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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of September 25, 1996
(the "Agreement") by and among Xxxxxx Pharmaceuticals, Inc., a Nevada
corporation ("Xxxxxx"), Opalacq Co., a Delaware corporation and the wholly-owned
subsidiary of Xxxxxx ("Xxxxxx Sub") and Oclassen Pharmaceuticals, Inc., a
Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of Xxxxxx and the Company have
determined that a business combination between Xxxxxx and the Company merging
their respective pharmaceutical businesses is in the best interests of their
respective companies and stockholders and presents an opportunity for their
respective companies to achieve long-term strategic and financial benefits, and
accordingly have agreed to effect the merger provided for herein upon the terms
and subject to the conditions set forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that (a)
for federal income tax purposes, the merger provided for herein shall qualify as
a "reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"); (b) for accounting purposes, the merger
provided for herein shall qualify as a "pooling of interests"; and (c) the
shares of Xxxxxx Common Stock (as defined herein) to be issued pursuant to the
Merger shall be exempt securities pursuant to Section 3(a)(10) of the Securities
Act of 1933, as amended (the "Securities Act"); and
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.3 of this Agreement),
Xxxxxx Sub shall be merged with and into the Company in accordance with the laws
of the State of Delaware and the terms of this Agreement (the "Merger"),
whereupon the separate corporate existence of Xxxxxx Sub shall cease, and the
Company shall be the surviving corporation of the Merger (the Company, as the
surviving corporation after the Merger is sometimes referred to herein as the
"Surviving Corporation").
1.2. Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Venture Law Group, A Professional Corporation, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx,
XX 00000 at 10:00 a.m. three business days after all the conditions set forth in
Article VI of this Agreement (other than those that are waived by the party or
parties for whose benefit such conditions exist) are satisfied; or (b) at such
other place, time, and/or date as the parties hereto may otherwise agree. The
date upon which the Closing shall occur is referred to herein as the "Closing
Date." The Closing is expected to occur on or about November
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26, 1996.
1.3. Effective Time. If all the conditions to the Merger set forth in
Article VI of this Agreement have been fulfilled or waived and this Agreement
shall not have been terminated as provided in Article VIII hereof, the parties
hereto shall cause a certificate of merger ("the Certificate of Merger") to be
properly executed and filed in accordance with the laws of the State of Delaware
and the terms of this Agreement on or before the Closing Date. The parties
hereto shall also take such further actions as may be required under the laws of
the State of Delaware in connection with the consummation of the Merger. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware or at such later time
as is specified in the Certificate of Merger (the "Effective Time"). From and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities and duties of the Company and Xxxxxx Sub, all as
provided under applicable law.
1.4. Conversion of Shares.
(a) At the Effective Time:
(i) each share of Common Stock, par value $0.01 per share, of
Xxxxxx Sub outstanding at the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof, shall be
converted into and exchanged for one share of Common Stock, par value
$0.01 per share, of the Surviving Corporation;
(ii) in addition to the consideration set forth in Section
1.4(a)(vii) below, each share of Series A Preferred Stock, $0.001 par
value per share, of the Company (the "Series A Preferred Stock")
outstanding at the Effective Time, plus all accrued and unpaid
dividends thereon, by virtue of the Merger and without any action on
the part of the holders thereof, except as otherwise provided in
Sections 1.4(d) or 1.8 hereof, shall be converted into the right to
receive the number of shares of Common Stock, par value $0.0033 per
share (the "Xxxxxx Common Stock"), of Xxxxxx equal to the following:
$2.00 divided by the Average Closing Price (as defined herein) (the
"Series A Preferred Payout");
(iii) in addition to the consideration set forth in Section
1.4(a)(vii) below, each share of Series B Preferred Stock, $0.001 par
value per share, of the Company (the "Series B Preferred Stock")
outstanding at the Effective Time, plus all accrued and unpaid
dividends thereon, by virtue of the Merger and without any action on
the part of the holders thereof, except as otherwise provided in
Sections 1.4(d) or 1.8 hereof, shall be converted into the right to
receive the number of shares of Xxxxxx Common Stock equal to the
following: (A) the sum of $2.30 plus an amount equal to the cumulative
dividends accrued at the rate of $0.184 per annum from April 22, 1994
to and including the Closing Date; divided by (B) the Average Closing
Price (the "Series B Preferred Payout");
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(iv) in addition to the consideration set forth in Section
1.4(a)(vii) below, each share of Series C Preferred Stock, $0.001 par
value per share, of the Company (the "Series C Preferred Stock")
outstanding at the Effective Time, plus all accrued and unpaid
dividends thereon, by virtue of the Merger and without any action on
the part of the holders thereof, except as otherwise provided in
Sections 1.4(d) or 1.8 hereof, shall be converted into the right to
receive the number of shares of Xxxxxx Common Stock equal to the
following: (A) the sum of $4.364 plus an amount equal to the cumulative
dividends accrued at the rate of $0.35 per annum from April 22, 1994 to
and including the Closing Date; divided by (B) the Average Closing
Price (the "Series C Preferred Payout");
(v) in addition to the consideration set forth in Section
1.4(a)(vii) below, each share of Series D Preferred Stock, $0.001 par
value per share, of the Company (the "Series D Preferred Stock")
outstanding at the Effective Time, plus all accrued and unpaid
dividends thereon, by virtue of the Merger and without any action on
the part of the holders thereof, except as otherwise provided in
Sections 1.4(d) or 1.8 hereof, shall be converted into the right to
receive the number of shares of Xxxxxx Common Stock equal to the
following: (A) the sum of $5.00 plus an amount equal to the cumulative
dividends accrued at the rate of $0.40 per annum from April 22, 1994 to
and including the Closing Date; divided by (B) the Average Closing
Price (the "Series D Preferred Payout");
(vi) in addition to the consideration set forth in Section
1.4(a)(vii) below, each share of Series E Preferred Stock, $0.001 par
value per share, of the Company (the "Series E Preferred Stock")
outstanding at the Effective Time, plus all accrued and unpaid
dividends thereon, by virtue of the Merger and without any action on
the part of the holders thereof, except as otherwise provided in
Sections 1.4(d) or 1.8 hereof, shall be converted into the right to
receive the number of shares of Xxxxxx Common Stock equal to the
following: (A) the sum of $12.00 plus an amount equal to the cumulative
dividends accrued at the rate of $0.96 per annum from April 22, 1994 to
and including the Closing Date; divided by (B) the Average Closing
Price (the "Series E Preferred Payout");
(vii) each share of Common Stock, $0.001 par value per share, of
the Company (the "Company Common Stock") and each share of Preferred
Stock outstanding at the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, except as
otherwise provided in Sections 1.4(d) or 1.8 hereof, shall be converted
into the right to receive the number of shares of Xxxxxx Common Stock
equal to the following: (A)(I) $135,000,000; less (II) the sum of (v)
the Series A Preferred Payout multiplied by the number of shares of
Series A Preferred Stock outstanding at the Effective Time multiplied
by the Average Closing Price; plus (w) the Series B Preferred Payout
multiplied by the number of shares of Series B Preferred Stock
outstanding at the Effective Time multiplied by the Average Closing
Price; plus (x) the Series C Preferred Payout multiplied by the number
of shares of Series C Preferred Stock outstanding at the Effective Time
multiplied by the Average Closing Price; plus (y) the Series D
Preferred Payout multiplied by the number of shares of Series D
Preferred Stock outstanding at the Effective Time multiplied
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by the Average Closing Price; plus (z) the Series E Preferred Payout
multiplied by the number of shares of Series E Preferred Stock
outstanding at the Effective Time multiplied by the Average Closing
Price; divided by (B) the aggregate number of shares of Company Common
Stock outstanding at the Effective Time on a fully diluted basis,
including, without limitation, the number of shares of Company Common
Stock which can be purchased and/or received by the conversion of all
outstanding shares of Preferred Stock (as defined herein) at the
Effective Time or the exercise of all outstanding options, warrants, or
other rights to purchase shares of Company Common Stock, whether or not
such rights are currently exercisable, at the Effective Time; and
further divided by (C) the Average Closing Price (the "Exchange
Ratio").
(b) Subject to the provisions of Section 1.8, all holders of Company
Common Stock and Preferred Stock (the "Stockholders," who are listed on Exhibit
A attached hereto, which shall be updated at the Closing) shall be required to
deposit seven and one-half percent (7.5%) of the shares of Xxxxxx Common Stock
to be received by them in the Merger into an escrow account (the "Escrow"),
which shares shall be held and distributed in accordance with the terms of an
Escrow Agreement (the "Escrow Agreement") to be entered into by and among
Xxxxxx, the Stockholder Agent (as defined herein) and American Stock Transfer &
Trust Company or such other party as the parties may mutually agree upon, as
escrow agent (the "Escrow Agent"), in substantially the form attached hereto as
Exhibit B.
(c) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of Company Common Stock and
Preferred Stock shall cease to be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of shares of Company Common Stock and
Preferred Stock shall thereafter cease to have any rights with respect to such
shares of Company Common Stock and Preferred Stock, except for the right to
receive (except as otherwise provided in Section 1.8 hereof), without interest,
the consideration set forth in this Section 1.4 and cash for fractional shares
of Xxxxxx Common Stock in accordance with Section 1.6 of this Agreement upon the
surrender of a certificate (each, a "Certificate") representing such shares of
Company Common Stock or Preferred Stock, as the case may be, in accordance with
the provisions of this Article I.
(d) Each share of Company Common Stock and Preferred Stock held by the
Company as treasury stock or owned by Xxxxxx or any Subsidiary (as defined in
Section 1.4(e) of this Agreement) of Xxxxxx at the Effective Time shall be
canceled, and no payment shall be made with respect thereto.
(e) For purposes of this Agreement, (i) the term "Average Closing
Price" shall mean the average of the per share daily closing price of Xxxxxx
Common Stock as quoted on the Nasdaq National Market ("Nasdaq") (and as reported
by The Wall Street Journal or, if not reported thereby, by another authoritative
source) during the ten (10) consecutive trading days ending two trading days
prior to the Closing Date; provided, however, that (A) if the Average Closing
Price is greater than $35.00 (appropriately adjusted for any stock split,
reverse stock split, stock dividend, reorganization,
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recapitalization or other like change with respect to the Xxxxxx Common Stock
occurring after the date hereof and prior to the Effective Time), for purposes
of this Agreement, the Average Closing Price shall be deemed to be equal to
$35.00 (appropriately adjusted for any stock split, reverse stock split, stock
dividend, reorganization, recapitalization or other like change with respect to
the Xxxxxx Common Stock occurring after the date hereof and prior to the
Effective Time); and (B) if the Average Closing Price is less than $27.00
(appropriately adjusted for any stock split, reverse stock split, stock
dividend, reorganization, recapitalization or other like change with respect to
the Xxxxxx Common Stock occurring after the date hereof and prior to the
Effective Time), for purposes of this Agreement, the Average Closing Price shall
be deemed to be equal to $27.00 (appropriately adjusted for any stock split,
reverse stock split, stock dividend, reorganization, recapitalization or other
like change with respect to the Xxxxxx Common Stock occurring after the date
hereof and prior to the Effective Time); (ii) the word "Subsidiary" when used
with respect to any Person means any corporation or other organization, whether
incorporated or unincorporated, of which (A) at least fifty percent (50%) of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries; or (B) such Person or any other Subsidiary of such Person is a
general partner, it being understood that representations and warranties of a
Person concerning any former Subsidiary of such Person shall be deemed to relate
only to the periods during which such former Subsidiary was a Subsidiary of such
Person; (iii) the word "Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof, or any affiliate (as that term is defined in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act")) of any of the foregoing; (iv) the
term "Preferred Stock" shall mean the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock together; and (v) the term "Preferred Payout" shall mean the
Series A Preferred Payout, the Series B Preferred Payout, the Series C Preferred
Payout, the Series D Preferred Payout and the Series E Preferred Payout
together.
1.5. Stock Options. All options to acquire Company Common Stock
(individually, a "Company Option" and collectively, the "Company Options")
outstanding at the Effective Time under the Company's 1992 Stock Option Plan and
the Company's 1992 Director Stock Option Plan or otherwise (the "Company Stock
Option Plans") shall remain outstanding following the Effective Time. At the
Effective Time, such Company Options shall, by virtue of the Merger and without
any further action on the part of the Company or the holder of such Company
Options, be assumed by Xxxxxx in such manner that Xxxxxx (a) is a corporation
(or a parent or a subsidiary corporation of such corporation) "assuming a stock
option in a transaction to which Section 424(a) applied" within the meaning of
Section 424 of the Code; or (b) to the extent that Section 424 of the Code does
not apply to any such Company Options, would be such a corporation (or a parent
or a subsidiary corporation of such corporation) were Section 424 applicable to
such option. Each Company Option assumed by Xxxxxx shall be exercisable upon the
same terms and conditions as under the applicable Company Stock Option Plan and
the applicable option agreement issued thereunder, except that (x)
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the unexercised portion of each such Company Option shall be exercisable for
that whole number of shares of Xxxxxx Common Stock (rounded to the nearest whole
share, with 0.5 rounded upward) equal to the number of shares of Company Common
Stock subject to the unexercised portion of such Company Option multiplied by
the Exchange Ratio; and (y) the option exercise price per share of Xxxxxx Common
Stock shall be an amount equal to the option exercise price per share of Company
Common Stock subject to such Company Option in effect at the Effective Time
divided by the Exchange Ratio (the option price per share, as so determined,
being rounded to the nearest full cent, with $0.005 rounded upward). No payment
shall be made for fractional interests. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the Code,
if applicable, and all of the other terms of the Company Options shall otherwise
remain unchanged. As soon as practicable after the Effective Time, Xxxxxx shall
deliver to the holders of Company Options appropriate notices setting forth such
holders' rights pursuant to such Company Options, as amended by this Section
1.5. Xxxxxx shall take all corporate actions necessary to reserve for issuance
such number of shares of Xxxxxx Common Stock as will be necessary to satisfy
exercises in full of all Company Options after the Effective Time. Within
forty-five (45) days after the Effective Time, Xxxxxx shall register the shares
of Xxxxxx Common Stock issuable upon exercise of such Company Options with the
Securities and Exchange Commission on Form S-8.
1.6. Exchange of Certificates Representing Company Common Stock and
Preferred Stock.
(a) American Stock Transfer & Trust Company shall act as exchange
agent (the "Exchange Agent") in the Merger.
(b) As of the Effective Time, Xxxxxx shall deposit or cause to be
deposited with the Exchange Agent for exchange in accordance with this Article
I, the shares of Xxxxxx Common Stock issuable pursuant to Section 1.4 in
exchange for shares of Company Common Stock and Preferred Stock outstanding at
the Effective Time, less such number of shares of Xxxxxx Common Stock as are to
be deposited into the Escrow pursuant to the requirement of 1.4(b) and Article
VII hereof.
(c) On or promptly after the Effective Time (but not later than five
(5) business days after the Effective Time), Xxxxxx shall mail to each holder of
record of shares of Company Common Stock and Preferred Stock (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such shares of Company Common Stock or Preferred Stock shall
pass, only upon delivery of the Certificates representing such shares to Xxxxxx;
and (ii) instructions for use in effecting the surrender of such Certificates in
exchange for certificates representing shares of Xxxxxx Common Stock and cash in
lieu of fractional shares. Upon surrender of a Certificate representing shares
of Company Common Stock or Preferred Stock for cancellation to Xxxxxx, together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, the holder of the shares represented by such
Certificate shall be entitled to receive in exchange therefor (i) a certificate
representing that number of whole shares of Xxxxxx Common Stock; and (ii) a
check representing the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions of
this Section 1.6, after giving effect to any
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required withholding tax and less the number of shares of Xxxxxx Common Stock
required to be deposited by such Stockholder into the Escrow pursuant to the
terms of Section 1.4 hereof, and the shares represented by the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions, if
any, payable to holders of shares of Company Common Stock and Preferred Stock.
In the event of a transfer of ownership of Company Common Stock or Preferred
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Xxxxxx Common Stock,
together with a check for the cash to be paid in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, may be issued to such a
transferee if the Certificate representing such Company Common Stock or
Preferred Stock is presented to Xxxxxx, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until so surrendered, each Certificate that, at
the Effective Time, represented shares of Company Common Stock or Preferred
Stock will be deemed from and after the Effective Time, for all corporate
purposes other than the payment of dividends (except to the extent provided in
Section 1.6(d) below), to evidence the ownership of the number of full shares of
Xxxxxx Common Stock into which such shares of Company Common Stock or Preferred
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.4.
(d) As of the Effective Time, Xxxxxx shall deposit or cause to be
deposited with the Escrow Agent a Certificate (issued in the name of the Escrow
Agent or its nominee) representing the Xxxxxx Common Stock deposited in the
Escrow ("Escrow Shares"), as described in Section 1.4(b), for the purpose of
securing the indemnification obligations of the Stockholders set forth in this
Agreement. The Escrow Shares shall be held by the Escrow Agent under the Escrow
Agreement pursuant to the terms thereof and shall be disbursed in accordance
with the terms of the Escrow Agreement. The adoption of this Agreement and the
approval of the Merger by the Stockholders shall constitute approval of the
Escrow Agreement and of all of the arrangements relating thereto, including
without limitation the placement of the Escrow Shares in escrow and the
appointment of the Stockholder Agent (as defined herein). Any shares of Xxxxxx
Common Stock or other equity securities issued or distributed by Xxxxxx
(including shares issued upon a stock split) ("New Shares") in respect of Xxxxxx
Common Stock in the Escrow which have not been released from the Escrow shall be
added to the Escrow and become a part thereof. New Shares issued in respect of
Xxxxxx Common Stock which have been released from the Escrow shall not be added
to the Escrow, but shall be distributed to the holders thereof. When and if cash
dividends on Xxxxxx Common Stock in the Escrow shall be declared and paid, they
shall not be added to the Escrow, but shall be paid to those on whose behalf
such Xxxxxx Common Stock is held who, at the Effective Time, held Company Common
Stock or Preferred Stock. Each Stockholder shall have voting rights with respect
to the shares of Xxxxxx Common Stock contributed to the Escrow on behalf of such
Stockholder (and on any voting securities added to the Escrow in respect of such
shares of Xxxxxx Common Stock) so long as such shares of Xxxxxx Common Stock or
other voting securities are held in the Escrow. As the record holder of such
shares, the Escrow Agent shall vote such shares in accordance with the
instructions of the Stockholders having the beneficial interest therein and
shall promptly deliver copies of all proxy solicitation materials to such
Stockholders. Xxxxxx shall show the Xxxxxx
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Common Stock contributed to the Escrow Fund as issued and outstanding on its
balance sheet.
(e) Notwithstanding anything to the contrary contained herein, no
dividends or other distributions declared after the Effective Time on Xxxxxx
Common Stock shall be paid with respect to any shares of Company Common Stock
and/or Preferred Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole shares of Xxxxxx Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of Xxxxxx Common Stock and not paid, less the amount of any withholding taxes
which may be required thereon; and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Xxxxxx Common Stock, less the
amount of any withholding taxes which may be required thereon.
(f) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock or
Preferred Stock which were outstanding at the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged for the consideration set forth in this Article
I deliverable in respect thereof pursuant to this Agreement in accordance with
the procedures set forth in this Section 1.6. Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145(c) under the Securities Act shall not be exchanged until Xxxxxx has
received an Affiliate Letter (as defined herein) from such person as provided in
Section 5.9.
(g) No fractional shares of Xxxxxx Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Xxxxxx
Common Stock pursuant to Section 1.4, cash adjustments will be paid to holders
in respect of any fractional share of Xxxxxx Common Stock that would otherwise
be issuable, and the amount of such cash adjustment shall be equal to such
fractional proportion of the Average Closing Price of a share of Xxxxxx Common
Stock.
(h) All former stockholders of the Company shall look only to Xxxxxx
for payment of shares of Xxxxxx Common Stock, cash in lieu of fractional shares
and unpaid dividends and distributions on the Xxxxxx Common Stock deliverable in
respect of each share of Company Common Stock or Preferred Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
(i) None of Xxxxxx, Xxxxxx Sub, the Company, the Surviving Corporation
or any other person shall be liable to any former holder of shares of Company
Common Stock or Preferred Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
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(j) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, Xxxxxx will issue
in exchange for such lost, stolen or destroyed Certificate, shares of Xxxxxx
Common Stock and cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Xxxxxx Common Stock as provided in this Section 1.6,
deliverable in respect thereof pursuant to this Agreement.
1.7. Adjustment of Exchange Ratio. In the event that, subsequent to
the date of this Agreement but prior to the Effective Time, the outstanding
shares of Xxxxxx Common Stock, Company Common Stock or Preferred Stock shall
have been changed into a different number of shares or a different class as a
result of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, split, combination, exchange, recapitalization or other
similar transaction, the Exchange Ratio and the Preferred Payouts shall be
appropriately adjusted.
1.8. Dissenting Shares. Notwithstanding anything to the contrary
contained in this Agreement, in the event appraisal rights are available to the
Stockholders pursuant to applicable law, any shares of Company Common Stock or
Preferred Stock held by a person who objects to the Merger and who complies with
all of the provisions of applicable law concerning the rights of such person to
dissent from the Merger and to require appraisal of such person's shares of
Company Common Stock or Preferred Stock, as the case may be (the "Company
Dissenting Shares"), shall not be converted into the right to receive shares of
Xxxxxx Common Stock pursuant to Section 1.4 of this Agreement but shall become
the right to receive such consideration as may be determined to be due to the
holder of such Company Dissenting Shares pursuant to applicable law; provided
however, that the Company Dissenting Shares held by a person at the Effective
Time who shall, after the Effective Time, withdraw the demand for appraisal or
lose the right to appraisal, in either case pursuant to applicable law, shall be
deemed to have converted, as of the Effective Time, his or her shares of Company
Common Stock or Preferred Stock, as the case may be, into shares of Xxxxxx
Common Stock pursuant to Section 1.4 of this Agreement.
1.9. Tax Consequences and Accounting Treatment. It is intended by the
parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Code and that the transaction be accounted for as
a pooling of interests.
1.10. Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Xxxxxx Sub, the officers and directors of the
Company and Xxxxxx Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
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ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
2.1. Certificate of Incorporation of the Surviving Corporation. The
certificate of incorporation of Xxxxxx Sub in effect at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation until amended
in accordance with its terms and pursuant to applicable law; provided however,
that Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is Oclassen
Pharmaceuticals, Inc.".
2.2. By-Laws of the Surviving Corporation. The By-Laws of Xxxxxx Sub in
effect at the Effective Time shall be the By-Laws of the Surviving Corporation
until amended in accordance with the terms of such By-Laws and pursuant to
applicable law and the Certificate of Incorporation of the Surviving
Corporation.
2.3. Directors of the Surviving Corporation. The directors of the
Surviving Corporation immediately after the Effective Time shall consist of the
persons listed on Exhibit C attached hereto, to hold office until their
successors are duly appointed or elected in accordance with applicable law.
2.4. Officers of the Surviving Corporation. The officers of the
Surviving Corporation immediately after the Effective Time shall consist of the
persons listed on Exhibit D attached hereto who shall hold the offices listed
opposite their respective names until their successors are duly appointed or
elected in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF XXXXXX AND XXXXXX SUB
Xxxxxx and Xxxxxx Sub represent and warrant to the Company that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure statement delivered by Xxxxxx and Xxxxxx Sub to the
Company concurrently herewith and identified as the"Xxxxxx Disclosure
Statement." All exceptions noted in the Xxxxxx Disclosure Statement shall be
numbered to correspond to the applicable sections to which such exception
refers.
3.1 Existence, Good Standing, Corporate Authority. Each of Xxxxxx and
Xxxxxx Sub (i) is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation; (ii)
has all requisite power and authority to own or lease, and operate its
properties and assets, and to carry on its business as now conducted and as
currently proposed to be conducted, except where the failure to have such power
and authority would not have a Xxxxxx Material Adverse Effect (as defined
herein); (iii) is duly qualified or licensed to do business and is in good
standing in all jurisdictions in which it owns or leases property or in which
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the conduct of its business requires it to so quality or be licensed, except
where the failure to so qualify would not have a Xxxxxx Material Adverse Effect;
and (iv) has obtained all licenses, permits, franchises and other governmental
authorizations necessary to the ownership or operation of its properties or the
conduct of its business, except where the failure to have obtained such
licenses, permits, franchises or authorizations would not have a Xxxxxx Material
Adverse Effect. The copies of Xxxxxx'x and Xxxxxx Sub's Articles or Certificate
of Incorporation and By-Laws previously delivered to the Company are true and
correct. For purposes of this Agreement, a "Material Adverse Effect" when used
with respect to any entity means (a) a material adverse effect on the business,
results of operations, financial condition or prospects of such entity and its
subsidiaries, if any, taken as a whole, or (b) a material impairment in the
ability of such entity or its subsidiaries to perform any of their obligations
under this Agreement or to consummate the Merger.
3.2 Authorization of Agreement and Other Documents. The execution and
delivery of this Agreement and the other documents executed in connection
herewith to which Xxxxxx or Xxxxxx Sub is a party (collectively, the "Xxxxxx
Ancillary Documents"), have been duly authorized by the Board of Directors of
Xxxxxx and Xxxxxx Sub and no other proceedings on the part of Xxxxxx or Xxxxxx
Sub or their stockholders are necessary to authorize the execution, delivery or
performance of this Agreement or any Xxxxxx Ancillary Document; except the
approval of the Merger by the sole stockholder of Xxxxxx Sub. This Agreement is,
and, as of the Closing Date, each of the Xxxxxx Ancillary Documents will be, a
valid and binding obligation of Xxxxxx and/or Xxxxxx Sub, as the case may be,
enforceable against Xxxxxx and/or Xxxxxx Sub, as the case may be, in accordance
with its terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency; reorganization, moratorium, fraudulent conveyance or
other similar laws affecting enforcement of creditors' rights generally, and by
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
3.3 No Violation. Neither the execution and delivery by Xxxxxx and
Xxxxxx Sub of this Agreement or the Xxxxxx Ancillary Agreements, nor the
consummation by Xxxxxx and Xxxxxx Sub of the transactions contemplated hereby
and thereby in accordance with their respective terms, will (a) conflict with or
result in a breach of any provisions of the Articles or Certificate of
Incorporation or By-Laws of Xxxxxx or Xxxxxx Sub; (b) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of the Xxxxxx
stock option plans, or any grant or award made under any of the foregoing; (c)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Xxxxxx or Xxxxxx Sub under, or result in
being declared void, voidable, or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any material license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which Xxxxxx or Xxxxxx Sub is a
party, or by which Xxxxxx or Xxxxxx Sub or any of their respective properties is
bound or affected, except for any of the foregoing matters which would not have
a
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Xxxxxx Material Adverse Effect; (d) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgement, injunction, order
or decree binding upon or applicable to Xxxxxx or Xxxxxx Sub, except for any of
the foregoing matters which would not have a Xxxxxx Material Adverse Effect; or
(e) other than the filings provided for in Sections 1.3 and 5.7, filings under
applicable federal, state and local laws and regulations, filings required under
the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), the
Exchange Act, the Securities Act, or applicable state securities and "Blue Sky"
laws or filings in connection with the maintenance of qualification to do
business in other jurisdictions (collectively, the "Regulatory Filings"),
require any material consent, approval or authorization of, or declaration of,
or registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would have a Xxxxxx Material Adverse Effect.
3.4 SEC Documents. Xxxxxx has delivered to the Company each
registration statement, report, proxy statement or information statement (as
defined in Regulation 14C under the Exchange Act) prepared by it since January
1, 1994, which reports constitute all of the documents required to be filed by
Xxxxxx with the Securities and Exchange Commission ("SEC") since such date, each
in the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Xxxxxx Reports"). As of their respective dates, the Xxxxxx
Reports or (a) complied as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations thereunder; and (b) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Xxxxxx has timely
filed with the SEC all reports required to be filed under Section 13, 14 and
15(d) of the Exchange Act since January 1, 1994. Each of the consolidated
balance sheets of Xxxxxx included in or incorporated by reference into the
Xxxxxx Reports (including the related notes and schedules) fairly present in all
material respects the consolidated financial position of Xxxxxx and the Xxxxxx
Subsidiaries as of its date, and each of the consolidated statements of income,
retained earnings and cash flows of Xxxxxx included in or incorporated by
reference into the Xxxxxx Reports (including any related notes and schedules)
fairly present in all material respects the results of operations, retained
earnings or cash flows, as the case may be, of Xxxxxx and the Xxxxxx
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). The financial statements of Xxxxxx, including the
notes thereto, included in or incorporated by reference into the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, and have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto), Since January 1, 1994, there has been no material change in
Xxxxxx'x accounting methods or principles except as described in the notes to
such Xxxxxx financial statements.
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3.5 No Brokers. Xxxxxx has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
the Company or Xxxxxx, Xxxxxx Sub or their Subsidiaries to pay any finder's fee,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Xxxxxx has retained Xxxxxx Xxxx LLC as its
financial advisor, the arrangements with which have been disclosed in writing to
the Company prior to the date hereof.
3.6 Opinion of Financial Advisor. Xxxxxx has received the opinion of
Xxxxxx Xxxx LLC, to the effect that, as of the date hereof, the consideration to
be paid by Xxxxxx pursuant to the Merger is fair to Xxxxxx from a financial
point of view.
3.7 Xxxxxx Common Stock. The issuance and delivery by Xxxxxx of shares
of Xxxxxx Common Stock in connection with the Merger and this Agreement have
been duly and validly authorized by all necessary corporate action on the part
of Xxxxxx. The shares of Xxxxxx Common Stock to be issued in connection with the
Merger and this Agreement, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable.
3.8 Capitalization
(a) The total authorized capital stock of Xxxxxx consists of (i)
500,000,000 shares of Xxxxxx Common Stock, 36,778,718 shares of which are issued
and outstanding as of September 1, 1996 and (ii) 2,500,000 shares of Preferred
Stock, none of which are issued and outstanding as of the date of this
Agreement. The authorized capital stock of Xxxxxx Sub consists of 1,000 shares
of Common Stock, $0.01 par value per share, 100 shares of which, as of the date
hereof, are issued and outstanding and are held by Xxxxxx. There are no shares
of capital stock of Xxxxxx or Xxxxxx Sub of any other class authorized, issued
or outstanding. Except as set forth in the Xxxxxx Disclosure Statement, Xxxxxx
has not issued any shares of Xxxxxx Common Stock or Preferred Stock since
September 1, 1996.
(b) Except as set forth in the Xxxxxx Disclosure Statement, each
share of outstanding Xxxxxx Common Stock is to the knowledge of Xxxxxx, free and
clear of all material options, proxies, voting trusts, voting agreements,
judgements, pledges, charges, escrows, rights of first refusal or first offer.
For purposes of this Agreement, the terms "knowledge" or "known to" when used
with respect to any entity means the actual knowledge of the Chairman of the
Board of Directors, President, Chief Executive Officer or any Vice President of
such entity.
(c) Except as set forth in the Xxxxxx Disclosure Statement, there
are currently no outstanding, and as of the Closing; there will be no
outstanding (i) securities convertible into or exchangeable for any capital
stock of Xxxxxx or any of its Subsidiaries, (ii) options, warrants or other
rights to purchase or subscribe to capital stock of Xxxxxx or any of its
Subsidiaries or securities convertible into or exchangeable for capital stock of
Xxxxxx or any of its Subsidiaries, or (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind
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relating to the issuance of any capital stock of Xxxxxx or any of its
Subsidiaries.
3.9 Material Adverse Change. Since June 30, 1996 to the date of this
Agreement, Xxxxxx, Xxxxxx Sub and their Subsidiaries, taken as a whole, have not
suffered any change in their businesses, operations, assets, liabilities,
financial condition or prospects which would have a Xxxxxx Material Adverse
Effect; provided, that a Xxxxxx Material Adverse Effect will not be deemed to
have occurred solely as a result of fluctuations in the value of Xxxxxx Common
Stock due to or arising from any public disclosures by Xxxxxx (including its 50%
subsidiary, Somerset Pharmaceuticals, Inc.), including, without limitation,
disclosures relating to Xxxxxx'x entering into any other transactions
(including, without limitation, transactions relating to the acquisition of
assets, stock or merger transactions).
3.10 Litigation. There is no litigation or proceeding, in law or in
equity, and there are no proceedings or governmental investigations before any
commission or other administrative authority, pending or, to Xxxxxx'x knowledge,
threatened against Xxxxxx, any of its Subsidiaries or any of Xxxxxx'x or its
Subsidiaries' respective officers, directors or affiliates, with respect to or
affecting Xxxxxx'x or any of its Subsidiaries' operations, business, products,
sales practices or financial condition, or related to the consummation of the
transactions contemplated hereby, or by the Xxxxxx Ancillary Documents or the
Ancillary Documents which, in each case, if conducted with results unfavorable
to Xxxxxx or any of its Subsidiaries, would have a Xxxxxx Material Adverse
Effect. There are no facts known to Xxxxxx which, if known by a potential
claimant or governmental authority, would give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to Xxxxxx or any of its
Subsidiaries, would have a Xxxxxx Material Adverse Effect.
3.11 Hearing Notice and Proxy Statement, At the time the notice (the
"Hearing Notice" of the hearing to be held by the California Commissioner of
Corporations to consider the terms, conditions and fairness of the transactions
contemplated hereby (the "Hearing") pursuant to Section 25142 of the Corporate
Securities Law of 1968 of the State of California (the "California Law") shall
be mailed to the Stockholders, and at the time the information statement to be
delivered to the Stockholders in connection with the solicitation of written
consents or the stockholder meeting of the Company to vote on the Merger and the
other transactions contemplated hereby (the "Proxy Statement") shall be
delivered to the Stockholders, and at all times subsequent to such dates up to
and including the date of the stockholder meeting and the Effective Time, such
Hearing Notice, with respect to all information (other than information with
respect to the Company furnished to Xxxxxx by the Company for inclusion therein,
as to which no representation or warranty is hereby made) set forth therein, and
such Proxy Statement, with respect to information (including all financial data)
set forth therein with respect to Xxxxxx or Xxxxxx Sub furnished to the Company
by Xxxxxx or Xxxxxx Sub for inclusion therein, respectively, will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements or information
contained therein, in the light of the circumstances under which such statements
are made, not misleading.
3.12 Securities Act Exemption. The Xxxxxx Common Stock to be issued
pursuant to this
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Agreement and the Certificate of Merger will be exempt from the registration
requirements of the Securities Act by virtue of Section 3 (a)(10) thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Xxxxxx and Xxxxxx Sub that the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure statement delivered by the Company to Xxxxxx and Xxxxxx
Sub concurrently herewith and identified as the "Disclosure Statement." All
exceptions noted in the Disclosure Statement shall be numbered to correspond to
the applicable sections to which such exception refers.
4.1. Organization, Standing and Qualification.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; (ii) has all requisite
power and authority to own or lease, and operate its properties and assets, and
to carry on its business as now conducted and as currently proposed to be
conducted except where the failure to have such power and authority would not
have a Company Material Adverse Effect; (iii) is duly qualified or licensed to
do business and is in good standing in all jurisdictions in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed except where the failure to so qualify would not have a
Company Material Adverse Effect; and (iv) has obtained all licenses, permits,
franchises and other governmental authorizations necessary to the ownership or
operation of its properties or the conduct of its business except where the
failure to have obtained such licenses, permits, franchises or authorizations
would not have a Company Material Adverse Effect.
4.2. Capitalization.
(a) The total authorized capital stock of the Company consists of (i)
30,000,000 shares of common stock, par value $0.001 per share, 1,814,879 shares
of which are issued and outstanding as of the date of this Agreement; (ii)
1,000,000 shares of Series A Preferred Stock, par value $0.001 per share,
500,000 shares of which are issued and outstanding as of the date of this
Agreement; (iii) 2,889,403 shares of Series B Preferred Stock, par value $0.001
per share, 1,418,184 shares of which are issued and outstanding as of the date
of this Agreement; (iv) 3,024,748 shares of Series C Preferred Stock, par value
$0.001 per share, 1,442,906 shares of which are issued and outstanding as of the
date of this Agreement; (v) 7,000,000 shares of Series D Preferred Stock, par
value $0.001 per share, 3,105,888 shares of which are issued and outstanding as
of the date of this Agreement; (vi) 625,000 shares of Series E Preferred Stock,
par value $0.001 per share, 625,000 shares of which are issued and outstanding
as of the date of this Agreement; and (iii) 1,000,000 shares of preferred stock,
none of which are issued and outstanding as of the date of this Agreement. There
are no shares of capital stock of the Company of any other class authorized,
issued or outstanding. As of the date of this Agreement, the Common Stock and
Preferred Stock of the Company are owned of record by the
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Stockholders in the amounts set forth on the attached Exhibit A. Each
outstanding share of Preferred Stock is convertible into one share of Company
Common Stock.
(b) Except as set forth in the Disclosure Statement, each share of the
outstanding Company Common Stock and Preferred Stock is (i) duly authorized and
validly issued; (ii) fully paid and nonassessable and free of preemptive and
similar rights; and (iii) to the knowledge of the Company, free and clear of all
Claims and restrictions on voting and transfer other than restrictions on
transfer imposed by Federal and state securities laws.
(c) Except as set forth in the Disclosure Statement, there are
currently no outstanding, and, except as set forth in the Disclosure Statement,
as permitted pursuant to Section 5.2, as contemplated by Section 6.3(j) or the
exercise or cancellation of outstanding options in accordance with their terms,
as of the Closing, there will be no outstanding (i) securities convertible into
or exchangeable for any capital stock of the Company, (ii) options, warrants or
other rights to purchase or subscribe to capital stock of the Company or
securities convertible into or exchangeable for capital stock of the Company, or
(iii) contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind to which the Company is a party or is bound relating to the
issuance of any capital stock of the Company. The Disclosure Statement
identifies, as of the date hereof, the option holder, the number of shares
subject to each option, the exercise price, the vesting schedule and the
expiration date of each outstanding option or warrant to purchase capital stock
of the Company.
4.3. Ownership Interests. The Company has no Subsidiaries and does not
own any direct or indirect interest in any corporation, joint venture, limited
liability company, partnership, association or other entity. Since January 1,
1990, the Company has not (i) disposed of the capital stock (other than Company
Common Stock and Preferred Stock) or all or substantially all of the assets of
any ongoing business, or (ii) purchased the business and/or all or substantially
all of the assets of another person, firm or corporation (whether by purchase of
stock, assets, merger or otherwise).
4.4. Constituent Documents. True and complete copies of the Certificate
of Incorporation and all amendments thereto, the By-Laws as amended and
currently in force, all stock records, and all corporate minute books and
records of the Company have been furnished or made available by the Company to
Xxxxxx for inspection. Said stock records accurately reflect all stock
transactions and the current stock ownership of the Company. The corporate
minute books and records of the Company contain true and complete copies of all
resolutions adopted by the stockholders or the board of directors of the Company
and any other action formally taken by them respectively as such.
4.5. Authorization of Agreement and Other Documents. The execution and
delivery of this Agreement and the other documents executed in connection
herewith to which the Company is a party (collectively, the "Ancillary
Documents"), have been duly authorized by the Board of Directors of the Company
and no other proceedings on the part of the Company or its Stockholders are
necessary to authorize the execution, delivery or performance of this Agreement
or any Ancillary Document, except the approval of the Merger by the
Stockholders. This Agreement is, and, as of
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the Closing Date, each of the Ancillary Documents will be, a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting enforcement of creditors' rights generally, and by
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
4.6. No Violation. Neither the execution and delivery of this Agreement
nor the Ancillary Documents by the Company nor the consummation by the Company
of the transactions contemplated hereby and thereby in accordance with their
respective terms, will (a) conflict with or result in a breach of any provisions
of the Certificate of Incorporation or By-Laws of the Company; (b) result in a
breach or violation of, a default under, or the triggering of any payment or
other material obligations pursuant to, or accelerate vesting under, any of the
Company Stock Option Plans, or any grant or award made under any of the
foregoing; (c) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of the Company under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company is a party, or by
which the Company or any of its properties is bound or affected, except for any
of the foregoing matters which would not have a Company Material Adverse Effect;
(d) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgement, injunction, order or decree binding upon or
applicable to the Company, except for any of the foregoing matters which would
not have a Company Material Adverse Effect; or (e) other than the Regulatory
Filings, require any material consent, approval or authorization of, or
declaration of, or registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have a Company Material
Adverse Effect.
4.7. Compliance with Laws--General.
(a) The Company holds all permits, licenses, variances, exemptions,
orders and approvals of any court, arbitral, tribunal, administrative agency or
commissioner or other governmental or other regulatory authority or agency
("Governmental Entities") necessary for the lawful conduct of its business (the
"Permits"), except where the failure to hold such permits would not have a
Company Material Adverse Effect.
(b) The Company is in substantial compliance with the material terms of
its Permits.
(c) The Company is in substantial compliance with all laws, ordinances
or regulations of all Governmental Entities (including, but not limited to,
those related to occupational health and
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safety, controlled substances or employment and employment practices) that are
applicable to the Company or affect or relate to this Agreement or the
transactions contemplated hereby ,except for any noncompliance that would not
have a Company Material Adverse Effect.
(d) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Entity with
respect to the Company is to the knowledge of the Company, pending or
threatened.
(e) The Company currently is not subject to any agreement, contract or
decree with any Governmental Entities arising out of any current or previously
existing violations of any laws, ordinances or regulations applicable to the
Company.
4.8. Compliance with Laws--FDA.
(a) As to each drug of the Company for which an application has been
approved by the Food and Drug Administration (the "FDA"), which drug is
described in the Disclosure Statement, the applicant and all persons performing
operations covered by the application are in substantial compliance with 21
U.S.C. Sections 355 or 357, 21 C.F.R. Parts 314 or 430 et. seq., respectively,
and all terms and conditions of the application.
(b) As to each biologic product of the Company for which an
establishment license application ("ELA") and/or product license application
("PLA") has been filed, which products are described in the Disclosure
Statement, the applicant and all persons performing operations covered by the
application are in substantial compliance with 42 U.S.C. Section 262, 21 C.F.R.
Part 601 et. seq., and all terms and conditions of the ELA and/or PLA.
(c) The Company is in substantial compliance with all applicable
registration and listing requirements set forth in 21 U.S.C. Section 360 and 21
C.F.R. Part 207.
(d) All manufacturing operations conducted by or, to the knowledge of
the Company, for the benefit of the Company have been and are being conducted in
substantial compliance with the good manufacturing practice regulations set
forth in 21 C.F.R. Parts 210 and 211.
(e) Neither the Company, nor, to the knowledge of the Company, its
officers, employees, or agents have made an untrue statement of material fact or
fraudulent statement to the FDA, failed to disclose a material fact required to
be disclosed to the FDA, or committed an act, made a statement, or failed to
make a statement that could reasonably be expected to provide a basis for the
FDA to invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities," set forth in 56 Fed. Reg 46191 (September 10,
1991).
(f) The Company has made available to Xxxxxx copies of any and all
reports of inspection observations, establishment inspection reports, warning
letters and any other documents received from or issued by the FDA within the
last three years that indicate or suggest lack of
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compliance with the FDA regulatory requirements by the Company, or persons
covered by product applications or otherwise performing services for the benefit
of the Company.
(g) The Company has not received any written notice that the FDA has
commenced, or threatened to initiate, any action to withdraw its approval or
request the recall of any product of the Company or commenced or threatened to
initiate, any action to enjoin production at any facility owned or used by the
Company or any other facility at which any of the Company's products are
manufactured, processed, packaged, labeled, stored, distributed, tested or
otherwise handled (the "Manufacturing Locations").
(h) As to each article of drug or consumer product currently
manufactured and/or distributed by the Company, which products are described in
the Disclosure Statement, such article is not adulterated or misbranded within
the meaning of the FDCA, 21 U.S.C. Sections 301c et. seq.
(i) As to each drug referred to in (a), the Company, and its officers,
employees, agents and affiliates have included or caused to be included in the
application for such drug, where required, the certification described in 21
U.S.C. Section 335a(k)(l) and the list described in 21 U.S.C. Section
335a(k)(2), and such certification and such list was in each case true and
accurate when made and remained true and accurate thereafter.
(j) Neither the Company, nor, to the knowledge of the Company, its
officers, employees, agents or affiliates, has been convicted of any crime or
engaged in any conduct for which debarment is mandated by 21 U.S.C. Section
335a(a) or authorized by 21 U.S.C. Section 335a(b).
(k) As to each application submitted to, but not approved by, the FDA,
and not withdrawn by the Company, or applicants acting on its behalf as of the
date of this Agreement, the Company has complied in all material respects with
the requirements of 21 U.S.C. Sections 355 and 357 and 21 C.F.R. Parts 312, 314
and 430 et. seq. and has provided, or will provide, all additional information
and taken, or will take, all additional action requested by the FDA in
connection with the application.
4.9. Books and Records. The Company's books, accounts and records are,
and have been, in all material respects, maintained in the Company's usual,
regular and ordinary manner, in accordance with GAAP, and all material
transactions to which the Company is or has been a party are properly reflected
therein.
4.10. Financial Statements. (a) The Disclosure Statement contains
complete and accurate copies of the audited balance sheets, statements of income
and stockholders' equity, statements of cash flows and notes to financial
statements (together with any supplementary information thereto) of the Company
as of and for the years ended December 31, 1995, 1994 and 1993. The financial
statements described in the preceding sentence are hereinafter referred to as
the "Financial Statements." The Disclosure Schedule also contains complete and
accurate copies of the unaudited balance sheet, unaudited statement of income
and unaudited statement of cash flows of the Company
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as of and for the six-month period ended June 30, 1996. The financial statements
described in the preceding sentence are referred to herein as the "Interim
Financial Statements". The Financial Statements and the Interim Financial
Statements present accurately and completely the financial position of the
Company as of the dates thereof (subject, in the case of the Interim Financial
Statements, to normal year-end audit adjustments) and the results of operations
and cash flows of the Company for the periods covered by said statements, in
accordance with GAAP, except that the Interim Financial Statements do not
include footnotes. The Company has provided to Xxxxxx or its counsel complete
and correct copies of all attorneys' responses to audit inquiry letters and all
management letters from the Company's independent certified public accountants
for the last five (5) fiscal years of the Company.
4.11. Accounts Receivables. To the knowledge of the Company, none of
the trade receivables and notes receivable which are reflected on the Financial
Statements, the Interim Financial Statements or which arose subsequent to the
date of the Interim Financial Statements, is or was subject to any counterclaim
or set off. All of such trade receivables arose out of bona fide, arms-length
transactions for the sale of goods or performance of services, and all such
trade receivables and notes receivable are good and collectible (or have been
collected) in the ordinary course of business using normal collection practices
at the aggregate recorded amounts thereof, less the amount of applicable
reserves for doubtful accounts and for allowances and discounts. All such
reserves, allowances and discounts, were and are adequate and materially
consistent in extent with reserves, allowances and discounts previously
maintained by the Company in the ordinary course of its business. Since June 30,
1996, there has not been a material change in the aggregate amount of the
Company's aggregate trade receivables or a material adverse change in the aging
thereof. The Company does not have, to a material extent, any outstanding sales
on consignment, sales on approval, sales on return or guaranteed sales.
4.12. Inventory. All inventory of the Company which is held for sale or
resale, including raw materials, work in process and finished goods
(collectively, "Inventory"), consists of items of a quantity and quality
historically useable and/or saleable in the normal course of business, except
for items of obsolete and slow-moving material and materials which are below
standard quality, all of which have been written down to estimated net
realizable value on an item by item basis. None of such write-downs have had a
Company Material Adverse Effect since June 30, 1996. With the exception of items
of below standard quality which have been written down to their estimated net
realizable value, the Inventory is free from defects in materials and/or
workmanship. All Inventory reflected in the Financial Statements or the Interim
Financial Statements is valued at the lower of cost or market with cost
determined by the first in first out accounting method. Since June 30, 1996,
there has not been a material change in the level of the Inventory. All
Inventory is, and, to the knowledge of the Company, all tools, dies, jigs,
patterns, molds, equipment, supplies and other materials used in the production
of Inventory are, located at the Real Estate, the Leased Premises or the
Manufacturing Locations.
4.13. Bank Accounts. The Disclosure Statement contains a list showing:
(a) the name of each bank, safe deposit company or other financial institution
in which the Company has an account,
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lock box or safe deposit box; (b) the names of all persons authorized to draw
thereon or to have access thereto and the names of all persons and entities, if
any, holding powers of attorney from the Company; and (c) all instruments or
agreements to which the Company is a party as an endorser, surety or guarantor,
other than checks or other instruments endorsed for collection or deposit.
4.14. Intellectual Property.
(a) The Disclosure Statement identifies all of the following which are
used in the Company's business and in which the Company claims any ownership
rights: (i) all registered trademarks, service marks, slogans, trade names,
trade dress and the like (collectively with the associated goodwill of each,
"Trademarks"), together with information regarding all registrations and pending
applications to register any such rights; (ii) all common law Trademarks; (iii)
all patents on and pending applications to patent any technology or design; (iv)
all registrations of and applications to register copyrights; and (v) all
licenses or rights in computer software, Trademarks, patents, copyrights,
unpatented formulations, manufacturing methods and other know-how, whether to or
by the Company, other than licenses to commercially available computer software
and other know-how entered into by the Company in the ordinary course of
business. The rights required to be so identified, together with all proprietary
formulation, manufacturing methods, know-how and trade secrets that are material
to the Company's business, are referred to herein collectively as the
"Intellectual Property".
(b)(i) The Company is the owner of or duly licensed to use each
Trademark and its associated goodwill; (ii) each Trademark registration exists
and has been maintained in good standing; (iii) each patent and application
included in the Intellectual Property exists, is owned by or licensed to the
Company and, to the Company's knowledge, has been maintained in good standing;
(iv) each copyright registration exists and is owned by the Company; (v) to the
Company's knowledge, no other firm, corporation, association or person claims
the right to use in connection with similar or closely related goods and in the
same geographic area, any xxxx which is identical or confusingly similar to any
of the Trademarks; (vi) the Company has no knowledge of any claim that any third
party asserts ownership rights in any of the Intellectual Property; (vii) the
Company has no knowledge of any claim or knowledge of any facts that would give
the Company any reason to believe that the Company's use of any Intellectual
Property infringes any right of any third party; (viii) the Company has no
knowledge and there are no facts known to the Company that would give the
Company any reason to believe that any third party is infringing on any of the
Company's rights in any of the Intellectual Property; (ix) the Company has no
knowledge and there are no facts known to the Company that would give the
Company any reason to believe that any of its actions has infringed or is
infringing on any third party's Intellectual Property rights; (x) there is no
government restriction or any limitation, domestic or foreign, on the manner in
which any of the Intellectual Property may be used or licensed; and (xi) neither
the Company nor, to the Company's knowledge, any of its shareholders, officers,
directors or employees or former employees has disclosed any confidential
information of the Company except in the ordinary course of business of the
Company or with the authority of the Company.
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4.15. Title to Properties. Attached to the Disclosure Statement is a
list and description of each item of real or tangible personal property owned by
the Company which has a net book value in excess of $50,000. The Company (i) has
good, marketable, legal and valid title to such property free and clear of all
liens, claims, encumbrances or security interests (collectively, "Liens"),
except for (A) Liens set forth on the Disclosure Statement and (B) (x)
mechanic's, materialmen's, and similar liens, (y) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation and (z) liens on goods in transit incurred pursuant to documentary
letters of credit; and (ii) enjoys peaceful and undisturbed possession under all
leases to which it is a party as lessee. All of the leases to which the Company
is a party (other than leases for Leased Premises, as defined herein) are legal,
valid and binding obligations of the Company and in full force and effect, and
no default by the Company, or, to the knowledge of the Company, any other party
thereto has occurred or is continuing thereunder. No property or asset used by
the Company in connection with the operation of its business is held under any
lease or under any conditional sale or other title retention agreement. Except
for such assets and facilities as are immaterial to the business of the Company,
all tangible assets and facilities of the Company are in good operating
condition and repair (ordinary wear and tear excepted) and, in the aggregate,
are sufficient to conduct the business of the Company as previously conducted
prior to the date hereof.
4.16. Real Estate.
(a) The Company does not own any real estate, or have the option to
acquire any real estate, other than the premises identified in the Disclosure
Statement (the "Real Estate"). The Disclosure Statement accurately sets forth
the street addresses and legal descriptions of the Real Estate. The Company
holds fee simple title to the Real Estate, subject only to real estate taxes not
delinquent and to covenants, conditions, restrictions and easements of record
which are set forth in the Disclosure Statement, none of which makes title to
the Real Estate unmarketable and none of which are violated by the Company or
interfere with the Company's use thereof. The Real Estate is not subject to any
leases or tenancies. None of the improvements comprising the Real Estate or the
businesses conducted or proposed to be conducted by the Company thereon, are in
violation of any material use or occupancy restriction, limitation, condition or
covenant of record or any zoning or building law, code, ordinance or public
utility easement or any other applicable law. No material expenditures are
required to be made for the repair or maintenance of any improvements on the
Real Estate or for the Real Estate to be used for its intended purpose.
(b) The Company does not lease any real estate other than the premises
identified in the Disclosure Statement as being so leased (the "Leased
Premises"). The Leased Premises are leased to the Company, pursuant to written
leases, true, correct and complete copies of which have been provided to Xxxxxx
or its counsel. None of the improvements comprising the Leased Premises, or the
businesses conducted or proposed to be conducted by the Company thereon, are in
violation of any building line or use or occupancy restriction, limitation,
condition or covenant of record or any zoning or building law, code or
ordinance, public utility or other easements or other applicable law, except for
violations which do not have a Company Material Adverse Effect or materially
interfere with the conduct of the business of the Company. No material
expenditures are required to be made
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for the repair or maintenance of any improvements on the Leased Premises or for
the Leased Premises to be used for its intended purpose. The Company is not in
default under any agreement relating to the Leased Premises nor, to the
knowledge of the Company, is any other party thereto in default thereunder. All
options in favor of the Company to purchase any of the Leased Premises, if any,
are in full force and effect.
(c) The Real Estate, the Leased Premises, each facility located on the
Real Estate and the Leased Premises and, to the Company's knowledge, each of the
Manufacturing Facilities are currently served by gas, electricity, water, sewage
and waste disposal and other utilities adequate to operate such Real Estate,
Leased Premises, Manufacturing Facility and/or facility at its current rate of
production, and none of the utility companies serving any such Real Estate,
Leased Premises, any facility and, to the Company's knowledge, each of the
Manufacturing Facilities has threatened the Company with any reduction in
service.
(d) There are no challenges or appeals pending regarding the amount of
the taxes on, or the assessed valuation of, the Real Estate or the Leased
Premises, and no special arrangements or agreements exist with any governmental
authority with respect thereto (the representations and warranties contained in
this Section 4.16(d) shall not be deemed to be breached by any prospective
general increase in real estate tax rates).
(e) There are no condemnation proceedings pending or, to the Company's
knowledge, threatened with respect to any portion of the Real Estate or the
Leased Premises.
(f) There is no tax assessment (in addition to the normal, annual
general real estate tax assessment) pending or, to the Company's knowledge,
threatened with respect to any portion of the Real Estate or, to the extent the
Company is liable for payment therefor, the Leased Premises.
(g) The buildings and other facilities located on the Real Estate and
the Leased Premises are free of any material latent structural or engineering
defects known to the Company or any material patent structural or engineering
defects.
4.17. Contracts.
(a) The Company is not a party to, or bound by, or the issuer or
beneficiary of, any undischarged written or oral: (i) agreement or arrangement
obligating the Company to pay or receive, or pursuant to which the Company has
previously paid or received, an amount in excess of $75,000; (ii) employment or
consulting agreement or arrangement; (iii) collective bargaining agreement; (iv)
plan or contract or arrangement providing for bonuses, options, deferred
compensation, retirement payments, profit sharing, medical and dental benefits
or the like covering employees of the Company, other than Plans, Welfare Plans
and Employee Benefit Plans (in each case as defined herein) described in the
Disclosure Statement; (v) agreement restricting in any manner the Company's
right to compete with any other person or entity, the Company's right to sell to
or purchase from any other person or entity, the right of any other party to
compete with the
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Company, or the ability of such person or entity to employ any of the Company's
employees; (vi) agreement between the Company and any of its affiliates or other
Related Parties (as herein defined); (vii) guaranty, performance, bid or
completion bond, or surety or indemnification agreement; (viii) requirements
contract; (ix) loan or credit agreement, pledge agreement, note, security
agreement, mortgage, debenture, indenture, factoring agreement or letter of
credit; (x) agreement for the treatment or disposal of Materials of
Environmental Concern (as defined herein); (xi) power of attorney; (xii)
partnership or joint venture agreement; or (xiii) any other agreement not
entered into in the ordinary course of business. The Company is not currently
negotiating (and has not entered into preliminary discussions with respect to)
any transaction involving an aggregate payment by the Company and/or receipts to
the Company in excess of $250,000.
(b) All agreements, leases, subleases and other instruments referred to
in this Section 4.17, are in full force and binding upon the Company, and, to
the knowledge of the Company, the other parties thereto. The Company is not and,
to the Company's knowledge, none of the other parties thereto are in default of
a material provision under any such agreement, lease, sublease or other
instrument. No event, occurrence or condition exists which, with the lapse of
time, the giving of notice, or both, or the happening of any further event or
condition, would become a default of a material provision under any such
agreement, lease, sublease or other instrument by the Company, or, to the
knowledge of the Company, the other contracting party. The Company has not
released or waived any material right under any such agreement, lease, sublease
or other instrument.
(c) Immediately after the Closing, except as contemplated by this
Agreement, the Company will not be bound by the terms of any stock option
agreement, registration rights agreement, stockholders agreement, management
agreement, consulting agreement or any other agreement relating to the equity or
management of the Company.
(d) The Company is not a party to, or bound by, any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by the Company according to the terms of this Agreement will be a
default of a material provision under or an event of acceleration, or grounds
for termination, or whereby timely performance by the Company of this Agreement
may be prohibited, prevented or delayed.
4.18. Insurance. The Disclosure Statement contains a true and correct
list of all insurance policies which are owned by the Company or which name the
Company as an insured (or loss payee), including without limitation those which
pertain to the Company's assets, employees or operations. All such insurance
policies are in full force and effect and the Company has not received notice of
cancellation of any such insurance policies. In the three (3) year period ending
on the date hereof, the Company has not received any written notice from, or on
behalf of, any insurance carrier relating to or involving an annual increase by
over 10% in insurance rates (except to the extent that insurance risks may be
increased for all similarly situated risks) or non-renewal of a policy, or
requiring or suggesting material alteration of any of the Company's assets,
purchase of additional equipment, or material modification of any of the
Company's methods of doing business. The
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Company has not made any claim for reimbursement from its insurance carriers
since June 30, 1993.
4.19. Litigation. There is no litigation or proceeding, in law or in
equity, and there are no proceedings or governmental investigations before any
commission or other administrative authority, pending or, to the Company's
knowledge, threatened against the Company, or any of the Company's officers,
directors or affiliates, with respect to or affecting the Company's operations,
business, products, sales practices or financial condition, or related to the
consummation of the transactions contemplated hereby or by the Xxxxxx Ancillary
Documents or the Ancillary Documents. There are no facts known to the Company
which, if known by a potential claimant or governmental authority, would give
rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company, would have a Company Material Adverse Effect.
4.20. Warranties. The Company has not made any oral or written
warranties with respect to the quality or absence of defects of its products or
services which it has sold or performed which are in force as of the date hereof
except as are described in the Disclosure Statement. There are no material
claims pending, anticipated or threatened against the Company with respect to
the quality of or absence of defects in such products or services. The
Disclosure Statement sets forth a summary, which is accurate in all material
respects, of all returns of products during the period beginning January 1, 1995
and ending on the date hereof, and all credits and allowances for returned
products given to customers during said period, and said summary contains a
description of any reoccurring product defects (other than returns due to date
expirations). The Company has no knowledge of or reason to believe that the
percentage of products sold and services performed by the Company for which
warranties are presently in effect and for which warranty adjustments can be
expected during unexpired warranty periods which extend beyond the Closing will
be higher than the percentage of such products and services which the Company
has sold and performed for which warranty adjustments have been required in the
past.
4.21. Products Liability. The Company has not received any written
notice relating to, nor does the Company have knowledge of any facts or
circumstances which could give rise to, any claim involving any product
manufactured, produced, distributed or sold by or on behalf of the Company
resulting from an alleged defect in design, manufacture, materials or
workmanship, or any alleged failure to warn, or from any breach of implied
warranties or representations, other than notices or claims that have been
settled or resolved by the Company prior to the date of this Agreement.
4.22. Arbitration. The Company is not a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any
administrative, judicial or arbitration proceeding with any governmental
authority) with respect to or affecting the properties, assets, personnel or
business activities of the Company.
4.23. Taxes.
(a) As used in this Agreement, (i) the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits,
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license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind whatever of a
nature similar to taxes, together with any interest and any penalties, additions
to tax or additional amounts with respect thereto, and the term "Tax" means any
one of the foregoing Taxes; and (ii) the term "Returns" means all returns,
declarations, reports, statements and other documents required to be filed in
respect of Taxes, and the term "Return" means any one of the foregoing Returns.
(b) There have been properly completed and filed on a timely basis and
in correct form all Returns required to be filed by the Company. As of the time
of filing, the foregoing Returns were correct and complete. An extension of time
within which to file any Return which has not been filed has not been requested
or granted.
(c) With respect to all amounts in respect of Taxes imposed upon the
Company, or for which the Company is or could be liable, whether to taxing
authorities (as, for example, under law) or to other persons or entities (as,
for example, under tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before the date of the Interim
Financial Statements, all applicable tax laws and agreements have been fully
complied with, and all amounts required to be paid by the Company, to taxing
authorities or others, on or before the date hereof have been paid or fully
reserved for on the Financial Statements or Interim Financial Statements, and
any Taxes accrued but not due and payable as of the date of the Interim
Financial Statements have been accrued or otherwise reserved for in the Interim
Financial Statements. No Taxes have been (or will prior to the Closing Date be)
recorded by the Company other than in the ordinary course of business. There are
no Liens filed against any asset of the Company resulting from the failure to
pay any Tax when due.
(d) No issues have been raised (and are currently pending) by any
taxing authority in connection with any of the Returns. No waivers of statutes
of limitation with respect to the Returns have been given by the Company (or
with respect to any Return which a taxing authority has asserted should have
been filed by the Company) which waivers are still in effect. The Disclosure
Statement sets forth those years for which examinations have been completed,
those years for which examinations are presently being conducted, and those
years for which required Returns have not yet been filed. All deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the Financial Statements, or are
being contested and an adequate reserve therefor has been established and is
fully reflected as a liability in the Financial Statements or the Interim
Financial Statements.
(e) The unpaid Taxes of the Company do not exceed the reserve for tax
liability (excluding any reserve for deferred Taxes established to reflect
timing differences between book and tax income) set forth or included in the
Interim Financial Statements, as adjusted for the passage of time through the
Closing.
(f) The Company is not or at any time has been a party to or bound by
(nor will the Company
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become a party to or bound by) any tax indemnity, tax sharing or tax allocation
agreement.
(g) The Company has never been a member of an affiliated group of
corporations, within the meaning of section 1504 of the Code.
(h) All material elections with respect to Taxes affecting the Company
as of the date hereof that are not reflected in the Company's Returns are set
forth in the Disclosure Statement.
4.24. ERISA Neither the Company nor any corporation or business which
is now or at the relevant time was an affiliate of the Company as determined
under the Code section 414(b), (c), (m) or (o) ("ERISA Affiliate") maintains,
administers, contributes to or has any liability under, or has maintained,
administered, contributed to or had any liability under, nor do the employees of
the Company, or any ERISA Affiliate receive or have any reason to expect to
receive as a condition of employment, benefits pursuant to any: employee pension
benefit plan (as defined in Section 3(2) of ERISA) ("Plan"), including, without
limitation, any multi-employer plan as defined in Section 3(37) of ERISA
("Multi-Employer Plan") or any non-qualified deferred compensation plan or
retirement plan; employee welfare benefit plan (as defined in Section 3(1) of
ERISA) ("Welfare Plan"), including any other plan, program, agreement or
arrangement under which former employees of the Company, or an ERISA Affiliate
(or their beneficiaries) are entitled, or current employees of the Company or an
ERISA Affiliate will be entitled, following termination of employment, to
medical, health or life insurance or other benefits other than pursuant to
benefit continuation rights granted by state or federal law; or bonus, stock,
stock purchase, or stock option plan, severance plan, salary continuation,
vacation, sick leave, fringe benefit, incentive, insurance, welfare or similar
plan or arrangement ("Employee Benefit Plan") other than those Plans, Welfare
Plans and Employee Benefit Plans described in the Disclosure Statement;
(a) To the knowledge of the Company, all Plans, Welfare Plans and
Employee Benefit Plans and any related trust agreements, insurance contracts or
annuity contracts (or any related trust instruments) comply with and are and
have been operated in accordance with each applicable provision of ERISA, the
Code (including, without limitation, the requirements of Code section 401(a) to
the extent any Plan is intended to conform to that section), other Federal
statutes, state law (including, without limitation, state insurance law) and the
regulations and rules promulgated pursuant thereto or in connection therewith.
Neither the Company nor any ERISA Affiliate has any notice or knowledge of any
violation of any of the foregoing by any Plan, Welfare Plan, or Employee Benefit
Plan. Each Welfare Plan which is a group health plan (within the meaning of
section 5000(b)(1) of the Code) complies with and has been maintained and
operated in accordance with each of the requirements of section 162(k) of the
Code as in effect for years beginning prior to 1989, Section 4980B of the Code
for years beginning after December 31, 1988 and Part 6 of Subtitle B of Title I
of ERISA. A favorable determination as to the qualification under the Code of
each of the Plans which is intended to qualify under section 401 of the Code and
each material amendment thereto has been made by the Internal Revenue Service
("IRS"), each trust funding Welfare Plans or Plans is and has been tax-exempt
and each Plan and related trust agreement remain qualified under the Code.
Future compliance with the requirements of ERISA and the Code
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as in effect on the date hereof and any collective bargaining agreements to
which the Company or any ERISA Affiliate is subject or bound will not result in
any increase in benefits under any Plan or any Welfare Plan. All required
reports, notices and descriptions with respect to the Plans, Welfare Plans and
Employee Benefit Plans have been appropriately filed or distributed (including
without limitation IRS Forms 5500 Annual Reports, summary plan descriptions,
summary annual reports, notice to interested parties and any notice of plan
amendment which is required prior to the effectiveness of such amendments) and
all required surety bonds have been properly and timely purchased and
maintained. The costs of administering the Plans, Welfare Plans and Employee
Benefit Plans, including fees for the trustees and other service providers which
are customarily paid by the Company, have been paid or will be paid or accrued
on the Company's financial statements prior to the date hereof.
(b) To the knowledge of the Company, neither any Plan or Welfare Plan
fiduciary nor any Plan or Welfare Plan has engaged in any transaction in
violation of Section 406 of ERISA or any "prohibited transaction" (as defined in
section 4975(c)(1) of the Code) for which a valid exemption is not available.
Neither the Company nor any ERISA Affiliate has failed to make any contributions
or to pay any amounts due and owing to a Plan, Welfare Plan or Employee Benefit
Plan, including, in all cases, Multi-Employer Plans, as required by the terms of
any Plan, Welfare Plan or Employee Benefit Plan, or collective bargaining
agreement or ERISA or any other applicable law. There has been no reduction or
curtailment of accrued benefits with respect to any of the Plans. Full payment
has been made or such amount has been accrued on the Company's financial
statements of all amounts which the Company or any ERISA Affiliate is required
or committed to pay to the Plans as of the date hereof;
(c) True and complete copies of each Plan, Welfare Plan and Employee
Benefit Plan, related trust agreements, insurance contracts, annuity contracts
or other funding vehicles, determination letters, summary plan descriptions,
copies of any pending applications, filings or notices with respect to any of
the Plans, Welfare Plans or Employee Benefit Plans with the IRS, the Pension
Benefit Guaranty Corporation ("PBGC"), the Department of Labor or any other
governmental agency, copies of all corporate resolutions or other documents
pertaining to the adoption of the Plans, Welfare Plans or Employee Benefit Plans
or any amendments thereto or to the appointment of any fiduciaries thereunder
and copies of any investment management agreements thereunder and of any
fiduciary insurance policies, surety bonds, rules, regulations or policies, of
the trustees or of any committee thereunder, all communications and notices to
employees regarding any Plan, Welfare Plan, or Employee Benefit Plan, annual
reports on Form 5500, Form 990 financial statements and actuarial reports for
the most recent five Plan years, and each plan, agreement, instrument and
commitment referred to herein, have been furnished to Xxxxxx and its counsel,
and all such Plans, Welfare Plans, or Employee Benefit Plans are listed on the
Disclosure Statement. All of the foregoing are legally valid, binding, in full
force and effect, and there are no defaults thereunder; and none of the rights
of the Company thereunder will be impaired by this Agreement or the consummation
of the transaction contemplated hereby. The annual reports on Form 5500
furnished to Xxxxxx fully and accurately set forth the financial and actuarial
condition of each Plan and each trust funding any Welfare Plan. With respect to
each Plan, Welfare Plan and Employee Benefit Plan, the Disclosure
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Statement sets forth the name and address of the administrator and trustees and
the policy number and insurer under all insurance policies;
(d) The aggregate present value of all accrued benefits, both vested
and non-vested, pursuant to each Plan subject to Title IV of ERISA, determined
on the basis of current participation and projected compensation for active
participants, and including the maximum value of all subsidized benefits, and
earnings, set forth in the 1995 actuarial report for the Plan, using PBGC
actuarial assumptions and methods applicable to a defined benefit pension plan
terminating on such date, does not exceed the current fair market value of Plan
assets. None of the Plans, Welfare Plans or Employee Benefit Plans has any
material unfunded liabilities which are not reflected on the Financial
Statements or, in the case of a Plan, on the latest actuarial report issued with
respect to such Plans. None of the Plans is a "top-heavy" plan, as defined in
Section 416 of the Code. The Company does not have plans, programs, arrangements
and has not made any other commitments to its employees, former employees or
their beneficiaries under which it has any obligation to provide any retiree or
other employee benefit payments which are not adequately funded through a trust
or other funding arrangement. There have been no changes in the operation or
interpretation of any of the Plans, Welfare Plans or Employee Benefit Plans
since the most recent annual report or actuarial report which would have any
material effect on the cost of operating or maintaining such Plans, Welfare
Plans or Employee Benefit Plans;
(e) There are no pending or threatened claims, lawsuits or arbitration
asserted or instituted against any of the Plans, Welfare Plans, or Employee
Benefit Plans, other than, in each case, Multi-Employer Plans, or any
fiduciaries thereof, except in the case of Multi-Employer Plans, fiduciaries
that are officers, employees, directors, agents or owners of the Company or
ERISA Affiliates of the Company, with respect to their duties to the Plan,
Welfare Plans or Employee Benefit Plan or the assets of any trusts thereunder,
by any employee or beneficiary covered under any Plans, Welfare Plans or
Employee Benefit Plans or otherwise involving any Plan, Welfare Plan or Employee
Benefit Plan (other than routine claims for benefits); and the Company has no
knowledge of any facts which would give rise to or could reasonably be expected
to give rise to any such claims, lawsuits or arbitrations. To the knowledge of
the Company, neither the Company nor any its ERISA Affiliates, nor any of their
directors, officers, employees or any other "fiduciary," as such term in defined
in Section 3(21) of ERISA, has any liability for failure to comply with ERISA or
the Code or failure to act in connection with the administration or investment
of any Plan; and
4.25. Labor Matters. Except as set forth in the Disclosure Statement or
for events that occur after the date hereof which are disclosed in writing by
the Company to Xxxxxx, (a) there is no labor strike, dispute, slowdown, work
stoppage or lockout pending or, to the knowledge of the Company, threatened
against or affecting the Company and during the past three years, there has not
been any such action; (b) there are no union claims to represent the employees
of the Company, (c) the Company is not a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company; (d) none of the employees of the Company
are represented by any labor organization and the Company does not have any
knowledge of any current
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union organizing activities among the employees of the Company, nor to the
knowledge of the Company does any question concerning representation exist
concerning such employees; (e) to the knowledge of the Company, the Company is,
and has at all times been, in material compliance with all applicable employment
laws and practices, including, without limitation, any such laws relating to
employment discrimination, occupational safety and health and unfair labor
practices; (f) there is no unfair labor practice charge or complaint against the
Company pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or, to the knowledge of the Company, any charges
or complaints, or facts which could give rise to a charge or complaint, pending
or threatened with any Governmental Entity who has jurisdiction over unlawful
employment practices; (g) there is no grievance or arbitration proceeding
arising out of any collective bargaining agreement or other grievance procedure
pending relating to the Company; (h) the Company is not delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to the date of this
Agreement or amounts required to be reimbursed to such employees; (i) upon
termination of the employment of any of the employees of the Company after the
Closing, the Company will not be liable to any of its employees for severance
pay; (j) the employment of each of the Company's employees is terminable at will
without cost to the Company except for payments disclosed on the Disclosure
Statement or required under the Plans, Welfare Plans and Employee Benefit Plans
and payment of accrued salaries or wages and vacation pay; (k) no employee or
former employee of the Company has any right to be rehired by the Company prior
to the Company's hiring a person not previously employed by the Company; and (l)
the Disclosure Statement contains a true and complete list of all employees who
are employed by the Company as of June 30, 1996, and said list correctly
reflects their salaries, wages, other compensation (other than benefits under
the Plans, Welfare Plans and Employee Benefit Plans), dates of employment and
positions. The Company does not owe any past or present employee any sum in
excess of $50,000 individually or $100,000 in the aggregate other than for
accrued wages or salaries for the current payroll period, and amounts payable
under Plans, Welfare Plans or Employee Benefit Plans. No employee owes any sum
to the Company in excess of $50,000, and all employees together do not owe the
Company in excess of $100,000.
4.26. Environmental Matters.
(a) The Company and its assets and business are in substantial
compliance with all Environmental Laws and Environmental Permits (as herein
defined) applicable to it. A copy of any notice, citation, inquiry or complaint
which the Company has received in the past three years of any alleged violation
of any Environmental Law or Environmental Permit has been provided to Xxxxxx or
its counsel, and all violations alleged in said notices have been or are being
corrected. A description of all such violations currently being corrected is
contained in the Disclosure Statement. The Company possesses all Environmental
Permits which are required for the operation of its business, and is in
substantial compliance with the provisions of all such Environmental Permits.
Copies of all Environmental Permits issued to the Company have been provided or
made available to Xxxxxx or its counsel. The Company has delivered to Xxxxxx
copies of all environmental reports with respect to the Real Estate and the
Leased Premises in its possession (other than reports prepared by or on behalf
of Xxxxxx) which were conducted during the last five years.
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(b) The Disclosure Statement sets forth a complete list of all
Materials of Environmental Concern stored, treated, generated, used, transported
or Released (as herein defined) in connection with the operation of the
Company's business. There has been no storage, treatment, generation,
transportation or Release of any Materials of Environmental Concern by the
Company, or, to the knowledge of the Company, by any other person or entity for
which the Company is or may be held responsible, at any Facility (as herein
defined) or any Offsite Facility (as herein defined) in violation of, or which
could give rise to any material obligation under, Environmental Laws.
(c) The Disclosure Statement sets forth a complete list of all
Containers (as herein defined) that are now present at, or have heretofore been
removed from, the Real Estate or the Leased Premises. All Containers which have
been heretofore removed from the Real Estate or the Leased Premises have been
removed substantially in accordance with all applicable Environmental Laws.
(d) For the purposes of this Agreement: (i) "Environmental Laws" means
all federal, state and local statutes, regulations, ordinances, rules,
regulations and policies, all court orders and decrees and arbitration awards,
and the common law, which pertain to environmental matters or contamination of
any type whatsoever. Environmental Laws include, without limitation, those
relating to: manufacture, processing, use, distribution, treatment, storage,
disposal, generation or transportation of Materials of Environmental Concern;
air, surface or ground water or noise pollution; Releases; protection of
wildlife, endangered species, wetlands or natural resources; Containers; health
and safety of employees and other persons; and notification requirements
relating to the foregoing; (ii) "Environmental Permits" means licenses, permits,
registrations, governmental approvals, agreements and consents which are
required under or are issued pursuant to Environmental Laws; (iii) "Materials of
Environmental Concern" means (A) pollutants, contaminants, pesticides,
radioactive substances, solid wastes or hazardous or extremely hazardous,
special, dangerous or toxic wastes, substances, chemicals or materials within
the meaning of any Environmental Law, including without limitation any (i)
"hazardous substance" as defined in CERCLA, and (ii) any "hazardous waste" as
defined in the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C., Sec.
6902 et. seq., and all amendments thereto and reauthorizations thereof; and (B)
even if not prohibited, limited or regulated by Environmental Laws, all
pollutants, contaminants, hazardous, dangerous or toxic chemical materials,
wastes or any other substances, including without limitation, any industrial
process or pollution control waste (whether or not hazardous within the meaning
of RCRA) which could pose a hazard to the environment or the health and safety
of any person, or impair the use or value of any portion of the Real Estate or
the Leased Premises; (iv) "Release" means any spill, discharge, leak, emission,
escape, injection, dumping, or other release or threatened release of any
Materials of Environmental Concern into the environment, whether or not
notification or reporting to any governmental agency was or is, required,
including without limitation any Release which is subject to CERCLA; (v)
"Facility" means any facility as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601, et. seq., as amended
and reauthorized ("CERCLA"); (vi) "Offsite Facility" means any Facility which is
not presently, and has not heretofore been, owned, leased or occupied by the
Company; and (vii) "Containers" means above-ground and under-ground storage
tanks, vessels and related
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equipment and containers.
4.27. Interim Conduct of Business. Except as otherwise contemplated by
this Agreement, and as reflected in the Interim Financial Statements, since June
30, 1996, the Company has not:
(a) sold, assigned, leased, exchanged, transferred or otherwise
disposed of any portion of its assets or property, except for sales of Inventory
and cash applied in the payment of the Company's Liabilities in the usual and
ordinary course of business in accordance with the Company's past practices;
(b) written off any asset which has a net book value which exceeds
$50,000 individually or $100,000 in the aggregate in value, or suffered any
casualty, damage, destruction or loss, or interruption in use, of any material
asset, property or portion of Inventory (whether or not covered by insurance),
on account of fire, flood, riot, strike or other hazard or Act of God;
(c) waived any material right arising out of the conduct of, or with
respect to, its business;
(d) made (or committed to make) capital expenditures in an amount which
exceeds $50,000 for any item or $200,000 in the aggregate;
(e) made any change in accounting methods or principles;
(f) borrowed any money or issued any bonds, debentures, notes or other
corporate securities (other than equity securities), including without
limitation, those evidencing borrowed money;
(g) entered into any transaction with, or made any payment to, or
incurred any liability to, any Related Party (as defined herein) in an amount
which exceeds $25,000 or $100,000 in the aggregate (except for payment of salary
and other customary expense reimbursements made in the ordinary course of
business to Related Parties who are employees of the Company);
(h) increased the compensation payable to any employee, except for
normal pay increases in the ordinary course of business consistent with past
practices;
(i) made any payments or distributions to its employees, officers or
directors except such amounts as constitute currently effective compensation for
services rendered, or reimbursement for reasonable ordinary and necessary
out-of-pocket business expenses;
(j) paid or incurred any management or consulting fees, or engaged any
consultants, except in the ordinary course of business;
(k) hired any employee who has an annual salary in excess of $50,000,
or employees with aggregate annual salaries or wages in excess of $100,000;
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(l) terminated any employee having an annual salary or wages in excess
of $50,000 or employees with aggregate annual salaries or wages in excess of
$100,000;
(m) adopted any new Plan, Welfare Plan or Employee Benefit Plan;
(n) issued or sold any securities of any class, except for the grant or
exercise of options to purchase Company Common Stock under the Company Option
Plans;
(o) paid, declared or set aside any dividend or other distribution on
its securities of any class, except as contemplated by this Agreement with
respect to the Preferred Stock, or purchased, exchanged or redeemed any of its
securities of any class; or
(p) without limitation by the enumeration of any of the foregoing,
entered into any transaction other than in the usual and ordinary course of
business in accordance with past practices.
Notwithstanding the foregoing, the Company shall not be deemed to have breached
the terms of this Section 4.27 by entering into this Agreement or by
consummating the transactions contemplated hereby.
4.28. Affiliated Transactions. Since January 1, 1993, the Company has
not been a party to any transactions (other than employee compensation and other
ordinary incidents of employment) in excess of $25,000 individually or $100,000
in the aggregate with a "Related Party". For purposes of this Agreement, the
term "Related Party" shall mean: any present or former officer or director
present 10% stockholder or present affiliate of the Company, any present or
former known spouse, ancestor or descendant of any of the aforementioned persons
or any trust or other similar entity for the benefit of any of the foregoing
persons. No property or interest in any property (including, without limitation,
designs and drawings concerning machinery) which relates to and is or will be
necessary or useful in the present or currently contemplated future operation of
the Company's business, is presently owned by or leased or licensed by or to any
Related Party. Prior to the Closing, all amounts due and owing to or from the
Company by or to any of the Related Parties (excluding employee compensation and
other incidents of employment) shall be paid in full. Except for the ownership
of securities representing less than a 2% equity interest in various publicly
traded companies, neither the Company, nor to the Company's knowledge, any
Related Party has an interest, directly or indirectly, in any business,
corporate or otherwise, which is in competition with the Company's business.
4.29. Significant Customers, Suppliers, Distributors and Employees. The
Disclosure Statement sets forth an accurate list of the Company's Significant
Customers (as defined herein), Significant Suppliers (as defined herein),
Significant Distributors (as defined herein) and Significant Employees (as
defined herein). The Company has no knowledge of any intention or indication of
intention by a (a) Significant Customer to terminate its business relationship
with the Company or to limit or alter its business relationship with the Company
in any material respect; (b) Significant Supplier to terminate its business
relationship with the Company or to limit or alter its business
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relationship with the Company in any material respect; (c) Significant
Distributor to terminate its business relationship with the Company or to limit
or alter its business relationship with the Company in any material respect; or
(d) Significant Employee intends to terminate his employment with the Company.
As used herein, (w) "Significant Customer" means the 10 largest customers of the
Company measured in terms of sales volume in dollars for each of the years ended
December 31, 1995 and 1994, (x) "Significant Supplier" means any supplier of the
Company from whom the Company has purchased $250,000 or more of goods during
either of years ended December 31, 1995 or 1994 for use in the Company's
business; (y) "Significant Distributor" means any distributor that, on the
Company's behalf, has distributed to other distributors, wholesalers, retailers
or end users, the Company's products with a value in excess of $250,000 during
either of years ended December 31, 1995 or 1994; and (z) "Significant Employee"
means the Chief Executive Officer, the President, the Senior Director of
Research and Development, any Vice President, the Director of Field Sales or any
regional sales manager of the Company.
4.30. Material Adverse Change. Since June 30, 1996 to the date of this
Agreement, the Company has not suffered any material adverse change in the
business, operations, assets, liabilities, financial condition or prospects of
the Company.
4.31. Bribes. Neither the Company, nor, to its knowledge, any of its
current officers, directors, employees, agents or representatives has made,
directly or indirectly, with respect to the Company, or its respective business
activities, any bribes or kickbacks, illegal political contributions, payments
from corporate funds not recorded on the books and records of the Company,
payments from corporate funds to governmental officials, in their individual
capacities, for the purpose of affecting their action or the action of the
government they represent, to obtain favorable treatment in securing business or
licenses or to obtain special concessions, or illegal payments from corporate
funds to obtain or retain business.
4.32. Absence of Indemnifiable Claims, etc. There are no pending claims
and, to the knowledge of the Company, no facts that would entitle any director,
officer or employee of the Company to indemnification by the Company under
applicable law, the Certificate of Incorporation or By-laws of the Company or
any insurance policy maintained by the Company.
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4.33. No Undisclosed Liabilities. There are no liabilities of the
Company other than (i) liabilities disclosed or provided for in the Interim
Financial Statements; (ii) liabilities which, individual or in the aggregate,
are not material to the Company; (iii) liabilities under this Agreement (or
contemplated hereby) or disclosed in the Disclosure Statement and (iv)
liabilities incurred since June 30, 1996 in the ordinary course of business and
consistent with past practices.
4.34. No Brokers. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Xxxxxx, Xxxxxx Sub or their Subsidiaries to pay any
finder's fee, brokerage or agent's commissions or other like payments in
connection with negotiations leading to this Agreement or the consummation of
the transactions contemplated hereby, except that the Company has retained
Xxxxxx Brothers as its financial advisor, the arrangements with which have been
disclosed in writing to Xxxxxx prior to the date hereof.
4.35. Tax Reorganization. The Company has not taken or failed to take
any action which would prevent the Merger from (a) constituting a reorganization
within the meaning of section 368(a) of the Code or (b) being treated as a
"pooling or interests" for accounting purposes.
4.36 Opinion of Financial Advisor. The Company has received the opinion
of Xxxxxx Brothers to the effect that, as of the date hereof, the consideration
to be received by the Company's Stockholders pursuant to the Merger is fair to
such Stockholders from a financial point of view.
4.37. Hearing Notice and Proxy Statement. At the time the Hearing
Notice shall be mailed to the Stockholders, and at the time the Proxy Statement
shall be delivered to the Stockholders, and at all times subsequent to such
dates up to and including the date of the stockholder meeting and the Effective
Time, such Hearing Notice, with respect to information (including all financial
data) set forth therein with respect to the Company furnished to Xxxxxx by the
Company for inclusion therein, and such Proxy Statement, with respect to all
information (other than information with respect to Xxxxxx or Xxxxxx Sub
furnished to the Company by Xxxxxx for inclusion therein, as to which no
representation or warranty is hereby made) set forth therein, respectively, will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
or information contained therein, in the light of the circumstances under which
such statements are made, not misleading.
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ARTICLE V
COVENANTS
5.1 Alternative Proposals. Prior to the Effective Time, the Company
agrees (a) except to the extent reasonably required by fiduciary duty
obligations under applicable laws, that it shall not, and it shall direct and
cause its officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its Stockholders) with respect to a
merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company (any such proposal or offer being hereinafter
referred to as an "Alternative Proposal") or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
(b) that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and it will take the necessary steps to
inform the individuals or entities referred to above of the obligations
undertaken in this Section 5.1; and (c) that it will notify Xxxxxx immediately
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it.
5.2 Interim Operations.
(a) During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
except as set forth in the Disclosure Statement, unless Xxxxxx has consented in
writing thereto (which consent shall not be unreasonably withheld), the Company:
(i) Shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
(ii) To the extent consistent with its business, shall use
commercially reasonable efforts to preserve intact its business organization and
goodwill, keep available the services of its officers and employees and maintain
satisfactory relationships with those persons having business relationships with
it;
(iii) Shall not amend its Certificate of Incorporation or By-Laws
or comparable governing instruments, except as contemplated by this Agreement;
(iv) Shall promptly notify Xxxxxx of any material emergency or
other Company Material Adverse Effect, any material litigation or material
governmental complaints, investigations
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or hearings (or communications indicating that the same may be contemplated), or
the material breach of any representation or warranty contained herein;
(v) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
existed on the date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire any
shares of its capital stock, except pursuant to the Company Stock Option Plans;
(C) increase any compensation or enter into or amend any employment agreement
with any of its present or future officers, directors or employees, except for
normal increases consistent with past practice and the payment of cash bonuses
to officers and employees pursuant to (I) the discretionary bonus program of the
Company in an amount not to exceed $500,000 in the aggregate for calendar year
1996; and (II) the sales incentive program of the Company in effect as of the
date hereof; (D) grant any severance or termination package to any employee or
consultant, except to the extent consistent with past practices; (E) hire any
new employee who shall have, or terminate the employment of any employee who
has, an annual salary in excess of $75,000; or (F) adopt any new employee
benefit plan (including any stock option, stock benefit or stock purchase plan)
or amend any existing employee benefit plan in any material respect, except for
changes which are less favorable to participants in such plans;
(vi) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests; or (B) directly or indirectly, redeem,
purchase or otherwise acquire any shares of its capital stock, or make any
commitment for any such action;
(vii) Shall not enter into any agreement or transaction, or agree
to enter into any agreement or transaction, outside the ordinary course of
business, including, without limitation, any transaction involving a merger,
consolidation, joint venture, license agreement partial or complete liquidation
or dissolution, reorganization, recapitalization, restructuring or a purchase,
sale, lease or other disposition of a material portion of assets or capital
stock;
(viii) Shall not incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of others other than (i) in the
ordinary course of its business consistent with past practices, but in no event
in an amount exceeding $50,000 individually or $100,000 in the aggregate (other
than normal expenditures for the purchase of raw materials or other supplies) or
(ii) pursuant to the Company's bank line of credit in the ordinary course of
business consistent with past practices;
(ix) Shall not make any loans, advances or capital contributions
to, or investments in, any other Person (except for loans to employees made in
connection with the purchase of Company Common Stock under existing option
agreements and advances of expenses made to employees in the ordinary course of
business);
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(x) Except as described in the Disclosure Statement, shall not
make or commit to made any capital expenditures in excess of $50,000
individually or $100,000 in the aggregate;
(xi) Shall not apply any of its assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate or Related Party of the
Company or enter into any transaction with any affiliate or Related Party of the
Company (except for payment of salary and other customary expense reimbursements
made in the ordinary course of business to Related Parties who are employees of
the Company);
(xii) Shall not alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected;
(xiii) Shall not grant or make any mortgage or pledge or subject
itself or any of its material properties or assets to any lien, charge or
encumbrance of any kind, except Liens for taxes not currently due; and
(xiv) Shall maintain insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are currently in
effect.
(b) Prior to the Effective Time, unless the Company has consented in
writing thereto (which consent shall not be unreasonably withheld), Xxxxxx:
(i) Shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as heretofore conducted
(except for entering into transactions described in 5.2(b)(iv) below);
(ii) Shall promptly deliver to the Company true and correct
copies of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;
(iii) Shall promptly notify the Company of any material emergency
or other Xxxxxx Material Adverse Effect, any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the material breach of any
representation or warranty contained herein;
(iii) Shall not amend its Articles of Incorporation or By-laws;
(iv) Shall promptly notify the Company of its entering into any
agreement with respect to any material transaction involving a merger,
consolidation, joint venture, partial or complete liquidation or dissolution,
reorganization or recapitalization, restructuring or a purchase, sale, lease or
other disposition of a material portion of assets or capital stock; and
(v) Shall not take any action that would result in a failure to
maintain the trading of Xxxxxx Common Stock on the Nasdaq National Market.
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5.3 Meetings of Stockholders. The Company will take all action
necessary in accordance with applicable law and its Certificate of Incorporation
and By-Laws to convene a meeting of its Stockholders to consider and vote upon
the approval of this Agreement and the transactions contemplated hereby. It is
contemplated that such Stockholder meeting will take place on or about November
26, 1996 or as soon as practicable thereafter. Xxxxxx will prepare as promptly
as practicable in conjunction with the Company an Application for Permit and
Request for Hearing pursuant to Sections 25121 and 25142 of the California Law,
including a proposed Hearing Notice for use by the California Commissioner of
Corporations in connection with the Hearing, and the Company shall prepare an
information statement for use in connection with such Application and such
Stockholder meeting. Neither the Company nor Xxxxxx shall distribute or use such
Hearing Notice or Proxy Statement other than for internal review unless the
other party shall have consented in writing to the information set forth in such
document relating to it. The Proxy Statement shall include the recommendation of
the Board of Directors of the Company in favor of the Merger which shall not be
changed unless the Board of Directors of the Company, upon receipt of a written
opinion from its outside counsel following receipt of a written proposal or
offer for an acquisition, shall determine that failure so to change its
recommendation would constitute a breach of the Board's fiduciary duty under
applicable law. The Company shall use its best efforts to solicit from
stockholders of the Company proxies or written consents in favor of the Merger
and shall take all other action necessary or advisable to secure the vote or
consent of its Stockholders required by Delaware Law to effect the Merger.
5.4 Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Xxxxxx shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; (c) use commercially reasonable efforts to obtain all
consents under or with respect to, any contract, lease, agreement, purchase
order, sales order or other instrument, Permit or Environmental Permit, where
the consummation of the transactions contemplated hereby would be prohibited or
constitute an event of default, or grounds for acceleration or termination, in
the absence of such consent; and (d) take, or cause to be taken, all other
commercially reasonable actions as are reasonably necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. If, at any time after the Effective Time, any further
commercially reasonable action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of Xxxxxx and the
Surviving Corporation shall take all such necessary action.
5.5 Inspection of Records. From the date hereof to the Effective Time,
the Company shall (a) allow all designated officers, attorneys, accountants and
other representatives of Xxxxxx reasonable access at all reasonable times to the
offices, records and files, correspondence, audits and
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properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs of the Company; (b) furnish to Xxxxxx, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request; and (c) instruct
the employees, counsel and financial advisors of the Company to cooperate with
Xxxxxx and its investigation of the business of the Company. From the date
hereof to the Effective Time, Xxxxxx shall (a) furnish to the Company, its
counsel, financial advisors, auditors and other authorized representative such
financial and operating data and other information as such persons may
reasonably request, and (b) instruct the officers, counsel and financial
advisors of Xxxxxx to cooperate with the Company in its investigation of the
business of Xxxxxx or its Subsidiaries. All information disclosed by the Company
to Xxxxxx and its representatives or by Xxxxxx to the Company and its
representatives shall be subject to the terms of that certain Non-Disclosure
Agreement (the "Confidentiality Agreement") dated as of April 18, 1996 between
Xxxxxx and the Company.
5.6 Publicity. Neither party hereto shall make any press release or
public announcement with respect to this Agreement, the Merger or the
transactions contemplated hereby without the prior written consent of the other
party hereto (which consent shall not be unreasonably withheld); provided,
however, that each party hereto may make any disclosure or announcement which
such party, in the opinion of its legal counsel, is obligated to make pursuant
to applicable law or regulation of any national securities exchange, in which
case, the party desiring to make the disclosure shall consult with the other
party hereto prior to making such disclosure or announcement.
5.7 Fairness Hearing. Pursuant to Section 25142 of the California Law,
as soon as practicable after the date hereof, Xxxxxx and the Company shall
submit an application for a permit (the "Exemption Permit") with the
Commissioner of Corporations of the State of California to allow Xxxxxx to issue
the shares of Xxxxxx Common Stock pursuant to the terms of this Agreement in
compliance with Section 3(a)(10) of the Securities Act and the California
Securities Laws.
5.8 Further Action. Each party hereto shall, subject to the fulfillment
at or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger.
5.9 Affiliate Letters. At least 30 days prior to the Closing Date, the
Company shall deliver to Xxxxxx a list of names and addresses of those persons
who were or will be, in the Company's reasonable judgment, at the record date
for its Stockholders' meeting to approve the Merger, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. The Company shall
provide Xxxxxx such information and documents as Xxxxxx shall reasonably request
for purposes of reviewing such list. The Company shall deliver or cause to be
delivered to Xxxxxx, prior to the Closing Date, from each of the Affiliates of
the Company identified in the foregoing list, an Affiliate Letter in
substantially the form attached hereto as Exhibit X. Xxxxxx shall be entitled to
place legends as
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specified in such Affiliate Letters on the certificates evidencing any Xxxxxx
Common Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Xxxxxx Common Stock, consistent with the terms of such Affiliate
Letters.
5.10 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein.
5.11 Tax Treatment of Merger. From and after the date hereof and until
the Effective Time, neither Xxxxxx nor the Company nor any of their respective
Subsidiaries or other affiliates shall knowingly take any action, or knowingly
fail to take any action, that would jeopardize qualification of the Merger as
(a) a reorganization within the meaning of Section 368(a) of the Code; (b) a
"pooling of interests" for accounting purposes; or (c) enter into any contract,
agreement, commitment or arrangement with respect to the foregoing. After the
Effective Time, Xxxxxx shall not take or fail to take (and shall cause the
Surviving Corporation not to take or fail to take) any action that is reasonably
likely to jeopardize qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
5.12 Employee Benefit Plans. Xxxxxx covenants and agrees that it will
continue the Company's existing benefit plans and arrangements for a period of
at least six months following the Effective Date. Thereafter, to the extent the
existing benefit plans and arrangements provided by the Company to its employees
are terminated, such employees who remain employees of the Surviving Corporation
shall be entitled to participate in all benefit plans and arrangements that are
available and subsequently become available to Xxxxxx'x employees on the same
basis as Watson's employees in similar positions are eligible to participate.
For purposes of satisfying the terms and conditions of such plans, Xxxxxx shall
give full credit for eligibility, vesting or benefit accrual for each
participant's period of service with the Company prior to the Effective Time;
provided, that the benefit plans and arrangements to be provided to Xxxxx X.
Xxxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. XxXxxxx shall be determined pursuant
to the terms of their respective employment agreement with the Surviving
Corporation. To the extent Xxxxxx'x benefit plans provide medical or dental
welfare benefits after the Closing Date, Xxxxxx shall cause all pre-existing
condition exclusions and actively at work requirements to be waived and Xxxxxx
shall provide that any expenses incurred on or before the Closing Date shall be
taken into account under Xxxxxx'x benefit plans for purposes of satisfying the
applicable deductible, coinsurance and maximum out-of-pocket provisions for such
employees and their covered dependents.
5.13 Company Bonus and 401 (k) Plan. Following the Closing, Xxxxxx
agrees to make the bonus payments which were declared by the Board of Directors
of the Company for calendar year 1996 pursuant to the Company's discretionary
bonus program in an amount not to exceed $500,000 less the aggregate amount paid
by the Company under such program pursuant to Section 5.2(a)(v)(C)(I) hereof
plus amounts payable pursuant to the Company's sales incentive program for
calendar year 1996 less any amounts paid under such program prior to Closing.
Xxxxxx covenants
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to make all matching contribution payments to the Company' s employee retirement
savings plan (the "401(k) Plan") for the 1996 fiscal year up to an amount equal
to $1,500 per employee.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions (unless waived by each of the parties hereto in accordance with the
provisions of Section 8.6 hereof):
(a) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(b) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger or
materially changes the terms or conditions of this Agreement shall have been
issued and remain in effect. In the event any such order or injunction shall
have been issued, each party agrees to use its reasonable efforts to have any
such injunction lifted.
(c) The Commissioner of Corporations of the State of California shall
have issued the Exemption Permit, and all necessary approvals under other state
securities laws relating to the issuance or trading of the Xxxxxx Common Stock
to be issued to the Stockholders in connection with the Merger shall have been
received.
(d) All material consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time.
(e) The Xxxxxx Common Stock to be issued to the Stockholders in
connection with the Merger shall have been authorized for trading on the Nasdaq
National Market.
(f) Xxxxxx, the Stockholders Agent and the Escrow Agent shall have
entered into the Escrow Agreement.
(g) At least ninety-five percent (95%) of the aggregate number of
outstanding shares of Preferred Stock shall have been voluntarily converted into
shares of Company Common Stock prior to the Effective Time.
(h) Xxxxxx shall have received the opinion of X'Xxxxxx & Xxxxxx,
counsel to Xxxxxx,
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dated the Closing Date, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that the Company and Xxxxxx will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In rendering
such opinion, counsel shall be entitled to rely upon, among other things,
reasonable assumptions as well as representations and covenants of Xxxxxx,
Xxxxxx Sub, the Company and certain stockholders of the Company.
(i) The Company shall have received the opinion of Venture Law Group, A
Professional Corporation, counsel to the Company, dated the Closing Date, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that the
Company and Xxxxxx will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In rendering such opinion, counsel shall
be entitled to rely upon, among other things, reasonable assumptions as well as
representations and covenants of Xxxxxx, Xxxxxx Sub, the Company and certain
stockholders of the Company.
(j) Xxxxxx shall have received the opinion of Price Waterhouse, dated
the Closing Date, to the effect that the Merger will be treated as a "pooling of
interests" for accounting purposes.
(k) The Company shall have received from Xxxxxx Xxxxxxxx LLP a letter,
dated the Closing Date, indicating that the Company has not taken any action
that would preclude it from entering into a transaction that would be treated as
a "pooling of interests" for accounting purposes.
(l) This Agreement and the Merger and other transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
Stockholders.
(m) Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. XxXxxxx shall
have entered into an Employment Agreement in substantially the form attached
hereto as Exhibit F, G and H.
6.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions (unless
waived by the Company in accordance with the provisions of Section 8.6 hereof):
(a) Xxxxxx shall have performed, in all material respects, all of its
agreements contained herein that are required to be performed by Xxxxxx on or
prior to the Closing Date, and the Company shall have received a certificate of
the Chairman or President of Xxxxxx, dated the Closing Date, certifying to such
effect.
(b) The representations and warranties of Xxxxxx and Xxxxxx Sub
contained in this Agreement and in any document delivered in connection herewith
shall be true and correct as of the Closing in all material respects, and the
Company shall have received a certificate of the Chairman or President of
Xxxxxx, dated the Closing Date, certifying to such effect.
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(c) The Company shall have received from Xxxxxx certified copies of the
resolutions of Xxxxxx'x and Xxxxxx Sub's Boards of Directors approving and
adopting this Agreement, the Xxxxxx Ancillary Documents and the transactions
contemplated hereby and thereby.
(d) The Company shall have received the opinion of X'Xxxxxx & Xxxxxx to
such matters as the Company or the Company's counsel shall reasonably request.
(e) From the date of this Agreement through the Effective Time, there
shall not have occurred any event that would have or would be reasonably likely
to have a material adverse effect in the financial condition, business,
operations or prospects of Xxxxxx and its Subsidiaries, taken as a whole;
provided, that such an event will not be deemed to have occurred solely as a
result of fluctuations in the value of Xxxxxx Common Stock due to or arising
from any public disclosures by Xxxxxx (including its 50% subsidiary, Somerset
Pharmaceuticals, Inc.), including, without limitation, disclosures relating to
Xxxxxx'x entering into any other transactions (including, without limitation,
transactions relating to the acquisition of assets, stock or merger
transactions).
(f) Xxxxxx and Xxxxxx Sub shall have executed and delivered such other
documents and taken such other actions as the Company shall reasonably request.
6.3 Conditions to Obligation of Xxxxxx and Xxxxxx Sub to Effect the
Merger. The obligations of Xxxxxx and Xxxxxx Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions (unless waived by the Company in accordance with the provisions of
Section 8.6 hereof):
(a) The Company shall have performed, in all material respects, all of
its agreements contained herein that are required to be performed by the Company
on or prior to the Closing Date, and Xxxxxx shall have received a certificate of
the Chairman or President of the Company, dated the Closing Date, certifying to
such effect.
(b) The representations and warranties of the Company contained in this
Agreement and in any document delivered in connection herewith shall be true and
correct as of the Closing in all material respects, and Xxxxxx shall have
received a certificate of the Chairman or President of the Company, dated the
Closing Date, certifying to such effect.
(c) Xxxxxx shall have received from the Company certified copies of the
resolutions of the Company's Board of Directors and Stockholders approving and
adopting this Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby.
(d) Xxxxxx shall have received the opinion of Venture Law Group, A
Professional Corporation, to such matters as Xxxxxx or Xxxxxx'x counsel shall
reasonably request.
(e) From the date of this Agreement through the Effective Time, there
shall not have occurred any event that would have or would be reasonably likely
to have a material adverse effect
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in the financial condition, business, operations or prospects of the Company.
(f) The holders of not more than five percent (5%) of the outstanding
aggregate value of the Company Common Stock and Preferred Stock (valued based
upon the number of shares of Xxxxxx Common Stock such holders would have
received upon the consummation of the Merger pursuant to Section 1.4 hereof)
shall have perfected dissenters' rights under applicable law.
(g) The Company shall have received all necessary consents with respect
to any contract, lease, purchase order, sales order, license agreement, Permit,
Environmental Permit and license which are required as a result of a change of
control of the Company except in those instances where failure to receive any
such consent would not have a Company Material Adverse Effect.
(i) The Certificate of Incorporation of the Company shall have been
amended in the form attached hereto as Exhibit I.
(j) The warrants to purchase shares of Company Preferred Stock held by
Xxxxx-Xxxxxxxxx Institute for Cancer Research and Xxxxx X. Xxxxxxxx shall have
been exercised or terminated prior to the Effective Time and shall be of no
further force and effect.
(k) The Company shall have executed and delivered such other documents
and taken such other actions as Xxxxxx shall reasonably request.
ARTICLE VII
INDEMNIFICATION
7.1 General. From and after the Closing, the parties shall indemnify
each other as provided in this Article VII. For the purposes of this Article
VII, each party shall be deemed to have remade all of its representations and
warranties contained in this Agreement at the Closing with the same effect as if
originally made at the Closing; provided, however, that the Xxxxxx Disclosure
Statement and the Disclosure Statement may be updated at the Closing by Xxxxxx
or the Company, as the case may be, and no indemnity shall be provided hereunder
with respect to the matters set forth therein except for anything contained in
the Company Disclosure Statement regarding the Labor-Related Proceedings with
respect to Xxxxx Xxxxxxxx as described in Section 4.19 of the Company Disclosure
Statement. No disclosure contained in the updated Xxxxxx Disclosure Statement or
the Disclosure Statement, as the case may be, shall be deemed a waiver of
Xxxxxx'x or the Company's representations and warranties made on the date hereof
with respect to the conditions to closing set forth in Sections 6.2(b) and
6.3(c) hereof; provided, however, that any updates contained in the Xxxxxx
Disclosure Statement or the Disclosure Statement that were permitted pursuant to
Section 5.2 hereof shall not give either party the right to terminate this
Agreement pursuant to Article VIII hereof.
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7.2 Certain Definitions. As used in this Article VII, the following
terms shall have the indicated meanings:
(a) "Damages" shall mean all liabilities, assessments, levies,
losses, fines, penalties, damages, costs and expenses, including, without
limitation, reasonable fees and expenses of attorneys, accountants and other
professionals, actually sustained or incurred by an Indemnified Party in
connection with the defense or investigation of any claim (after giving effect
to any insurance proceeds actually received by an Indemnified Party and it being
understood that to the extent any such Damages have been reserved for by the
Company on the Financial Statements or the Interim Financial Statements in
accordance with GAAP, the amount of such reserve shall be deducted from the
Damages sustained by a Xxxxxx Indemnitee).
(b) "Indemnified Party" shall mean a party hereto who is entitled
to indemnification from another party hereto pursuant to this Article VII.
(c) "Indemnifying Party" shall mean a party hereto who is required
to provide indemnification under this Article VII to another party hereto.
(d) "Third Party Claims" shall mean any claims for Damages which
are asserted or threatened by a party other than the parties hereto, their
successors and permitted assigns, against any Indemnified Party or to which an
Indemnified Party is subject.
7.3 The Stockholder's Indemnification Obligations. Each of the
Stockholders shall jointly and severally indemnify, save and keep Xxxxxx, Xxxxxx
Sub, the Surviving Corporation, each of their respective Subsidiaries and their
respective successors and permitted assigns (each a "Xxxxxx Indemnitee" and
collectively the "Xxxxxx Indemnitees") harmless against and from all Damages
sustained or incurred by any Xxxxxx Indemnitee, as a result of or arising out
of: (a) any inaccuracy in or breach of any representation and warranty made by
the Company to Xxxxxx herein or in any Ancillary Document; and (b) any breach by
the Company, or the Stockholders' Agent of, or failure of the Company, or the
Stockholders' Agent to comply with, any of the covenants or obligations under
this Agreement or the Ancillary Documents to be performed by the Company, or the
Stockholders' Agent (including without limitation the Stockholders' obligations
under this Article VII).
7.4 Xxxxxx'x Indemnification Obligations. Xxxxxx shall indemnify, save
and keep the Stockholders and their respective successors and permitted assigns
("Seller Indemnitees"), forever harmless against and from all Damages sustained
or incurred by any Seller Indemnitee, as a result of or arising out of: (a) any
inaccuracy in or breach of any representation and warranty made by Xxxxxx or
Xxxxxx Sub to the Company herein or in any Xxxxxx Ancillary Document; and (b)
any breach by Xxxxxx or Xxxxxx Sub of, or failure by Xxxxxx or Xxxxxx Sub to
comply with, any of the covenants or obligations under this Agreement or the
Xxxxxx Ancillary Documents to be performed by Xxxxxx or Xxxxxx Sub (including
without limitation its obligations under this Article VII).
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7.5 Limitation on Indemnification Obligations.
(a) All representations and warranties contained in this Agreement
shall survive the Closing for a period of twelve months from the Effective Date
(the "Survival Period"). A claim by a Xxxxxx Indemnitee or a Seller Indemnitee
for indemnification under this Article VII must be asserted within the Survival
Period.
(b) Notwithstanding anything to the contrary contained herein, (i)
the Xxxxxx Indemnitees shall only be entitled to indemnification pursuant to
Section 7.3 hereof once the Xxxxxx Indemnitees' aggregate claims for
indemnification exceed $600,000.00, but after such claims exceed such amount,
the Xxxxxx Indemnitees shall be entitled to seek indemnification for all
indemnification claims from the first dollar of Damages; and (ii) the
indemnification obligations of the Stockholders pursuant to Section 7.3 hereof
shall be limited to the amount deposited by the Stockholders into the Escrow and
the Xxxxxx Indemnitees shall not be entitled to pursue any claims for
indemnification against the Stockholders directly or personally and the sole
recourse of the Xxxxxx Indemnitees shall be to make claims against the Escrow in
accordance with the terms of the Escrow Agreement. Notwithstanding anything to
the contrary contained herein, for purposes of determining the amount of Damages
incurred by a Xxxxxx Indemnitee pursuant to Section 7.3 hereof, the Company's
representations and warranties contained herein shall be read without regard to
the Company's disclosure relating to the Labor-Related Proceedings with respect
to Xxxxx Xxxxxxxx as described in Section 4.19 of the Company Disclosure
Schedule.
(c) Notwithstanding anything to the contrary contained herein, (i)
the Seller Indemnitees shall only be entitled to indemnification pursuant to
Section 7.4 hereof once the Seller Indemnitees' aggregate claims for
indemnification exceed $600,000, but after such claims exceed such amount, the
Seller Indemnitees shall be entitled to seek indemnification for all
indemnification claims from the first dollar of Damages; and (ii) the
indemnification obligations of Xxxxxx pursuant to Section 7.4 hereof shall be
limited to an amount equal to $10,125,000 in the aggregate.
7.6 Cooperation. Subject to the provisions of Section 7.8, the
Indemnifying Party shall have the right, at its own expense, to participate in
the defense of any Third Party Claim, and if said right is exercised, the
parties shall cooperate in the investigation and defense of said Third Party
Claim.
7.7 Subrogation. The Indemnifying Party shall not be entitled to
require that any action be brought against any other person before action is
brought against it hereunder by the Indemnified Party and shall not be
subrogated to any right of action until it has paid in full or successfully
defended against the Third Party Claim for which indemnification is sought.
7.8 Indemnification Claims Procedures.
(a) Promptly following the receipt of notice by the Xxxxxx
Indemnitees of a Third Party Claim which the Xxxxxx Indemnitees believe may
result in a demand against the Escrow,
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Xxxxxx shall notify the Stockholder Agent of such claim in accordance with the
provisions of the Escrow Agreement. Promptly following the receipt by the
Stockholder Indemnitees of notice of a Third Party Claim which the Stockholder
Indemnitees believe may result in a demand for indemnification pursuant to
Section 7.4 hereof, the Stockholder Agent shall notify Xxxxxx of such claim. The
party receiving the notice of the Third Party Claim shall notify the other party
hereto of such Third Party Claim. The failure to give such notice shall not
relieve the Indemnifying Party of its obligations under this Agreement except to
the extent that the Indemnifying Party is substantially prejudiced as a result
of the failure to give such notice. Within fifteen (15) business days after
receipt of the notice by the Indemnifying Party pursuant to the preceding
sentence, the Indemnifying Party shall notify the Indemnified Party whether it
elects to control the defense of the Third Party Claim. If the Indemnifying
Party elects to undertake the defense of such Third Party Claim, it shall do so
at its own expense with counsel of its own choosing and it shall acknowledge in
writing without qualification its indemnification obligations as provided in
this Agreement to the Indemnified Party as to such Third Party Claim. If the
Indemnifying Party elects not to defend the Third Party Claim or fails to pursue
such Third Party Claim diligently, the Indemnified Party shall have the right to
undertake, conduct and control the defense of such Third Party Claim through
counsel of its own choosing. The party that litigates or contests the Third
Party Claim shall keep the other party fully advised of the progress and
disposition of such claim.
(b) In the event the Indemnifying Party elects not to undertake the
defense of the Third Party Claim or fails to pursue diligently the defense of
such a claim and the Indemnified Party litigates or otherwise contests or
settles the Third Party Claim, then, provided that a final determination has
been made that the Indemnified Party is entitled to indemnification hereunder,
the Indemnifying Party shall promptly reimburse the Indemnified Party for all
amounts paid to settle such claim or all amounts paid in satisfaction of a
judgment against the Indemnified Party in contesting such claim and in providing
its right to indemnification hereunder, all in accordance with the provisions of
this Article VII. Notwithstanding the foregoing, no settlement of any Third
Party Claim without the prior written consent of the Indemnifying Party shall be
determinative of the validity of any claim that the Indemnified Party is
entitled to indemnification hereunder.
(c) No Third Party Claim will be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party, which consent will
not be unreasonably withheld; provided, however, that if such claim asserts that
the Indemnifying Party is jointly and severally liable and the Indemnified Party
shall be fully released from all liability relating to such Third Party Claim in
connection with such settlement, the Indemnifying Party shall not be required to
obtain the consent of the Indemnified Party. If, however, the Indemnified Party
refuses to consent to a bona fide offered settlement which the Indemnifying
Party wishes to accept, the Indemnified Party may continue to pursue such Third
Party Claim free of any participation by the Indemnifying Party, at the sole
expense of the Indemnified Party. In such event, the Indemnifying Party shall
pay to the Indemnified Party the amount of the offer of settlement which the
Indemnified Party refused to accept, plus the costs and expenses incurred by the
Indemnified Party prior to the date the Indemnifying Party notifies the
Indemnified Party of the offer of settlement, all in accordance with the terms
of this Article VII, and, upon the payment or receipt of such amount, as the
case may be,
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the Indemnifying Party shall have no further liability with respect to such
Third Party Claim. The Indemnifying Party shall be entitled to recover from the
Indemnified Party any additional expenses incurred by such Indemnifying Party as
a result of the decision of the Indemnified Party to pursue the matter.
7.9 Stockholder Agent.
(a) In the event that the Merger is approved, effective upon such vote,
and without further act of any Stockholder, a committee (the "Committee"") of
Xxxxxxx Xxxxxx and Xxxx Xxxx shall be appointed as agents and attorneys-in-fact
(collectively, the "Stockholder Agent") for each Stockholder (except such
Stockholders, if any, as shall have perfected their dissenter rights under
applicable law). The Stockholder Agent, for and on behalf of Stockholders, shall
have the power to take any and all actions required to be taken by the
Stockholders pursuant to this Agreement or the Escrow Agreement, including,
without limitation, the power to give and receive notes and communications, to
enter into and perform the Escrow Agreement, to make claims for indemnification
against Xxxxxx, to authorize delivery to Xxxxxx of Xxxxxx Common Stock or other
property from the Escrow Fund in satisfaction of claims by Xxxxxx, to object to
such deliveries, to agree to negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary
appropriate or in the judgment of Stockholder Agent for the accomplishment of
the foregoing. The Stockholder Agent shall act by unanimous vote or unanimous
written action or consent of the members of the Committee. Effective upon the
approval of this Agreement by the Stockholders, the Stockholders individually
shall have no power or authority to take any actions against Xxxxxx or otherwise
pursuant to this Agreement or the Escrow Agreement, and all actions of the
Stockholders, whether pursuant to this Agreement or the Escrow Agreement, must
be taken solely by the Stockholder Agent.
(b) Xxxxxx shall have no liability of any kind to any Stockholder as a
result of or arising out of any action taken or not taken by the Stockholder
Agent at any time under this Agreement or the Escrow Agreement and each
Stockholder hereby releases Xxxxxx from any such liability. Xxxxxx may
conclusively rely, without any obligation of investigation or inquiry of any
kind, on any action taken by the Stockholder Agent as having been fully
authorized and approved by all necessary action by each Stockholder (except such
Stockholders, if any, as shall have perfected their dissenter rights under
applicable law).
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ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
mutual written consent of Xxxxxx and the Company.
8.2 Termination by Either Xxxxxx or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Xxxxxx or the Company if (a) the Merger shall not have been
consummated on or prior to (i) December 31, 1996; or (ii) if, as of December 1,
1996, the Commissioner of Corporations of the State of California has not yet
held the fairness hearing as described in Section 5.7 hereof, January 31, 1997;
provided, however, that the right to terminate this Agreement under this Section
8.2(a) will 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 Merger to occur on or before such date; (b) the approval of the
Stockholders shall not have been obtained at a meeting duly convened therefor or
at any adjournment thereof; provided, however, that the Company shall not have
the right to terminate this Agreement under this Section 8.2(b) if the Company
caused (directly or indirectly) or aided in the failure to obtain such approval;
or (c) a court of competent jurisdiction or a governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action either (i) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; or (ii)
compelling Xxxxxx, Xxxxxx Sub or the Surviving Corporation to dispose of or hold
separate all or a material portion of the respective businesses or assets of
Xxxxxx, the Company or their respective Subsidiaries, and such order, decree,
ruling or other action shall have become final and non-appealable.
8.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Board of Directors of the Company, if there has been a material breach by
Xxxxxx or Xxxxxx Sub of any representation, warranty, covenant or agreement set
forth in this Agreement on the part of Xxxxxx, which breach is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by the Company to Xxxxxx.
8.4 Termination by Xxxxxx. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Board of Directors of Xxxxxx, if there has been a material breach by the Company
of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Xxxxxx to the Company.
8.5 Effect of Termination and Abandonment. In the event of termination
of this Agreement
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and the abandonment of the Merger pursuant to this Article 8, all obligations of
the parties hereto shall terminate, except the obligations of the parties
pursuant to Sections 5.10, which obligations shall survive the termination of
this Agreement.
8.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand by facsimile, or by nationally recognized private carrier
shall be deemed given on the day following receipt; provided, however, that a
notice delivered by facsimile shall only be effective if such notice is also
delivered by hand, or deposited in the United States mail, postage prepaid,
registered or certified mail, on or before two (2) business days after its
delivery by facsimile. All notices shall be addressed as follows:
If to Xxxxxx or Xxxxxx Sub: If to the Company:
Xxxxxx Pharmaceuticals, Inc. Oclassen Pharmaceuticals, Inc.
000 Xxxxxx Xxxxxx 000 Xxxxxxx Xxx
Xxxxxx, Xxxxxxxxxx 00000 Xxx Xxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xx. Xxxxx Xxxx, Attn: Xxxxx X. Xxxxxxxx, Chairman
Chairman & CEO Xxxxx X. Xxxxxxx, CEO
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With copies to: With copies to:
X'Xxxxxx & Xxxxxx Venture Law Group
00 Xxxxx XxXxxxx, Xxxxx 0000 A Professional Corporation
Xxxxxxx, Xxxxxxxx 00000 0000 Xxxx Xxxx Xxxx
Fax: (000) 000-0000 Menlo Park, California
Attn: Xxxxxx X. Xxxxxxx Fax (000) 000-0000
Attn: Xxxxx Xxxxxxx
If to the Stockholder Agent:
___________________________
___________________________
___________________________
Fax:
Attn:
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
9.2 Assignment, Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.4, 1.5, 1.6, 1.7, 1.8, 2.3, 2.4 and 5.12, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.3 Entire Agreement. This Agreement, the Exhibits, the Disclosure
Statement, the Xxxxxx Disclosure Statement, the Confidentiality Agreement, the
Ancillary Documents, the Xxxxxx Ancillary Agreements, and any other documents
delivered by the parties in connection herewith 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. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
9.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
Stockholders, but after any such Stockholder approval, no amendment shall be
made which by law requires the further approval of Stockholders without
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obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
9.6 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
9.7 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
9.8 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
9.9 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
9.10 Incorporation of Exhibits. The Disclosure Statement, the Xxxxxx
Disclosure Statement 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.
9.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.12 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any California Court,
this being in addition to any other remedy to which they are entitled at law or
in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
XXXXXX PHARMACEUTICALS, INC.
By:______________________________
Title:___________________________
OPALACQ CO.
By:______________________________
Title:___________________________
OCLASSEN PHARMACEUTICALS, INC.
By:______________________________
Title:___________________________
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