employees of the Company immediately as of
the Effective Time.
6.7 Indemnification of Officers and Directors. Acquiror agrees that, with
respect to any claim arising within the six (6) year period after the Effective
Time, Acquiror shall guaranty the obligations of the Company as in effect as of
the Agreement Date in respect of indemnification and advancement of expenses for
the benefit of the present and former officers and directors of the Company,
including as set forth in Article 6 of the Company's bylaws as in effect as of
the Agreement Date and pursuant to those certain Indemnification Agreements
which the Company has in place with each of its directors and officers and which
are identified on Section 3.21 of the Company Disclosure Schedules.
6.8 Registration of Valeant Common Stock. The Parties acknowledge that the
shares of Valeant Common Stock, if any, to be issued as part of the Merger
Consideration will not be registered with the SEC or any other Governmental
Entity at the time of issuance and are being issued in reliance on an exemption
from registration under the Securities Act and applicable blue sky laws.
Simultaneous with the execution hereof, Acquiror shall enter into a registration
rights agreement (the "Registration Rights Agreement") in substantially the form
attached hereto as Exhibit G, which by its terms shall be effective only if the
Financing is not consummated on or prior to February 15, 2005. The Registration
Rights Agreement shall, among other things, identify each holder of Company
Capital Stock who shall receive shares of Valeant Common Stock pursuant to the
Merger as an intended third party beneficiary of the provisions of such
agreement. Among other matters, the Registration Rights Agreement shall provide
that Acquiror shall use commercially reasonable efforts to (a) file a
registration statement to register for resale under the Securities Act all
shares of Valeant Common Stock issued as part of the Merger within five (5)
Business Days of the Effective Time, (b) have such registration statement
declared effective by the SEC as soon as practicable thereafter, and (c) keep
such registration statement continuously effective for a period ending on the
earlier of (i) the first (1st) anniversary of the issuance by Acquiror of such
shares and (ii) the date upon which all such shares shall have been publicly
resold by the holders thereof.
6.9 Verification of Wholesale Inventory Levels. As soon as reasonably
possible following the signing of this Agreement, the Company shall provide
Acquiror with contact information for each of the wholesalers for the Company's
Products and shall use its commercially reasonable efforts to facilitate the
Acquiror's independent verification with such wholesalers of the level of
inventory then maintained by such wholesalers for the Company's Products
(including as to type, amount and shelf life).
48
6.10 Financing. Acquiror shall use commercially reasonable efforts to
consummate the Financing on or before February 15, 2005; provided, however, that
Acquiror shall not be required to proceed with the Financing, and may terminate
the Financing at any time in its sole discretion, if Acquiror determines in its
reasonable judgment that consummation of the Financing is no longer prudent in
light of then current circumstances in the financial markets or otherwise. If
Acquiror consummates the Financing on or before February 15, 2005, the Merger
Consideration shall consist solely of cash and the Registration Rights Agreement
will be automatically terminated and of no force or effect.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each Party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval. This Agreement and the
transactions contemplated hereby (including the Merger), the Merger
Liquidation Exemption and the Dividend Waiver shall have been approved by
votes of the Company Stockholders representing, at a minimum, the Company
Stockholder Approval.
(b) HSR Act. The waiting periods (and any extensions thereof)
applicable to the transactions contemplated by this Agreement under the
HSR Act shall have been terminated or shall have expired, and no condition
shall have been imposed by any Governmental Entity on the Parties hereto
adversely impacting the ability of the Parties to conduct the respective
businesses of the Parties substantially in the manner such businesses are
being conducted as of the Agreement Date.
(c) Governmental and Regulatory Approvals. All material consents,
approvals and actions of, filings with and notices to any Governmental
Entity required of the Company, Acquiror or Merger Sub to consummate the
Merger and the other transactions contemplated hereby will have been
obtained.
(d) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity
of competent jurisdiction or other legal restraint or prohibition
(collectively, "Restraints") affecting the Closing or seeking to prohibit
the transactions contemplated under this Agreement shall be in effect;
provided, however, that each of the Parties shall have used its
commercially reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that
may be entered.
(e) Escrow Agreement. Acquiror, the Company and Escrow Agent shall
have executed the Escrow Agreement, and such agreement shall be in full
force and effect.
(f) Pre-Closing Wholesaler Inventory Level. In the event that
Acquiror shall have elected, pursuant to Section 2.12, to have a
Pre-Closing Wholesaler Inventory Xxxxx
00
Xxxxxxxxxx, the Company and Acquiror shall have agreed on (i) the amount
of any Excess Contribution Price Decrease, or (ii) that the Pre-Closing
Wholesaler Inventory Level is such that no amount of Excess Contribution
Price Decrease is applicable.
7.2 Conditions to Obligations of Acquiror. The obligation of Acquiror to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The representations and
warranties made by the Company in Article 3 that are qualified as to
materiality shall be true and correct as of the Agreement Date and the
Effective Time, and such representations and warranties that are not
qualified as to materiality shall be true and correct in all material
respects as of the Agreement Date and the Effective Time; except (i) that
those representations and warranties that address matters only as of a
particular date need only remain true and correct as of such date (subject
to the following clauses (ii) and (iii)); (ii) for changes contemplated by
this Agreement; and (iii) where the failure to be so true and correct
would not, individually or in the aggregate, have any Material Adverse
Effect. The Acquiror shall have received a certificate of the Chief
Executive Officer and the Chief Financial Officer of the Company, dated as
of the Closing Date, to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date. The
Acquiror shall have received a certificate of the Chief Executive Officer
and the Chief Financial Officer of the Company, dated as of the Closing
Date, to such effect.
(c) No Material Adverse Change. At any time after the Agreement Date
there shall not have occurred any Material Adverse Change.
(d) Opinion of Counsel. The Acquiror shall have received an opinion
dated the Closing Date, from Pillsbury Winthrop LLP, counsel to the
Company, in substantially the form attached hereto as Exhibit H.
(e) Dissenting Shares. The number of Dissenting Shares shall not
exceed five percent (5%) of the outstanding shares of Company Capital
Stock.
(f) Voting Agreement. The Voting Agreement shall remain in full
force and effect and the Principal Stockholders shall have complied in all
material respects with the Voting Agreement and shall have materially
performed all of their respective obligations thereunder.
(g) Consents. Except for those matters addressed in Section 7.2 of
the Company Disclosure Schedules, the Company shall have received all of
the consents, approvals, permits or licenses set forth in Section 3.5 of
the Company Disclosure Schedules.
(h) Accredited Investor Representations. Not less than fifteen (15)
days prior to the Closing, Acquiror shall have received a certificate in
the form attached hereto as
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Exhibit I (an "Accredited Investor's Certificate") from: (i) each holder
of Preferred Stock who would be entitled to receive shares of Valeant
Common Stock as part of the Merger Consideration, and (ii) each Electing
Common Holder.
(i) Regiment Debt. Proper instruments and certificates to evidence
the release of all Encumbrances securing the Regiment Debt shall be
available, pending repayment in full of the Regiment Debt as of the
Closing Date, as contemplated by this Agreement, for filing, recordation
or other appropriate action immediately following the Closing Date.
7.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
warranties made by Acquiror in this Agreement that are qualified as to
materiality shall be true and correct as of the Agreement Date and the
Effective Time, and the representations and warranties in this Agreement
that are not qualified as to materiality shall be true and correct in all
material respects as of the Agreement Date and the Effective Time, except
(i) that those representations and warranties that address matters only as
of a particular date shall remain true and correct as of such date
(subject to the following clauses (ii) and (iii)); (ii) for changes
contemplated by this Agreement; and (iii) where the failure to be so true
and correct would not, individually or in the aggregate, have a material
adverse effect with respect to Acquiror. The Company shall have received a
certificate of the Chief Executive Officer and the Chief Financial Officer
of Acquiror, dated as of the Closing Date, to such effect.
(b) Performance of Obligations of Acquiror. Acquiror shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date. The
Company shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of Acquiror, dated as of the Closing Date, to
such effect.
(c) Opinion of Counsel. The Stockholders' Representatives shall have
received an opinion dated the Closing Date, from Xxxxxxxx, Xxxxxxxx &
Xxxxxx P.C., counsel to Acquiror, in substantially the form attached
hereto as Exhibit J.
(d) Consents. Acquiror shall have received all of the consents,
approvals, permits or licenses set forth in Section 4.4 of the Acquiror
Disclosure Schedules.
(e) Exchange Fund. Cash in an aggregate amount equal to the Net Cash
Consideration and certificates representing the Stock Consideration shall
have been deposited with the Exchange Agent for the benefit of the
Eligible Company Holders as contemplated hereby (noting that this deposit
is expected to take place on the morning of the Closing Date, but prior
nonetheless to the Closing).
51
(f) Escrow Fund. Cash in an aggregate amount equal to the Initial
Escrow Amount shall have been deposited with the Escrow Agent to comprise
the initial Escrow Fund as contemplated hereby (and by the Escrow
Agreement).
(g) Registration Rights Agreement. Acquiror shall have executed the
Registration Rights Agreement (which agreement shall identify each holder
of Company Capital Stock who receives shares of Valeant Common Stock
pursuant to the Merger as an intended third party beneficiary of the
provisions of such agreement), and such agreement shall be in full force
and effect.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the Company Stockholder Approval:
(a) By mutual written consent of Acquiror and the Company;
(b) By either Acquiror or the Company:
(i) if the Merger shall not have been consummated by April 30, 2005;
provided, however, that the right to terminate this Agreement pursuant to
this Section 8.1(b)(i) shall not be available to any Party whose failure
to perform any of its obligations under this Agreement is the basis for
the failure of the Merger to be consummated by such time; or
(ii) if any Restraint having any of the effects set forth in Section
7.1(d) shall be in effect and shall have become final and nonappealable;
provided, however, that the Party seeking to terminate this Agreement
pursuant to this Section 8.1(b)(ii) shall have used commercially
reasonable efforts to prevent the entry of and to remove such Restraint;
(c) By Acquiror:
(i) if the Company Stockholder Approval shall not have been obtained
and the proposed date of termination is more than two (2) Business Days
after the Agreement Date;
(ii) if the Company shall have breached or failed to perform any of
its representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform (A) is not cured
within thirty (30) days after written notice thereof or (B) is incapable
of being cured by the Company, such that the conditions set forth in
Section 7.2(a) or Section 7.2(b) would not be satisfied;
(iii) in the event that the Company shall fail to satisfy any of the
conditions set forth in Section 7.2(c), Section 7.2(e) or Section 7.2(i);
52
(iv) if any of the Principal Stockholders have failed materially to
perform their respective obligations or caused a material breach of their
obligations under the Voting Agreements;
(v) if, prior to the Effective Time, the Closing Value of the shares
of Valeant Common Stock falls to below $22.50 per share and Valeant has
not consummated the Financing; or
(vi) if the Board of Directors of the Company shall have made a
Subsequent Determination.
(d) By the Company:
(i) if Acquiror shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform (A) is not cured within
ten (10) days after written notice thereof or (B) is incapable of being
cured by Acquiror; or
(ii) upon the expiration of five (5) Business Days following
delivery of a Proposal Notice related to a Superior Proposal as permitted
under Section 5.4(b) hereof.
8.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or Acquiror as provided in Section 8.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of Acquiror or the Company, other than the provisions of
this Section 8.2, Section 8.3, Article 9 and Article 10, which provisions
survive such termination; provided, however, that nothing herein shall relieve
any Party from any liability for any willful and material breach by such Party
of any of its representations, warranties, covenants or agreements set forth in
this Agreement.
8.3 Fees and Expenses.
(a) Termination Fee and Expense Reimbursement.
(i) If this Agreement is terminated pursuant to Section 8.1(c)(vi)
or Section 8.1(d)(ii), then the Company shall (x) pay Acquiror a fee of
Fifteen Million Dollars ($15,000,000) in cash, which amount shall be
payable in same day funds within three (3) Business Days following
termination of this Agreement, and (y) reimburse Acquiror and Merger Sub
for all reasonable out-of-pocket expenses and fees paid or payable by
Acquiror or Merger Sub in connection with this Agreement and the
transactions contemplated hereby.
(ii) If this Agreement is terminated pursuant to Section 8.1(c)(v),
then Acquiror shall (x) pay the Company a fee of Fifteen Million Dollars
($15,000,000) in cash, which amount shall be payable in same day funds
within three (3) Business Days following termination of this Agreement,
and (y) reimburse the Company for all reasonable out-of-pocket expenses
and fees paid or payable by the Company in connection with this Agreement
and the transactions contemplated hereby.
53
(b) Other Expenses. Except as provided otherwise in Section 8.3(a),
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such
expenses, whether or not the Merger is consummated ; provided, however,
that Acquiror shall promptly reimburse the Company for all fees and
expenses of the Company's independent accounting firm reasonably incurred
by the Company (including such fees and expenses incurred prior to the
Agreement Date) in preparation for potential inclusion of financial
statements of the Company (or information from such financial statements)
in any actual or proposed registration statement (including as
contemplated by the Registration Rights Agreement) or report (including a
Current Report on Form 8-K) of Acquiror under the Securities Act or the
Exchange Act (which fees and expenses shall also, in all events, be
excluded from the determination of any Closing Date Working Capital
Calculation).
ARTICLE 9
INDEMNIFICATION
9.1 Survival. All representations and warranties of the Parties contained
in this Agreement and the other agreements, certificates and documents
contemplated hereby shall survive the Effective Time and remain operative and in
full force and effect, regardless of any investigation or disclosure made by or
on behalf of any other Party, until the one-year anniversary of the Effective
Time (the "Release Date"). All covenants of the Parties shall survive according
to their respective terms.
9.2 Indemnification By Eligible Company Holders.
(a) Subject to the provisions of this Article 9, the Eligible
Company Holders shall indemnify and hold harmless Acquiror and the
Surviving Corporation and their respective officers, directors, agents,
representatives, stockholders, employees, and each person, if any, who
controls or may control Acquiror or the Surviving Corporation within the
meaning of the Securities Act or the Exchange Act (collectively the
"Acquiror Indemnified Parties"), following the Effective Time, from and
against any and all claims, demands, suits, actions, causes of actions,
losses, reductions in value, costs, damages (including consequential
damages), liabilities and expenses, including reasonable attorneys' fees,
other professionals' and experts' fees and court or arbitration costs,
amounts paid in settlement and sanctions (hereinafter collectively
referred to as "Damages") to the extent and by reason of:
(i) any breach of the representations and warranties of the Company
contained in Article 3 when read together with the Company Disclosure
Schedules; or
(ii) any breach of the covenants of the Company set forth in this
Agreement prior to the Effective Time; or
(iii) any third party claim, or threatened third party claim,
asserted against an Acquiror Indemnified Party arising out of the
Company's actions or inactions prior to the
54
Effective Time (excepting, in all instances, any actual or threatened
claim identified in the Company Disclosure Schedules).
(b) Any claim for indemnification made by an Acquiror Indemnified
Party under this Section 9.2 must be specifically identified in a written
notice delivered to each of the Stockholder Representatives by no later
than the Release Date (an "Acquiror Claim Notice"). Any such Acquiror
Claim Notice shall include, in reasonable detail and among other
information, (i) the identity, nature and amount of each individual item
of Damages sought with respect to such claim, as well as the nature of
each breach at issue with respect to any such item, and (ii) statements
that the amount of Damages sought has actually been incurred or suffered
by an Acquiror Indemnified Party. If delivered to the Stockholder
Representatives by no later than the Release Date, a claim for
indemnification set forth in an Acquiror Claim Notice as provided herein
shall survive the Release Date until final resolution thereof as provided
in this Article 9.
(c) Notwithstanding the foregoing provisions of this Article 9 (or
any other provision of this Agreement), the Parties agree that:
(i) the indemnification provided for in Section 9.2(a) shall not
apply unless and until the aggregate Damages for which one or both
Acquiror Indemnified Parties seeks or has sought indemnification
hereunder, as stated in one or more Acquiror Claim Notices, exceed a
cumulative aggregate of $500,000 (the "Basket"), in which case the right
to recover Damages shall apply to the full amount of the Basket; provided,
however, that the Basket shall not apply to any such indemnification claim
(x) involving fraud or willful misrepresentation on the part of the
Company or (y) based upon a breach of Sections 3.1, 3.2 or 3.3;
(ii) the indemnification provided for in Section 9.2(a) shall not
apply to the extent that the Damages at issue have already been reflected
in an adjustment to the Merger Consideration due to either (x) a Working
Capital Price Decrease as contemplated by Section 2.11 or (y) an Excess
Contribution Price Decrease as contemplated by Section 2.12;
(iii) any Damages as to which the indemnification provided for in
Section 9.2(a) may apply shall be determined net of any actual recovery
(whether by way of payment, discount, credit, off-set, tax benefit,
counterclaim or otherwise) received by an Acquiror Indemnified Party from
a third party (including any insurer or taxing authority) less any current
or prospective cost associated with receiving such recovery;
(iv) prior to the Effective Time, no Eligible Company Holder shall
have any liability to any Acquiror Indemnified Party in respect of this
Agreement, the Merger or the other transactions and arrangements
contemplated hereby (excepting, in the instance of any Principal
Stockholder, solely with respect to such Principal Stockholder's
obligations as provided in the Voting Agreement);
(v) from and after the Effective Time, no Eligible Company Holder
shall have any liability to any Acquiror Indemnified Party in respect of
this Agreement, the Merger
55
or the other transactions and arrangements contemplated hereby except as
expressly provided in this Section 9.2; provided, however, that (x) the
total amount of such liability shall be limited in the aggregate, as of
any time from and after the Effective Time, to the then current amount in
the Escrow Fund after adjusting for any deductions or distributions which
should have been made therefrom as provided herein, (y) such liability
shall be limited solely to recourse by an Acquiror Indemnified Party to
the Escrow Fund as provided in this Article 9 (i.e., such liability is
thus limited, as to any Eligible Company Holder and as of any time from
and after the Effective Time, to such Eligible Company Holder's pro rata
share of the then current amount in the Escrow Fund after adjusting for
any deductions or distributions which should have been made therefrom as
provided herein) and (z) such liability is non-recourse to the Eligible
Company Holders; and
(vi) nothing in this Agreement shall (x) limit the right of any
Party to seek specific performance of, or equitable relief with respect
to, another Party with respect to a breach of any covenant or agreement
set forth in this Agreement or (y) be deemed a waiver by any Party to this
Agreement of any right or remedy which such Party may have at law or in
equity based on any claim of fraud.
9.3 Indemnification By Acquiror.
(a) Acquiror shall indemnify and hold harmless the Eligible Company
Holders, following the Effective Time, from and against any Damages to the
extent and by reason of any breach of the representations, warranties or
covenants given or made by Acquiror in this Agreement or in the
certificates of Acquiror, dated as of the Closing Date, to be delivered by
Acquiror pursuant to Sections 7.3(a) and (b).
(b) Any claim for indemnification made by an Eligible Company Holder
under this Section 9.3 must be specifically identified in a written notice
delivered to Acquiror by no later than the Release Date (a "Eligible
Holder Claim Notice"). Any such Eligible Holder Claim Notice shall
include, in reasonable detail and among other information, the identity,
nature and estimated magnitude of Damages related to such claim. If
delivered to Acquiror by no later than the Release Date, a claim for
indemnification set forth in an Eligible Holder Claim Notice as provided
herein shall survive the Release Date until final resolution thereof.
(c) The indemnification provided for in Section 9.3(a) shall not
apply unless and until the aggregate Damages for which one or more
Eligible Company Holders seeks or has sought indemnification hereunder, as
stated in one or more Eligible Holder Claim Notices as provided herein,
exceeds a cumulative aggregate equal to the Basket, in which case the
right to recover Damages shall apply to the full amount of the Basket;
provided, however, that the Basket shall not apply to any such
indemnification claim (i) involving fraud or willful misrepresentation on
the part of Acquiror or (ii) based upon a breach of Sections 4.3 or 4.7.
56
9.4 Effect on Merger Consideration; Stockholder Representatives.
(a) The entitlement of any Eligible Company Holder to receive such
Eligible Company Holder's pro rata share of the amount of the Merger
Consideration represented as of any given time by the Escrow Fund is
expressly subject to the applicable provisions of this Article 9
(including the ability of the Acquiror Indemnified Parties to seek
recourse against the Escrow Fund for Damages as provided in Section 9.2
above).
(b) By virtue of their approval of this Agreement and the Merger,
each Company Stockholder (other than any holder of Dissenting Shares)
shall be deemed to have approved, effective as of such vote and without
any further action by the Company Stockholders, the appointment of Xxxxxxx
X. Xxxxx, Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxxx Xxx Xxxxxx as
representatives of the Company Stockholders as provided under this
Agreement (the "Stockholders' Representatives"); provided, however, that a
successor to any Stockholders' Representative may be chosen by Eligible
Company Holders holding more than fifty percent (50%) of the then present
percentage interests in the Escrow Fund (assuming, for this purpose, a
distribution of the entire amount of the Escrow Fund on the date of
determination).
(c) The Stockholders' Representatives shall be deemed to be
appointed and constituted agent and attorney-in-fact by each Eligible
Company Holder, for and on behalf of such Eligible Company Holder, to do
the following: (i) to give and receive notices and communications; (ii) to
authorize recovery by any Acquiror Indemnified Party against the Escrow
Fund in satisfaction of claims as contemplated by this Article 9; (iii) to
object to such recovery; (iv) to agree to, negotiate, enter into
settlements and compromises of, and comply with awards of arbitrators with
respect to, claims against the Escrow Fund; (v) to waive or settle any and
all rights of Eligible Company Holders with respect to the delivery of any
portion of the Escrow Fund; (vi) to participate in an arbitration of any
disputed claim as contemplated by Section 9.5(a)(ii); (vii) to resolve,
with full authority to settle in any manner, any such disputed claim;
(viii) in the instance of the Working Capital Stockholder Representative,
to object to the Acquiror-Determined Closing Date Working Capital
Calculation; (iv) in the instance of the Working Capital Stockholder
Representative, to resolve, with full authority, any matters relating to
the Stipulated Closing Date Working Capital Calculation; (x) to take all
actions necessary or appropriate in the judgment of the Stockholders'
Representatives' for the accomplishment of any of the foregoing; and (xi)
to receive any portion of the Escrow Fund otherwise to be distributed to
the Eligible Company Holders and to use an appropriate portion thereof for
purposes of paying the costs associated with any of the foregoing. In the
absence of any specific statement in this Agreement to the contrary, any
decision of, or action by, the Stockholders' Representatives shall require
the concurrence of a majority of the Stockholders' Representatives.
(d) Any Stockholders' Representative may resign upon thirty (30)
days' notice to Acquiror, each Eligible Company Holder and each other
Stockholders' Representative. Any Stockholders' Representative may be
replaced by the Eligible Company Holders from time to time upon not less
than five (5) days' prior written notice to Acquiror; provided, however,
that a Stockholders' Representative may not be replaced unless Eligible
Company Holders holding more than fifty percent (50%) of the then
57
present percentage interests in the Escrow Fund (assuming, for this
purpose, a distribution of the entire amount of the Escrow Fund on the
date of determination) agree to such replacement. No bond shall be
required of the Stockholders' Representatives, and the Stockholders'
Representatives shall receive no compensation for their services.
(e) The Stockholders' Representatives shall: (i) not be liable to
Acquiror, the Surviving Corporation or any Eligible Company Holders for
any act done or omitted as a Stockholders' Representative unless acting in
bad faith; (ii) be entitled to treat as genuine any letter or other
document furnished by Acquiror, the Surviving Corporation, any Eligible
Company Holder or the Escrow Agent and believed to be genuine and to have
been signed and presented by the proper party or parties; and (iii) be
reimbursed from any portion of the Escrow Fund otherwise to be distributed
to the Eligible Company Holders for any loss, liability or expense
incurred without bad faith on the part of the Stockholders'
Representatives and arising out of or in connection with the acceptance or
administration of the Stockholders' Representatives' duties hereunder
(including counsel fees and other out-of-pocket expenses), such
reimbursement to be made directly from the Escrow Fund by the Escrow
Agent, who shall be entitled to rely upon the instruction of any two (2)
Stockholders' Representatives in this regard. To the extent that there is
not a sufficient amount of the Escrow Fund otherwise to be distributed to
any Eligible Company Holders available, the Eligible Company Holders shall
severally, and not jointly, in proportion to each Eligible Company
Holder's pro rata entitlement to a share of the Escrow Fund, indemnify the
Stockholders' Representatives and hold the Stockholders' Representatives
harmless against any loss, liability or expense incurred without bad faith
on the part of the Stockholders' Representatives and arising out of or in
connection with the acceptance or administration of the Stockholders'
Representatives' duties hereunder.
(f) Acquiror and Merger Sub shall have no liability to any Eligible
Company Holder or otherwise arising out of the acts or omissions of the
Stockholders' Representatives or any disputes among the Eligible Company
Holders or with the Stockholders' Representatives.
9.5 Handling Claims 9.6.
(a) With respect to any Acquiror Claim Notice:
(i) Any Stockholders' Representative may notify Acquiror in writing
prior to the expiration of a period of thirty (30) days following the
delivery of such Acquiror Claim Notice to all of the Stockholders'
Representatives that some or all of the subject claim(s) of Acquiror are
disputed. In the absence of any such notice within such thirty (30) day
period, or upon an earlier notice from at least three (3) of the
Stockholder Representatives to Acquiror and the Escrow Agent confirming
that the subject claim(s) of Acquiror are not disputed, then promptly
following such thirtieth (30th) day or such earlier confirming notice, the
Damages in the amount specified in such Acquiror Claim Notice will be (x)
conclusively deemed a claim against the then current amount in the Escrow
Fund after adjusting for any deductions or distributions which should have
been made therefrom as provided herein and (y) paid by the Escrow Agent to
Acquiror from
58
such current amount in the Escrow Fund after adjusting for any deductions
or distributions which should have been made therefrom as provided herein
(to the extent such funds are available).
(ii) If any Stockholders' Representative notifies Acquiror in
writing prior to the expiration of the thirty (30) day period following
the delivery of such Acquiror Claim Notice to all of the Stockholders'
Representatives that some or all of the subject claim(s) of Acquiror are
disputed, then the Stockholders' Representatives and Acquiror shall
attempt in good faith to agree upon the rights of Acquiror with respect to
each of such claims within thirty (30) days after such objection. If at
least three (3) of the Stockholders' Representatives and Acquiror should
so agree on a claim, then a memorandum setting forth such agreement shall
be prepared and delivered to the Escrow Agent, with a statement of the
portion of the then current amount in the Escrow Fund after adjusting for
any deductions or distributions which should have been made therefrom as
provided herein, if any, to be distributed to Acquiror (and, if
applicable, such amount shall be promptly paid by the Escrow Agent to
Acquiror to the extent such funds are available). If the Stockholders'
Representatives and Acquiror are unable to resolve any such claim, then
either Acquiror or the Stockholders' Representatives may demand
arbitration of the matter unless the amount of the Damages is at issue in
pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or the Stockholders'
Representatives and Acquiror agree to arbitration, and in either such
event the matter shall be settled by arbitration conducted by one (1)
arbitrator mutually agreeable to Acquiror and the Stockholders'
Representatives. In the event that, within fifteen (15) days after
submission of any claim to arbitration, Acquiror and the Stockholders'
Representatives cannot mutually agree on one (1) arbitrator, then, within
ten (10) days after the end of such fifteen (15) day period, Acquiror, on
the one hand, and the Stockholders' Representatives, on the other hand,
shall each select one (1) arbitrator. The two (2) arbitrators so selected
shall select a third arbitrator. Any such arbitration shall be held in
Orange County, California, under the rules then in effect of the American
Arbitration Association. The arbitrator(s) shall (w) determine how all
expenses relating to the arbitration shall be paid (i.e., whether by
Acquiror or out of the Escrow Fund to the extent available for
distribution to the Eligible Company Holders), including the fees of each
arbitrator and the administrative fee of the American Arbitration
Association, (x) set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the
parties an opportunity (adequate in the sole judgment of the arbitrator or
majority of the three (3) arbitrators, as the case may be) to discover
relevant information about the subject matter of the dispute, (y) rule
upon motions to compel or limit discovery and (z) have the authority to
impose sanctions, including attorneys' fees and costs, to the same extent
as a competent court of law or equity, should the arbitrator(s) determine
that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification.
The decision of the arbitrator (or a majority of the three (3)
arbitrators, as the case may be) as to the validity and amount of any
disputed claim shall be final, binding, and conclusive. Any such decision
shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order
awarded by the arbitrator(s), and the Escrow Agent shall be
59
entitled to rely on, and make distributions from the Escrow Fund in
accordance with the terms of, such award, judgment, decree or order as
applicable. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
(b) With respect to the claim of any third party as to which an
Acquiror Claim Notice may be tendered, Acquiror shall have the right to
conduct and control the defense, settlement, adjustment or compromise of
any such claim; provided, however, that Acquiror shall (i) diligently
pursue such defense, (ii) provide notice to, and an opportunity for
participation in and comment from, the Stockholders' Representatives with
respect to such defense, and (iii) not effect the settlement, adjustment
or compromise of any such claim without the written consent of at least
three (3) Stockholders' Representatives (which consent shall not be
unreasonably withheld or delayed).
(c) With respect to any Eligible Holder Claim Notice:
(i) If Acquiror shall fail to notify the tendering Eligible Company
Holder(s) in writing prior to the expiration of a period of thirty (30)
days following delivery to Acquiror of an Eligible Holder Claim Notice
that some or all of the subject claim(s) of the tendering Eligible Company
Holder(s) are disputed, or upon an earlier notice from Acquiror to the
tendering Eligible Company Holder(s) confirming that the subject claim(s)
of the tendering Eligible Company Holder(s) are not disputed, then
promptly following such thirtieth (30th) day or such earlier confirming
notice, the Damages in the amount specified in such Eligible Holder Claim
Notice will be (i) conclusively deemed a liability of Acquiror and (ii)
promptly paid by Acquiror to the tendering Eligible Company Holder(s).
(ii) If Acquiror shall notify the tendering Eligible Company
Holder(s) in writing prior to the expiration of such period of thirty (30)
days following delivery of the subject Eligible Holder Claim Notice to
Acquiror that some or all of the subject claim(s) of the tendering
Eligible Company Holder(s) are disputed, then Acquiror and the tendering
Eligible Company Holder(s) shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims
within thirty (30) days after objection by Acquiror. To the extent that
the parties are able to so agree, then any claims which are the subject of
such an agreement shall be handled as agreed. To the extent that the
parties are not able to so agree, then the subject claim will be submitted
to arbitration in accordance with Section 9.5(a)(ii).
ARTICLE 10
GENERAL PROVISIONS
10.1 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
60
if to the Company, to:
Xcel Pharmaceuticals, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Pillsbury Winthrop LLP
00000 Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxxx
if to Acquiror or Merger Sub, to:
Valeant Pharmaceuticals International
0000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx, 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
with a copy to: Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
If to the Stockholders' Representatives:
Xxxxxxx X. Xxxxx Xxxxx X. Xxxxx
000 X. Xxxx Xxxxxx c/o Domain Associates, LLC
Xxxxxx Xxxxx, Xxxxxxxxxx 00000 Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile No.: (000) 000-0000
Xxxxxx X. Xxxxxx Xxxxxx Xxx Xxxxxx
c/o Xxxxxx Xxxxxxx & Co., :LLC c/o New Enterprise Associates
The Mill 00 Xxxxxxxxx Xxxxxx 0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000 Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
Notice given by the telecopier will be deemed delivered on the day the sender
receives telecopier confirmation that such notice was reached at the telecopier
number of the addressee. Notices
61
delivered personally shall be deemed delivered as of the actual receipt and
overnight couriered notices shall be deemed delivered one day after sending.
10.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties.
10.3 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the Exhibits and other documents and instruments referred to herein)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter of this Agreement. Except as set forth in (i) Articles 2 and 9
with respect to the Eligible Company Holders regarding their treatment and
receipt of consideration as set forth therein, (ii) Section 6.7 with respect to
the indemnified parties identified therein and (iii) Article 9 with respect to
the rights and protections afforded therein to the Stockholders' Representatives
and the Eligible Company Holders, with each of the referenced Persons intended
as a third party beneficiary of the corresponding referenced portions of this
Agreement, this Agreement is not intended to confer upon any Person other than
the Parties any rights or remedies.
10.4 Governing Law. Except as to those matters under the DGCL which are
specific to the merger of one Delaware corporation into another Delaware
corporation (such as the Merger), this Agreement and the agreements,
instruments, and documents contemplated hereby will be governed by, and
construed in accordance with, the laws of the State of California, without
regard to principles of conflict of laws thereof.
10.5 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement may be assigned, in whole or in part, by
operation of law or otherwise by any of the Parties hereto without the prior
written consent of the other Parties; provided, however, that Acquiror and
Merger Sub may assign their respective rights and obligations hereunder to any
direct or indirect wholly-owned subsidiary of Acquiror (although no such
assignment shall relieve Acquiror of any of its obligations hereunder). Any
assignment in violation of the preceding sentence shall be void. Subject to the
preceding two sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the Parties and their respective successors
and assigns.
10.6 Consent to Jurisdiction. Each of the Parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
State of California or any California state court of applicable jurisdiction, in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a federal court sitting in the State of California or a California
state court.
10.7 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References to Sections and Articles refer to sections and
articles of this Agreement unless otherwise stated.
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10.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner so that the
transactions contemplated hereby are fulfilled to the extent possible.
10.9 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the Parties; provided, however, that the
provisions of Articles 2 or 9 insofar as they affect the role of the
Stockholders' Representatives may not be modified without the prior written
consent of each of the Stockholders' Representatives. This Agreement may be
amended by the Parties consistent with the preceding sentence upon action taken
by or on behalf of their respective boards of directors at any time before or
after the Company Stockholder Approval; provided, however, that after any such
Company Stockholder Approval, there shall not be made any amendment affecting
the Merger Consideration or that by law requires further approval by the Company
Stockholders without the further approval of such stockholders.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any Party hereto in the exercise of any right hereunder
will impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor will any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not alternative to or exclusive to, and not
exclusive of, any rights or remedies otherwise available.
10.11 Extension; Waiver. At any time prior to the Effective Time, any
Party other than Merger Sub may (a) extend the time for the performance of any
of the obligations or other acts of the other Parties, (b) waive any
inaccuracies in the representations and warranties of another Party contained in
this Agreement or in any document delivered pursuant to this Agreement or (c)
waive compliance by any Party with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a Party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party. The failure of any Party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
10.12 Specific Performance. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
required to be performed by any Party were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each Party shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction without the
necessity of posting a bond, this being in addition to any other remedy to which
a Party is entitled at law or in equity.
63
10.13 Interpretation. When a reference is made in this Agreement to an
Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used as defined terms in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a Person
are also to its permitted successors and assigns.
[Remainder of page intentionally left blank]
64
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement and Plan
of Merger to be signed by their respective officers thereunto duly authorized,
all as of the Agreement Date.
XCEL PHARMACEUTICALS, INC.
By: /s/ Xxxxxxx X. Xxxxx
___________________________________
Name: Xxxxxxx X. Xxxxx
______________________________
Title: President and Chief Executive
Officer
_____________________________
VALEANT PHARMACEUTICALS
INTERNATIONAL
By: /s/ Xxxxxxx X. Xxxxx
___________________________________
Name: Xxxxxxx X. Xxxxx
______________________________
Title: Chief Executive Officer and
President
_____________________________
BW ACQUISITION SUB, INC.
By: /s/ Xxxx X. Xxxxxx
___________________________________
Name: Xxxx X. Xxxxxx
______________________________
Title: Vice President and Treasurer
_____________________________
List of Appendices, Schedules and Exhibits
Appendices
1 Defined Terms
Schedules
Company Disclosure Schedules
- Article 3
- Section 5.1
- Section 7.2
- Section 11
Acquiror Disclosure Schedules
Exhibits
A Voting Agreement
B Charter Amendment
C Escrow Agreement
D Letter of Transmittal
E September-End Working Capital Calculation
F Example Inventory Calculation
G Registration Rights Agreement
H Form of Opinion for the Company's Counsel
I Accredited Investor's Certificate
J Form of Opinion for Acquiror's Counsel
66
APPENDIX 1
DEFINITIONS
For purposes of this Agreement:
"Accredited Investor's Certificate" has the meaning set forth in Section
7.2(h).
"Acquiror" has the meaning set forth in the Recitals.
"Acquiror Claim Notice" has the meaning set forth in Section 9.2(b).
"Acquiror-Determined Closing Date Working Capital Calculation" has the
meaning set forth in Section 2.11(d).
"Acquiror Disclosure Schedules" has the meaning set forth in Article 4.
"Acquiror Indemnified Parties" has the meaning set forth in Section
9.2(a).
"Acquiror SEC Filings" has the meaning set forth in Section 4.8.
"Adjusted Cash Consideration" means the Cash Consideration, plus the
aggregate exercise proceeds which would result from an exercise immediately
prior to the Effective Time of all In-the-Money Options (assuming full vesting),
less the amount of any Excess Contribution Price Decrease (if applicable), less
an amount equal to the Regiment Debt outstanding immediately prior to the
Effective Time.
"Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.
"Aggregate Series A-1 Amount" means One Hundred Eight Million Nine Hundred
Thousand Dollars ($108,900,000) (i.e., the number of shares of Series A-1
Preferred Stock issued and outstanding as of the Effective Time, multiplied by
the Series A-1 Per Share Amount).
"Aggregate Series B-1 Amount" means Forty-Four Million Five Hundred Fifty
Thousand Dollars ($44,550,000) (i.e., the number of shares of Series B-1
Preferred Stock issued and outstanding as of the Effective Time, multiplied by
the Series B-1 Per Share Amount).
"Aggregate Series C-1 Amount" means Fifty-One Million Four Hundred Eighty
Thousand Dollars ($51,480,000) (i.e., the number of shares of Series C-1
Preferred Stock issued and outstanding as of the Effective Time, multiplied by
the Series C-1 Per Share Amount).
"Aggregate Preferred Liquidation Amount" means Two Hundred Four Million
Nine Hundred Thirty Thousand Dollars ($204,930,000) (i.e., the sum of the
Aggregate Series A-1 Amount, the Aggregate Series B-1 Amount and the Aggregate
Series C-1 Amount).
i
"Agreement" has the meaning set forth in the Recitals.
"Agreement Date" has the meaning set forth in the Recitals.
"ANDA" means an "abbreviated new drug application," as such term is used
under the United States Federal Food, Drug and Cosmetic Act, as amended from
time to time.
"Available Escrow Amount" means an amount equal to the Initial Escrow
Amount, plus any accrued interest, less the amount of any Working Capital Price
Decrease (if applicable), less the aggregate amount of any Pending Claim
Holdbacks (but only for so long as, and to the extent that, they remain
pending), less the aggregate amount distributed to Acquiror pursuant to the
indemnification provisions benefiting Acquiror in Article 9, less the aggregate
amount distributable or previously distributed from the Escrow Account to
Eligible Company Holders as contemplated pursuant to the provisions of this
Agreement pertaining to the Escrow Fund and the Escrow Agreement.
"Basket" has the meaning set forth in Section 9.2(c)(i).
"Benefit Plans" has the meaning set forth in Section 3.11(a).
"Business Day" shall mean any day other than a day on which banks in the
States of Delaware, California, or New York are authorized or obligated to be
closed.
"Cash Consideration" means (a) in the event Acquiror has not consummated
the Financing by the close of business on February 15, 2005, Two Hundred Thirty
Million Dollars ($230,000,000), or (b) in the event Acquiror has consummated the
Financing on or prior to February 15, 2005, Two Hundred Eighty Million Dollars
($280,000,000).
"Cash Percentage" means the percentage obtained by subtracting the Stock
Percentage from one hundred percent (100%).
"Certificate" means a stock certificate which immediately prior to the
Effective Time represented an outstanding share of Company Capital Stock.
"Certificate of Merger" has the meaning set forth in Section 1.3.
"Charter Amendment" has the meaning set forth in Section 2.1(a).
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Closing Value" means the average of the closing prices of Valeant Common
Stock on the New York Stock Exchange for the ten (10) trading days immediately
preceding the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
ii
"Collaboration" has the meaning set forth in Section 3.18(a).
"Collaborative Partner" has the meaning set forth in Section 3.18(a).
"Common Per Share Amount" means an amount equal to the quotient of: (i)
the Net Merger Consideration, minus the Aggregate Preferred Liquidation Amount,
divided by, (ii) the Fully Diluted Number of Common Shares.
"Common Per Share Escrow Amount" means an amount equal to: (i) the Common
Per Share Amount, multiplied by (ii) the Initial Escrow Amount divided by the
Net Merger Consideration.
"Company" has the meaning set forth in the Recitals.
"Company Capital Stock" means shares of Company Common Stock or Preferred
Stock.
"Company Charter" means the Company's certificate of incorporation, as
amended as of the Agreement Date.
"Company Common Stock" means shares of the Company's common stock, par
value $0.0001 per share.
"Company Disclosure Schedules" has the meaning set forth in the preface to
Article 3.
"Company Permits" has the meaning set forth in Section 3.9(a).
"Company Stockholder Approval" has the meaning set forth in Section
2.1(b).
"Company Stockholders" means the holders of the outstanding shares of
Company Capital Stock immediately prior to the Effective Time.
"Company Stock Options" means options issued pursuant to the Company Stock
Plan and exercisable for shares of Company Common Stock.
"Company Stock Plan" means the Xcel Pharmaceuticals, Inc. 2001 Stock Plan.
"Competing Transaction" means any merger, consolidation, share exchange,
business combination or similar transaction involving the Company or the
acquisition in any manner, directly or indirectly, of a material equity interest
in any voting securities of, or a substantial portion of the assets of, the
Company, other than the transactions contemplated by this Agreement.
"Confidentiality Agreement" has the meaning set forth in Section 6.2(a).
"Consent" means any approval consent, ratification, permission, waiver or
authorization (including any license or governmental authorization).
iii
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Damages" has the meaning set forth in Section 9.2(a).
"DGCL" means the Delaware General Corporation Law.
"Dissenting Shares" has the meaning set forth in Section 2.8(a).
"Dividend Waiver" has the meaning set forth in Section 2.1(a).
"DOL" has the meaning set forth in Section 3.11(b).
"Effective Time" has the meaning set forth in Section 1.3.
"Electing Common Holder" has the meaning set forth in Section 2.5(b)(i).
"Eligible Company Holders" means (a) all Company Stockholders and (b) all
holders of In-the-Money Options.
"Eligible Holder Claim Notice" has the meaning set forth in Section
9.3(b).
"Employment Agreements" has the meaning set forth in Section 6.5.
"Encumbrance" means any claim, lien, pledge, security interest or other
encumbrance of any kind on any property or asset of the Company pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a Party, or
by which any property or asset of the Company is bound or affected.
"Environmental Claims" means any claim, demand, suit, proceeding, action,
cause of action, investigation, Liability, expense, penalty, fine, cost,
injunction, demand for payment or compensation, remediation, corrective action
or other demand for response, asserted by or payable to any Person, whether or
not involving any injury to human health or the environment, natural resources
or any property, based on any release or threatened release of Hazardous
Materials, or alleging that the Company is not in compliance with any applicable
Environmental Law.
"Environmental Laws" means any Legal Requirement of the United States, or
any other jurisdiction and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of the environment or
natural resources, or human health and safety, including those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permits" means any permit, approval, identification number,
license and other authorization required under any applicable Environmental Law.
iv
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business, whether or not
incorporated, that together with the Company would be deemed to be a "single
employer" within the meaning of Section 4001(b) of ERISA.
"Escrow Account" has the meaning set forth in Section 2.4(a).
"Escrow Agent" has the meaning set forth in Section 2.4(a).
"Escrow Agreement" has the meaning set forth in Section 2.4(a).
"Escrow Fund" has the meaning set forth in Section 2.4(a).
"Example Inventory Calculation" has the meaning set forth in Section
2.12(a).
"Excess Contribution Price Decrease" has the meaning set forth in Section
2.12(b).
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Agent" has the meaning set forth in Section 2.5(a).
"Exchange Fund" has the meaning set forth in Section 2.5(a).
"FDA" has the meaning set forth in Section 3.18(a).
"FDCA" has the meaning set forth in Section 3.18(a).
"Final Escrow Release Date" has the meaning set forth in Section
2.4(b)(iii).
"Financial Statements" has the meaning set forth in Section 3.6(a).
"Financing" means the offering, issuance and sale by Acquiror of at least
7.2 million (7,200,000) shares of Valeant Common Stock.
"First Escrow Release Date" has the meaning set forth in Section
2.4(b)(i).
"Fully Diluted Number of Common Shares" means the sum of: (i) the number
of shares of Company Common Stock issued and outstanding immediately prior to
the Effective Time, and (ii) the number of shares of Company Common Stock
issuable as of immediately prior to the Effective Time pursuant to In-the-Money
Options.
"GAAP" has the meaning set forth in Section 3.6(a).
"Governmental Entity" has the meaning set forth in Section 3.5.
"Hazardous Materials" means (i) any petroleum, petroleum products or by
products or breakdown products, radioactive materials which are not naturally
occurring at, on or under the subject real property, asbestos-containing
materials or polychlorinated biphenyls or (ii) any
v
chemical, material or substance defined or regulated as dangerous, toxic or
hazardous or as a pollutant or contaminant or waste under any applicable
Environmental Law.
"HSR Act" has the meaning set forth in Section 3.5.
"In-the-Money Option" has the meaning set forth in Section 2.3(a).
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, (i) the
principal of and premium, if any, in respect of any indebtedness of such Person
for money borrowed, (ii) the principal, premium, if any, and interest of such
Person with respect to obligations evidenced by bonds, debentures, notes or,
except for accrued liabilities arising in the Ordinary Course of Business with
respect to the Company, other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or businesses
(other than trade payables which are not overdue or in default), (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) but only
to the extent of drawings thereunder, (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable or accrued liabilities arising in the Ordinary
Course of Business which are not overdue or in default), (v) every capital lease
obligation (determined in accordance with GAAP) of such Person, except for
capital lease obligations arising in the Ordinary Course of Business, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, (vii) every
obligation to pay rent or other payment amounts of such Person with respect to
any sale-leaseback transaction to which such Person is a party, payable through
the stated maturity of such sale-leaseback transaction, (viii) factoring
arrangements of such Person, whether or not such arrangements appear on the
balance sheet of such Person; and (ix) every obligation of the type referred to
in clauses (i) through (viii) of another Person the payment of which, in any
case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise.
"Initial Escrow Amount" has the meaning set forth in Section 2.4(a).
"Initial Financial Statements" has the meaning set forth in Section
3.6(a).
"Insiders" has the meaning set forth in Section 3.29.
"Intellectual Property" means: (a) United States, foreign and
international patents, patent applications, including provisional applications,
and statutory invention registrations ("Patents"), (b) trademarks, service
marks, domain names, trade dress, logos and other source identifiers, including
registrations and applications for registration thereof, and (c) copyrights,
including registrations and applications for registration thereof.
"Interim Financial Statements" has the meaning set forth in Section
3.6(a).
"IRS" has the meaning set forth in Section 3.11(b).
"Key Employees" has the meaning set forth in Section 6.5.
vi
"Knowledge" means (i) with respect to the Company, the actual knowledge,
assuming reasonable inquiry under the circumstances, of the Company's Chief
Executive Officer (Xxxx Xxxxx) and Chief Financial Officer (Xxxxxx Xxxxxx) as
well as any other officer of the Company with a title of at least Vice
President; and (ii) with respect to Acquiror, the actual knowledge, assuming
reasonable inquiry under the circumstances, of Acquiror's Chief Executive
Officer and President (Xxxxxxx Xxxxx), President and Chief Scientific Officer
(Xxx Xxxxx), President, North American Global Commercial Development (Xxx
Xxxxxxx), Executive Vice President and Chief Financial Officer (Xxxx Xxxxxx),
Executive Vice President and General Counsel (Xxxxxx Xxxxxxx), Vice President,
Global Commercial Development (Xxxxxxx Xxxxxxxxx), and Manufacturing Engineer
(Xxxx XxXxxxxxxx).
"Lease" has the meaning set forth in Section 3.25.
"Legal Requirement" means any federal, state, local, municipal, or other
order, constitution, law, rule, ordinance, permit, judgment, principle of common
law, regulation, statute or treaty.
"Letter of Transmittal" has the meaning set forth in Section 2.5(b).
"Liabilities" has the meaning set forth in Section 3.6(b).
"License(s)" means all contracts, licenses and agreements to which the
Company is a party: (A) with respect to Owned Intellectual Property licensed or
transferred to any third party and (B) pursuant to which a third party has
licensed or transferred any Licensed Intellectual Property to the Company as of
the Agreement Date (excluding commercial off-the-shelf or shrink wrap licenses
of computer software).
"Licensed Intellectual Property" means all Intellectual Property licensed
to the Company or any of its subsidiaries by a third party pursuant to a License
or Licenses and used in or necessary for the business of the Company.
"Lien" means any pledge, claim, lien, tax, charge, encumbrance or security
interest of any kind or nature whatsoever.
"Major Supplier" has the meaning set forth in Section 3.17(a).
"Material Adverse Change" means any change, event, occurrence or state of
facts that has or has had, or is reasonably likely to have, a Material Adverse
Effect on the Company; provided, however, that none of the events or
circumstances described in Section 11 of the Company Disclosure Schedules shall
constitute a "Material Adverse Change."
"Material Adverse Effect" means any material adverse effect on the
business, condition (financial or other), results of operations, performance or
properties of the Company, taken as a whole, other than any material adverse
effect (i) relating to the economy or securities markets of the United States or
any other region in general, (ii) relating to the industry in which the Company
operates generally, (iii) resulting from or relating to the events or
circumstances
vii
described in Section 11 of the Company Disclosure Schedules, or (iv) resulting
from compliance with the terms or conditions of this Agreement.
"Material Contracts" means the following written or oral contracts,
leases, agreements, arrangements or understandings to which the Company is a
party or to which any portion of the Company's assets or operations taken as a
whole is subject:
(a) Any employment or consulting agreement, contract or commitment
between the Company and any employee, officer or director thereof
providing for an obligation to pay or accrue compensation of $100,000 or
more per annum or providing for the payment or accrual of any additional
compensation upon a change in control of the Company or upon any
termination of employment or consulting relationship following a change in
control of the Company;
(b) any agreements, contracts or commitments with any current
officer or director or Person who was, within one year preceding the
Agreement Date, an officer or director of the Company (except for any
employment agreement, Company Stock Option or agreement for any purchase
or sale of any Company Capital Stock);
(c) any material licenses or registrations required by a
Governmental Entity;
(d) any material agreements, contracts or commitments relating to
the borrowing of money in excess of an aggregate of $100,000, or guaranty
including any security arrangements in connection therewith;
(e) any agreements, contracts or commitments relating to the lease,
sublease or license of real or personal property that require payments by
the Company during any consecutive 12-month period in excess of $100,000;
(f) contracts and agreements that (A) require payments by the
Company in excess of $100,000 during any consecutive twelve-month period
and (B) are not terminable by the Company on notice of thirty (30) days or
less without penalty;
(g) stockholder, voting trust or similar contracts and agreements
relating to the voting of shares or other equity or debt interests of the
Company;
(h) contracts and agreements entered in to since January 1, 2004
providing for the acquisition or disposition of assets having a value in
excess of $100,000 other than sales or purchases of inventories or
equipment in the Ordinary Course of Business;
(i) franchise agreements;
(j) joint venture agreements, partnership agreements and other
similar contracts and agreements involving collaborations or a sharing of
profits and expenses;
(k) contracts and agreements governing the terms of indebtedness of
third parties owed to the Company, other than receivables arising from the
sale of goods or services;
viii
(l) contracts and agreements prohibiting or materially restricting
the ability of the Company to conduct its business, to engage in any
business or operate in any geographical area or to compete with any
Person, other than supplier and customer agreements relating to
nondisclosure of confidential information of the other party which are not
material to the Company;
(m) contracts and agreements providing for future payments that are
conditioned, in whole or in part, on a change in control of the Company
(other than Company Stock Options or agreements for any purchase or sale
of any Company Capital Stock);
(n) agreements pertaining to rights of first refusal, rights of last
refusal, milestone payments, in-licenses, out-licenses, and all comparable
agreements;
(o) any agreements with clinical research organizations pursuant to
the terms of which there is a current obligation of the Company to make
annual payments in excess of $100,000; and
(p) any other agreements, contracts or commitments pursuant to the
terms of which there is a current obligation or right of the Company to
make annual payments in excess of $100,000 or to receive annual payments
in excess of $100,000.
"Merger" has the meaning set forth in the Recitals.
"Merger Consideration" means the Adjusted Cash Consideration plus, if any,
the Stock Consideration.
"Merger Liquidation Exemption" has the meaning set forth in Section
2.1(a).
"Merger Sub" has the meaning set forth in the Recitals.
"NDA" means a " new drug application", as such term is used under the
United States Federal Food, Drug and Cosmetic Act, as amended from time to time.
"Net Cash Consideration" means the Adjusted Cash Consideration less (i)
the Initial Escrow Amount, and (ii) the aggregate exercise proceeds which would
result from an exercise immediately prior to the Effective Time of all
In-the-Money Options (assuming full vesting).
"Net Merger Consideration" means the sum of Two Hundred Eighty Million
Dollars ($280,000,000), plus the aggregate exercise proceeds which would result
from an exercise immediately prior to the Effective Time of all In-the-Money
Options (assuming full vesting), less the amount of any Excess Contribution
Price Decrease (if applicable), less an amount equal to the Regiment Debt
outstanding immediately prior to the Effective Time.
"Net Working Capital" has the meaning set forth in Section 2.11(a).
"Ordinary Course of Business" means the ordinary course of business of the
Company, consistent with past custom and practice (including with respect to
quantity and frequency).
ix
"Owned Intellectual Property" means all Intellectual Property owned by the
Company, including all Owned Intellectual Property listed on Section 3.16(a) of
the Company Disclosure Schedules.
"Parties" means the Acquiror, Merger Sub, and the Company.
"Patents" has the meaning set forth in the definition of "Intellectual
Property."
"Pending Claim" has the meaning set forth in Section 2.4(d).
"Pending Claim Holdback" has the meaning set forth in Section 2.4(d).
"Permitted Encumbrances" has the meaning set forth in Section 3.30.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
"Pre-Closing Wholesaler Inventory Level" has the meaning set forth in
Section 2.12(a).
"Preferred Stock" means the Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock of the Company.
"Principal Stockholder(s)" has the meaning set forth in the Recitals.
"Product Inventory" has the meaning set forth in Section 3.20(a).
"Products" has the meaning set forth in Section 3.19(a).
"Proposal Notice" has the meaning set forth in Section 5.4(b).
"Reference Balance Sheet" has the meaning set forth in Section 3.6(a).
"Regiment" means Regiment Capital III, L.P.
"Regiment Debt" means all outstanding principal and interest, as well as
any other amounts owing by the Company, under that certain Financing Agreement,
dated as of March 28, 2003, by and among the Company, the lenders party thereto,
and Regiment, as collateral agent and administrative agent.
"Registered Proprietary Name" has the meaning set forth in Section
3.16(a)(ii).
"Registration Rights Agreement" has the meaning set forth in Section 6.8.
"Release Date" has the meaning set forth in Section 9.1.
"Restraints" has the meaning set forth in Section 7.1(d).
"Retention Plan" has the meaning set forth in Section 6.6(b).
x
"SEC" means the United States Securities and Exchange Commission.
"sNDA" means a "supplemental new drug application," as such term is used
under the FDCA.
"Second Escrow Release Date" has the meaning set forth in Section
2.4(b)(ii).
"Securities Act" means the Securities Act of 1933.
"September-End Working Capital Calculation" has the meaning set forth in
Section 2.11(c).
"Series A Preferred Stock" means the Series X-0, X-0, X-0 and A-4
Preferred Stock, par value $0.0001 per share, of the Company.
"Series A-1 Per Share Amount" means $9.90 per outstanding share of Series
A-1 Preferred Stock (i.e., $0.10 less than the liquidation preference specified
in the Company Charter for the Series A-1 Preferred Stock in the event of a
"Liquidation" as defined therein).
"Series A-1 Per Share Escrow Amount" means an amount equal to: (i) the
Series A-1 Per Share Amount, multiplied by (ii) the Initial Escrow Amount
divided by the Net Merger Consideration.
"Series A-1 Preferred Stock" means the Series A-1 Preferred Stock, par
value $0.0001 per share, of the Company.
"Series B Preferred Stock" means the Series X-0, X-0, X-0 and B-4
Preferred Stock, par value $0.0001 per share, of the Company.
"Series B-1 Per Share Amount" means $11.88 per outstanding share of Series
B-1 Preferred Stock (i.e., $0.12 less than the liquidation preference specified
in the Company Charter for the Series B-1 Preferred Stock in the event of a
"Liquidation" as defined therein).
"Series B-1 Per Share Escrow Amount" means an amount equal to: (i) the
Series B-1 Per Share Amount, multiplied by (ii) the Initial Escrow Amount
divided by the Net Merger Consideration.
"Series B-1 Preferred Stock" means the Series B-1 Preferred Stock, par
value $0.0001 per share, of the Company.
"Series C Preferred Stock" means the Series C-1, C-2, C-3 and C-4
Preferred Stock, par value $0.0001 per share, of the Company.
"Series C-1 Per Share Amount" means $12.87 per outstanding share of Series
C-1 Preferred Stock (i.e., $0.13 less than the liquidation preference specified
in the Company Charter for the Series C-1 Preferred Stock in the event of a
"Liquidation" as defined therein).
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"Series C-1 Per Share Escrow Amount" means an amount equal to: (i) the
Series C-1 Per Share Amount, multiplied by (ii) the Initial Escrow Amount
divided by the Net Merger Consideration.
"Series C-1 Preferred Stock" means the Series C-1 Preferred Stock, par
value $0.0001 per share, of the Company.
"Spreadsheet" has the meaning set forth in Section 5.5.
"Stipulated Closing Date Working Capital Calculation" has the meaning set
forth in Section 2.11(e).
"Stock Consideration" means (a) in the event Acquiror has not consummated
the Financing by the close of business on February 15, 2005, the shares of
Valeant Common Stock with an aggregate Closing Value equal to Fifty Million
Dollars ($50,000,000) to be issued to holders of Company Capital Stock in
accordance with the terms and conditions of this Agreement, or (b) in the event
Acquiror has consummated the Financing on or prior to February 15, 2005, zero
(0) shares of Valeant Common Stock.
"Stock Percentage" means (a) in the event Acquiror has not consummated the
Financing by the close of business on February 15, 2005, the percentage obtained
by dividing (i) Fifty Million Dollars ($50,000,000) by (ii) the sum of (x) the
Aggregate Preferred Liquidation Amount, and (y) the Common Per Share Amount
multiplied by all shares of Company Common Stock held by Electing Common Holders
(excluding any shares which would result from any exercise of In-the-Money
Options), or (b) in the event Acquiror has consummated the Financing on or prior
to February 15, 2005, zero percent (0%).
"Stock Reference Date" has the meaning set forth in Section 3.3(a).
"Stockholders' Representatives" has the meaning set forth in Section
9.4(b).
"Subsequent Determination" has the meaning set forth in Section 5.4(b).
"Subsidiary" of any Person means another Person of which sufficient voting
securities, other voting ownership, or voting partnership interests (or, if
there are no such voting interests, fifty percent (50%) or more of the equity
interests) of such Person to elect at least a majority of its Board of Directors
or other governing body are owned, directly or indirectly, by such first Person.
"Superior Proposal" has the meaning set forth in Section 5.4(b).
"Supplemental Disclosure Schedule" has the meaning set forth in Section
7.2(a).
"Surviving Corporation" has the meaning set forth in Section 1.1.
"Taxes" means all (x) federal, state, local or foreign net and gross
income, alternative or add-on minimum, environmental, gross receipts, ad
valorem, value added, goods and services, capital stock, profits, license,
single business, employment, severance, stamp, unemployment,
xii
customs, property, sales, excise, use, occupation, service, transfer, payroll,
social security, franchise, withholding and other taxes or similar governmental
duties, charges, fees, levies or other assessments including any interest,
penalties or additions with respect thereto, (y) liability for the payment of
any amounts of the type described in clause (x) as a result of being a member of
an affiliated, consolidated, combined or unitary group, and (z) liability for
the payment of any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to indemnify any
other person with respect to the payment of any amounts of the type described in
clauses (x) or (y).
"Transaction Fees" mean the amounts invoiced (or otherwise payable) for
services rendered by legal and other advisers to the Company (excluding any
investment banker, broker, finder or similar intermediary) in connection with
the transactions contemplated by this Agreement (including the Merger).
"Unregistered Proprietary Name" has the meaning set forth in Section
3.16(a)(iii).
"Valeant Common Stock" means the common stock of Acquiror, par value $0.01
per share and, unless the context requires otherwise, the associated preferred
share purchase rights issued pursuant to that certain Rights Agreement, dated as
of November 2, 1994 (as amended), between the Acquiror and American Stock
Transfer & Trust Company, as trustee.
"Voting Agreement" has the meaning set forth in the Recitals.
"Working Capital Price Decrease" has the meaning set forth in Section
2.11(f).
"Working Capital Price Increase" has the meaning set forth in Section
2.11(f).
"Working Capital Stockholder Representative" shall mean Xxxxxxx X. Xxxxx
in his capacity as a Stockholder Representative as contemplated by this
Agreement; provided, however, that a successor may be chosen from among any
Stockholder Representatives by Eligible Company Holders holding more than fifty
percent (50%) of the then present percentage interests in the proceeds of any
distribution of a Working Capital Price Increase as contemplated by Section
2.11(f) (assuming, for this purpose, a distribution of the Working Capital Price
Increase on the date of determination).
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