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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
among
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation,
MPC MERGER CORP.,
a Delaware corporation, and
ASCENT PEDIATRICS, INC.,
a Delaware corporation
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TABLE OF CONTENTS
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ARTICLE I THE MERGER........................................................................................3
SECTION 1.01. The Merger................................................................................3
SECTION 1.02. Effective Time; Closing...................................................................3
SECTION 1.03. Effect of the Merger......................................................................3
SECTION 1.04. Certificate of Incorporation; Bylaws......................................................3
SECTION 1.05. Directors and Officers....................................................................4
ARTICLE II MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES...................................................4
SECTION 2.01. Merger Consideration......................................................................4
SECTION 2.02. Payment of Merger Consideration...........................................................5
SECTION 2.03. Additional Payments.......................................................................8
SECTION 2.04. Company Stock Options and Warrants.......................................................12
SECTION 2.05. Dissenting Shares........................................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................14
SECTION 3.01. Organization and Qualification...........................................................15
SECTION 3.02. Certificate of Incorporation and Bylaws..................................................15
SECTION 3.03. Capitalization...........................................................................15
SECTION 3.04. Authority Relative to this Agreement.....................................................16
SECTION 3.05. Consents and Approvals; No Violations....................................................17
SECTION 3.06. Permits; Compliance......................................................................18
SECTION 3.07. Company SEC Reports......................................................................19
SECTION 3.08. Financial Statements.....................................................................19
SECTION 3.09. Absence of Undisclosed Liabilities.......................................................20
SECTION 3.10. Absence of Certain Changes or Events.....................................................21
SECTION 3.11. Absence of Litigation....................................................................21
SECTION 3.12. Employee Benefit Plans; Labor Matters....................................................21
SECTION 3.13. Contracts................................................................................24
SECTION 3.14. Environmental Matters....................................................................26
SECTION 3.15. Preclinical Testing and Clinical Trials..................................................26
SECTION 3.16. Intellectual Property....................................................................27
SECTION 3.17. Taxes....................................................................................29
SECTION 3.18. Assets...................................................................................31
SECTION 3.19. Certain Interests........................................................................31
SECTION 3.20. Insurance Policies.......................................................................31
SECTION 3.21. Brokers..................................................................................31
SECTION 3.22. Vote Required............................................................................31
SECTION 3.23. Takeover Restrictions....................................................................31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........................................32
SECTION 4.01. Organization and Qualification...........................................................33
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SECTION 4.02. Certificate of Incorporation and Bylaws..................................................33
SECTION 4.03. Authority Relative to this Agreement.....................................................33
SECTION 4.04. Consents and Approvals; No Violations....................................................33
SECTION 4.05. Financing................................................................................35
SECTION 4.06. Ownership of Merger Sub; No Prior Activities.............................................35
SECTION 4.07. Brokers..................................................................................35
SECTION 4.08. Information Supplied.....................................................................35
ARTICLE V CONDUCT OF BUSINESSES PENDING THE MERGER.........................................................35
SECTION 5.01. Conduct of Business by the Company Pending the Merger....................................35
ARTICLE VI ADDITIONAL AGREEMENTS...........................................................................38
SECTION 6.01. Preparation of the Proxy Statement.......................................................38
SECTION 6.02. Company Stockholders' Meeting............................................................38
SECTION 6.03. Access to Information; Confidentiality; Transition.......................................38
SECTION 6.04. No Solicitation of Transactions..........................................................39
SECTION 6.05. Employee Benefits Matters................................................................41
SECTION 6.06. Further Action; Consents; Filings........................................................42
SECTION 6.07. Public Announcements.....................................................................42
SECTION 6.08. Expenses.................................................................................42
SECTION 6.09. Other Deductions.........................................................................43
SECTION 6.10. Company Notes............................................................................44
SECTION 6.11. Director and Officer Indemnification.....................................................44
SECTION 6.12. Notification of Certain Matters..........................................................44
SECTION 6.13. Pediatric Product Sales, Marketing and Development.......................................45
SECTION 6.14. Other Matters............................................................................45
SECTION 6.15. Voting Agreement.........................................................................46
ARTICLE VII CONDITIONS TO THE MERGER SECTION...............................................................46
SECTION 7.01. Conditions to the Obligations of Each Party..............................................46
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub...................................47
SECTION 7.03. Conditions to the Obligations of the Company.............................................48
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.............................................................48
SECTION 8.01. Termination..............................................................................48
SECTION 8.02. Notice of Termination; Effect of Termination.............................................50
SECTION 8.03. Extension; Waiver........................................................................51
ARTICLE IX RIGHT OF SETOFF.................................................................................51
SECTION 9.01. Survival of Representations, Warranties and Other Obligations............................51
SECTION 9.02. Right of Setoff Against the Contingent Payments..........................................51
SECTION 9.03. Procedure for Third Party Claims.........................................................53
SECTION 9.04. Calculation Representative...............................................................54
ARTICLE X GENERAL PROVISIONS...............................................................................55
SECTION 10.01. Notices..................................................................................55
SECTION 10.02. Certain Definitions......................................................................56
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SECTION 10.03. Separability.............................................................................67
SECTION 10.04. Assignment...............................................................................67
SECTION 10.05. No Third Party Beneficiaries.............................................................67
SECTION 10.06. Incorporation of Exhibits................................................................67
SECTION 10.07. Specific Performance.....................................................................67
SECTION 10.08. Governing Law; Forum.....................................................................67
SECTION 10.09. Headings.................................................................................67
SECTION 10.10. Counterparts.............................................................................67
SECTION 10.11. Entire Agreement.........................................................................67
SECTION 10.12. Attorney's Fees..........................................................................68
SECTION 10.13. Amendments and Supplements...............................................................68
Exhibit A Example of Contingent Payment Calculations
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan Of Merger, dated as of October 1, 2001 (this
"AGREEMENT"), is among Medicis Pharmaceutical Corporation, a Delaware
corporation ("PARENT"), MPC Merger Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("MERGER SUB"),and Ascent Pediatrics, Inc., a
Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the General Corporations Law of the State of Delaware
(the "DGCL"), Parent 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 Boards of Directors of Parent, the Merger Sub and the
Company have approved this Agreement, the Merger and the other transactions
contemplated by this Agreement (collectively, the "TRANSACTION");
WHEREAS, each share of common stock of the Company, par value $.00004
per share (the "COMPANY COMMON STOCK"), is currently held by State Street Bank
and Trust Company as depositary (the "DEPOSITARY") under that certain Depositary
Agreement dated February 16, 1999, as amended, by and among the Company, the
Depositary and Alpharma USPD, Inc. (the "DEPOSITARY AGREEMENT"). Each share of
Company Common Stock is evidenced by a depositary share (each a "DEPOSITARY
SHARE") which is represented by a depositary receipt (each a "DEPOSITARY
RECEIPT" and each holder of a Depositary Share, a "DEPOSITARY HOLDER") and was
subject to the right and option of the Company to purchase all outstanding
shares of Company Common Stock (the "CALL OPTION"). The Company assigned the
Call Option to Alpharma USPD, Inc. ("ALPHARMA") on July 23, 1999. Alpharma, in
connection with that certain Termination Agreement dated December 29, 2000, by
and among the Company, Alpharma, Alpharma, Inc., the Depositary and the Original
Lenders (as defined therein) dated December 29, 2000 (the "TERMINATION
AGREEMENT"), irrevocably and unconditionally agreed that it would not exercise
the Call Option and that, at any time upon the request of the Company, it would
deliver to the Company and the Depositary a Call Option Rejection Notice (as
defined in the Depositary Agreement);
WHEREAS, certain Depositary Holders of the Company own such number of
Depositary Shares of the Company and certain stockholders own such number of
shares of Series H Preferred Stock, par value $.01, of the Company (the "SERIES
H PREFERRED STOCK," and, together with the Company Common Stock the "COMPANY
STOCK"), as is set forth in SECTION 1.01 of the Company's Disclosure Schedule
(such stockholders collectively being referred to herein as the "PRINCIPAL
STOCKHOLDERS");
WHEREAS, as a condition and inducement to Parent's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent is
entering into a voting agreement (a "VOTING AGREEMENT") with each of the
Principal Stockholders, dated the date hereof;
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WHEREAS, as a condition and inducement to Parent's and Merger
Sub's entering into this Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Agreement, the
holders of the Series H Preferred Stock (the "SERIES H HOLDERS"), the holders
(the "7.5% SUBORDINATED NOTE HOLDERS") of the 7.5% Subordinated Notes (as
defined below), certain holders of the 8% Subordinated Notes (as defined below),
the holders of the 7.5% Convertible Subordinated Notes (as defined below) and
certain holders of the 8% Convertible Subordinated Notes (as defined below) (the
7.5% Subordinated Notes, 8% Subordinated Notes, 7.5% Convertible Subordinated
Notes and 8% Convertible Subordinated Notes, collectively the "COMPANY NOTES"
and such holders, collectively the "NOTE HOLDERS") and the holder (the "SERIES G
WARRANT HOLDER") of Series G Warrants (such Series G Warrants owned and any
additional Series G Warrants issued to the Series G Warrant Holder after the
date hereof being referred to as the "SERIES G WARRANTS") issued pursuant to the
Fifth Amendment of the May 1998 Securities Purchase Agreement (as defined in
SECTION 3.09(b)(ii) BELOW) have entered into an agreement (the "NOTE AGREEMENT")
pursuant to which, among other things, (i) the 7.5% Subordinated Note Holders
have agreed not to require the repayment of the 7.5% Subordinated Notes until
the earliest to occur of (A) the consummation of the Merger, (B) the termination
of the Merger Agreement, and (C) the Drop Dead Date (as defined below); (ii) the
7.5% Subordinated Note Holders have agreed that if the Merger has not been
consummated or the Agreement terminated prior to December 31, 2001, the Demand
Date (as defined in the 7.5% Subordinated Notes) shall automatically be extended
from December 31, 2001 to the earliest to occur of (A) the consummation of the
Merger, (B) the termination of the Merger Agreement and (C) the Drop Dead Date;
(iii) the Series H Holders have agreed not to cause the Company to redeem the
Series H Preferred Stock prior to the earliest to occur of (A) the consummation
of the Merger, (B) the termination of the Merger Agreement and (C) the Drop Dead
Date; (iv) the Note Holders have agreed not to convert any of the Notes into
equity securities of the Company; and (v) the Series G Warrant Holder has agreed
that all unexercised Series G Warrants held by the Series G Warrant Holder at
the Effective Time will terminate immediately prior to the consummation of the
Merger;
WHEREAS, as a condition and inducement to Parent's and Merger
Sub's entering into this Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Agreement, Parent
is entering into an agreement with each of the Principal Stockholders and each
of certain other holders of Company Stock (the "OTHER HOLDERS") pursuant to
which, among other things, each Principal Stockholder and Other Holder has
agreed to be bound by SECTIONS 2.03 and 9.04 hereof (the "EXCLUSIVE REMEDY
AGREEMENT"); and
WHEREAS, certain capitalized terms used in this Agreement are
defined in SECTION 10.02 of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, including without limitation Article
VII, and in accordance with the DGCL, at the Effective Time (as defined in
SECTION 1.02), Merger Sub shall be merged with and into the Company. As a result
of the Merger, the separate corporate existence of Merger Sub shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION").
SECTION 1.02. EFFECTIVE TIME; CLOSING. As promptly as practicable,
and in any event within three Business Days, following the satisfaction or, if
permissible, waiver of the conditions set forth in Article VII (or such other
date as may be agreed upon by each of the parties hereto) (other than the
delivery of items to be delivered at the Closing and other than satisfaction of
those conditions that by their nature are to be satisfied at the Closing, it
being understood that the occurrence of the Closing shall remain subject to the
delivery of such items and the satisfaction or waiver of such conditions at the
Closing), the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of
State of the State of Delaware, in such form as is required by, and executed in
accordance with, the relevant provisions of the DGCL. The Merger shall be
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware in accordance with the DGCL, or at
such later time on the day of such filing as is specified in the Certificate of
Merger (the "EFFECTIVE TIME"). Immediately prior to the filing of the
Certificate of Merger, a closing (the "CLOSING") will be held at the offices of
Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (or such other
place as the parties may agree). The date on which the Closing shall occur is
referred to herein as the "CLOSING DATE."
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time (i) all the property, rights, privileges, powers and
franchises of Merger Sub shall vest in the Surviving Corporation, and (ii) all
debts, liabilities, obligations, restrictions, disabilities and duties of Merger
Sub shall become the debts, liabilities, obligations, restrictions, disabilities
and duties of the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the certificate of incorporation of the
Company shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by law and such certificate of
incorporation; provided, however, that such certificate of incorporation may
only be amended with respect to the exculpation and indemnification of the
Company Indemnified Parties in accordance with the terms of SECTION 6.11 hereof.
(b) At the Effective Time, the bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by law, the certificate of
incorporation of the Surviving Corporation and
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such bylaws; provided, however, that such bylaws shall be amended to change all
references to the name of the Merger Sub to refer to the name of the Surviving
Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. At the Effective Time, the
directors of Merger Sub immediately prior to the Effective Time shall become the
initial 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 become the officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company or the holders of any of
the following securities, pursuant to this Agreement and the DGCL:
(i) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
in accordance with SECTION 2.01(a)(iii) and any Dissenting Shares (as
defined in SECTION 2.05(a)) shall be converted into the right to receive
the Common Stock Merger Consideration (as defined in SECTION 10.02(a))
payable, without interest, except as provided by SECTION 2.03(g) and
SECTION 9.02(c), to the holder of such share of Company Common Stock each
a "COMMON HOLDER" and collectively the "COMMON HOLDERS"), upon surrender,
in the manner provided in SECTION 2.02, of the certificate that formerly
evidenced such share. As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have
any rights with respect thereto, except the right to receive the Common
Stock Merger Consideration;
(ii) each share of Series H Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares)
shall be converted into the right to receive the Series H Merger
Consideration (as defined in SECTION 10.02(a)), payable, without interest,
to the holder of such share of Series H Preferred Stock, upon surrender,
in the manner provided in SECTION 2.02, of the certificate that formerly
evidenced such share. As of the Effective Time, all such shares of Series
H Preferred Stock shall no longer be outstanding and shall automatically
be cancelled and shall cease to exist, and each holder of a certificate
representing any such shares of Series H Preferred Stock shall cease to
have any rights with respect thereto, except the right to receive the
Series H Merger Consideration;
(iii) each share of Company Stock held in the treasury of the
Company and each share of Company Stock owned by Parent or any direct or
indirect wholly owned
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subsidiary of Parent or of the Company immediately prior to the Effective
Time shall be cancelled and extinguished without any conversion or
exchange thereof and no payment or distribution shall be made with respect
thereto; and
(iv) each share of common stock, par value $0.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $.00004 per share, of
the Surviving Corporation.
(b) The Company shall cause Alpharma to issue the Call Option Rejection
Notice, such Call Option Rejection Notice to be effective immediately after the
Effective Time, thereby entitling the Depositary Holders to receive the Common
Stock Merger Consideration upon surrender of the Depositary Receipts
attributable to the Depositary Shares. After the Effective Time, Parent will
take such action with the Depositary as is reasonably necessary to cause the
Common Stock Merger Consideration deposited with the Depositary as the sole
holder of record of the Company Common Stock to be paid to the holders of the
Depositary Receipts.
SECTION 2.02. PAYMENT OF MERGER CONSIDERATION.
(a) Prior to the Effective Time, Parent shall designate the Depositary
or such other bank or trust company reasonably satisfactory to the Company to
act as agent (the "PAYING AGENT") for the holders of shares of Company Stock to
receive the Initial Merger Consideration to which holders of Company Stock shall
become entitled hereunder. On or prior to the Closing, Parent shall transfer to
the Paying Agent the cash, subject to SECTION 2.02(g), necessary to pay the
Aggregate Initial Common Stock Consideration and the Aggregate Series H Merger
Consideration. The Contingent Payments (as defined in SECTION 2.03(a)), if
earned, shall be paid as provided in SECTION 2.02(d). The Excess Warrant
Proceeds (as defined in SECTION 2.04(b)), if any, shall be paid as provided in
SECTION 2.02(f). All funds deposited with the Paying Agent shall be invested by
the Paying Agent in (i) certificates of deposits in or repurchase agreements
from United States commercial banks having capital resources in excess of $1
billion, (ii) obligations of the United States government or any agency thereof,
(iii) obligations guaranteed by the United States government, (iv) in money
market accounts in financial institutions having capital resources in excess of
$1 billion or (v) as otherwise provided in the agreement entered into between
the Paying Agent, Parent and the Company; provided, however, that all such
investments will be in short term, highly liquid investments. Parent shall pay
the fees and expenses of the Paying Agent.
(b) Promptly after the Effective Time, Parent shall cause the Paying
Agent to mail to each Person who was, at the Effective Time, a holder of record
of shares of Company Stock entitled to receive the applicable Per Share Merger
Consideration pursuant to SECTION 2.01(a) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates or Depositary Receipts evidencing such shares of Company Stock (the
"CERTIFICATES") shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates pursuant to such letter of transmittal. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may reasonably be required pursuant to such
instructions, the holder of
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such Certificate shall be entitled to receive in exchange therefor the
applicable Per Share Merger Consideration. Provision shall be made for holders
of Certificates or Depositary Receipts evidencing such shares of Company Stock
to procure in person immediately after the Effective Time a letter of
transmittal and to deliver in person immediately after the Effective Time such
letter of transmittal and Certificates or Depositary Receipts in exchange for
that portion of the Initial Merger Consideration to which such holders are
entitled hereunder.
(c) Except as provided in SECTION 2.03(g) or SECTION 9.02(c), no
interest shall accrue or be paid on the applicable Per Share Merger
Consideration. If the payment equal to the applicable Per Share Merger
Consideration is to be made to a Person other than the Person in whose name the
surrendered Certificate formerly evidencing shares of Company Stock is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the Person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the applicable Per Share Merger Consideration to a Person other than
the registered holder of the Certificate surrendered, or shall have established
to the satisfaction of Parent that such taxes either have been paid or are not
applicable.
(d) Simultaneous with the occurrence of any of the following events (i)
the delivery of each Net Sales Statement (as defined in SECTION 2.03(b) below),
(ii) the resolution of any dispute regarding the amount of any Contingent
Payment pursuant to SECTION 2.03(d), (iii) the determination that additional
amounts are payable pursuant to SECTION 2.03(h) or (iv) the resolution of any
dispute regarding the amount of any setoff pursuant to SECTION 9.03, Parent
shall transfer to the Paying Agent the cash necessary to pay the amount of any
earned Contingent Payment, if any, without interest, and shall cause the Paying
Agent to promptly distribute to the Common Holders the Contingent Payment to
which such Common Holders are entitled.
(e) At any time following six months after the Initial Merger
Consideration, a Contingent Payment or a payment of Excess Warrant Proceeds has
been transferred to the Paying Agent, Parent shall be entitled to require the
Paying Agent to deliver to it any funds which had been transferred to the Paying
Agent with respect to the Initial Merger Consideration, such Contingent Payment
or such payment of Excess Warrant Proceeds, as applicable, and not disbursed to
holders of shares of Company Stock (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it, if any). Thereafter, such holders shall be entitled to look to
Parent (subject to abandoned property, escheat and other similar laws) only as
general creditors thereof with respect to any applicable Per Share Merger
Consideration that may be payable to them. Notwithstanding the foregoing,
neither Parent, the Surviving Corporation nor the Paying Agent shall be liable
to any holder of a share of Company Stock for any applicable Per Share Merger
Consideration properly delivered in respect of such share of Company Stock to a
public official pursuant to any abandoned property, escheat or other similar
law.
(f) Within five Business Days of any exercise of Out-of-the-Money
Warrants (as defined in SECTION 2.04(b) below), including the payment to Parent
or the Surviving Corporation of the exercise price therefor, Parent shall
transfer to the Paying Agent the cash necessary to pay the Excess Warrant
Proceeds (as defined in SECTION 2.04(b)(ii)), if any, resulting from the
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exercise of such Out-of-the-Money Warrants, without interest, and shall cause
the Paying Agent to promptly distribute to the Common Holders the Excess Warrant
Proceeds to which such Common Holders are entitled.
(g) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Stock, or Company Stock Options (as defined in
SECTION 2.04(a) below) on the records of the Company. In the event of a transfer
of ownership of Company Stock prior to the Effective Time which is not
registered in the transfer records of the Company, the Per Share Merger
Consideration may be paid to a Person other than the Person in whose name the
Certificate so surrendered is registered, if such Certificate is presented to
the Paying Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. From and after the Effective Time, the holders of shares of Company Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Stock, except as otherwise
provided herein or by applicable law, and other than the right to receive upon
surrender of the applicable Company Stock, the Per Share Merger Consideration.
After the Effective Time, no dividends, interest or other distributions shall be
paid to the holder of any unsurrendered shares of Company Stock. The applicable
Per Share Merger Consideration paid pursuant to this Agreement shall be deemed
to have been paid in full satisfaction of all rights pertaining to the
surrendered Company Stock.
(h) Each of the Surviving Corporation and Parent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any Common Holder or Series H Holder (collectively, the "COMPANY
STOCKHOLDERS") such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (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 Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the Company Stockholder in
respect of which such deduction and withholding was made by the Surviving
Corporation or Parent, as the case may be.
(i) All cash amounts payable to a holder of Company Stock shall be
rounded upward to the nearest whole cent and shall be paid to the Company
Stockholders by the Paying Agent by check or wire transfer in immediately
available funds (in accordance with the Paying Agent's customary practice)
pursuant to the written payment instructions delivered by each Company
Stockholder to the Paying Agent upon surrender of such Company Stockholder's
Certificate.
(j) In the event any Certificate shall have been lost, stolen or
destroyed, the Paying Agent, subject to such other conditions as the Paying
Agent may reasonably impose (including the posting of an indemnity bond or other
surety in favor of Parent with respect to the Certificate alleged to be lost,
stolen or destroyed), shall be authorized to accept an affidavit from the record
holder of such Certificate in a form reasonably satisfactory to the Paying Agent
and upon receipt of such affidavit issue in exchange for such lost, stolen or
destroyed Certificates, the applicable Per Share Merger Consideration in respect
thereof pursuant to this Agreement.
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SECTION 2.03. ADDITIONAL PAYMENTS.
(a) CONTINGENT PAYMENTS. Parent shall pay to the Common Holders as
additional consideration for the shares of Company Common Stock additional
amounts, if earned, in accordance with the following terms (each such amount
being referred to individually as a "CONTINGENT PAYMENT" and, together with the
Premium Adjustment, as defined below, the "CONTINGENT PAYMENTS"):
(i) an amount (such amount, the "FIRST CONTINGENT PAYMENT") equal to
(A) the product of (x) the Premium Base Amount for the first Premium Year
multiplied by (y) 1.05 less (B) the Contingent Payment Adjustments (as
defined in SECTION 10.02(a) below). "PREMIUM BASE AMOUNT" means the amount
that equals (A) the lesser of (i) Ten Million Dollars ($10,000,000) and
(ii) the amount by which Net Sales (as defined in SECTION 10.02(a) below)
exceeds Twenty-Five Million Dollars ($25,000,000) plus (B) the Divestiture
Amount (as defined in SECTION 10.02(a) below), if any, less (C) any
setoffs, if any, pursuant to SECTION 9.02(c);
(ii) an amount (such amount, the "SECOND CONTINGENT PAYMENT") equal to
(A) the product of (x) the Premium Base Amount for the second Premium Year
multiplied by (y) 1.10 less (B) the Contingent Payment Adjustments;
(iii) an amount (such amount, the "THIRD CONTINGENT PAYMENT") equal to
(A) the product of (x) the Premium Base Amount for the third Premium Year
multiplied by (y) 1.15 less (B) the Contingent Payment Adjustments;
(iv) an amount (such amount, the "FOURTH CONTINGENT PAYMENT") equal to
(A) the product of (x) the Premium Base Amount for the fourth Premium Year
multiplied by (y) 1.20 less (B) the Contingent Payment Adjustments;
(v) an amount (such amount, the "FIFTH CONTINGENT PAYMENT") equal to
(A) the product of (x) the Premium Base Amount for the fifth Premium Year
multiplied by (y) 1.25 less (B) the Contingent Payment Adjustments;
(vi) an additional amount (the "PREMIUM ADJUSTMENT") equal to (A) the
amount by which the result of (x) the aggregate Net Sales, plus (y) the
aggregate Divestiture Amounts, in each case for Premium Years one through
five, less (z) all amounts, if any, set off pursuant to SECTION 9.02(c),
exceeds (B) the sum of (x) $125,000,000 and (y) the aggregate Premium Base
Amount for Premium Years one through five, in which event the Premium
Adjustment would equal the lesser of such amount and $50,000,000;
provided, however, that in no event shall the sum of the aggregate Premium
Base Amount for Premium Years one through five and the Premium Adjustment
exceed $50,000,000. An example of the calculations made in this SECTION
2.03(a) is provided as EXHIBIT A hereto.
(vii) Pursuant to the Termination Agreement, Alpharma has the right to
receive 2% of the aggregate Consideration (as defined therein) in excess
of $65.0 million, in the event of a Change of Control of the Company (as
defined therein). Therefore, Parent shall pay to Alpharma from time to
time an amount equal to 2% of the amount that would
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have been the Contingent Payments if no payment had been made to Alpharma,
from and after the initial $5.0 million in Contingent Payments paid to
Common Holders pursuant to this SECTION 2.03 (the "ALPHARMA PAYMENTS")
instead of such amount being paid to the former Common Holders. Parent
shall make such payments to Alpharma on a parity with and at the same time
Parent transfers funds for the Contingent Payments to the Paying Agent. No
calculation in this SECTION 2.03(a)(vii) shall impact the calculations
made pursuant to SECTIONS 2.03(a)(i)-(vi), the parties hereto agreeing
that the purpose of this SECTION 2.03(a)(vii) shall be to pay to Alpharma
a portion of the Contingent Payments that would otherwise be paid to the
former Common Holders.
(b) NET SALES STATEMENTS. For each Premium Year, Parent shall prepare a
statement (each a "NET SALES STATEMENT") setting forth the Net Sales of each
Pediatric Product (which Net Sales Statement shall also list unit quantities,
the Net Sales amount of Pediatric Products shipped by Parent, its subsidiaries,
affiliates, licensees or sublicensees by product and the Net Sales Deductions
per Pediatric Product, aggregated by category, made) for the Premium Year to
which such Net Sales Statement relates. Within forty-five (45) calendar days
following the end of each Premium Year, Parent shall deliver to the Calculation
Representative (as defined in SECTION 9.04) a copy of the Net Sales Statement
for such Premium Year, along with a calculation of the related Contingent
Payment, if any, including all amounts, if any, setoff pursuant to SECTION
9.02(c) below or adjusted pursuant to the Contingent Payment Adjustments). In
the event that Parent determines according to this SECTION 2.03 that a
Contingent Payment is not to be paid during a Premium Year, Parent shall as
promptly as practicable notify the Calculation Representative in writing of such
fact, which notice shall describe the basis of Parent's determination. In
addition, Parent shall provide notification to the Common Holders, by press
release or otherwise, of the amount of any Contingent Payment earned, if any, or
if no Contingent Payment was earned, of such fact. The Calculation
Representative shall use its reasonable best efforts to cause its agents,
representatives, affiliates, stockholders, employees, officers and directors
(the Calculation Representative and such Persons being referred to as the
"RECEIVING PARTIES"), to treat and hold as confidential (and not disclose or
provide access to any Person) all information contained and relating to the Net
Sales Statements; provided, however, that this obligation shall not apply to any
information which:
(i) either before or after the date of disclosure to the Receiving
Parties becomes generally known to the public by some means other than a
breach of this SECTION 2.03(b);
(ii) is subsequently disclosed to the Receiving Parties by a third
party having a lawful right to make such disclosure and who is not under
an obligation of confidentiality to Parent;
(iii) is independently developed by or for the Receiving Party without
reference to or reliance upon any information received from Parent; or
(iv) is required by law, rule, regulation or bona fide legal process
(including any arbitration proceeding pursuant to SECTION 2.03(d) below)
to be disclosed, provided that the Receiving Party takes reasonable steps
to restrict and maintain the confidentiality of such information and
provides reasonable notice to Parent.
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(c) ASSIGNABILITY. The right of each Common Holder to receive payments
pursuant to SECTION 2.03 may not be transferred or assigned except by operation
of law or by will or intestate succession.
(d) DISPUTE RESOLUTION; ARBITRATION. In the event that any dispute,
controversy or claim that arises in connection with this SECTION 2.03, such
dispute, controversy or claim shall be settled by arbitration in accordance with
the following:
(i) The Parent and the Calculation Representative shall attempt in good
faith to resolve promptly through negotiations any claim or dispute under
this SECTION 2.03. If any such dispute, controversy or claim should arise,
Parent and the Calculation Representative shall meet once (or more if
mutually agreed) to attempt to resolve the matter (the "SETTLEMENT
MEETING"). Either Parent or the Calculation Representative may request the
other to attend a Settlement Meeting at a mutually agreed time and place
within ten (10) days after delivery of a written notice of a dispute,
controversy or claim. The occurrence of a Settlement Meeting with respect
to a dispute, controversy or claim shall be a condition precedent to
instituting an arbitration proceeding with respect to a claim or dispute
under this SECTION 2.03, provided that if Parent or the Calculation
Representative refuses to attend a Settlement Meeting the other party may
proceed to institute an arbitration proceeding as provided below.
(ii) Applicable Rules. A panel of three arbitrators shall conduct the
arbitration proceedings in accordance with the provisions of the Federal
Arbitration Act (99 U.S.C. Section 1 et seq.) (the "FEDERAL ARBITRATION
ACT") and the Commercial Arbitration Rules of the American Arbitration
Association (the "ARBITRATION RULES"). The arbitration shall be held in
New York, New York.
(iii) Initiation of Arbitration. To submit a dispute, controversy or
claim to arbitration, either Parent or the Calculation Representative
shall furnish to the other and the American Arbitration Association a
notice (the "ARBITRATION NOTICE") containing (A) the name and address of
the complaining party, (B) the nature of the dispute, controversy or claim
in reasonable detail, (C) their intent to commence arbitration proceeding
under this Agreement and (D) the other information required under the
Federal Arbitration Act and the Arbitration Rules.
(iv) Selection of Arbitrators. Within twenty Business Days after
delivery of the Arbitration Notice, Purchaser and the Calculation
Representative shall each select one arbitrator. Within ten Business Days
after the selection of the last of those two arbitrators, those two
arbitrators shall select the third arbitrator from the list of the
American Arbitration Association's National Panel of Commercial
Arbitrators (the "PANEL LIST"). If the first two arbitrators cannot select
a third arbitrator within such ten Business Day period, the American
Arbitration Association shall select such third arbitrator from the list.
Each arbitrator shall be an individual not subject to disqualification
under Rule No. 19 (or any successor rule) of the Arbitration Rules (or any
successor rule).
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(v) Discovery. During the period beginning with the selection of the
third arbitrator and ending upon the conclusion of the arbitration
proceedings, the arbitrators shall have the authority to permit the
parties to conduct such discovery as the arbitrators consider appropriate.
The decision of a majority of the panel shall be the decision of the
arbitrators.
(vi) Judgments. The determination of the arbitrators as to the
resolution of the dispute, controversy or claim shall be final and binding
and conclusive to the maximum extent permitted by law. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. This agreement to arbitrate is irrevocable.
(vii) Acknowledgement. The parties hereto acknowledge and agree that
the rights and restrictions set forth in this SECTION 2.03, including but
not limited to the amount of and the method for calculating the Contingent
Payments and the method of resolving disputes set forth in this SECTION
2.03(d), have been bargained for at arms length, and constitute essential
terms to the transactions contemplated by this Agreement.
(e) CONTINGENT PAYMENTS NOT ROYALTIES. The Contingent Payments provided
for pursuant to this SECTION 2.03 are provided as a result of bona fide
difficulties in determining the value of the Company. The Contingent Payments
represent additional consideration for the Company Stock and are not intended to
be royalty payments.
(f) FEES AND EXPENSES. Any reasonable fees and expenses incurred by any
party in connection with resolving any dispute, claim or controversy under this
SECTION 2.03, including, without limitation, any legal fees or fees and expenses
incurred in connection with any arbitration proceeding held pursuant to SECTION
2.03(d), shall be borne by such party; provided, however, in the event that the
Parent is the prevailing party, the reasonable legal fees or fees and expenses
incurred by the Parent shall be setoff against any future Contingent Payments;
and provided, further, that in the event that the Calculation Representative is
the prevailing party, the reasonable legal fees or expenses incurred by the
Calculation Representative shall be paid by the Parent. The question of which
party is the prevailing party shall be submitted to the arbitrators as part of
the arbitration proceeding.
(g) LATE PAYMENTS; COLLECTIONS. Any amount not paid when due under this
SECTION 2.03 shall bear interest at the lesser of (i) five percent (5%) per
annum compounded annually, or (ii) the highest rate permitted by Law.
(h) BOOKS AND RECORDS; AUDITS. For a period of not less than three (3)
years after the relevant Premium Year, Parent, its subsidiaries, affiliates,
licensees and sublicensees shall keep full, true and accurate books of account
sufficient to determine the amounts payable pursuant to this SECTION 2.03. The
Calculation Representative shall have the right, not more than once during any
calendar year, to have the books and records of Parent, its subsidiaries,
affiliates, licensees or sublicensees audited by a qualified independent
accounting firm of its choosing, under appropriate confidentiality provisions,
to ascertain the accuracy of the reports and payments under this SECTION 2.03
and compliance by Parent, its subsidiaries, affiliates, licensees or
sublicensees with its obligations under this SECTION 2.03. Such audit shall be
conducted upon at least ten (10) days' advance notice during normal business
hours and in a
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manner that does not interfere unreasonably with the business of the audited
entity. Subject to Parent's right to dispute such amounts in accordance with
SECTION 2.03(d), any underpayment determined by such audit shall promptly be
paid by Parent. If Parent has underpaid an amount due under SECTION 2.03 by more
than ten percent (10%), Parent shall reimburse the Calculation Representative
for the cost of such audit (with the cost of the audit to be borne by the
Calculation Representative in all other cases).
SECTION 2.04. COMPANY STOCK OPTIONS AND WARRANTS.
(a) Subject to the consummation of the Merger, prior to the Effective
Time, the Company shall take all necessary action (i) to amend the Company's
1997 Director Stock Option Plan to provide that all shares of Company Stock
subject to outstanding options under the 1997 Director Stock Option Plan shall
become fully vested and exercisable, whether or not previously vested and
exercisable prior to the Effective Time, and all such options not exercised
prior to the Effective Time shall be cancelled and no options granted pursuant
to the 1997 Director Stock Option Plan will be outstanding at or after the
Effective Time (such amendment to be approved by the Company's Board of
Directors and by each Person who holds an option granted under the 1997 Director
Stock Option Plan in his or her individual capacity); (ii) with respect to all
options granted and outstanding under each of the Company's Amended and Restated
1992 Equity Incentive Plan, the Company's 1997 Director Stock Option Plan, the
Company's 1997 Employee Stock Purchase Plan, the Company's Amended and Restated
1999 Stock Incentive Plan, the Company's Amended and Restated 2000 California
Stock Option Plan (collectively, with the 1997 Employee Stock Purchase Plan, the
"COMPANY STOCK PLANS"), to accelerate the vesting and exercisability of
outstanding options and rights to purchase Company Stock granted under the
Company Stock Plans (each, a "COMPANY STOCK OPTION"), whether or not such
Company Stock Options were previously vested and exercisable prior to the
Effective Time; (iii) to take such actions as provided under the Company's 1997
Employee Stock Purchase Plan to cause options granted thereunder to become
exercisable as of a date established by the Company's Board of Directors prior
to the Effective Time; (iv) to permit each holder of a Company Stock Option
(each, a "COMPANY OPTIONHOLDER") to exercise all of his Company Stock Options
which are fully vested and exercisable, including as a result of aforementioned
acceleration, prior to the Effective Time; (v) to take all action necessary,
including, without limitation, obtaining consents of and providing written
notice to the Company Optionholders to the extent necessary, to provide that all
Company Stock Options not so exercised shall be cancelled and that no Company
Stock Options will be outstanding at or after the Effective Time; and (vi) to
terminate the Company Stock Plans as of the Effective Time.
(b) In the event that at any time from and after the Effective Time a
holder of warrants to purchase any Company equity securities (such warrants, the
"COMPANY WARRANTS" and such holders, the "COMPANY WARRANT HOLDERS") that are not
In-the-Money Warrants (as defined in SECTION 10.02(a) below) ("OUT-OF-THE-MONEY
WARRANTS") properly exercises Out-of-the-Money Warrants ("EXERCISED WARRANTS")
and delivers the exercise price for such Exercised Warrants to Parent or the
Surviving Corporation, then
(i) the portion (the "ALLOCATED CONSIDERATION") of the aggregate
exercise price of such Exercised Warrants equal to the Common Stock Merger
Consideration paid by
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Parent to Common Holders pursuant to SECTION 2.02 prior to such exercise
with respect to the number of shares of Company Common Stock for which
such Exercised Warrants are exercised shall be repaid to the Person that
exercises such Exercised Warrants (or upon the mutual agreement of Parent
and such Person, shall be deducted from the exercise price actually paid
by such Person to Parent or the Surviving Corporation in connection with
such exercise);
(ii) Parent shall pay to the Common Holders, in accordance with SECTION
2.02(f), an amount (the "EXCESS WARRANT PROCEEDS") equal to the amount by
which (A) the aggregate exercise price of such Exercised Warrants exceeds
(B) the Allocated Consideration; and
(iii) with respect to any payment made to Common Holders following the
exercise of such Exercised Warrants and the payment by Parent of the
Excess Warrant Proceeds with respect to the exercise of such Exercised
Warrants, (A) the Person exercising such Exercised Warrants shall be
deemed a Common Holder for purposes of this Agreement, and (B) the Per
Share Denominator (as defined below) shall be adjusted in accordance with
the definition of such term.
The parties acknowledge that the purpose of this SECTION 2.04(b) is to
allocate the exercise price of the Exercised Warrants among the holders of such
Exercised Warrants and the holders of Common Stock in a manner that has the same
result as if such Exercised Warrants had been exercised prior to the Effective
Time.
SECTION 2.05. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
shares of Company Stock that are outstanding immediately prior to the Effective
Time and that are held by Company Stockholders as of the Effective Time who have
exercised and perfected appraisal rights for such shares of Company Stock in
accordance with Section 262 of the DGCL and who, as of the Effective Time, have
neither effectively withdrawn nor lost their right to such appraisal
(collectively, the "DISSENTING SHARES") shall not be converted into or represent
the right to receive the Merger Consideration (as defined in SECTION 10.02(a)
below). Such Company Stockholders shall be entitled to receive payment of the
appraised value of such shares of Company Stock held by them in accordance with
DGCL, except that all Dissenting Shares held by Company Stockholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such shares of Company Stock under DGCL shall thereupon
be deemed to have been converted into, and to have become exchangeable for, as
of the occurrence of such event, the right to receive the Merger Consideration
provided by SECTION 2.01, without any interest thereon, upon surrender, in the
manner provided in SECTION 2.02, of the Certificates that formerly evidenced
such shares of Company Stock.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands received by the
Company, and any other related instruments served pursuant to DGCL and received
by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under DGCL. The Company shall
not, except with the prior written consent of Parent
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(which shall not be unreasonably withheld or delayed), voluntarily make any
payment with respect to any demands for appraisal or offer to settle or settle
any such demands. Except as provided in SECTION 2.05(a), holders of Dissenting
Shares shall not be entitled to receive their Merger Consideration and such
Merger Consideration shall be retained by Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company
to Parent and Merger Sub concurrently with the execution of this Agreement (the
"COMPANY DISCLOSURE SCHEDULE") the Company represents and warrants to Parent and
Merger Sub that the statements contained in this Article III are true and
correct as of the date hereof. The Company Disclosure Schedule shall be arranged
in paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article III and the disclosure in any paragraph shall qualify (1) the
corresponding paragraph in this Article III and (2) the other paragraphs in this
Article III only to the extent that it is clear from a reading of such
disclosure that it also qualifies or applies to such other paragraphs. The
Company represents and warrants to Parent and Merger Sub as follows:
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SECTION 3.01. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power and authority would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
The Company is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed or in good standing that have not had, and would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The term "COMPANY MATERIAL ADVERSE EFFECT" means any
change, effect, event, occurrence or state of facts that is materially adverse
to the business, properties, operations, financial condition and results of
operations of the Company taken as a whole or materially impairs or delays the
ability of the Company to perform its material obligations under this Agreement
or to consummate the Merger; provided, however, that none of the following shall
be deemed, singly or in the aggregate, to constitute, or be considered in
determining whether there exists, a Company Material Adverse Effect: any change,
effect, event, occurrence or state of facts resulting from (i) any factors
generally affecting the healthcare or pharmaceutical industry, (ii) any factors
generally affecting general economic conditions or the securities markets, (iii)
acts or omissions of Parent or the Merger Sub, including without limitation acts
or omissions contemplated by or pursuant to this Agreement; (iv) acts or
omissions of the Company contemplated by or pursuant to this Agreement; (v) the
pendency or announcement of the Merger (including the loss by the Company of any
customers, suppliers or employees and any consequences of such loss); and (vi)
the continued incurrence of losses by the Company in the ordinary course of
business. The Company has no subsidiaries.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company
has heretofore furnished to Parent a complete and correct copy of the
certificate of incorporation and the bylaws, each as amended to date, of the
Company. Such certificate of incorporation and bylaws are in full force and
effect. The Company is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (a)
60,000,000 shares of Company Common Stock and (b) 5,000,000 shares of Company
Preferred Stock, 4,000 of which have been designated as Series H Preferred
Stock.
(b) As of the date hereof, (i) 17,056,817 shares of Company Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable and free of preemptive rights, (ii) no shares of Company
Common Stock are held in the treasury of the Company, (iii) 2,239,6661 shares of
Company Common Stock are reserved for future issuance upon exercise of
outstanding stock options granted pursuant to the Company Stock Plans, (iv)
10,908,031 shares of Company Common Stock are reserved for future issuance upon
exercise of outstanding Company Warrants, or the right to receive Company
Warrants, (v) 6,140,351 shares of Company Common Stock are reserved for future
issuance upon
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conversion of the Company Notes and (vi) 1,619,731 shares of Company Common
Stock remain available for future issuance under the Company Stock Plans.
(c) As of the date hereof, (i) 17,056,817 Depositary Shares are issued
and outstanding under the Depositary Agreement, (ii) 20,907,774 Depositary
Shares are reserved for future issuance upon exercise of outstanding warrants,
stock options or outstanding stock incentive rights granted pursuant to the
Company Stock Plans and (iii) all Depositary Shares and Depositary Receipts have
been issued in accordance with the Depositary Agreement.
(d) As of the date hereof, 2,001 shares of Series H Preferred Stock are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable and free of preemptive rights and 1,999 shares of Series H
Preferred Stock have been reserved for future issuance. There are no other
shares of preferred stock of the Company outstanding or reserved for future
issuance.
(e) There are no outstanding subscriptions, options, rights, warrants,
convertible securities, stock appreciation rights, phantom equity or other
rights, agreements, arrangements or commitments of any character (including
"rights plans" or "poison pills") relating to the issued or unissued capital
stock of the Company or obligating the Company to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of capital stock of, or other equity
interests in, the Company or obligating the Company to grant, extend, accelerate
the vesting of or enter into or make payment with respect to any such
subscription, option, right, warrant, convertible security, stock appreciation
right, phantom equity or other such commitment or agreements. All shares of
Company Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. All
Company Stock, Depositary Shares, subscriptions, options, rights, warrants,
convertible securities, stock appreciation rights, phantom equity or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or obligating the Company to
issue, transfer, sell, redeem, repurchase or otherwise acquire any shares of
capital stock of, or other equity interests in, the Company or obligating the
Company to grant, extend, accelerate the vesting of or enter into or make
payment with respect to any such subscription, option, right, warrant,
convertible security, stock appreciation right, phantom equity or other such
commitment or agreements (i) were issued in accordance with all applicable laws
and (ii) are free from any preemptive rights associated with such issuances.
(f) To the Company's knowledge, there are no voting trusts, proxies or
other agreements or understandings with respect to the voting of shares of
capital stock of the Company other than the Depositary Agreement and the Voting
Agreement.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, and, subject to the adoption of this
Agreement and the approval of the Merger by the Company Stockholders, to
consummate the Transactions. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the Transactions
have been duly and validly authorized by all necessary corporate
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action, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Transactions other
than the Company Stockholders' Approval (as defined in SECTION 3.22 below) and
the filing of the Certificate of Merger as required by DGCL. This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (the "ENFORCEABILITY EXCEPTION").
(b) The Board of Directors of the Company at a meeting duly called and
held, has (i) determined that the Merger is in the best interest of the Company
and the Company Stockholders, (ii) approved the Merger and adopted this
Agreement in accordance with the provisions of DGCL, and (iii) directed that
this Agreement and the Merger be submitted to the Company Stockholders for their
adoption and approval and resolved to recommend that the Company Stockholders
vote in favor of the adoption of this Agreement and the approval of the Merger.
A copy of the resolutions adopted by the Company's Board of Directors approving
this Agreement is set forth in SECTION 3.04(b) of the Company Disclosure
Schedule.
SECTION 3.05. CONSENTS AND APPROVALS; NO VIOLATIONS. The execution
and delivery of this Agreement does not, the consummation of the Transactions
will not and the performance by the Company of its obligations hereunder will
not:
(a) subject to obtaining the Company Stockholders' Approval, conflict
with any provision of the certificate of incorporation or bylaws (or other
organizational documents) of the Company;
(b) subject to obtaining the Company Stockholders' Approval, require
any consent, waiver, approval, order, authorization or permit of, or
registration, filing with or notification to, any governmental or regulatory
authority or agency (a "GOVERNMENTAL AUTHORITY"), except for (i) the filing of
the Certificate of Merger with the Delaware Secretary of State and appropriate
corresponding documents with the secretaries of state of the other states in
which the Company is qualified to do business, (ii) the filing of the Proxy
Statement (as defined in SECTION 6.01 hereof) with the SEC in accordance with
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (iii) such
consents, approvals, orders, authorizations and regulations, declarations and
filings as may be required under applicable state securities or blue sky laws,
(iv) the filing of such reports, schedules or materials under the Exchange Act
and Regulation MA as may be required in connection with this Agreement and the
Transactions, and (v) such other consents, waivers, approvals, orders,
authorizations or permits of or registration, filing with or notification to any
Governmental Authority that, if not obtained or made, would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect;
(c) result in any violation or breach of, or constitute a default (with
or without notice or lapse of time or both) under, or give rise to any right of
termination, forfeiture, cancellation or acceleration, transfer fees or
guaranteed payments or a loss of a material benefit
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under, or require a consent, waiver or approval under any of the terms,
conditions or provisions of any Material Contracts (as defined in SECTION
3.13(a)), except for any such conflicts, violations, breaches, defaults,
terminations, fees, rights, payments, cancellations or accelerations that would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect or such consents, waivers and approvals which if not
obtained would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect;
(d) subject to obtaining the Company Stockholders' Approval and
compliance with the requirements specified in SECTION 3.05(b), conflict with or
violate the provisions of any order, writ, injunction, judgment, decree,
statute, rule or regulation ("LAW") applicable to the Company or any of its
properties or assets except for such conflicts or violations which, would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect; or
(e) result in the creation of any lien, mortgage, pledge, security
interest, encumbrance, claim or charge of any kind ("LIEN") upon any properties
or assets of the Company (including, but not limited to, the Owned Intellectual
Property) or on any shares of capital stock of the Company under any agreement
or instrument to which the Company is a party or by which the Company or any of
its properties or assets is bound.
SECTION 3.06. PERMITS; COMPLIANCE.
(a) The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
the Company to own, lease and operate its properties as it is now being operated
or to carry on its business as it is now being conducted, other than those, the
absence of which would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect (the "COMPANY PERMITS"), and
no suspension or cancellation of any of the Company Permits is pending or, to
the Company's knowledge, threatened.
(b) The Company is not in conflict with, or in default, breach or
violation of, in each case, in any respect, (i) any Law applicable to the
Company or the ownership or operation of any property or asset of the Company,
or (ii) any Company Permits, except for any such conflicts, defaults, breaches
or violations that would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
(c) The Company's activities related to the research, development,
manufacture, testing, distribution, holding, sales and/or marketing of each
product or product candidate subject to the United States Food and Drug
Administration's (the "FDA") jurisdiction under the Federal Food, Drug, and
Cosmetic Act (the "FDCA") are in compliance in all material respects with all
applicable requirements under the FDCA and any other applicable Laws including,
but not limited to, (i) applicable Laws relating to good manufacturing
practices, labeling, advertising, record keeping or filing of reports including,
but not limited to, 21 CFR Part 203 (Prescription Drug Marketing Act) or (ii)
applicable Laws relating to sponsor obligations for
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products under an investigational new drug application, a new drug application
or an abbreviated new drug application.
(d) The Company has, prior to the execution of this Agreement, made
available to Parent copies of all documents in its possession material to
assessing compliance of the Company with the FDCA and its implementing
regulations since January 1, 1999, including, but not limited to, copies of (i)
all warning letters, notices of adverse findings and similar correspondence
received since January 1, 1999, (ii) all audit reports performed since January
1, 1999, and (iii) any document concerning any significant oral or written
communication received from the FDA since January 1, 1999.
(e) Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee or other person acting on behalf of the
Company, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others, or established or
maintained any unlawful or unrecorded funds in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any other domestic or foreign law.
SECTION 3.07. COMPANY SEC REPORTS. The Company has timely filed
with the Securities and Exchange Commission (the "SEC"), and has heretofore made
available (provided that all documents filed by the Company electronically with
the SEC and publicly available prior to the date hereof shall be deemed
available) to Parent true and complete copies of, each form, registration
statement, report, schedule, proxy or information statement and other document
(including exhibits and amendments thereto), including without limitation its
Annual Reports to Stockholders to the extent incorporated by reference in
certain of such reports, required to be filed by it with the SEC since January
1, 1999 under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or
the Exchange Act (collectively, the "COMPANY SEC REPORTS"). As of the respective
dates each Company SEC Report was filed, such Company SEC Report filed on or
prior to the date of this Agreement, including without limitation any financial
statements or schedules included therein, (a) complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and the applicable rules and regulations promulgated
thereunder, and (b) did not at the time it was filed (or if amended or
superceded by a filing prior to the date of this Agreement, then as and on the
date so amended or superceded) 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 therein, in light of the circumstances under which
they were made, not misleading. Each contract, lease, indenture, agreement,
arrangement or understanding to which the Company is a party that is required to
be filed with the SEC has been timely filed.
SECTION 3.08. FINANCIAL STATEMENTS. Each of the financial
statements of the Company contained in the Company SEC Reports filed on or prior
to the date of this Agreement (including any related notes and schedules) (the
"COMPANY FINANCIAL STATEMENTS") at the time filed were prepared from, and were
in accordance with, the books and records of the Company, complied in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto and subject, in the case of quarterly financial statements, to
normal and recurring year end
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adjustments and the absence of financial footnotes in the case of any unaudited
interim financial statements) and fairly presented the financial position of the
Company as of the date thereof and the results of operations and cash flows (and
changes in financial position, if any) of the Company for the periods presented
therein (subject to, in the case of unaudited interim financial statements,
normal and recurring year end adjustments and the absence of financial footnotes
in the case of any unaudited interim financial statements).
SECTION 3.09. ABSENCE OF UNDISCLOSED LIABILITIES.
(a) There are no debts, liabilities or obligations, whether accrued or
fixed, absolute or contingent, matured or unmatured or determined or
determinable ("LIABILITIES") of the Company that are not fully reflected or
reserved against on the Company's Balance Sheet dated as of June 30, 2001 (the
"BALANCE SHEET") and that would be required under GAAP to be reflected or
reserved thereon, except Liabilities incurred since the date of the Balance
Sheet in the ordinary course of the business, consistent with the past practice
of the Company, which have not had, and would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect. There
are no outstanding warranty or product liability claims against the Company.
(b) The Company represents and warrants that, as of the date hereof:
(i) $6,250,000 principal, plus no accrued and unpaid interest, is
outstanding under the 7.5% Subordinated Notes issued on January 2, 2001
(the "7.5% SUBORDINATED NOTES");
(ii) $1,749,126 principal, plus approximately $485,693.00 in accrued
and unpaid interest, is outstanding under the 8% Subordinated Notes issued
under the Second Amendment on July 23, 1999 under the May 13, 1998
Securities Purchase Agreement, as amended (the "MAY 1998 SECURITIES
PURCHASE AGREEMENT") by and among the Company, Xxxxxx Xxxx Investors II,
L.P., FS Employee Investors LLC, FS Parallel Fund LP, BancBoston Ventures
Inc. and Xxxxx Partners (the "8% SUBORDINATED NOTES");
(iii) $14,000,000 principal, plus no accrued and unpaid interest, is
outstanding under the 7.5% Convertible Subordinated Notes issued on July
23, 1999 under the Third Amendment to the May 1998 Securities Purchase
Agreement and the 7.5% Convertible Subordinated Notes issued on October
15, 1999 under the Fourth Amendment to the May 1998 Securities Purchase
Agreement (the "7.5% CONVERTIBLE SUBORDINATED NOTES");
(iv) $7,000,000 principal, plus approximately $829,760.00 in accrued
and unpaid interest and dividends is outstanding under the 8% Convertible
Subordinated Notes issued on July 23, 1999 upon exchange of Series G
Preferred Stock in the Second Amendment to the May 1998 Securities
Purchase Agreement (the "8% CONVERTIBLE SUBORDINATED NOTES"); and
(v) a total of $6,606 in unpaid dividends has accrued pursuant to the
terms of the Series H Preferred Stock.
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SECTION 3.10. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30,
2001 except as contained in the SEC Reports filed on or prior to the date of
this Agreement, the Company has conducted its business only in the ordinary
course and in a manner consistent with past practice, and since such date (a)
there has not been any Company Material Adverse Effect and (b) the Company has
not taken any action which, if such action had been taken after the date of this
Agreement, would have required the written consent of Parent pursuant to the
lettered paragraphs of the second paragraph of SECTION 5.01 hereof; provided,
however, that solely for purposes of this SECTION 3.10, the phrase "other than
in the ordinary course of business consistent with past practices" shall be
inserted at the beginning of each of paragraphs (g), (h) and (j) of the second
paragraph of SECTION 5.01 hereof.
SECTION 3.11. ABSENCE OF LITIGATION. There is no litigation, suit,
claim, arbitration, action, proceeding or investigation (collectively,
"LITIGATION") pending or, to the knowledge of the Company, threatened against
the Company, or any property or asset of the Company, before any court,
arbitrator or Governmental Authority. None of the Company or any property or
assets (including, but not limited to, the Owned Intellectual Property) of the
Company, is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any court,
arbitrator or Governmental Authority.
SECTION 3.12. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) SECTION 3.12(a) of the Company Disclosure Schedule contains a true
and complete list of all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
all bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical, disability or life insurance, supplemental
retirement, severance or other material benefit plans, programs or arrangements
(other than the Company Stock Plans), and all employment (other than oral
employment agreements that are terminable at will), termination, severance or
other similar contracts or agreements pursuant to which services are provided to
the Company, whether oral or written, whether legally enforceable or not, to
which the Company is a party, or with respect to which the Company has any
obligation to, or which are maintained, contributed to or sponsored by the
Company or any entity which is a part of a "controlled group of corporations"
with, under "common control" with, or a member of an "affiliated service group"
with the Company as such terms are defined in Section 414(b), (c), (m) or (o) of
the Code (an "ERISA AFFILIATE") for the benefit, of any current or former
employee, officer or director of the Company (collectively, the "COMPANY BENEFIT
PLANS").
(b) Each Company Benefit Plan is in writing, the Company has furnished
or made available to Parent with a true and complete copy of each Company
Benefit Plan, including, without limitation, (i) a copy of each trust, annuity
contract or other funding arrangement, (ii) each summary plan description
("SPD") and summary of material modifications and summaries, if any, furnished
or made available to employees, officers and directors of the Company of all
incentive compensation, other plans and fringe benefits for which SPDs are not
required, (iii) the Internal Revenue Service ("IRS") Form 5500, if any, for the
most recently completed fiscal year, (iv) the most recently received IRS
determination letter for each such
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Company Benefit Plan intended to be qualified under Section 401(a) of the Code,
(v) the actuarial report and certified financial statements in connection with
each such Company Benefit Plan, if applicable, for the most recently completed
three fiscal years, (vi) any correspondence with the IRS or the Department of
Labor with respect to each such Company Benefit Plan, (vii) each administrative
or other services agreement or contract in effect prior to the Closing Date and
any amendments thereto effective as of a later date, and (viii) the
notifications to employees of their rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations promulgated
thereunder ("COBRA").
(c) None of the Company Benefit Plans is a multiemployer plan (within
the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "MULTIEMPLOYER PLAN") or
a single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Company could incur liability under Section 4063 or 4064 of
ERISA (a "MULTIPLE EMPLOYER PLAN"). None of the Company Benefit Plans provides
for or promises retiree medical, disability or life insurance benefits to any
current or former employee, officer or director of the Company except as
required by applicable Law. No Company Benefit Plans are self-insured "multiple
employer welfare arrangements" as such term is defined in Section 3(40) of
ERISA.
(d) None of the Company Benefit Plans provides for the payment of
separation, severance, change of control, termination or similar-type benefits
to any person or obligates the Company to pay separation, severance,
termination, change of control or similar-type benefits solely or partially as a
result of the Transactions or as a result of a "change in control", within the
meaning of such term under any Company Benefit Plan or Section 280G of the Code.
Neither the execution and delivery of this Agreement nor the consummation of the
Transactions, either alone or together with another event, will (i) result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute, forgiveness of indebtedness or otherwise)
becoming due under any Company Benefit Plan, (ii) increase any benefits
otherwise payable under any Company Benefit Plan or other arrangement, (iii)
result in the acceleration of the time of payment, vesting or funding of any
benefits under any Company Benefit Plan, (iv) affect in any respects any Company
Benefit Plan's current treatment under any Laws, including any tax or social
contribution Law or (v) give rise to the payment of any amount that would not be
deductible pursuant to the terms of Sections 162(a)(1), 162(m) and/or 280G of
the Code or would require the payment of an excise tax imposed by Section 4999
of the Code or any "gross up" of any such excise tax.
(e) Each Company Benefit Plan is now and always has been operated in
all material respects in accordance with its terms and the requirements of all
applicable Laws (including the regulations and rules promulgated thereunder),
including, without limitation, ERISA and the Code. The Company has performed all
material obligations required to be performed by it under, and is not in any
material respect in default under or in violation of, the Company Benefit Plans.
No action, claim or proceeding is pending or, to the Company's knowledge,
threatened with respect to any Company Benefit Plan (other than claims for
benefits in the ordinary course). None of the Company nor any ERISA Affiliate is
subject to any penalty or tax with respect to any Company Benefit Plan under
Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
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(f) Each Company Benefit Plan that is intended to be qualified under
Section 401(a) or Section 401(k) of the Code has timely received a favorable
determination letter from the IRS considering the Tax Reform Act of 1986, as
amended, and subsequent changes in the law or applicable regulations covering
all of the provisions applicable to the Company Benefit Plan for which
determination letters are currently available, that the Company Benefit Plan is
so qualified and each trust established in connection with any Company Benefit
Plan that is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that it is
so exempt, and to the Company's knowledge, no fact or event has occurred since
the date of such determination letter or letters from the IRS considering the
Tax Reform Act of 1986, as amended, to adversely affect the qualified status of
any such Company Benefit Plan or the exempt status of any such trust.
(g) The Company has not incurred any material unsatisfied liability
under, arising out of or by operation of Title IV of ERISA (other than liability
for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer
Plan. All "benefit liabilities" within the meaning of Section 4001(a)(16) of
ERISA are fully funded with respect to each applicable Company Benefit Plan
which is subject to Title IV of ERISA as determined on a termination basis using
the assumed interest rate set forth in each Company Benefit Plan or otherwise
required by ERISA or the Code.
(h) All contributions, premiums or payments required to be made or
accrued with respect to any Company Benefit Plan prior to the date hereof have
been made on or before their due dates. All such contributions made for open
taxable years of the Company and for which Tax Returns (as defined below) have
been filed have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority and,
to the Company's knowledge, no fact or event exists which would reasonably be
expected to give rise to any such challenge or disallowance.
(i) The Company does not have any Company Benefit Plan that is not
subject to United States Law.
(j) The Company is not and never has been a party to or otherwise bound
by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. The Company is not the
subject of any proceeding asserting that the Company has committed an unfair
labor practice or seeking to compel it to bargain with any labor union or labor
organization, nor is there pending or, to the knowledge of the Company,
threatened, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving the Company.
(k) As of the date hereof, SECTION 3.12(k) of the Company Disclosure
Schedule sets forth a true and complete list of the names, titles, annual
salaries and all compensation pursuant to any commission or bonus plan or
similar arrangement of all officers of the Company and all other employees of
the Company.
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SECTION 3.13. CONTRACTS.
(a) SECTION 3.13(a) of the Company Disclosure Schedule lists each of
the following written contracts and agreements of the Company (such contracts
and agreements being "MATERIAL CONTRACTS"):
(i) each contract and agreement which (A) involved consideration of
more than $10,000, in the aggregate, during the calendar year ended
December 31, 2000 that continues to be executory, (B) is likely to involve
consideration of more than $10,000, in the aggregate, during the calendar
year ending December 31, 2001, or (C) is likely to involve consideration
of more than $10,000, in the aggregate, over the remaining term of such
contract, and which, in any such case, cannot be canceled by the Company
without penalty or further payment and without more than 90 days' notice;
(ii) all broker, distributor, dealer, manufacturer's representative,
franchise, physician consulting, clinical study, data management,
research, agency and sales promotion contracts and agreements to which the
Company is a party;
(iii) all market research, market consulting and advertising contracts
and agreements, management contracts (excluding contracts for employment),
contracts with other consultants and any contracts and agreements
involving the payment of royalties or other amounts calculated based upon
the revenues or income of the Company or the revenue or income related to
any product of the Company to which the Company is a party and, in each
case, which is likely to involve consideration of more than $10,000, in
the aggregate, during the calendar year ending December 31, 2001;
(iv) all contracts and agreements evidencing indebtedness for borrowed
money in excess of $25,000;
(v) all leases and subleases of real property;
(vi) all contracts and agreements with any Governmental Authority to
which the Company is a party;
(vii) all contracts and agreements that limit or purport to limit the
ability of the Company to compete in any line of business or with any
Person or in any geographic area or during any period of time;
(viii) to the best of the Company's knowledge after reasonable
investigation all contracts containing confidentiality requirements
(including all nondisclosure agreements), which require the Company to
keep confidential information belonging to third parties;
(ix) all non-arm's length contracts and agreements in excess of $10,000
individually between or among the Company and any Principal Stockholder
or, to the Company's knowledge, any affiliate of such Principal
Stockholder;
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(x) any other material agreement of the Company which is terminable
upon, or prohibits a change of ownership or control of, the Company;
(xi) all contracts and agreements for Owned Intellectual Property (as
defined in SECTION 10.02) or Licenses (as defined in SECTION 10.02), other
than (A) any sublicense implicit as a result of a sale or transfer to an
end-user of any Company product, (B) any confidentiality or nondisclosure
agreements, in each case entered into in the ordinary course of the
Company's business and (C) licenses of commercial off-the-shelf or
shrink-wrap computer software;
(xii) all material contracts and agreements providing for benefits
under any Company Benefit Plan;
(xiii) all material contracts or arrangements (excluding contracts with
customs brokers or legal counsel prosecuting patent applications or
registrations and/or trademark applications or registrations on behalf of
the Company) that, to the Company's knowledge, result in any Person
holding a power of attorney from the Company that relates to the Company
or its business;
(xiv) all contracts for employment for persons required to be listed in
SECTION 3.12(k) of the Disclosure Schedule;
(xv) all contracts and agreements with any Person authorized to act as
a purchasing agent for a third party pursuant to which the Company sells
products, has agreed to discount products or pursuant to which the Company
has agreed to utilize an electronic business-to-business exchange to sell
its products; and
(xvi) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company or to the
conduct of its business, or the absence of which would prevent or
materially delay consummation of the Merger or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement.
(b) (i) Each Material Contract is valid and binding on the Company,
and, to the knowledge of the Company, on the other parties thereto (subject, in
each case, to the Enforceability Exception) and is in full force and effect
(subject to expiration thereof after the date hereof in accordance with the
terms of such Material Contract) and represents, together with any other
contracts listed on the Company Disclosure Schedule that relate to the same
subject matter, the entire agreement between the respective parties with respect
to the subject matter of such Material Contract;
(ii) The Company has not (A) received any written notice of termination
or cancellation under any Material Contract, (B) received any written
notice of breach or default under any Material Contract, which breach or
default has not been cured, and (C) granted to any other third party any
rights, adverse or otherwise, under any Material Contract that would
constitute a breach of such Material Contract; and
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(iii) The Company and, to the Company's knowledge, any other party to
each Material Contract, are not in breach or default thereof, and no event
has occurred that, with notice or lapse of time, would constitute such a
breach or default or permit termination, modification or acceleration
under such Material Contract.
SECTION 3.14. ENVIRONMENTAL MATTERS. The Company (a) is in
compliance with all federal, state or local statutes, laws, ordinances,
regulations, rules, codes or orders of the United States or any other
jurisdiction and any enforceable judicial or administrative interpretation
thereof, including any legally enforceable judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials, as in effect as of the date of this Agreement
("ENVIRONMENTAL LAWS") applicable to the conduct of the Company's business as
presently conducted or to the assets and properties owned by the Company, except
where noncompliance would not reasonably be expected to have a Company Material
Adverse Effect, (b) holds all permits, approvals, identification numbers,
licenses and other authorizations required under any applicable Environmental
Law ("ENVIRONMENTAL PERMITS") material to the conduct of the Company's business
as presently conducted, except where the failure to have the Environmental
Permit would not reasonably be expected to have a Company Material Adverse
Effect and (c) is in compliance with its Environmental Permits for the conduct
of its business as presently conducted, except where noncompliance would not
reasonably be expected to have a Company Material Adverse Effect. The Company
has not received any written request for information, or been notified in
writing that it is a potentially responsible party, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended as of
the date hereof ("CERCLA"), or any similar law of any state, locality or any
other jurisdiction. The Company has not entered into or agreed in writing to any
consent decree or order or is not subject to such judgment, decree or judicial
order relating to compliance by the Company with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (b) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law ("HAZARDOUS
MATERIALS"), and no such investigation, litigation or other proceeding is
pending or, to the knowledge of the Company, threatened against the Company.
SECTION 3.15. PRECLINICAL TESTING AND CLINICAL TRIALS. SECTION 3.15
of the Company Disclosure Schedule sets forth all human clinical trials
conducted by the Company, on behalf of the Company, or in which the Company has
participated (the "COMPANY ONGOING CLINICAL PROGRAMS"). To the Company's
knowledge, the Company Ongoing Clinical Programs were and, if still pending, are
being conducted in accordance with applicable laws and regulations, including
but not limited to, 21 CFR part 50 (informed consent), part 56 (institutional
review boards), part 58 (good laboratory practices), part 812 (investigational
device exemptions), and all other applicable laws and regulations, except where
the failure to be so conducted would individually or in the aggregate reasonably
be expected to have a Company Material Adverse Effect. Since January 1, 2000,
neither the Company, nor any agent or representative of the Company, has
received any written notices or correspondence from the United States Food and
Drug Administration or any other governmental agency requiring the
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delay, termination, suspension or modification of any clinical trials conducted
by or on behalf of the Company or in which the Company has participated, or any
disqualification of testing facilities used by the Company. To the Company's
knowledge, no clinical investigator acting for the Company has been, is or is
threatened to become, the subject of any disbarment or disqualification
proceedings by any regulatory agency or has been terminated or threatened to be
terminated from any such investigation.
SECTION 3.16. INTELLECTUAL PROPERTY.
(a) SECTION 3.16(a) of the Company Disclosure Schedule sets forth a
true and complete list of all U.S. and foreign patents and patent applications
and design registrations and applications, all Registered Proprietary Names in
all countries of the world and all Unregistered Proprietary Names, all copyright
registrations and applications for registration of copyrights in all countries
of the world, all domain name registrations and applications for registration of
domain names, and mask works and registrations and registration applications
relating thereto and all documents and materials that embody, identify or
document trade secrets included in the Owned Intellectual Property (as defined
in SECTION 10.02) and Licensed Intellectual Property (as defined in SECTION
10.02), and Licenses (as defined in SECTION 10.02) (other than licenses of
commercial off-the-shelf or shrink-wrap computer software). The Company does not
have any Company Software (as defined in SECTION 10.02).
(b) To the Company's knowledge (i) (A) the use of the Owned
Intellectual Property and the Licensed Intellectual Property in connection with
the operation of the business of the Company as currently conducted, and (B) the
manufacture, use, offer for sale, and sale of the Pediatric Products (as such
products exist as of the date hereof) do not infringe or misappropriate or
otherwise violate the Intellectual Property rights of any third party, and no
claim is pending or, to the Company's knowledge, threatened against the Company
alleging any of the foregoing; and (ii) for the conduct of the business of the
Company as presently conducted, no right, license, lease, consent, or other
agreement is required with respect to any patent, invention, know-how,
technology, or the like, and any Proprietary Name, copyright, domain name or
other Intellectual Property other than those described in SECTION 3.16(b) of the
Company Disclosure Schedule. None of the patents or patent applications listed
in SECTION 3.16(a) of the Company Disclosure Schedule is involved in any
interference, reexamination, conflict or opposition proceeding, and to the
Company's knowledge, there has been no threat or other indication that any such
proceeding will hereafter be commenced. None of the Registered Proprietary Names
or registrations or applications to use or register such Registered Proprietary
Names listed in SECTION 3.16(a) of the Company Disclosure Schedule is involved
in any opposition, cancellation, nullification, interference, conflict or
concurrent use proceeding, and to the Company's knowledge, there has been no
threat or other indication that any such proceeding will hereafter be commenced.
(c) The Company is the exclusive owner of the entire and unencumbered
right, title and interest in and to each item of the Owned Intellectual
Property, and, to the Company's knowledge, is entitled to use the Owned
Intellectual Property and the Licensed Intellectual Property in the ordinary
course of its business as presently conducted, subject only to the terms of the
Licenses listed on SECTION 3.16(a) of the Company Disclosure Schedule. To the
Company's knowledge, none of the activities or business previously or currently
conducted by
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the Company or planned to be conducted by the Company (including the
manufacture, use or sale of the future products which are the subject of Company
Ongoing Clinical Programs for any clinical indications) infringes, violates or
constitutes a misappropriation of, any Intellectual Property rights of any other
Person. To the Company's knowledge, the Company has not received any complaint,
claim or notice alleging any such infringement, violation or misappropriation,
present or future.
(d) The Owned Intellectual Property and the Licensed Intellectual
Property include all of the Intellectual Property used in the ordinary
day-to-day conduct of the business of the Company as presently conducted, and
there are no other items of Intellectual Property that are material to or
necessary for such ordinary day-to-day conduct of such business. To the
Company's knowledge, the Owned Intellectual Property and the Licensed
Intellectual Property are issued, granted or pending (to the extent such
concepts are applicable) and are otherwise in good standing, all without
challenge of any kind, and are valid and enforceable, and have not been adjudged
invalid or unenforceable (except for challenges to validity that may be received
in the ordinary course of the prosecution of patent applications in patent
offices) in whole or part and the Company is unaware of any fact which,
individually or in the aggregate, would reasonably be argued to detrimentally
affect the validity, ownership or enforceability of any item of the Owned
Intellectual Property or the Licensed Intellectual Property.
(e) No legal proceedings are pending or, to the Company's knowledge,
threatened against the Company (i) based upon or challenging or seeking to deny
or restrict the use by the Company of any of the Owned Intellectual Property or
the Licensed Intellectual Property, (ii) alleging that any services provided by,
processes used by, or products manufactured, used or sold by the Company
infringe or misappropriate any Intellectual Property right of any third party,
or (iii) alleging that the Licenses being licensed are in conflict with the
terms of any third party license or other agreement.
(f) To the Company's knowledge, no third party is engaging in any
activity that infringes or misappropriates the Owned Intellectual Property or
the Licensed Intellectual Property. With respect to the Company's rights in the
Owned Intellectual Property or the Company's right to use the Licensed
Intellectual Property, the consummation of the Transactions will not have a
Company Material Adverse Effect.
(g) The Company has delivered or made available to Parent, as requested
by Parent, true and correct and complete copies of patents, patent applications,
license commitments and other agreements identified in SECTION 3.16(a) of the
Company Disclosure Schedule and all applications and registrations for
Registered Proprietary Names and copyrights, licenses, leases, commitments and
other agreements listed or described in SECTION 3.16(a) of the Company
Disclosure Schedule, other than licenses of commercial off-the-shelf or
shrink-wrap computer software.
(h) The Company has taken reasonable steps in accordance with normal
industry practice to maintain the confidentiality of its trade secrets,
confidential and/or proprietary information and other Intellectual Property.
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(i) To the knowledge of the Company, (i) there has been no
misappropriation of any material trade secrets or other confidential and/or
proprietary information or Intellectual Property 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 of the Company, 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
Intellectual Property.
(j) Each current officer or employee of the Company, including but not
limited to, all current research and development personnel at the Company has
executed an agreement with the Company regarding confidentiality and proprietary
information substantially in the form attached to SECTION 3.16(j)(i) of the
Company Disclosure Schedule. The Company is not aware that any of its officers
or employees are in violation of any such agreement.
SECTION 3.17. TAXES.
(a) (i) All Tax Returns (as defined in SECTION 10.02(a) below) in
respect of Taxes (as defined in SECTION 10.02(a) below) required to be filed
with respect to the Company have been timely filed; (ii) all Taxes required to
be shown on such Tax Returns or otherwise due have been timely paid; (iii) the
unpaid Taxes of the Company for Tax periods through June 30, 2001 do not exceed
the accruals and reserves for Taxes set forth on the Balance Sheet (exclusive of
any accruals for "deferred taxes" or similar items that reflect timing
differences between Tax and financial accounting principles; (iv) all such Tax
Returns are true, correct and complete in all material respects and properly
reflect the Taxes of Company for the periods covered thereby; (v) no adjustment
relating to such Tax Returns has been proposed or discussed formally or
informally by any Tax Authority (as defined in SECTION 10.02(a) below) and, to
the knowledge of the Company, no basis exists for any such material adjustment;
(vi) there are no pending or, to the knowledge of the Company, threatened
actions or proceedings for the assessment or collection of Taxes against the
Company; (vii) no claim has been made by a Governmental Authority in a
jurisdiction where the Company does not file Tax Returns that the Company may be
subject to Tax in such jurisdiction; (viii) no consent under Section 341(f) of
the Code has been filed with respect to the Company; (ix) there are no Tax liens
on any assets of the Company; (x) the Company has not made any payments, is not
obligated to make any payments, is not a party to any agreement, and by
execution of this Agreement does not become party to an agreement, that under
certain circumstances could obligate it to make any payments that would not be
deductible by the Company by reason of any one or more of Sections 162(m) and
280G of the Code; (xi) except as provided in SECTION 2.04, no acceleration of
the vesting schedule for any property that is substantially unvested within the
meaning of the regulations under Section 83 of the Code will occur in connection
with the Transactions; (xii) the Company has not been a member of any affiliated
group (within the meaning of Section 1504(a)(1) of the Code), other than the
affiliated group for which the Company files a consolidated Tax Return as the
common parent, for any period for which the statute of limitations for any Tax
has not expired; (xiii) the Company has not been at any time a member of any
partnership or joint venture or the holder of a beneficial interest in any trust
for any period for which the statute of limitations for any Tax has not expired;
(xiv) the Company is not subject to any accumulated
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earnings tax penalty or personal holding company tax; (xv) the Company has not
been a party to a transaction described in Section 355 of the Code, and (xvi)
since June 30, 2001, the Company has not made, changed or revoked any material
Tax election, changed any annual Tax accounting period, adopted or changed any
method of Tax accounting, filed any amended Tax Return, entered into any closing
agreement, settled any Tax claim or assessment, surrendered any right to claim a
Tax refund, consented to any extension or waiver of the limitation period
applicable to any Tax claim or assessment or taken or omitted to take any other
action with respect to Taxes, if any such action or omission would have the
effect, individually or in the aggregate, of materially increasing the Tax
liability of the Company, Parent or any affiliate of Parent.
(b) (i) There are no outstanding waivers or agreements extending the
statute of limitations for any period with respect to any Tax to which the
Company may be subject; (ii) the Company has not participated in or cooperated
with an international boycott within the meaning of Section 999 of the Code;
(iii) there are no requests for information currently outstanding that could
affect the Taxes of the Company; (iv) there are no proposed reassessments of any
property owned by the Company that could increase the amount of any Tax to which
the Company would be subject; (v) no power of attorney that is currently in
force has been granted with respect to any matter relating to Taxes that could
affect the Company; (vi) there are no Tax allocation, sharing or Tax
indemnification agreements or arrangements affecting the Company; (vii) the
Company has no liability for the Taxes of any Person under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise; (viii) the Company has not
been and is not in violation of any federal, state, local or foreign tax law or
the rules and regulations of any Tax Authority except such violation as would
not reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect; (ix) the Company has not entered into any agreement or
arrangement with any Tax Authority that requires the Company to take any action
or to refrain from taking any action; (x) no closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local, or foreign law has been entered into by or with respect to
the Company; (xi) the Company will not be required to include any amount in
income for any taxable period ending after June 30, 2001 as a result of a change
in accounting or pursuant to any agreement with any Tax authority with respect
to any prior taxable period; (xii) there is no application pending with any Tax
Authority requesting permission for any changes in any accounting method of the
Company; (xiii) no Tax Authority has proposed any such adjustment or change in
accounting method with respect to the Company; (xiv) the Company is not a
"foreign person" within the meaning of Section 1445(b)(2) of the Code; and (xv)
all monies required to be withheld by the Company and paid to Tax Authorities
for all Taxes have been collected or withheld and either paid to the respective
Tax Authorities or set aside in accounts for such purpose.
(c) SECTION 3.17(c) of the Company Disclosure Schedule lists (i) all
income Tax Returns filed with respect to the Company for the prior three tax
years, (ii) the taxable years of the Company for which the statutes of
limitations with respect to income Taxes have not expired, and (iii) those years
for which examinations have been completed, those years for which examinations
are presently being conducted, and those years for which examinations have not
yet been initiated.
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(d) The Company has delivered to Parent complete and correct copies of
all Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company for the tax years ending on or after
December 31, 1997.
SECTION 3.18. ASSETS. Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, the
Company owns, leases or has the legal right to use all of the properties and
assets, including, without limitation, real property, personal property and
Owned Intellectual Property used in or necessary for the conduct of the business
of the Company as it is currently conducted (all such properties and assets
being the "ASSETS"). The Company has good and marketable title to, or, in the
case of leased or subleased Assets, valid and subsisting leasehold interests in,
all the Assets, free and clear of all encumbrances, except such encumbrances (a)
arising in the ordinary course of business consistent with past practices, (b)
reflected in the Company Financial Statements (c) which have not had, and would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect or (d) listed in SECTION 3.18 of the Company Disclosure
Schedule.
SECTION 3.19. CERTAIN INTERESTS. Except as set forth in the Company
SEC Reports filed on or prior to the date of this Agreement, the Company has not
entered into any transaction with any director, officer or other affiliate of
the Company or any transaction that would be subject to proxy statement
disclosure pursuant to Item 404 of Regulation S-K.
SECTION 3.20. INSURANCE POLICIES. SECTION 3.20 of the Company
Disclosure Schedule sets forth a true and complete list of all insurance
policies held by the Company. True and complete copies of all such policies have
been provided or made available by the Company to Parent. All premiums due on
such policies have been paid. The Company has not failed to give any notice or
present any claim under any such policy in a timely fashion, except where such
failure would not reasonably be expected to prejudice the Company's ability to
make a claim. Such insurance has (i) been maintained in full force and effect
and (ii) not been canceled or changed, except to extend the maturity dates
thereof.
SECTION 3.21. BROKERS. Except the FS Transaction Fee (defined in
SECTION 6.09(a) below) and the Company's arrangement with Xxxxx, Xxxxxxxx &
Xxxx, Inc., no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the Company.
SECTION 3.22. VOTE REQUIRED. The only votes of the holders of any
classes or series of capital stock of the Company necessary to approve this
Agreement and the Transactions (the "COMPANY STOCKHOLDERS' APPROVAL") is (a) the
affirmative vote of the holders of at least a majority of the outstanding
Company Common Stock as of the record date for such vote, voting as a single
class and (b) the affirmative vote of the holders of at least 80% of the Series
H Preferred Stock outstanding as of the record date for such vote, voting as a
separate class, and each voting in favor of the adoption of this Agreement and
the approval of the Merger.
SECTION 3.23. TAKEOVER RESTRICTIONS. The Company and the Board of
Directors of the Company have each taken all action required to be taken by it
in order to exempt
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the Merger, this Agreement, the Voting Agreements and the transactions
contemplated hereby and thereby from, the requirements of Section 203 of the
DGCL and any other applicable "moratorium," "control share," "fair price,"
"affiliate transaction," "business combination," or other antitakeover laws and
regulations of any state.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by Parent to
the Company concurrently with the execution of this Agreement (the "PARENT
DISCLOSURE SCHEDULE") Parent represents and warrants to the Company that the
statements contained in this Article IV are true and correct as of the date
hereof. The Parent Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and the disclosure in any paragraph shall qualify (1) the corresponding
paragraph in this Article IV and (2) the other paragraphs in this Article IV
only to the extent that it is clear from a reading of such disclosure that it
also qualifies or applies to such other paragraphs. Parent represents and
warrants to the Company as follows:
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SECTION 4.01. ORGANIZATION AND QUALIFICATION. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
and authority would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Each of Parent and Merger Sub
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction in which the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed or in good standing that have not had, and would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. The term "PARENT MATERIAL ADVERSE EFFECT" means any
change, effect, event, occurrence or state of facts that is materially adverse
to the business, properties, operations, financial condition and results of
operations of Parent and its subsidiaries taken as a whole or materially impairs
or delays the ability of Parent to perform its material obligations under this
Agreement or to consummate the Merger; provided, however, that none of the
following shall be deemed, singly or in the aggregate, to constitute, or be
considered in determining whether there exists, a Parent Material Adverse
Effect: any change, effect, event, occurrence or state of facts resulting from
(i) any factors generally affecting the healthcare or pharmaceutical industry,
(ii) any factors generally affecting general economic conditions or the
securities markets, (iii) acts or omissions of the Company, including without
limitation acts or omissions contemplated by or pursuant to this Agreement; (iv)
acts or omissions of Parent or Merger Sub contemplated by or pursuant to this
Agreement; and (v) the pendency or announcement of the Merger.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS Neither
Parent nor Merger Sub is in violation of any of the provisions of their
respective certificate of incorporation or bylaws.
SECTION 4.03. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent
and Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance of this Agreement by each of Parent and Merger Sub and
the consummation by each of Parent and Merger Sub of the Transactions have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing of appropriate merger documents as required by
the DGCL). This Agreement has been duly and validly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against each of Parent
and Merger Sub in accordance with its terms, subject to the Enforceability
Exception.
SECTION 4.04. CONSENTS AND APPROVALS; NO VIOLATIONS. The execution
and delivery of this Agreement does not, the consummation by Parent and Merger
of the Transactions will not, and the performance by Parent and Merger Sub of
its obligations hereunder will not:
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(a) conflict with any provision of the certificate of incorporation or
bylaws (or other organizational documents) of Parent or Merger Sub;
(b) require any consent, waiver, approval, order, authorization or
permit of, or registration, filing with or notification to, any Governmental
Authority, except for (i) the filing of the Certificate of Merger with the
Delaware Secretary of State, (ii) such consents, approvals, orders,
authorizations and regulations, declarations and filings as may be required
under applicable state securities or blue sky laws, (iii) the filing of such
reports, schedules or materials under the Exchange Act and Regulation MA as may
be required in connection with this Agreement and the Transactions, and (iv)
such other consents, waivers, approvals, orders, authorizations or permits of or
registration, filing with or notification of any Governmental Authority that, if
not obtained or made, would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect; or
(c) result in any violation or breach of, or constitute a default (with
or without notice or lapse of time or both) under, or give rise to any right of
termination, forfeiture, cancellation or acceleration, transfer fees or
guaranteed payments or a loss of a material benefit under, or require a consent,
waiver or approval under any of the terms, conditions or provisions of any
material contract of Parent, except for any such conflicts, violations,
breaches, defaults, terminations, fees, rights, payments, cancellations or
accelerations that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect or such consents, waivers and
approvals which if not obtained would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect;
(d) conflict with or violate any Law applicable to Parent or Merger Sub
or any of its properties or assets except for such conflicts or violations
which, would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
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SECTION 4.05. FINANCING. Parent has, and shall have at the
Effective Time and at any time thereafter when due, funds available sufficient
to permit Parent to pay the Aggregate Merger Consideration pursuant to SECTION
2.01.
SECTION 4.06. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. Parent
owns all of the outstanding capital stock of Merger Sub. Merger Sub was formed
by Parent solely for the purpose of engaging in the Transactions. As of the date
of this Agreement and the Effective Time, except for obligations or liabilities
incurred in connection with its incorporation or organization and this Agreement
and the Transactions, Merger Sub has not and will not have incurred, directly or
indirectly, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
SECTION 4.07. BROKERS. Except for Corporate Development
Specialists, Inc., a New Jersey corporation, and Xxxxxx Xxxxxx Partners, the
fees of which shall be the sole responsibility of Parent, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Parent or Merger Sub.
SECTION 4.08. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement (as defined below) will
(except to the extent revised or superseded by amendments or supplements
contemplated hereby), at the date the Proxy Statement is first mailed to the
Company Stockholders or at the time of the Company Stockholders Meeting, 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 are made, not
misleading.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. The Company agrees that, between the date of this Agreement and the
earlier to occur of the Effective Time and the termination of this Agreement,
except as set forth in SECTION 5.01 of the Company Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Parent shall
otherwise consent in writing:
(i) the Company shall conduct its business in the ordinary course
consistent with past practice;
(ii) the Company shall use all reasonable best efforts, in light of the
terms of this Agreement, to preserve intact its business organization, to
keep available the services of the current officers, employees and
consultants of the Company and to preserve the current relationships of
the Company with customers, suppliers and other persons with which the
Company has significant business relations; and
(iii) the Company and the board of directors of the Company shall not
take any action that would cause the Merger, this Agreement, the Voting
Agreement and the
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transactions contemplated hereby and thereby to be subject to the
requirements of Section 203 of the DGCL or any other applicable
"moratorium," "control share," "fair price," "affiliate transaction,"
"business combination," or other antitakeover laws and
regulations of any state.
By way of amplification and not limitation, except as otherwise
contemplated by this Agreement or as set forth in SECTION 5.01 of the Company
Disclosure Schedule, the Company shall not, between the date of this Agreement
and the earlier to occur of the Effective Time and the termination of this
Agreement, directly or indirectly, do, or propose to do, any of the following
without the prior written consent of Parent:
(a) adopt or propose any change to its certificate of incorporation or
bylaws (or similar organizational documents);
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any shares of its
capital stock of any class, or any options, warrants and rights to receive
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company, including, without
limitation, any grant of options to a "disqualified individual" within the
meaning of Section 280G of the Code, except pursuant to the terms of options,
warrants or convertible securities outstanding on the date of this Agreement,
pursuant to any contracts, instruments or arrangements referred to in SECTION
3.03 or SCHEDULE 3.03 of the Company Disclosure Schedule, or under the Company
Stock Plans;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock other than with respect to the Series H Preferred Stock if
required by the terms thereof;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock other than
shares of Series H Preferred Stock if required by the terms thereof;
(e) acquire (including, without limitation, by merger, consolidation or
acquisition of stock or assets) any equity interest in any corporation,
partnership, other business organization or any division thereof or enter into a
new line of business or commence business operations outside of its existing
area of operations unrelated to the pharmaceuticals and life science areas or,
except in the ordinary course of business and consistent with past practice, any
assets for a purchase price in excess of $10,000 individually, or $50,000 in the
aggregate (excluding money market accounts and similar interests);
(f) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person, or make any loans or
advances, in excess of $5,000 individually or $10,000 in the aggregate;
(g) authorize any capital expenditure in excess of $10,000 in the
aggregate;
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(h) except as required to comply with applicable Law, increase the
compensation payable or to become payable to its officers or employees, grant
any severance or termination pay, or right thereto, to, or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company, enter into any employment or consulting arrangements or, except
as permitted in paragraph (j) below, with any person who provides services to
the Company that provides for compensation amounts that are not in accordance
with past practice or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(i) take any action that would give rise to a claim under the WARN Act
or any similar state law or regulation because of a "plant closing" or "mass
layoff" (each as defined in the WARN Act);
(j) enter into any contract, agreement or obligation, including without
limitation consulting agreements, in excess of $5,000 which shall not terminate
or be subject to termination for convenience, in each case, without cost, by the
Company upon notice of 30 days or less, except purchase or sales orders issued
or received in the ordinary course of business, consistent with past practices;
(k) enter into any contract relating to the business development of any
Pediatric Product or a pharmaceutical product of any third party, including but
not limited to licensing, development, co-development, marketing or co-marketing
agreements;
(l) change any method or accounting practice by the Company except for
any such change required by applicable Law or GAAP;
(m) except if required by Law, make, change or revoke any material Tax
election, change any annual Tax accounting period, adopt or change any method of
Tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment or take or omit to take any other action with respect to
Taxes, if any such action or omission would have the effect of materially
increasing the Tax liability of the Company, Parent or any affiliate of Parent;
(n) other than in the ordinary day-to-day conduct of the business of
the Company, (i) sell, assign, lease, terminate, abandon, fail to maintain, fail
to prosecute as deemed prudent by the Company, transfer or otherwise dispose of
or grant any security interest in and to any item of the Owned Intellectual
Property or Licensed Intellectual Property, in whole or in part, (ii) grant any
license with respect to any Owned Intellectual Property (other than licenses in
the ordinary course in connection with sales), or (iii) disclose, or allow to be
disclosed, any confidential Owned Intellectual Property, unless such Owned
Intellectual Property is subject to a confidentiality or nondisclosure covenant
protecting against disclosure thereof; or
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(o) pay, discharge, satisfy or enter into any settlement or consent
with respect to any material claim or litigation, (absolute, accrued, asserted
or unasserted, contingent or otherwise).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF THE PROXY STATEMENT. As promptly as
practicable after the execution of this Agreement, the Company shall prepare and
file with the SEC a Proxy Statement (the "PROXY STATEMENT") (it being understood
and agreed that both parties will use their reasonable best efforts to
accomplish this preparation and filing within three (3) weeks after the date
hereof). The Company will use its reasonable best efforts to respond to the
comments of the SEC in connection with the Proxy Statement and to furnish all
information required to prepare the Proxy Statement. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable following completion of any
SEC review. If necessary under applicable Law, after the definitive Proxy
Statement shall have been mailed, the Company shall promptly circulate amended,
supplemented or supplemental proxy materials and, if required in connection
therewith, re-solicit proxies. The Company shall promptly advise Parent of any
request by the SEC for amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
SECTION 6.02. COMPANY STOCKHOLDERS' MEETING. The Company shall, as
promptly as reasonably practicable after the date hereof (i) take all steps
reasonably necessary to call, give notice of, convene and hold a special meeting
of its stockholders (the "COMPANY STOCKHOLDERS MEETING") for the purpose of
securing the Company Stockholders' Approval, (ii) distribute to the Company
Stockholders the Proxy Statement in accordance with applicable federal and state
law and with its certificate of incorporation and bylaws, which Proxy Statement
shall contain the recommendation of the Board of Directors of the Company that
the Company Stockholders adopt this Agreement and approve the Merger, (iii)
except as otherwise permitted pursuant to Section 6.04, use all reasonable best
efforts to solicit from the Company Stockholders proxies in favor of the
adoption of this Agreement and approval of the Merger and to secure the Company
Stockholders' Approval; provided, however, the Company shall not be required to
retain the services of a proxy solicitor or utilize any Company employees, other
than the Company's chief executive officer, to solicit such proxies, and (iv)
consult with Parent with respect to each of the foregoing matters; provided,
that nothing contained in this Agreement shall prohibit the Company Board of
Directors from failing to make or from withdrawing or modifying its
recommendation to the Company Stockholders hereunder if the Board of Directors
of the Company, after consultation with independent legal counsel, determines in
good faith that such action is legally required for such Board of Directors to
comply with its fiduciary duties to its stockholders under applicable Law.
SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY; TRANSITION.
(a) From the date of this Agreement to the Effective Time, the Company
shall: (i) provide to Parent (and its officers, directors, employees,
accountants, consultants, legal
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counsel, agents and other representatives, collectively, "REPRESENTATIVES")
access at reasonable times upon reasonable prior notice to the officers,
employees, agents, accountants (subject to execution of customary undertakings),
properties, offices and other facilities of the Company and to the books and
records thereof, (ii) furnish promptly such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of the
Company as Parent or its Representatives may reasonably request, (iii) deliver
to Parent or its Representative copies of all reports regularly prepared by the
Company or the Company's Representatives in the ordinary course of the Company's
business (other than reports filed with the SEC and publicly available) and such
other reports regarding the Company as Parent or its Representatives may
reasonably request, and (iv) cause its Representatives to meet regularly with
Parent upon the request of Parent at reasonable times and upon reasonable prior
notice to discuss the Company and the Company's business. No investigation will
affect any of the representations or warranties made herein or the conditions to
the obligations of the parties hereto to consummate the transactions
contemplated hereby.
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement, dated as of August 20, 2001 and the Confidentiality
Agreement dated November 30, 1999 (the "CONFIDENTIALITY AGREEMENTS"), each
between the Company and Parent, as applicable, other than the obligations set
forth in Sections 2 and 3 of the August 20, 2001 Confidentiality Agreement. The
Confidentiality Agreements shall survive the execution and delivery of this
Agreement and the Effective Time.
(c) From the date of this Agreement to the Effective Time, Parent and
the Company shall work together to prepare for and facilitate a smooth
transition in anticipation of the consummation of the Transaction including, but
not limited to, using reasonable best efforts to put in place a six month
extension of that certain Warehouse Distribution Agreement by and between the
Company and Alpharma dated December 29, 2000, hold periodic meetings with
Company sales representatives and hold periodic meetings with Company sales
management personnel.
SECTION 6.04. NO SOLICITATION OF TRANSACTIONS.
(a) The Company agrees that (i) it and its officers, directors and
employees shall not and (ii) it shall use reasonable best efforts to ensure that
its agents and representatives shall not, (A) directly or indirectly, initiate,
solicit or knowingly encourage or facilitate any inquiries relating to or the
making of any Acquisition Proposal or (B) directly or indirectly, continue,
enter into or engage in any negotiations or discussions concerning any
Acquisition Proposal with or furnish any information relating to the Company or
provide access to the properties, books and records or any confidential
information or data of the Company to, any person relating to an Acquisition
Proposal. Notwithstanding the foregoing, nothing contained in this Agreement
shall prevent the Company or its Board of Directors from (i) taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act, (ii) prior to the Company
Stockholders' Approval being obtained, providing access to properties, books and
records and providing information or data in response to a request therefor by a
person who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors of the Company receives from the person so requesting such
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information an executed confidentiality agreement on terms substantially similar
to those contained in the August 20, 2001 Confidentiality Agreement (except for
(x) such changes specifically necessary in order for the Company to be able to
comply with its obligations under this Agreement and (y) the provisions of
Sections 2 and 3 of such Confidentiality Agreement) (provided that all such
written information that has not previously been supplied to Parent is also
provided on a prior or substantially concurrent basis to Parent), or (iii) prior
to the Company Stockholders' Approval being obtained, engaging in any
negotiations or discussions with any person who has made an unsolicited bona
fide written Acquisition Proposal; if and only to the extent that in connection
with the foregoing clauses (ii) and (iii), (1) the Company's Board of Directors
(after consultation with its independent legal counsel) determines in good faith
that such action is legally required for the Board of Directors to comply with
its fiduciary duties to the Company's stockholders under applicable law, (2)
such Acquisition Proposal is not subject to any financing contingencies or is,
in the good faith judgment of the Company's Board of Directors (after
consultation with its financial advisor), reasonably capable of being financed
by such other person and (3) the Company's Board of Directors determines in good
faith after consultation with its independent legal counsel and financial
advisor (taking into account among other things the legal, financial, regulatory
and other aspects of the proposal, the person making the proposal, the
likelihood of consummation and the time to complete such transaction) that such
Acquisition Proposal is reasonably likely to lead to a transaction that is
reasonably capable of being completed and that, if consummated, would reasonably
be expected to result in a transaction more favorable to the Company's
Stockholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Acquisition Proposal being referred to
in this Agreement as a "SUPERIOR PROPOSAL"). The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any persons conducted heretofore with respect
to any Acquisition Proposal and will use its reasonable best efforts to cause
any such person (or its agents or advisors) in possession of confidential
information about the Company that was furnished by or on behalf of the Company
to return or destroy all such information. The Company shall also notify Parent
promptly (but in no event later than 24 hours) after receipt of any Acquisition
Proposal or any indication of interest in making an Acquisition Proposal after
the date hereof, which notice shall include the identity of the person making
such Acquisition Proposal or indication and the material terms and conditions of
such Acquisition Proposal or indication (including any subsequent material
amendment or modification to such terms and conditions). The Company shall keep
Parent promptly informed in all material respects of the status and details of
any such Acquisition Proposal.
(b) The Board of Directors of the Company shall not (i) except as
permitted by the proviso of SECTION 6.02, withdraw (or modify in a manner
adverse to Parent) or propose publicly to withdraw (or modify in a manner
adverse to Parent) the recommendation or declaration of advisability by the
Board of Directors of the Company of this Agreement or the Merger, or recommend,
or propose publicly to recommend, the approval or adoption of any Acquisition
Proposal (other than an Acquisition Proposal made by Parent), (ii) adopt or
approve, or propose publicly to adopt or approve, any Acquisition Proposal
(other than an Acquisition Proposal made by Parent), (iii) cause or permit the
Company to enter into any letter of intent, memorandum of understanding,
agreement in principle, acquisition agreement, merger agreement, option
agreement, joint venture agreement, partnership agreement or similar agreement
which relates to or is reasonably likely to lead to, any Acquisition Proposal
(other
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than a confidentiality agreement referred to in SECTION 6.04(a)) or (iv) agree
or resolve to take any of the actions prohibited by clauses (i), (ii) or (iii)
of this sentence. Notwithstanding anything in this SECTION 6.04 to the contrary,
if, at any time prior to the Company Stockholder's Approval being obtained, the
Company's Board of Directors determines in good faith, after consultation with
its financial advisors and independent legal counsel, in response to an
Acquisition Proposal that was unsolicited and that did not otherwise result from
a material breach of this SECTION 6.04, that such proposal is a Superior
Proposal, the Company or its Board of Directors may terminate this Agreement
pursuant to SECTION 8.01(e) and prior to such termination, may take such actions
as it reasonably determines to be necessary to satisfy the pre-conditions to
termination specified in SECTION 8.01(e).
(c) For purposes of this Agreement, "ACQUISITION PROPOSAL" means any
proposal or offer with respect to (i) any tender offer or exchange offer, (ii)
any merger, consolidation, share exchange, business combination, sale of
substantially all of the assets, reorganization, recapitalization, liquidation,
dissolution or other similar transaction involving assets which, individually or
in the aggregate, constitute more than 25% of the consolidated assets or earning
power of the Company, (iii) any acquisition or purchase, direct or indirect, of
more than 25% of the consolidated assets of the Company, (iv) any acquisition or
purchase, direct or indirect, that, if consummated, would result in any person
beneficially owning securities constituting more than 25% of any class or series
of equity or voting securities of the Company or (v) the sale or license of any
Intellectual Property rights related to the Pediatric Products (other than
licenses in the ordinary course in connection with sales), in each case, other
than the Merger.
SECTION 6.05. EMPLOYEE BENEFITS MATTERS. The Surviving Corporation
shall take all reasonable actions necessary or appropriate to permit the
employees who as of the Effective Time were employed by the Company and who
continue to be employed by the Surviving Corporation after the Effective Time
(the "RETAINED EMPLOYEES") to continue to participate from and after the
Effective Time in the Company Benefit Plans in which such Retained Employees
were participating immediately prior to the Effective Time. Notwithstanding the
foregoing, the Surviving Corporation may permit any such employee benefit plan
or arrangement to be terminated or discontinued on or after the Effective Time,
provided that the Surviving Corporation shall (a) take all reasonable actions
necessary or appropriate to permit the Retained Employees participating in such
employee benefit plan or arrangement to immediately thereafter participate in
employee benefit plans or arrangements substantially comparable to those
maintained with respect to other Surviving Corporation employees (the
"REPLACEMENT PLANS"), (b) with respect to a Replacement Plan that is a group
health plan (i) credit such Retained Employees, for the year during which
participation in the Replacement Plan begins, with any deductibles and
copayments already incurred during such year under the terminated or
discontinued group health plan and (ii) waive any preexisting condition
limitations applicable to the Retained Employees (and their eligible dependents)
under the Replacement Plan to the extent that a Retained Employee's (or
dependent's) condition would not have caused a preexisting condition exclusion
under the terminated or discontinued group health plan, and (c)(1) cause each
Replacement Plan that is an employee pension benefit plan (as such term is
defined in Section 3(2) of ERISA) intended to be qualified under Section 401 of
the Code to be amended to provide that the Retained Employees shall receive
credit for participation and vesting purposes under such plan for their period
of employment with the Company and its predecessors to the extent such
predecessor employment was recognized by the Company and
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(2) credit the Retained Employees under each other Replacement Plan that is not
described in the preceding clause for their period of employment with the
Company and its predecessors to the extent such predecessor employment was
recognized by the Company. Notwithstanding anything contained in this Agreement
to the contrary, neither the Surviving Corporation, on the one hand, nor any
employee, on the other hand, shall be obligated to continue any employment
relationship or any specific terms of employment for any specific period of
time. Nothing contained in this Agreement shall limit or restrict Parent's right
on or after the Effective Time to amend, modify or terminate any of the Company
Benefit Plans.
SECTION 6.06. FURTHER ACTION; CONSENTS; FILINGS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable law or otherwise to consummate and make effective the
Transactions, (ii) obtain from Governmental Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by Parent or the Company or any of their subsidiaries in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the Transactions and (iii) make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement or the
Transactions required under applicable law. The parties hereto shall use their
reasonable best efforts to cooperate with each other in connection with the
making of all such filings necessary to consummate the Transactions, and shall
provide copies of all such documents to the nonfiling party and its legal
advisors prior to filing and, if requested, accept all reasonable additions,
deletions or changes suggested in connection therewith.
SECTION 6.07. PUBLIC ANNOUNCEMENTS. The initial public disclosure
(the "INITIAL PUBLIC DISCLOSURE") relating to this Agreement shall be a press
release, the text of which has been agreed to by each of Parent and the Company.
Thereafter, until the Effective Time, unless otherwise required by applicable
law, neither party hereto shall issue any press release or otherwise make any
public statements with respect to this Agreement or the Transactions without the
prior written consent of the other party hereto except that either party may
make public statements between the date of the Initial Public Disclosure and the
Closing Date solely to the extent that the content of such public statements is
limited to the agreed upon text of the Initial Public Disclosure.
SECTION 6.08. EXPENSES. Other than as set forth in SECTION 2.03(f)
and other than expenses incurred in connection with Article IX, all costs and
expenses incurred in connection with this Agreement and the Transactions
(including, without limitation, the fees and expenses of financial advisors,
accountants and legal counsel) ("EXPENSES") (i) if incurred by Parent or Merger
Sub, shall be paid by Parent, and (ii) if incurred by the Company, shall be paid
by the Company ("COMPANY EXPENSES"); provided, however, that all Company
Expenses actually paid by the Company on or prior to the Closing Date in excess
of $1,200,000 shall be deducted from the Initial Merger Consideration by Parent.
The Company, prior to the Effective Time, or the Calculation Representative,
after the Effective Time, shall provide Parent with copies of all invoices and
such other documents requested by Parent reasonably documenting any costs or
other expenses to be included within Company Expenses. To the extent that
Company Expenses are incurred by the Company in excess of $1,200,000 and have
not been
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previously deducted from the Initial Merger Consideration as contemplated by the
preceding sentence, such Company Expenses shall be deducted from the Contingent
Payments, if any.
SECTION 6.09. OTHER DEDUCTIONS.
(a) Pursuant to Section 6.4 of that certain Fifth Amended and Restated
Securities Purchase Agreement by and among the Company and certain investors
dated December 29, 2000, the Company is obligated to pay to Xxxxxx Xxxx
Investors II L.P., FS Employee Investors LLC and FS Parallel Fund L.P. (the "FS
ENTITIES") an aggregate cash amount equal to $3.0 million (the "FS TRANSACTION
FEE") upon completion of a Strategic Transaction, as defined therein. If the
Merger is consummated, the FS Transaction Fee shall be paid by Parent or the
Surviving Corporation when due and shall be deducted from the Initial Merger
Consideration.
(b) The Company has entered into (i) a retention agreement with Xxxxxx
Xxxxxxxx dated as of August 8, 2001, (ii) a retention agreement with X. Xxxxx
dated as of July 10, 2001, (iii) a retention agreement with X. Xxxx dated as of
July 10, 2001, (iv) a retention agreement with Xxxxxxxx Xxxxxxxx dated as of
September 24, 2001, (v) a retention agreement with Xxxx Xxxxxx dated as of
September 24, 2001, and (vi) a retention agreement with Xxxxxxx Xxxxxxxxxx dated
as of September 24, 2001 (collectively, "KEY MANAGEMENT" and the retention
agreements collectively the "RETENTION AGREEMENTS") which provide for certain
cash payments ("RETENTION PAYMENTS") to Key Management upon the consummation of
a strategic transaction. The Parent shall pay the Retention Payments which are
due at Closing and such Retention Payments shall be deducted from the Initial
Merger Consideration. The Surviving Corporation shall pay any Retention Payments
due after the Effective Time which Retention Payments, to the extent not
previously deducted from the Initial Merger Consideration, shall be deducted
from the Contingent Payments, if any.
(c) The Company has entered into amendments to certain consulting
agreements (the "CONSULTING AGREEMENTS") with each of Xxxxxx X. Xxxxxxx and
Xxxxxx X. Xxxxxxx (the "CONSULTANTS") as follows: (i) Amendment No. 1 to
Consulting Agreement dated as of July 12, 2001 with Xxxxxx X. Xxxxxxx and (ii)
Amendment No. 1 to Consulting Agreement with Xxxxxx X. Xxxxxxx dated as of July
9, 2001, each of which provide for certain cash payments ("TRANSACTION
INCENTIVES") upon the sale of the Company. Parent shall pay the Transaction
Incentives when due and the Transaction Incentives shall be deducted from the
Initial Merger Consideration.
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SECTION 6.10. COMPANY NOTES. Simultaneous with the consummation of
the Merger, Parent shall, on behalf of the Company, prepay the principal amounts
outstanding, plus all accrued and unpaid interest, under the Company Notes
(including any interest which has accrued in accordance with the terms of the
Company Notes between the date hereof and such date of prepayment) (such
aggregate amount being the "COMPANY NOTES AMOUNT") in full satisfaction of the
Company's obligations under the Company Notes. The Company Notes Amount shall be
deducted from the Initial Merger Consideration.
SECTION 6.11. DIRECTOR AND OFFICER INDEMNIFICATION.
(a) For six years after the Effective Time, the Surviving Corporation
shall, indemnify, defend and hold harmless each person who is now, or has been
at any time prior to the date hereof or who becomes prior to the Effective Time,
an officer or director of the Company (each a "COMPANY INDEMNIFIED PARTY")
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the prior written consent of Parent, which will not
be unreasonably withheld)) arising in whole or in part out of actions or
omissions in their capacity as such occurring at or prior to the Effective Time
to the full extent permitted under DGCL (or the laws of such other state in
which the Surviving Corporation may subsequently be domesticated if at least as
favorable) or the Surviving Corporation's certificate of incorporation and
bylaws, except to the extent such amounts are paid under directors' and
officers' liability insurance; provided, that any determination required to be
made with respect to whether a Company Indemnified Party's conduct complies with
the standards set forth under the DGCL (or the laws of such other state in which
the Surviving Corporation may subsequently be domesticated if at least as
favorable), the Surviving Corporation's certificate of incorporation or bylaws,
as the case may be, shall be made by independent counsel mutually acceptable to
the Surviving Corporation and the Company Indemnified Party; and provided,
further, that nothing herein shall impair any rights or obligations of any
Company Indemnified Party. In the event that any claim or claims are brought
against any Company Indemnified Party (whether arising before or after the
Effective Time), such Company Indemnified Party may select counsel for the
defense of such claim, which counsel shall be reasonably acceptable to the
Company (if selected prior to the Effective Time), and the Surviving Corporation
(if selected after the Effective Time).
(b) Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, purchase additional officers' and directors' liability
insurance coverage that (i) extends the existing officers' and directors'
liability insurance coverage to total coverage of $20 million and (ii) extends
the period of coverage to include the period commencing on the Effective Time
and ending not less than six years after the Effective Time, but in each case
only to the extent related to actions or omissions at or prior to the Effective
Time.
SECTION 6.12. NOTIFICATION OF CERTAIN MATTERS. Parent shall give
prompt notice to the Company, and the Company shall give prompt notice to
Parent, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate or (y) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied, and (ii) any failure of Parent
or the Company to comply
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with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, and which, in either (i) or (ii), in each case or
when aggregated with any other event or failure, would reasonably be expected to
provide the notified party the right to terminate this Agreement pursuant to
SECTION 8.01; provided, however, that the delivery of any notice pursuant to
this SECTION 6.12 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.13. PEDIATRIC PRODUCT SALES, MARKETING AND DEVELOPMENT.
From and after the Effective Time, Parent shall use commercially reasonable
efforts to market, promote and sell the Commercial Pediatric Products, which
efforts shall include the allocation of efforts and resources consistent with
the resources allocated by Parent to the marketing, promotion and sale of other
commercially available products of Parent with comparable commercial opportunity
in the marketplace. From and after the Effective Time, Parent shall use
commercially reasonable efforts to develop, market commercialize and sell the
Development Pediatric Products, which efforts shall include the allocation of
efforts and resources consistent with the resources allocated by Parent to the
development, marketing, commercialization and sale of other in development
products of Parent with comparable commercial opportunity in the marketplace.
SECTION 6.14. OTHER MATTERS.
(a) The Company shall use its reasonable best efforts to:
(i) purchase a tail insurance policy (the "EXTENSION POLICY") providing
extended insurance coverage as follows: (A) a products liability policy
extension for 3 years from the Effective Time, (B) employment practices
liability policy extension for 3 years from the Effective Time and (C)
fiduciary liability policy extension for 3 years from the Effective Time,
the cost of which shall be paid by Parent or the Surviving Corporation.
(ii) maintain in full force and effect the Company's worker's
compensation insurance policy and take such steps as are reasonably
requested by Parent to keep such coverage in effect post Closing through
the end of its current term, any additional cost of which shall be paid by
Parent or the Surviving Corporation (the "WORKERS COMP POLICY");
(iii) obtain the written resignations of each member of the board of
directors (the "BOARD RESIGNATIONS") of the Company, in each case
effective upon the Effective Time; and
(iv) obtain the written resignations of each officer (the "OFFICER
RESIGNATIONS") of the Company, in each case effective upon the Effective
Time; and
(v) obtain an amendment to the Depositary Agreement (the "DEPOSITARY
AMENDMENT") which amendment shall be reasonably satisfactory to Parent and
shall provide, for (A) the consent to the arbitration provisions contained
in SECTION 2.03 of this Agreement and (B) the binding effect of the
designation of the Calculation Representative pursuant to SECTION 9.04 of
this Agreement.
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(b) The Parent or the Surviving Corporation shall upon receipt of
customary documentation from the Company to Parent or the Surviving Corporation:
(i) reimburse the Company for the purchase by the Company of the
Extension Policy; and
(ii) reimburse the Company for the additional costs, if any, associated
with the maintenance and keeping effective by the Company of the Workers
Comp Policy.
(c) The Company will use its reasonable best efforts to have BancBoston
Ventures, Inc. ("BANCBOSTON") execute and deliver the Exclusive Remedy
Agreement, in the capacity of a Depositary Holder (as defined in the Exclusive
Remedy Agreement), with respect to the Depositary Shares held by BancBoston. The
Company will use its reasonable best efforts to have BancBoston execute and
deliver the Note Agreement, in the capacity of a Note Holder (as defined in the
Note Agreement) with respect to the 8% Convertible Subordinated Notes and the 8%
Subordinated Notes held by BancBoston. The Company shall give such notice to
BancBoston as shall be necessary to permit the Company to redeem at the
Effective Time the 8% Convertible Subordinated Notes and the 8% Subordinated
Notes held by BancBoston.
SECTION 6.15. VOTING AGREEMENT. Parent agrees that it will not (i)
amend or modify the Voting Agreement in any manner, (ii) purchase any of the
Subject Shares (as defined in the Voting Agreement) other than pursuant to this
Agreement, (iii) enter into an agreement with the Stockholders (as defined in
the Voting Agreement) inconsistent with the Voting Agreement or which imposes on
any of such Stockholders additional obligations from those set forth in the
Voting Agreement, in any case without the prior written consent of the Company,
which consent shall not be unreasonably withheld.
ARTICLE VII
CONDITIONS TO THE MERGER SECTION
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver (where permissible) on or prior to the
Closing Date by Parent or the Company of the following conditions:
(a) the Company shall have received the Company Stockholders' Approval;
(b) no Governmental Authority or court of competent jurisdiction
located or having jurisdiction in the United States shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment, decree,
executive order or award (an "ORDER") which is then in effect and has the effect
of making the Merger illegal or otherwise prohibiting consummation of the Merger
and the Transactions;
(c) other than the filing of the Certificate of Merger, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Authority
in connection with the Merger and the consummation of the Transactions, the
failure of which to file, obtain or occur would reasonably be expected to
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have, directly or indirectly, a Parent Material Adverse Effect or a Company
Material Adverse Effect, shall have been filed, been obtained or occurred on
terms and conditions which would not reasonably be expected to have a Parent
Material Adverse Effect or a Company Material Adverse Effect;
(d) the Company shall have obtained the Extension Policy which
Extension Policy shall be in full force and effect; and
(e) the Company shall have maintained the Workers Comp Policy which
Workers Comp Policy shall be in full force and effect.
SECTION 7.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver (where permissible) on or prior to the
Closing Date by Parent of the following additional conditions:
(a) each of the representations and warranties of the Company contained
in this Agreement (without giving effect to any materiality qualifications or
limitations therein or any references therein to Company Material Adverse
Effect) shall be true and correct, in each case as of the Effective Time as
though made on and as of the Effective Time, except (i) for such failures,
individually or in the aggregate, to be true and correct that would not
reasonably be expected to have a Company Material Adverse Effect; (ii) 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
qualifications in (i) above; and (iii) for changes expressly permitted or
contemplated by the terms of this Agreement, and Parent shall have received a
certificate signed on behalf of the Company by a duly authorized officer of the
Company to such effect;
(b) the Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by the Company on or prior to the Effective Time, and
Parent shall have received a certificate signed on behalf of the Company by a
duly authorized officer of the Company to that effect;
(c) the Company shall have received, each in form and substance
reasonably satisfactory to Parent, all third party consents necessary to
consummate the Transactions, the failure of which to obtain would reasonably be
expected to have a Company Material Adverse Effect;
(d) no event or events shall have occurred, which, individually or in
the aggregate, would reasonably be expected to have a Company Material Adverse
Effect;
(e) the Company shall have executed the Certificate of Merger for
filing pursuant to SECTION 1.02 hereof with the Secretary of State of the State
of Delaware;
(f) the Company shall have delivered to Parent the fully executed Board
Resignations and Officer Resignations;
(g) there shall not be pending or threatened any suit, action,
investigation or proceeding to which a Governmental Authority is a party (i)
seeking to restrain or prohibit the
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consummation of the Transactions or seeking to obtain from Parent or the Company
any damages that are material or (ii) seeking to prohibit or limit the ownership
or operation by Parent or the Company of any material portion of their
respective businesses or assets;
(h) Dissenting Shares shall comprise not more than 10% of the Company
Common Stock outstanding immediately prior to the Effective Time; and
(i) the Company shall have amended that certain Product Purchase
Agreement by and between the Company and Alpharma to (i) provide that the
assignment and assumption of certain GPO contracts from the Company to Alpharma
was in part and not in whole and (ii) obtain all third party consents associated
with consummation of the transactions contemplated by the Product Purchase
Agreement.
SECTION 7.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) by the Company following additional
conditions:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement (without giving effect to any materiality
qualifications or limitations therein or any references therein to Parent
Material Adverse Effect) shall be true and correct, in each case as of the
Effective Time, as though made on and as of the Effective Time, except (i) for
such failures, individually or in the aggregate, to be true and correct that
would not have a Parent Material Adverse Effect; (ii) that those representations
and warranties that address matters only as of a particular date shall remain
true and correct as of such date; and (iii) for changes expressly permitted or
contemplated by the terms of this Agreement, and the Company shall have received
a certificate signed on behalf of Parent by a duly authorized officer of Parent
to such effect; and
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by Parent and Merger Sub on or prior to the
Effective Time, and the Company shall have received a certificate signed on
behalf of Parent by a duly authorized officer of Parent to that effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated by this Agreement by the Company Stockholders, as
follows:
(a) by mutual written consent duly authorized by the Board of Directors
of each of Parent and the Company;
(b) by Parent or the Company, if the Effective Time shall not have
occurred on or before January 31, 2002 (the "DROP DEAD DATE"); provided,
however, that if SEC review of the
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Proxy Statement shall have occurred and such SEC review has not been completed
by December 31, 2001, then the Drop Dead Date shall be February 28, 2002;
provided, further, that the right to terminate this Agreement under this SECTION
8.01(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by Parent or the Company, if there shall be any Order which is
final and nonappealable preventing the consummation of the Merger; provided,
however, that the right to terminate this Agreement under this SECTION 8.01(c)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement hereunder has been the cause of, or resulted in, such
Order;
(d) by Parent (i) if the Board of Directors of the Company (or any
committee thereof) (x) withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Parent or (y) shall have
recommended to the Company Stockholders any Acquisition Proposal (other than an
Acquisition Proposal made by Parent); (ii) if the Company shall have entered
into an agreement with respect to an Acquisition Proposal (other than an
Acquisition Proposal made by Parent); or (iii) the Company shall have willfully
and materially breached any of its obligations under SECTIONS 6.02 or 6.04;
(e) by the Company, if, prior to the Company Stockholders' Approval
having been obtained, (i) the Company simultaneously enters into a definitive
agreement for a Superior Proposal in accordance with (and has otherwise complied
with) the terms of this SECTION 8.01(e), including the notice provisions herein,
(ii) the Company makes the payment of the Termination Fee as required pursuant
to SECTION 8.02 of this Agreement for which the Company is responsible under
SECTION 8.02 of this Agreement, (iii) the Company has complied in all material
respects with SECTION 6.04, (iv) the Company has provided Parent, three Business
Days prior to such termination, a written summary of the material terms and
conditions of such Acquisition Proposal (such three Business Day period shall
end at the same time of day on the third Business Day as such written summary
was provided to Parent by the Company) and (v) prior to any such termination,
the Company shall, and shall cause its respective financial and legal advisors
to, be reasonably available to negotiate with Parent any amendment to the terms
and conditions of this Agreement or new offer that Parent determines to propose,
and Parent does not make, within such three Business Day period, an offer to the
Company that is at least as favorable, in the Board of Directors' good faith
judgment, to the Company's Stockholders from a financial point of view as the
pending Acquisition Proposal;
(f) by the Company or Parent, if, at the Company Stockholders Meeting
(including any adjournment or postponement), the Company Stockholders' Approval
shall not have been obtained; or
(g) by Parent or the Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) would, if uncured at Closing,
cause the conditions set forth in SECTION 7.02 (in the case of termination by
Parent) or SECTION 7.03 (in the case of termination by the Company) not to be
satisfied, and (ii) shall not have been cured within twenty (20) Business Days
following receipt by the breaching party of written notice of such breach from
the other party.
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SECTION 8.02. NOTICE OF TERMINATION; EFFECT OF TERMINATION. In the
event the Company or Parent shall elect to terminate this Agreement pursuant to
SECTION 8.01, it shall give written notice of such termination to the other
party, which notice shall state the reasons for such termination.
(a) In the event of termination of the Agreement pursuant to this
Article VIII, all obligations of the parties shall terminate, except the
obligations of the parties pursuant to this SECTION 8.02 and except for the
provisions of SECTIONS 6.03(b), 6.07, 10.03, 10.08, 10.11 and 10.12, provided
that nothing herein shall relieve any party from liability for any willful
breaches hereof that shall have occurred prior to termination.
(b) In the event that this Agreement is terminated pursuant to SECTION
8.01(d), SECTION 8.01(e) or SECTION 8.01(f), then the Company shall promptly
(and in any event within one Business Day after such termination or, in the case
of any such termination by the Company, simultaneously with such termination
(such termination not to be effective unless such payment is made)) pay to
Parent an amount equal to a termination fee of $2,000,000 (the "TERMINATION
FEE").
(c) In the event (i) an Acquisition Proposal shall have been made to
the Company or an Acquisition Proposal shall have been made directly to the
stockholders of the Company generally or shall have otherwise become publicly
known or any person shall have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal, (ii) this Agreement is terminated
by the Company or Parent pursuant to SECTION 8.01(b) (and the Acquisition
Proposal shall not have been abandoned or withdrawn prior to such termination)
and (iii) within twelve months after such termination the Company enters into a
definitive agreement with respect to, or consummates, any Acquisition Proposal;
then the Company shall promptly (and in any event within one Business Day after
entering into such agreement or consummating an Acquisition Proposal), pay
Parent an amount equal to the Termination Fee. Solely for purposes of this
SECTION 8.02(c), (i) all references to 25% in the definition of Acquisition
Proposal shall be 40%, (ii) the references to tender offer and exchange offer in
the definition of Acquisition Proposal shall only mean such an offer that
relates to 40% or more of the Company's outstanding Common Stock, and (iii) the
reference to a sale or license of any Intellectual Property rights related to
the Pediatric Products in clause (v) of the definition of Acquisition Proposal
shall mean only such a sale or license that relates to such rights that comprise
40% or more of the fair market value of all such rights of the Company.
(d) Parent and the Company agree that the agreements contained in
SECTIONS 8.02(b) and 8.02(c) are an integral part of the transactions
contemplated by this Agreement and that the Termination Fee constitutes
liquidated damages and not a penalty.
(e) Notwithstanding anything to the contrary contained herein, receipt
by Parent of the amounts payable pursuant to SECTION 8.02(b) or SECTION 8.02(c)
shall constitute full settlement of any and all liabilities of the Company for
damages under this Agreement in respect of a termination of this Agreement
pursuant to SECTIONS 8.01(d), 8.01(e) or 8.01(f) other than with respect to
liabilities arising out of or attributable to the willful breach by the Company
of any covenant or agreement in this Agreement.
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SECTION 8.03. EXTENSION; WAIVER. At any time prior to the Effective
Time, any party hereto 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 made to such party contained herein or in any
document delivered pursuant to this Agreement or (c) waive compliance with any
of the agreements or conditions for the benefit of such party 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 delay in or failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a wavier of
such rights.
ARTICLE IX
RIGHT OF SETOFF
SECTION 9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND OTHER
OBLIGATIONS.
(a) The respective representations and warranties of the Company,
Parent and the Merger Sub contained in this Agreement shall expire with, and be
terminated and extinguished upon, the Effective Time. The respective agreements,
covenants and obligations made or undertaken by the Company, Parent, the Merger
Sub and the Surviving Corporation contained in this Agreement shall survive the
Closing and shall not merge in the performance of any obligation by any party
hereto, and shall remain in full force and effect, unless, in respect of any
agreement, covenant or obligation, some specified period is set forth in this
Agreement.
(b) Notwithstanding any other provisions hereof, the obligations of the
Surviving Corporation contained in this Agreement, including but not limited to
the obligations contained in SECTION 6.11, shall be binding upon the successors
and assigns of the Surviving Corporation. In the event the Surviving Corporation
or any of its successors or assigns (i) consolidates with or merges into any
other Person or (ii) transfers all or substantially all of its properties or
assets to any Person, then, and in each case, proper provision shall be made so
that successors and assigns of the Surviving Corporation honor the Surviving
Corporation's obligations set forth in this Agreement, including but not limited
to the obligations contained in SECTION 6.11.
(c) The obligations of Parent or the Surviving Corporation, as the case
may be, under SECTIONS 6.09, 6.10, 6.11 and 6.13 shall survive the consummation
of the Merger and shall not be terminated or modified in such a manner as to
adversely affect any Person to whom SECTIONS 6.09, 6.10, 6.11 or 6.13 applies
without the consent of such affected Person (it being expressly agreed that the
Person(s) to whom SECTIONS 6.09, 6.10, 6.11 and 6.13 apply shall be third party
beneficiaries of SECTIONS 6.09, 6.10, 6.11 and 6.13, each of whom may enforce
the provisions of SECTIONS 6.09, 6.10, 6.11 and 6.13).
SECTION 9.02. RIGHT OF SETOFF AGAINST THE CONTINGENT PAYMENTS.
(a) After the Effective Time, Parent shall have the right to setoff
against any future Contingent Payments any and all liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable attorneys'
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and consultants' fees and expenses and other reasonable costs of defending,
investigating or settling claims) (hereinafter, a "LOSS"), actually suffered or
incurred by Parent or its affiliates (including, after the Effective Time, the
Surviving Corporation), officers, directors, employees, agents, successors and
assigns (collectively, the "PARENT AFFILIATED Parties") arising out of or
resulting from one or more bona fide claims by third parties ("THIRD PARTY
CLAIMS") made against a Parent Affiliated Party prior to the date that is two
(2) years after the Effective Time (the "EXPIRATION TIME"), but not if made
thereafter, to the extent such claims arise out of:
(i) Section 9.02 Liabilities (as defined in SECTION 10.02(a) below) of
the Company as of the date of the Balance Sheet to the extent not fully
reflected or reserved against on the Balance Sheet; or
(ii) Section 9.02 Liabilities incurred subsequent to the date of the
Balance Sheet, other than (with respect to this clause (ii) and not with
respect to clause (iii)) Section 9.02 Liabilities incurred by the Company
subsequent to the date of the Balance Sheet in the ordinary course of
business which would have been reflected on or reserved against on the
Balance Sheet in accordance with GAAP and consistent with past practices
had they been incurred and not satisfied on or prior to the date of the
Balance Sheet; or
(iii) Section 9.02 Liabilities which are contingent liabilities and
which, in accordance with GAAP and consistent with past practices, the
Company determines prior to the Effective Time are "probable" claims.
All Losses under this SECTION 9.02(a) shall be determined net of all
insurance proceeds received or receivable. Parent shall, and shall cause the
Parent Affiliated Parties to, use reasonable efforts to mitigate any Losses
(which shall not include any obligation to expend any material funds).
(b) Notwithstanding anything to the contrary contained in this
Agreement, the sole remedy of the Parent Affiliated Parties with respect to
Third Party Claims shall be the right of setoff pursuant to this SECTION 9.02,
and:
(i) the maximum aggregate amount of Losses arising out of or resulting
from Third Party Claims that may be setoff against the Contingent Payments
shall be limited to $50,000,000 and the setoff against the Contingent
Payments pursuant to SECTION 9.02(c) shall be the Parent Affiliated
Parties' sole remedy to receive any payments pursuant to this SECTION
9.02; and
(ii) no Losses with respect to any Third Party Claims shall be setoff
against the Contingent Payments until such time as the aggregate amounts
of all such Losses shall equal or exceed $250,000 (the "DEDUCTIBLE"), and
then only with respect to the excess thereof over $250,000.
(c) Any Loss of any Parent Affiliated Party pursuant to this SECTION
9.02 may only be satisfied by setoff against any Contingent Payment which may
become payable to the Company Stockholders pursuant to SECTION 2.03 on or after
the date of the setoff (except, as to a particular claimed Loss, to the extent
of amounts withheld as to such Loss in accordance with the
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following sentence) including, without limitation, any Contingent Payments to be
paid or earned after the Expiration Time so long as the Third Party Claim with
respect to such Loss was made prior to the Expiration Time. In the event that
Parent claims a setoff is due pursuant to SECTION 9.02(a), Parent may withhold a
portion of a Contingent Payment that is otherwise due pursuant to SECTION 2.03
until the dispute with respect to the Loss is resolved; provided, however, that
in no event shall Parent withhold a portion of the Contingent Payment in excess
of the amount of the Loss in dispute. In the event that, upon resolution of such
dispute in accordance with SECTION 9.03, Parent is deemed to have incorrectly
withheld a portion of a Contingent Payment, Parent shall promptly pay such
incorrectly withheld portion to the Paying Agent in cash, together with interest
on such portion calculated from the date such withheld portion should have been
paid and calculated at the lesser of (i) five percent (5%) per annum, compounded
annually, or (ii) the highest rate permitted by Law. The failure to withhold a
sufficient portion of a Contingent Payment with respect to Losses shall not
limit or restrict the right of any Parent Affiliated Party to setoff such Losses
against one or more future Contingent Payments.
SECTION 9.03. PROCEDURE FOR THIRD PARTY CLAIMS.
(a) The obligations and liabilities with respect to Losses arising from
Third Party Claims under this Article IX shall be governed by and contingent
upon the following additional terms and conditions: (i) no claim may be asserted
or setoff made related to any Third Party Claim unless written notice of such
Third Party Claim is received by the Calculation Representative prior to the end
of the Expiration Time; and (ii) if the Parent Affiliated Party shall receive
notice of any Third Party Claim, Parent shall give the Calculation
Representative notice of such Third Party Claim promptly following the receipt
by the Parent Affiliated Party of such notice; provided, however, that the
failure to provide such notice shall not affect or reduce the Parent's right to
setoff, except to the extent that the amount of setoff is increased by such
failure. The notice of claim shall describe in reasonable detail the facts and
circumstances known to the Parent Affiliated Party that gave rise to such Third
Party Claim, and the amount or good faith estimate of the amount arising
therefrom.
(b) If the Calculation Representative acknowledges in writing the
Parent's right to setoff against the Contingent Payments any Losses that may
result from such Third Party Claim, then the Calculation Representative shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention to
do so to the Parent within 15 days of the receipt of such notice from the Parent
(and, to the extent the Calculation Representative defends such Third Party
Claim, the costs and expenses of counsel for the Parent Affiliated Parties shall
not constitute Losses); provided, however, that, if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the Parent Affiliated Party, based
on the advice of Parent's counsel, for the same counsel to represent both the
Parent Affiliated Party and the Calculation Representative, then the Parent
Affiliated Party shall be entitled to retain its own counsel, in each
jurisdiction for which counsel is required, and Parent may setoff such expenses
against any future Contingent Payments to the extent otherwise provided herein;
provided that the Parent Affiliated Parties shall not be entitled to select more
than one counsel in any jurisdiction. In the event that the Calculation
Representative exercises the right to undertake any such defense against any
such Third Party Claim as provided above, each Parent Affiliated Party shall
cooperate with the Calculation Representative in such defense and make
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available to the Calculation Representative, at such Parent Affiliated Party's
expense, all witnesses, pertinent records, materials and information in such
Parent Affiliated Party's possession or under such Parent Affiliated Party's
control relating thereto as are reasonably required by the Calculation
Representative. Similarly, in the event such Parent Affiliated Party is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the Calculation Representative shall cooperate with the Parent Affiliated
Party in such defense and make available to the Parent Affiliated Party, all
such witnesses, records, materials and information in the Calculation
Representative's possession or under the Calculation Representative's control
relating thereto as are reasonably required by the Parent Affiliated Party. No
such Third Party Claim may be settled by Calculation Representative without the
prior written consent of the Parent unless the Parent Affiliated Parties are
released in full in connection with such settlement. A Parent Affiliated Party
may settle any Third Party Claim without the consent of the Calculation
Representative; provided, however, that the Parent Affiliated Party may not
setoff such settled Third Party Claim against any Contingent Payment, any future
Contingent Payment or amounts withheld from Contingent Payments pursuant to
SECTION 9.02(c) unless the Calculation Representative consented to such
settlement. Notwithstanding the foregoing, if Parent notifies the Calculation
Representative in writing of its desire to settle a Third Party Claim and the
Calculation Representative does not within 10 Business Days of such notice
consent to such settlement, then Parent may at any time or from time to time
setoff against any Contingent Payment, any future Contingent Payments and any
amounts withheld from Contingent Payments pursuant to SECTION 9.02(c) relating
to such claim, any and all reasonable attorneys' and consultants' fees and
expenses and other reasonable costs of defending, investigating or settling such
claims (collectively, the "DEFENSE COSTS") with respect to such Third Party
Claim, whether incurred before or after such notification; provided, however, if
Parent does not settle such Third Party Claim and as a result of a final,
non-appealable judgment, no Parent Affiliated Party is liable to any party or
parties with respect to such Third Party Claim then in such case, Parent shall
not be entitled to setoff the Defense Costs with respect to such Third Party
Claim and shall reimburse any Defense Costs previously setoff with respect to
such Third Party Claim.
SECTION 9.04. CALCULATION REPRESENTATIVE. FS Private Investments,
LLC ("FS PRIVATE") or any affiliate of FS Private as FS Private shall designate
(the "FS DESIGNEE"), ("FS Private or the FS Designee, as the case may be, being
referred to herein as "CALCULATION REPRESENTATIVE"), shall have full authority
to act and to take any and all actions required or permitted to be taken under
this Agreement, with respect to any claims (including the settlement thereof)
made by one or more Parent Affiliated Parties for setoff pursuant to this
Article IX or any dispute, claim or controversy under SECTION 2.03(d). In the
event that FS Private, the FS Designee or any subsequent Calculation
Representative resigns as Calculation Representative or is no longer able to
perform such duties, Xxxxxx Xxxxxxxx, or if he is unable or unwilling to serve,
a Person (selected by an arbitrator listed on the Panel List) who is willing to
serve in such capacity, shall be the Calculation Representative; provided that
if the FS Designee resigns, FS Private shall again have the right to designate
an affiliate as Calculation Representative. Neither the Calculation
Representative nor any of its directors, officers, agents or employees shall be
liable to any Person for any error of judgment, or any action taken, suffered or
omitted to be taken, under this Agreement, except in the case of its gross
negligence, bad faith or willful misconduct. The Calculation Representative may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or
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omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. The Calculation Representative shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement. As to any matters not
expressly provided for in this Agreement, the Calculation Representative shall
not be required to exercise any discretion or take any action. The Parent
Affiliated Parties shall be entitled to rely on all statements, representations
and decisions of the Calculation Representative. Any out-of-pocket costs or
expenses incurred by the Calculation Representative in performing its duties and
responsibilities under this Agreement, and not paid by Parent or otherwise
reimbursed to the Calculation Representative as provided in this Agreement,
shall be (x) deducted from any unpaid Contingent Payments, if any, and paid by
Parent to the Calculation Representative solely from such future Contingent
Payments, if any, and (y) treated as Contingent Payment Adjustments; provided,
however, the Calculation Representative's rights under this sentence are
subordinated to Parent's prior right of setoff as to any unpaid amounts to which
Parent has made a claim under Article IX.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be deemed given if given in writing and
delivered in person, or mailed by registered or certified mail (postage prepaid,
return receipt requested) or delivered by a nationally recognized overnight
courier service, or confirmed facsimile transmission to the respective parties
at the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this SECTION 10.01):
if to Parent or Merger Sub or, after the Closing, the Surviving
Corporation:
Medicis Pharmaceutical Corporation
0000 X. Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
with a copy to each of:
Medicis Pharmaceutical Corporation
0000 X. Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attn: General Counsel
and
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, P.C.
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if to the Company before the Closing:
Ascent Pediatrics, Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx X000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: President
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to the Calculation Representative:
Calculation Representative
c/o FS Private Investments LLC
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
with a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
All such notices and communications hereunder shall be deemed given
when received, as evidenced by the signed acknowledgement of receipt of the
person to whom such notice or communication shall have been personally
delivered, the acknowledgement of receipt returned to the sender by the
applicable postal authorities, the confirmation of delivery rendered by the
applicable overnight courier service, or the confirmation by the sender of a
successful facsimile transmission to the person to whom such notice was sent via
facsimile.
SECTION 10.02. CERTAIN DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
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(i) "AFFILIATE" of a specified Person means a Person who directly, or
indirectly, through one or more intermediaries, controls, is controlled by
or is under common control with such specified Person.
(ii) "AGGREGATE INITIAL COMMON STOCK CONSIDERATION" means the Aggregate
Merger Consideration excluding the Contingent Payments and the Excess
Warrant Proceeds.
(iii) "AGGREGATE MERGER CONSIDERATION" means the Initial Merger
Consideration plus the Contingent Payments (as defined in SECTION
2.03(A)), if earned pursuant to SECTION 2.03 and the Excess Warrant
Proceeds, if any.
(iv) "AGGREGATE SERIES H MERGER CONSIDERATION" means the product of (i)
the Series H Merger Consideration and (ii) the number of shares of Series
H Preferred Stock issued and outstanding immediately prior to the
Effective Time.
(v) "BENEFICIAL OWNER", with respect to any shares, means a Person who
shall be deemed to be the beneficial owner of such shares under Rule 13d-3
of the Exchange Act.
(vi) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in New York City, New York.
(vii) "COMMERCIAL PEDIATRIC PRODUCTS" means collectively, Orapred(R)
prednisolone sodium phosphate oral solution (15mg prednisolone per 5ml),
Primsol(R) trimethoprim HCl oral solution (50mg/5ml) and Pediamist(R)
nasal saline spray.
(viii) "COMMON STOCK CASH MERGER CONSIDERATION" means the amount equal
to (i) the result of the Initial Merger Consideration less the Aggregate
Series H Merger Consideration, divided by (ii) the sum of (A) the number
of shares of Company Common Stock issued and outstanding immediately prior
to the Effective Time plus (B) the number of shares of Company Common
Stock issuable upon the exercise of In-the-Money Warrants.
(ix) "COMMON STOCK MERGER CONSIDERATION" means the Common Stock Cash
Merger Consideration plus the right to receive the Contingent Per Share
Payment, if any, and the Per Share Excess Warrant Proceeds, if any.
(x) "COMPANY SOFTWARE" means Software used by the Company in its
business as such Software exists on the date hereof that is either (A)
material to the operation of the business of the Company, (B)
manufactured, distributed, sold, licensed or marketed by the Company or
(C) developed by or for the Company; provided however, that Company
Software shall not include financial reporting Software or similar
Software.
(xi) "CONTINGENT PAYMENT ADJUSTMENTS" means any deductions for the
Alpharma Payments pursuant to SECTION 2.03(a)(vii), deductions pursuant to
SECTION 2.03(f), any deductions for Company Expenses in excess of
$1,200,000 in accordance
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with SECTION 6.08, any deductions for Retention Agreements pursuant to
SECTION 6.09(b), and any payments to the Calculation Representative in
accordance with SECTION 9.04, each to the extent not previously deducted
from the Initial Merger Consideration or in calculating any prior
Contingent Payment.
(xii) "CONTINGENT PER SHARE PAYMENT" means, with respect to each
Contingent Payment, an amount equal to (A) the applicable Contingent
Payment amount divided by (B) the Per Share Denominator; and the plural of
such term means the aggregate of such payments with respect to each share
of Company Common Stock.
(xiii) "CONTROL" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise.
(xiv) "DEVELOPMENT PEDIATRIC PRODUCTS" means, collectively,
Acetaminophen extended release sprinkles, Pediavent(R) albuterol extended
release suspension, and Non-refrigerated Orapred(R) prednisolone sodium
phosphate oral solution (15 mg prednisolone per 5 ml).
(xv) "DIVESTITURE AMOUNT" means, in the event that Parent divests
itself of substantially all of its right, title and interest in and to a
Pediatric Product, a one time payment of an amount equal to the product of
(a) the direct consideration received by Parent for such Pediatric
Product, net of Parent's out-of-pocket transaction costs associated with
such divestiture and (b) if the divestiture is consummated in the First
Premium Year, 5/11; in the Second Premium Year, 4/11; in the Third Premium
Year, 3/11; in the Fourth Premium Year, 2/11; or in the Fifth Premium
Year, 1/11.
(xvi) "GAAP" means United States generally accepted accounting
principles.
(xvii) "INITIAL MERGER CONSIDERATION" means $60.0 million in cash, plus
the aggregate consideration paid to the Company from the date hereof to
the Effective Time in connection with the exercise of Company Options and
Company Warrants, (a) less all Company Expenses actually paid by the
Company on or prior to the Closing Date in excess of $1,200,000 and (b)
less the payments required to be made pursuant to SECTIONS 6.09 and 6.10.
(xviii) "INTELLECTUAL PROPERTY" means: (a) inventions (whether
patentable or unpatentable and whether or not reduced to practice),
designs, improvements and United States, foreign and international
patents, patent applications, design registrations and applications, and
statutory invention registrations, together with all reissues,
continuations, continuations-in-part, divisionals, revisions, extensions,
and reexaminations relating thereto, (b) trademarks, service marks, domain
names, trade dress, logos, trade names, corporate names and other source
identifiers, and all goodwill associated therewith, including United
States and foreign xxxx registrations and applications for registration
thereof, (c) copyrightable works and copyrights, including
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registrations and applications for registration thereof, (d) trade secrets
and/or confidential and/or proprietary information relating to the
business, including but not limited to: processes, formulae, compositions,
methods, schematics, technology, technical data, know-how, drawings,
customer and supplier lists, pricing and cost information, computer
software programs or applications and tangible or intangible proprietary
information or material, (e) mask works and all applications,
registrations and renewals relating thereto, (f) rights of privacy,
personal and moral rights, publicity and endorsement, and all other rights
associated therewith in any jurisdiction and (g) Software.
(xix) "IN-THE-MONEY WARRANTS" means Company Warrants issued and
outstanding immediately prior to the Effective Time having an exercise
price of $.40 or less.
(xx) "KNOWLEDGE" of a Person shall mean the actual knowledge of any
fact, circumstance or condition by such Person, or, in the case of a
non-natural Person, the officers and management employees of such Person.
(xxi) "LICENSED INTELLECTUAL PROPERTY" means all Intellectual Property
licensed to the Company pursuant to the Licenses.
(xxii) "LICENSES" mean (A) licenses of Owned Intellectual Property by
the Company to third parties, (B) licenses of Intellectual Property by
third parties to the Company as of the date hereof, and (C) agreements
between the Company and third parties for the development of Intellectual
Property.
(xxiii) "MERGER CONSIDERATION" means the consideration for the Company
Stock provided for in SECTION 2.01.
(xxiv) "NET SALES" means the sum of (A) the difference between (x) the
gross amount invoiced by Parent or its subsidiaries, affiliates, licensees
or sublicensees from or on account of sales of Pediatric Products less (y)
any Net Sales Deductions; provided, however, the Company will allocate Net
Sales Deductions to the Pediatric Products only in an equitable manner
consistent with the manner in which it allocates Net Sales Deductions in
the balance of its business, plus (B) any amount received by Parent or its
affiliates under any copromotion, marketing or similar agreement with any
of the entities listed on SECTION 10.02(a)(xxiv) of the Company Disclosure
Schedule which provides for Parent or its affiliates to promote or market
the pharmaceutical products described on SECTION 10.02(a)(xxiv) of the
Company Disclosure Schedule.
(xxv) "NET SALES DEDUCTIONS" means any amounts deducted on Net Sales
invoices, in accordance with GAAP applied in a consistent manner with the
past practices of Parent related to sale of its other products for: (A)
normal, customary trade discounts (including volume discounts) actually
given or made, (B) credits, chargebacks, reductions, rebates, allowances
and adjustments for rejections, recalls, outdated products and returns,
(C) freight, shipping, insurance and other transportation charges, and (D)
sales, use, excise, value-added and similar taxes or duties imposed on the
sale (other than income taxes).
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(xxvi) "OWNED INTELLECTUAL PROPERTY" means all Intellectual Property
owned by the Company.
(xxvii) "PEDIATRIC PRODUCTS" means, collectively, the Commercial
Pediatric Products, and the Development Pediatric Products, in any
variation of these formulations containing the specified active
ingredients in any dosage form or by any name called.
(xxviii) "PER SHARE DENOMINATOR" means a number (which is subject to
adjustment from time to time) that as of the point in time at which this
term is used for any particular calculation equals the sum of (A) the
number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time plus (B) the number of shares of
Company Common Stock issuable upon the exercise of In-the-Money Warrants
plus (C) in the event that Out-of-the-Money Warrants are exercised after
the Effective Time, the aggregate number of shares of Company Common Stock
for which such Out-of-the-Money Warrants are exercised as of the point in
time at which this term is used for any particular calculation;
(xxix) "PER SHARE EXCESS WARRANT PROCEEDS" means, with respect to any
payment of Excess Warrant Proceeds, an amount equal to (A) the applicable
amount of Excess Warrant Proceeds divided by (B) the Per Share
Denominator, as adjusted from time to time.
(xxx) "PER SHARE MERGER CONSIDERATION" means, as applicable, the
Common Stock Merger Consideration or the Series H Merger Consideration.
(xxxi) "PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government.
(xxxii) "PREMIUM YEAR" means each of five consecutive twelve month
periods commencing on the first day of the first calendar month after the
Closing Date, with the fifth Premium Year ending one day prior to the
fifth anniversary of such commencement date.
(xxxiii) "REGISTERED PROPRIETARY NAME" means all trade marks, trade
names, brand names, and service marks registered or the subject of
applications for registration filed by Company in any country or
governmental unit thereof throughout the world.
(xxxiv) "SECTION 9.02 LIABILITIES" means all Liabilities arising out
of the conduct of the Company's business prior to the Effective Time other
than:
(x) Liabilities disclosed in SECTION 9.02 of the Company
Disclosure Schedule; and
(y) Payment or performance obligations under the terms of
contracts (but not for the breach or non-performance thereof)
disclosed in the Company Disclosure Schedule or entered into by the
Company prior to the Effective Time without violation of SECTION
5.01.
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(xxxv) "SERIES H CERTIFICATE" means the Company's Certificate of
Designation, Voting Powers, Preferences and Rights of Series H Preferred
Stock as filed with the Secretary of State of the State of Delaware on
December 29, 2000.
(xxxvi) "SERIES H MERGER CONSIDERATION" means an amount per share of
Series H Preferred Stock equal to the Redemption Price (as defined in the
Series H Certificate).
(xxxvii) "SOFTWARE" means computer software and programs in any form,
and all versions, updates, corrections, enhancements and modifications
thereof, and all related documentation and excluding commercial,
off-the-shelf software.
(xxxviii) "SUBSIDIARY" means, with respect to any party, any
corporation, partnership, joint venture, limited liability company or
other business association or entity, of which (x) at least a majority of
the securities or other interests having by their terms voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such Person is directly or indirectly
beneficially owned or controlled by such party or by any one or more of
its subsidiaries, or by such party and one or more of its subsidiaries, or
(y) such party or any Subsidiary of such party is a general partner of a
partnership or a manager of a limited liability company.
(xxxix) "TAX AUTHORITY" means the Internal Revenue Service and any
other domestic or foreign Governmental Authority responsible for the
administration, imposition, collection, or administration of any Taxes.
(xl) "TAXES" means any and all federal, state, local, or foreign
taxes, fees, levies, duties, tariffs, imposts and other charges of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any Tax
Authority, including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation or net worth;
taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value-added or gains taxes; and customs' duties, tariffs
and similar charges, whether disputed or not, including any obligations
under any agreements or arrangements with any other Person with respect to
such amounts, and including any liability arising as a transferee or
successor-in-interest.
(xli) "TAX RETURNS" means any and all reports, returns, declarations,
statements or other information required to be supplied to a Tax Authority
in connection with Taxes, including any schedules or attachments thereto,
and including any amendment thereof.
(xlii) "UNREGISTERED PROPRIETARY NAME" means all trade marks, trade
names, brand names, and service marks used by the Company but not
registered or the subject of an application for registration in any
country or governmental unit thereof throughout the world.
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(b) The following terms shall have the meanings defined for such terms
in the Sections of this Agreement set forth below:
7.5% Convertible Subordinated Notes................. 3.09(b)(iii)
7.5% Subordinated Notes............................. 3.09(b)(i)
7.5% Subordinated Note Holders...................... Recitals
8% Convertible Subordinated Notes................... 3.09(b)(iv)
8% Subordinated Notes............................... 3.09(b)(ii)
Acquisition Proposal................................ 6.04(c)
affiliate........................................... 10.02(a)(i)
Agreement........................................... Preamble
Aggregate Initial Common Stock Consideration........ 10.02(a)(ii)
Aggregate Merger Consideration...................... 10.02(a)(iii)
Aggregate Series H Merger Consideration............. 10.02(a)(iv)
Allocated Consideration............................. 2.04(b)(i)
Alpharma............................................ Recitals
Alpharma Payments................................... 2.03(a)(vii)
Arbitration Notice.................................. 2.03(d)(iii)
Arbitration Rules................................... 2.03(d)(ii)
Assets.............................................. 3.18
Balance Sheet....................................... 3.09(a)
BancBoston.......................................... 6.14(c)
beneficial owner.................................... 10.02(a)(v)
Board Resignations.................................. 6.14(a)(iii)
Business Day........................................ 10.02(a)(vi)
Calculation Representative.......................... 9.04
Call Option......................................... Recitals
CERCLA.............................................. 3.14
Certificates........................................ 2.02(b)
Certificate of Merger............................... 1.02
Closing............................................. 1.02
Closing Date........................................ 1.02
COBRA............................................... 3.12(b)
Code................................................ 2.02(h)
Commercial Pediatric Products....................... 10.02(a)(vii)
Common Holder(s) ................................... 2.01(a)(i)
Common Stock Cash Merger Consideration.............. 10.02(a)(viii)
Common Stock Merger Consideration................... 10.02(a)(ix)
Company............................................. Preamble
Company Benefit Plans............................... 3.12(a)
Company Common Stock................................ Recitals
Company Disclosure Schedule......................... Article III
Company Expenses.................................... 6.08
Company Financial Statements........................ 3.08
Company Indemnified Party........................... 6.11(a)
Company Material Adverse Effect..................... 3.01
Company Notes....................................... Recitals
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Company Notes Amount................................ 6.10
Company Ongoing Clinical Programs................... 3.15
Company Optionholder................................ 2.04(a)(iv)
Company Permits..................................... 3.06(a)
Company SEC Reports................................. 3.07
Company Software.................................... 10.02(a)(x)
Company Stock....................................... Recitals
Company Stock Option................................ 2.04(a)(ii)
Company Stock Plans................................. 2.04(a)(ii)
Company Stockholders................................ 2.02(h)
Company Stockholders Meeting........................ 6.02(i)
Company Stockholders' Approval...................... 3.22
Company Warrants.................................... 2.04(b)
Company Warrant Holders............................. 2.04(b)
Confidentiality Agreements.......................... 6.03(b)
Consultants......................................... 6.09(c)
Consulting Agreements............................... 6.09(c)
Contingent Payment(s)............................... 2.03(a)
Contingent Payment Adjustments...................... 10.02(a)(xi)
Contingent Per Share Payment........................ 10.02(a)(xii)
control............................................. 10.02(a)(xiii)
Deductible.......................................... 9.02(b)(ii)
Defense Costs....................................... 9.03(b)
Depositary.......................................... Recitals
Depositary Agreement................................ Recitals
Depositary Amendment................................ 6.14(a)(v)
Depositary Holder................................... Recitals
Depositary Receipt.................................. Recitals
Depositary Share.................................... Recitals
Development Pediatric Products...................... 10.02(a)(xiv)
DGCL................................................ Recitals
Dissenting Shares................................... 2.05(a)
Divestiture Amount.................................. 10.02(a)(xv)
Drop Dead Date...................................... 8.01(b)
Effective Time...................................... 1.02
Enforceability Exception............................ 3.04(a)
Environmental Laws.................................. 3.14
Environmental Permits............................... 3.14
ERISA............................................... 3.12(a)
ERISA Affiliate..................................... 3.12(a)
Excess Warrant Proceeds............................. 2.04(b)(ii)
Exchange Act........................................ 3.05(b)
Exclusive Remedy Agreement.......................... Recitals
Exercised Warrants.................................. 2.04(b)
Expenses............................................ 6.08
Expiration Time..................................... 9.02(a)
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Extension Policy.................................... 6.14(a)(i)
FDA................................................. 3.06(c)
FDCA................................................ 3.06(c)
Federal Arbitration Act............................. 2.03(d)(ii)
Fifth Contingent Payment............................ 2.03(a)(v)
First Contingent Payment............................ 2.03(a)(i)
Fourth Contingent Payment........................... 2.03(a)(iv)
FS Designee......................................... 9.04
FS Entities......................................... 6.09(a)
FS Private.......................................... 9.04
FS Transaction Fee.................................. 6.09(a)
GAAP................................................ 10.02(a)(xvi)
Governmental Authority.............................. 3.05(b)
Hazardous Materials................................. 3.14
Initial Merger Consideration........................ 10.02(a)(xvii)
Initial Public Disclosure........................... 6.07
Intellectual Property............................... 10.02(a)(xviii)
In-the-Money Warrants............................... 10.02(a)(xix)
IRS................................................. 3.12(b)
Key Management...................................... 6.09(b)
knowledge........................................... 10.02(xx)
Law................................................. 3.05(d)
Liabilities......................................... 3.09(a)
Licensed Intellectual Property...................... 10.02(a)(xxi)
Licenses............................................ 10.02(a)(xxii)
Lien................................................ 3.05(e)
Litigation.......................................... 3.11
Loss................................................ 9.02(a)
Material Contracts.................................. 3.13(a)
May 1998 Securities Purchase Agreement.............. 3.09(b)(ii)
Merger.............................................. Recitals
Merger Consideration................................ 10.02(a)(xxiii)
Merger Sub.......................................... Preamble
Multiemployer Plan.................................. 3.12(c)
Multiple Employer Plan.............................. 3.12(c)
Net Sales........................................... 10.02(a)(xxiv)
Net Sales Deductions................................ 10.02(a)(xxv)
Net Sales Statement................................. 2.03(b)
Note Agreement...................................... Recitals
Note Holder(s)...................................... Recitals
Officer Resignations................................ 6.14(a)(iv)
Order............................................... 7.01(b)
Other Holders....................................... Recitals
Out-of-the-Money Warrants........................... 2.04(b)
Owned Intellectual Property......................... 10.02(a)(xxvi)
Panel List.......................................... 2.03(d)(iv)
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Parent.............................................. Preamble
Parent Affiliated Parties........................... 9.02(a)
Parent Disclosure Schedule.......................... Article IV
Parent Material Adverse Effect...................... 4.01
Paying Agent........................................ 2.02(a)
Pediatric Products.................................. 10.02(a)(xxvii)
Per Share Denominator............................... 10.02(a)(xxviii)
Per Share Excess Warrant Proceeds................... 10.02(a)(xxix)
Per Share Merger Consideration...................... 10.02(a)(xxx)
Person.............................................. 10.02(a)(xxxi)
Premium Adjustment.................................. 2.03(a)(vi)
Premium Base Amount................................. 2.03(a)(i)
Premium Year........................................ 10.02(a)(xxxii)
Principal Stockholders.............................. Recitals
Proxy Statement..................................... 6.01
Receiving Parties................................... 2.03(b)
Registered Proprietary Name......................... 10.02(a)(xxxiii)
Replacement Plans................................... 6.05
Representatives..................................... 6.03(a)
Retained Employees.................................. 6.05
Retention Agreements................................ 6.09(b)
Retention Payments.................................. 6.09(b)
SEC................................................. 3.07
Second Contingent Payment........................... 2.03(a)(ii)
Section 9.02 Liabilities............................ 10.02(a)(xxxiv)
Securities Act...................................... 3.07
Series G Warrant(s)................................. Recitals
Series G Warrant Holder............................. Recitals
Series H Certificate................................ 10.02(a)(xxxv)
Series H Holder(s).................................. Recitals
Series H Merger Consideration....................... 10.02(a)(xxxvi)
Series H Preferred Stock............................ Recitals
Settlement Meeting.................................. 2.03(d)(i)
Software............................................ 10.02(a)(xxxvii)
SPD................................................. 3.12(b)
subsidiary.......................................... 10.02(a)(xxxviii)
Superior Proposal................................... 6.04(a)
Surviving Corporation............................... 1.01
Tax Authority....................................... 10.02(a)(xxxix)
Taxes............................................... 10.02(a)(xl)
Tax Returns......................................... 10.02(a)(xli)
Termination Agreement............................... Recitals
Termination Fee..................................... 8.02(b)
Third Contingent Payment............................ 2.03(a)(iii)
Third Party Claims.................................. 9.02(a)
Transaction......................................... Recitals
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Transaction Incentives.............................. 6.09(c)
Unregistered Proprietary Name....................... 10.02(a)(xlii)
Voting Agreement.................................... Recitals
Workers Comp Policy................................. 6.14(a)(ii)
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SECTION 10.03. SEPARABILITY. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect.
SECTION 10.04. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors, and assigns; provided, however, that neither this
Agreement nor any rights hereunder shall be assignable or otherwise subject to
hypothecation, in whole or in part, by operation of law or otherwise by any of
the parties without the prior written consent of the other parties, and any
assignment in violation hereof shall be null and void.
SECTION 10.05. NO THIRD PARTY BENEFICIARIES. Except for the Company
Indemnified Parties, no Person other than the parties hereto is an intended
beneficiary of this Agreement or any portion hereof. Nothing contained in this
SECTION 10.05 shall be construed as affecting the rights of the Company
Stockholders under SECTIONS 2.02, 2.03 or 9.01 or the rights of the Calculation
Representative under SECTION 2.03 and Article IX.
SECTION 10.06. INCORPORATION OF EXHIBITS. The Company Disclosure
Schedule, the Parent Disclosure Schedule and all Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
SECTION 10.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 10.08. GOVERNING LAW; FORUM. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that state and
without regard to any applicable conflicts of law. Each of the parties hereto
submits to the exclusive jurisdiction of the state and federal courts of the
United States located in the State of Delaware with respect to any claim or
cause of action arising out of this Agreement or the Transactions.
SECTION 10.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.10. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.11. ENTIRE AGREEMENT. This Agreement (including the
Exhibits, the Company Disclosure Schedule and the Parent Disclosure Schedule)
and the Confidentiality Agreements constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto.
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SECTION 10.12. ATTORNEY'S FEES. If any action at law or equity,
including an action for declaratory relief, is brought to enforce or interpret
any provision of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and expenses from the other party, which fees
and expenses shall be in addition to any other relief which may be awarded.
SECTION 10.13. AMENDMENTS AND SUPPLEMENTS. At any time before or
after approval of the matters presented in connection with the Merger by the
Company Stockholders and prior to the Effective Time, this Agreement may be
amended or supplemented in writing by the Company and Parent with respect to any
of the terms contained in this Agreement, except as otherwise provided by law;
provided, however, that following approval of this Agreement by the Company
Stockholders there shall be no amendment or change to the provisions hereof that
(i) alters or changes the amount and kind of the Merger Consideration; (ii)
alters or changes any term of the certificate of incorporation of the Surviving
Corporation to be effected by the Merger or (iii) alters or changes any term or
condition hereof if it would adversely affect the Company Stockholders.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of Parent, Merger Sub and the Company has
executed or has caused this Agreement to be executed by its respective officers
thereunto duly authorized as of the date first written above.
Medicis Pharmaceutical Corporation, a Delaware
corporation
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-------------------------------------------------
Name: Xxxx X. Xxxxxxxx, Xx.
Title: Executive Vice-President &
Chief Financial Officer
MPC Merger Corp., a Delaware corporation
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-------------------------------------------------
Name: Xxxx X. Xxxxxxxx, Xx.
Title: Secretary & Treasurer
Ascent Pediatrics, Inc., a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
MERGER AGREEMENT SIGNATURE PAGE
74
EXHIBIT A TO MERGER AGREEMENT
EXAMPLE OF CONTINGENT PAYMENT CALCULATIONS*
PREMIUM YEAR 1
--------------
- Net Sales of Pediatric Products = $30,000,000
- amount in excess of $25,000,000 = $5,000,000
- plus Divestiture Amount = $2,000,000
- less setoff pursuant to Section 9.02(c) of $1,000,000
- therefore Premium Base Amount = $6,000,000
Multiply Premium Base Amount by 1.050 = $6,300,000
- LESS Contingent Payment Adjustments of $500,000
Amount Due to Company Stockholders = $5,800,000
PREMIUM YEAR 2
--------------
- Net Sales of Pediatric Products = $42,000,000
- amount in excess of $25,000,000 = $17,000,000
- cap on Contingent Payment therefore amount in excess = $10,000,000
- therefore Premium Base Amount = $10,000,000
Multiply Premium Base Amount by 1.10 = $11,000,000
- LESS Contingent Payment Adjustments of $600,000
Amount Due to Company Stockholders = $10,400,000
PREMIUM YEAR 3
--------------
- Net Sales of Pediatric Products = $37,000,000
- amount in excess of $25,000,000 = $12,000,000
- cap on Contingent Payment therefore amount in excess = $10,000,000
- therefore Premium Base Amount = $10,000,000
Multiply Premium Base Amount by 1.15 = $11,500,000
- LESS Contingent Payment Adjustments of $200,000
Amount Due to Company Stockholders = $11,300,000
PREMIUM YEAR 4
--------------
- Net Sales of Pediatric Products = $27,000,000
- amount in excess of $25,000,000 = $2,000,000
- therefore Premium Base Amount = $ 2,000,000
Multiply Premium Base Amount by 1.2 = $2,400,000
- LESS Contingent Payment Adjustments of $40,000
Amount Due to Company Stockholders = $2,360,000
PREMIUM YEAR 5
--------------
- Net Sales of Pediatric Products = $21,000,000
- amount in excess of $25,000,000 = $ 0
- plus Divestiture Amount = $2,000,000
- therefore Premium Base Amount = $2,000,000
Multiply Premium Base Amount by 1.25 = $2,500,000
- LESS Contingent Payment Adjustments of $0
Amount Due to Company Stockholders = $ 2,500,000
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PREMIUM ADJUSTMENT
------------------
Sum of Net Sales and Divestiture Amounts for Premium Years 1 through 5:
Premium Year 1 $ 32,000,000
Premium Year 2 42,000,000
Premium Year 3 37,000,000
Premium Year 4 27,000,000
Premium Year 5 23,000,000
-----------
AGGREGATE NET SALES &
DIVESTITURE AMOUNTS $161,000,000
Less set off pursuant to 9.02(c) 1,000,000
NET $160,000,000
Sum of Premium Base Amount:
Premium Year 1 $ 6,000,000
Premium Year 2 10,000,000
Premium Year 3 10,000,000
Premium Year 4 2,000,000
Premium Year 5 2,000,000
-------------
AGGREGATE PREMIUM BASE AMOUNT $ 30,000,000
Plus $125,000,000
Amount in Excess of Threshold $155,000,000
Aggregate Net Sale and Divestiture Amounts of $161,000,000, less $1,000,000 in
offsets results in $160,000000. $125,000,000 plus the aggregate Premium Base
Amount of $30,000,000 earned during Premium Years 1 through 5, results in a
Premium Adjustment of $5,000,000 being payable.
