EXECUTION COPY
EXHIBIT 2(A.1)
MERGER AGREEMENT
BY AND AMONG
DUSA PHARMACEUTICALS, INC.,
SIRIUS LABORATORIES, INC.,
AND
THE SHAREHOLDERS OF SIRIUS LABORATORIES, INC.
SET FORTH ON THE
SIGNATURE PAGES ATTACHED HERETO
DECEMBER 30, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS............................................................................. 1
ARTICLE II MERGER; CLOSING........................................................................ 11
2.1 Merger....................................................................... 11
2.2 Consideration................................................................ 11
2.3 Closing...................................................................... 13
2.4 Closing Obligations.......................................................... 13
2.5 Liability Escrow............................................................. 15
2.6 Lock-Up...................................................................... 16
2.7 Registration Rights.......................................................... 17
2.8 Assumption of Sirius Liabilities............................................. 17
2.9 Shareholders and Expense Escrow.............................................. 17
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING SIRIUS....................................... 18
3.1 Organization and Good Standing............................................... 18
3.2 Authority; No Conflict; Consents............................................. 18
3.3 Capitalization............................................................... 19
3.4 Financial Statements......................................................... 20
3.5 Books and Records............................................................ 20
3.6 Title to Assets; Encumbrances................................................ 20
3.7 Revolving Credit and Other Debt.............................................. 21
3.8 Subsidiaries................................................................. 21
3.9 Intellectual Property Matters................................................ 21
3.10 Related Party Transactions................................................... 22
3.11 No Undisclosed Liabilities................................................... 22
3.12 Taxes........................................................................ 23
3.13 Employee Benefits............................................................ 24
3.14 Compliance with Legal Requirements; Governmental Authorizations.............. 27
3.15 Legal Proceedings............................................................ 29
3.16 Absence of Certain Changes and Events........................................ 30
3.17 Material Contracts; No Defaults.............................................. 31
3.18 Insurance.................................................................... 32
3.19 Environmental Matters........................................................ 34
3.20 Brokers or Finders........................................................... 36
3.21 Accounts Receivable.......................................................... 36
3.22 Inventory.................................................................... 36
3.23 Warranties................................................................... 36
3.24 Product Liability............................................................ 36
3.25 Customers and Suppliers...................................................... 37
3.26 Product Treatments; Product Returns.......................................... 37
3.27 Complete Copies of Materials................................................. 37
3.28 Disclosures.................................................................. 37
3.29 Principal Shareholders....................................................... 37
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3.30 Representations Complete..................................................... 38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SHAREHOLDERS............................... 38
4.1 Legal Capacity, Organization and Good Standing............................... 38
4.2 Authority; No Conflict....................................................... 38
4.3 Ownership of Shares.......................................................... 39
4.4 No Public Sale or Distribution............................................... 39
4.5 Reliance on Exemptions....................................................... 39
4.6 Information.................................................................. 39
4.7 No Governmental Review....................................................... 40
4.8 Transfer or Resale........................................................... 40
4.9 Legends...................................................................... 40
4.10 Brokers or Finders........................................................... 41
4.11 Representations Complete..................................................... 41
ARTICLE V REPRESENTATIONS AND WARRANTIES OF DUSA.................................................. 41
5.1 Organization and Good Standing............................................... 41
5.2 Authority; No Conflict....................................................... 41
5.3 Investment Intent............................................................ 42
5.4 Certain Proceedings.......................................................... 42
5.5 Brokers or Finders........................................................... 42
5.6 DUSA Sub..................................................................... 42
5.7 No Undisclosed Liabilities................................................... 42
5.8 Representations Complete..................................................... 42
5.9 Compliance with Legal Requirements........................................... 42
5.10 SEC Compliance............................................................... 42
5.11 No Contemplated Sale of DUSA................................................. 43
ARTICLE VI ADDITIONAL AGREEMENTS.................................................................. 43
6.1 Approvals of Governmental Bodies............................................. 43
6.2 Tax Matters.................................................................. 44
6.3 Expenses..................................................................... 44
6.4 Sirius Shareholders' Representatives......................................... 45
6.5 Sirius Information Statement................................................. 45
6.6 Sirius Shareholder Meeting................................................... 45
6.7 Investor Questionnaires...................................................... 45
6.8 Unaccredited Investors....................................................... 46
6.9 Transition................................................................... 46
6.10 Due Diligence................................................................ 46
6.11 Micanol License Agreement.................................................... 46
ARTICLE VII CONDITIONS PRECEDENT TO DUSA'S OBLIGATION TO CLOSE.................................... 46
7.1 Accuracy of Representations.................................................. 47
7.2 Covenants.................................................................... 47
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7.3 Board and Shareholder Approval............................................... 47
7.4 Closing Deliverables......................................................... 47
7.5 Consents..................................................................... 47
7.6 No Proceedings............................................................... 47
7.7 Termination of Sirius Employee Plans......................................... 47
7.8 Financial Statements......................................................... 47
7.9 Minimum Participation........................................................ 48
7.10 FIRPTA Affidavit............................................................. 48
7.11 Non-Competition.............................................................. 48
7.12 Access to Manufacturing and Distribution Facilities.......................... 48
7.13 No Dropped Coverage.......................................................... 48
7.14 Extending Reporting Endorsement.............................................. 49
7.15 Waiver of Right of First Refusal to Purchase Bioglan Shares.................. 49
7.16 Key Contracts................................................................ 49
7.17 Adverse Event Reporting...................................................... 49
7.18 Product Registrations........................................................ 49
7.19 Effective Form S-4........................................................... 49
7.20 Qualification Fees........................................................... 49
7.21 Schedules.................................................................... 49
7.22 Disclosures.................................................................. 49
ARTICLE VIII CONDITIONS PRECEDENT TO SHAREHOLDERS AND SIRIUS'S OBLIGATION TO CLOSE................ 50
8.1 Accuracy of Representations.................................................. 50
8.2 Covenants.................................................................... 50
8.3 Board Approval............................................................... 50
8.4 Closing Deliverables......................................................... 50
8.5 No Proceedings............................................................... 50
8.6 Disclosures.................................................................. 50
ARTICLE IX COVENANTS OF SIRIUS PRIOR TO CLOSING DATE.............................................. 50
9.1 Access and Investigations.................................................... 50
9.2 Operation of Sirius.......................................................... 51
9.3 Negative Covenant............................................................ 51
9.4 Required Approvals........................................................... 51
9.5 Standstill................................................................... 52
9.6 Employee Plans............................................................... 53
9.7 Representation and Warranty Insurance........................................ 53
ARTICLE X POST-CLOSING COVENANTS.................................................................. 53
10.1 Sirius Board Nominee......................................................... 53
10.2 Maintenance of Sirius D&O Insurance.......................................... 54
10.3 Continuity of Sirius Business................................................ 54
10.4 Product Development and Marketing Requirements............................... 54
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ARTICLE XI TERMINATION............................................................................ 55
11.1 Termination Events........................................................... 55
11.2 Effect of Termination........................................................ 56
11.3 Break-Up Fee................................................................. 56
ARTICLE XII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS..................... 57
12.1 Representations and Warranties............................................... 57
12.2 Limitation of Liability...................................................... 57
ARTICLE XIII INDEMNIFICATION...................................................................... 57
13.1 Indemnification of DUSA Indemnitees.......................................... 57
13.2 Indemnification of the Sirius Shareholders................................... 57
13.3 Limitations.................................................................. 58
13.4 General Provisions........................................................... 59
13.5 Procedures for Indemnification - Third Party Claims.......................... 59
13.6 Procedure for Indemnification - Other Claims................................. 61
ARTICLE XIV TAX MATTERS........................................................................... 61
14.1 Tax Allocation............................................................... 61
ARTICLE XV GENERAL PROVISIONS..................................................................... 62
15.1 Expenses..................................................................... 62
15.2 Public Announcements......................................................... 62
15.3 Confidentiality.............................................................. 62
15.4 Notices...................................................................... 62
15.5 Jurisdiction; Service of Process............................................. 63
15.6 Further Assurances........................................................... 64
15.7 Waiver....................................................................... 64
15.8 Entire Agreement and Modification............................................ 64
15.9 Disclosure Schedules......................................................... 64
15.10 Assignments, Successors, and No Third-Party Rights........................... 64
15.11 Severability................................................................. 65
15.12 Article and Section Headings, Construction................................... 65
15.13 Governing Law................................................................ 65
15.14 Counterparts................................................................. 65
ARTICLE XVI DISPUTE RESOLUTION.................................................................... 65
16.1 Arbitration.................................................................. 65
16.2 Judicial Proceedings......................................................... 66
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DISCLOSURE SCHEDULES
Schedule 1.80 New Products
Schedule 1.95 Products
Schedule 1.100 Management Bonus Program
Schedule 2.8 Assumed Liabilities
Schedule 3.1(a) Executive Officers and Directors of Sirius
Schedule 3.2(b) No Conflict
Schedule 3.2(c) Consents
Schedule 3.3(a) Capitalization and Shareholders
Schedule 3.3(b) Equity Incentive Plans/Options
Schedule 3.3(c) Shareholder Agreements
Schedule 3.3(d) Beneficial Ownership (Fully Diluted)
Schedule 3.4 Financial Statements
Schedule 3.6 Property and Assets
Schedule 3.8 Subsidiaries
Schedule 3.9(a) Intellectual Property Rights
Schedule 3.9(c) Claims, Judgments and Disputes
Schedule 3.10 Related Party Transactions
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12(c) Tax Returns
Schedule 3.13(b) Plans and Other Benefit Obligations
Schedule 3.13(c) Effect of Transaction
Schedule 3.14(a) Compliance with Legal Requirements
Schedule 3.14(b) Governmental Authorization
Schedule 3.14(c) Prescription and Non-Prescription Products
Schedule 3.15 Legal Proceedings
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17(a) Material Contracts
Schedule 3.17(b) Restrictive Contracts
Schedule 3.17(c) Validity of Material Contracts
Schedule 3.17(d) Material Compliance
Schedule 3.18(b) Insurance
Schedule 3.18(c) Validity of Insurance
Schedule 3.18(d) Claims-Made Policies
Schedule 3.19(b) Facilities
Schedule 3.21 Accounts Receivable
Schedule 3.23 Warranties
Schedule 3.24 Product Liability
Schedule 3.25 Customers and Suppliers
Schedule 3.26 Products Treatments; Product Returns
Schedule 4.2(b) No Conflict
Schedule 4.2(c) Consents
Schedule 9.6 Employee Plans
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EXHIBITS
Exhibit A Form of Subscription Agreement
Exhibit B Form of Liability Escrow Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Shareholders Escrow Agreement
Exhibit E Form of Expense Escrow Agreement
Exhibit F Undisclosed Liabilities of DUSA
Exhibit G Form of the 2006 Micanol License Agreement
Exhibit H1 Form of Non-Competition Agreement
Exhibit H2 Form of Non-Competition Agreement
Exhibit I Form of Amendment to Harmony Supply and Development Agreement
Exhibit J Form of Amendment to Amide Supply Agreement
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EXECUTION COPY
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is made on the 30th day of
December, 2005, by and among DUSA Pharmaceuticals, Inc., a publicly traded
pharmaceutical company incorporated in the State of New Jersey, with principal
offices at 00 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx ("DUSA"), Sirius
Laboratories, Inc., a privately held specialty pharmaceutical company
incorporated in the State of Illinois, with principal offices at 000 Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxxx Xxxxx, Xxxxxxxx ("Sirius"), and those shareholders of
Sirius set forth on the signature pages hereto (each a "Principal Shareholder"
and collectively the "Principal Shareholders"). DUSA, Sirius and the Principal
Shareholders are at times referred to each as a "Party" and collectively as the
"Parties."
RECITALS
WHEREAS, pursuant to a Plan of Merger and Reorganization, to be drafted in
a form mutually agreeable to the parties and delivered prior to the Closing Date
(the "Plan of Merger"), the Parties agree to effect a merger of Sirius with and
into a wholly-owned subsidiary of DUSA ("DUSA Sub") to be incorporated by DUSA
prior to Closing, resulting in DUSA Sub being the surviving entity, the Sirius
Shareholders receiving the consideration provided for herein, and DUSA owning
all of the issued and outstanding common stock of DUSA Sub (the "Transaction");
WHEREAS, the Parties intend that the Transaction constitute a
"reorganization" as defined in IRC Section 368(a); and
WHEREAS, the Parties agree to effect the Transaction and agree to be bound
by the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the Parties, in furtherance of the foregoing and for good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
1.1 "Accounts Receivable" means all of Sirius's trade accounts receivable,
notes receivable, employee advances and other miscellaneous receivables.
1.2 "Affiliates" means, with respect to any Person, any Persons directly
or indirectly controlling, controlled by, or under common control with, such
Person. For purposes hereof, the term "controlled" (including the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the direct or indirect ability or power to
direct or cause the direction of management policies of such Person or otherwise
direct the affairs of such Person, whether through ownership of voting
securities or otherwise.
1.3 "Agreement" has the meaning defined in the opening paragraph of this
Agreement.
1.4 "Altana" means Altana Inc., a New York corporation.
1.5 "Altana Agreement" means the Development, License and Supply
Agreement, dated as of June 13, 2005, by and between Sirius and Altana.
1.6 "Amide" means Amide Pharmaceuticals, Inc., a New Jersey corporation.
1.7 "Amide Supply Agreement" means the Supply Agreement, dated as of May
18, 2001, by and between Sirius and Amide.
1.8 "Balance Sheet" has the meaning defined in Section 3.4.
1.9 "Break-Up Fee" means One Hundred Twenty Five Thousand Dollars
($125,000) on or before February 7, 2006, or Two Hundred Fifty Thousand Dollars
($250,000) thereafter.
1.10 "Business Day" means any day other than a Saturday, Sunday or federal
holiday.
1.11 "Closing" has the meaning defined in Section 2.3.
1.12 "Closing Date" has the meaning defined in Section 2.3.
1.13 "Closing Deliverables" has the meaning defined in Section 2.4(a).
1.14 "Commercially Reasonable Efforts" means the efforts that a Party
desirous of achieving a business result would use in similar circumstances, to
ensure that such result is achieved in the context of such Party's business;
provided, however, that an obligation to use Commercially Reasonable Efforts
does not require the Party subject to that obligation to assume any Material
obligations or pay any Material amounts outside the normal course of its
business.
1.15 "Consent" means any approval, consent, ratification, waiver, or other
authorization, including any Governmental Authorization.
1.16 "Consideration" has the meaning defined in Section 2.2.
1.17 "Contract" means any agreement, contract, license, sublicense,
obligation, promise, or undertaking (whether written or oral and whether express
or implied) that is legally binding.
1.18 "Damages" means any and all losses, damages, liabilities,
obligations, costs and expenses, including without limitation, reasonable fees
and disbursements of counsel, sustained or incurred by the applicable Person
after deducting therefrom: (a) any Tax benefit actually recognized by the Person
resulting from such Damages; and (b) any insurance proceeds in the order
specified in Section 13.3(b) and any indemnity, contribution or other similar
payment actually recovered, net of all expenses incurred in prosecuting such
claim, by the Person suffering the Damages from any Third Party with respect
thereto.
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1.19 "Disclosure Schedules" means, collectively, those schedules delivered
by Sirius and attached to and incorporated in this Agreement that set forth the
facts and circumstances that qualify the representations and warranties of
Sirius in Article III and the Principal Shareholders in Article IV of this
Agreement, and "Schedule" means any schedule comprising part of the Disclosure
Schedules.
1.20 "Dissenters Escrow Account" shall have the meaning defined in Section
2.9(a).
1.21 "Dissenters Escrow Amount" shall be an amount equal to Thirty Million
Dollars ($30,000,000) less the Sirius Transaction Expenses and the Expense
Escrow Amount multiplied by the Dissenters Multiplier, which amount is to be
held in escrow by the Shareholders Escrow Agent pursuant to the terms and
conditions of the Shareholders Escrow Agreement.
1.22 "Dissenters Multiplier" means the total number of Sirius Shares held
by the Dissenting Shareholders as of the Closing Date divided by the total
number of Sirius Shares issued and outstanding as of the Closing Date.
1.23 "Dissenting Shareholders" means those shareholders of Sirius who
dissent from, refuse to participate in or otherwise fail to take part in the
Transaction.
1.24 "Dollars" means the United States Dollar.
1.25 "Draft Financial Statements" has the meaning defined in Section 3.4.
1.26 "DUSA" has the meaning defined in the opening paragraph of this
Agreement.
1.27 "DUSA Change of Control" has the meaning defined in Section 2.2(d).
1.28 "DUSA SEC Documents" means the reports, registration statements and
definitive proxy statements filed by DUSA with the SEC since January 1, 2004.
1.29 "DUSA Shares" means shares of common stock, no par value per share,
of DUSA, having the restrictions set forth in Sections 4.8 and 4.9.
1.30 "DUSA Sub" has the meaning defined in the Recitals of this Agreement.
1.31 "Elorac" means Elorac Limited, an Illinois partnership.
1.32 "Elorac Agreement" means the Sale and Purchase Agreement, dated as of
December 18, 2002, by and between Sirius and Elorac.
1.33 "Employee" means any current employee, consultant or agent of Sirius
or its ERISA Affiliates.
1.34 "Encumbrance" means any mortgage, easement, right of way, charge,
claim, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
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1.35 "Environmental Claim" has the meaning defined in Section 3.19(a).
1.36 "Environmental Laws" has the meaning defined in Section 3.19(a).
1.37 "Environmental Permits" has the meaning defined in Section 3.19(a).
1.38 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
1.39 "ERISA Affiliate" has the meaning defined in Section 3.13(a).
1.40 "Escrow Agent" means the Expense Escrow Agent, Shareholders Escrow
Agent and/or the Liability Escrow Agent, as applicable.
1.41 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.42 "Expense Escrow Account" shall have the meaning defined in Section
2.9(b).
1.43 "Expense Escrow Agent" shall have the meaning defined in Section
2.9(b).
1.44 "Expense Escrow Agreement" shall have the meaning defined in Section
2.9(b).
1.45 "Expense Escrow Amount" means the amount of the Consideration to be
delivered to the Expense Escrow Agent at Closing for payment of expenses arising
after the Closing pursuant to the Expense Escrow Agreement.
1.46 "Expenses" has the meaning defined in Section 6.3(a).
1.47 "Fair Market Value" means for purposes of Section 2.2(c)(ii), the
average closing price of DUSA Shares on the NASDAQ Stock Market for the last
twenty (20) trading days of the month in which the applicable milestone is
achieved, which average closing price shall be calculated by adding the closing
price of DUSA Shares for each of the twenty (20) designated days and dividing
the sum by twenty (20); and shall mean for purposes of Sections 2.2(b) and 2.5
the average closing price of DUSA Shares on the NASDAQ Stock Market for the
twenty (20) trading days prior to the public announcement of the Transaction by
DUSA, which average closing price shall be calculated by adding the closing
price of DUSA Shares for each of the twenty (20) designated days and dividing
the sum by twenty (20). If the closing price cannot be calculated for the DUSA
Shares on a particular date on any of the foregoing bases, the closing price of
such security on such date shall be the fair market value as mutually determined
by DUSA and the Shareholder Representatives. DUSA and the Shareholder
Representatives shall use Commercially Reasonable Efforts to resolve any dispute
regarding the determination of Fair Market Value, provided, however, that the
limitation with respect to Material expenditures shall not apply. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period. Should DUSA Shares cease to be quoted on the NASDAQ Stock
Market, for purposes of any calculation hereunder, the NASDAQ Stock Market shall
be replaced by the applicable exchange or quotation system or in the event the
DUSA Shares cease to trade on any exchange or
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quotation system, then the determination of Fair Market Value shall be mutually
determined by DUSA's Board of Directors and the Shareholders' Representatives.
1.48 "FDA" means the United States Food and Drug Administration, or any
successor agency.
1.49 "FDCA" means the United States Food, Drug and Cosmetic Act, as
amended, or any successor law, and the rules and regulations issued pursuant to
that Act or successor law.
1.50 "Final Financial Statements" has the meaning defined in Section 3.4.
1.51 "Floor" means Twenty Five Thousand Dollars ($25,000).
1.52 "Form S-4" has the meaning defined in Section 6.8.
1.53 "Governmental Authorization" means any approval, consent, license,
permit, certification, registration, waiver, or other authorization issued,
granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
1.54 "Governmental Body" means any: (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental or
quasi-governmental authority of any nature, including any governmental agency,
branch, department, official, or entity and any court or other tribunal; or (d)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
1.55 "Harmony" means Harmony Laboratories, Inc., a North Carolina
corporation.
1.56 "Harmony Supply and Development Agreement" means the Supply and
Development Agreement, dated as of September 18, 2001, by and between Sirius and
Harmony Laboratories, Inc.
1.57 "Hazardous Materials" has the meaning defined in Section 3.19(a).
1.58 "Indemnitee" and "Indemnitor" have the respective meanings defined in
Section 13.5.
1.59 "Intellectual Property Rights" means any item of or right under any
and all Know-how, Patents, inventions, trademarks, trade names, domain names,
service marks, trade dress, slogans, designs, concepts, compilations of
information, copyrights, or any application or registration thereof, whether by
ownership or license or the ability of an entity to grant access to, or a
license or sublicense of, such item or right, and any and all inventions,
improvements or discoveries in connection therewith.
1.60 "Interim Balance Sheet" has the meaning defined in Section 3.4.
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1.61 "Inventory" means all inventory of Sirius's business held for resale
and all raw materials, work in process, finished products, shipments in transit,
wrapping and supply and packaging items exclusively used or held for use in
Sirius's business, including, without limitation, inventory held for
distribution to physicians as samples.
1.62 "Investor Questionnaires" has the meaning defined in Section 6.7.
1.63 "IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
1.64 "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.65 "Know-how" means any and all unpatented formulae, processes, trade
secrets, technologies and know-how, whether or not patentable, including,
without limitation, synthesis, preparation, recovery and purification processes
and techniques, control methods and assays, chemical data, toxicological and
pharmacological data and techniques, clinical data, medical uses, product forms
and product formulations and specifications.
1.66 "Knowledge" means to the applicable person's actual knowledge after
reasonable inquiry.
1.67 "Legal Requirement" means any administrative order, constitution,
law, ordinance, principle of common law, court order, consent, decree, rule,
regulation, guidance, license, permit, statute, or treaty of any Governmental
Body.
1.68 "Liability Escrow Account" has the meaning defined in Section 2.5.
1.69 "Liability Escrow Agent" has the meaning defined in Section 2.5.
1.70 "Liability Escrow Agreement" has the meaning defined in Section 2.5.
1.71 "Liability Escrow Amount" has the meaning defined in Section 2.5.
1.72 "Material" means, (i) when used in connection with a monetary amount,
an amount of Twenty Five Thousand Dollars ($25,000) or more; and (ii) when used
with respect to a non-monetary concepts or a concept that is both monetary and
non-monetary, information that a reasonably prudent person would find important
in deciding to take an action (or not take an action).
1.73 "Material Adverse Effect (or Change)" means (i) any effect or change
that is Materially adverse to the business, assets, condition (financial or
otherwise), operating results, or operations of a particular Person taken as a
whole, including, without limitation, a court order or permanent injunction with
respect to the continued manufacturing, production and/or marketing of a Product
or the engaging of counsel with respect to any Third Party Intellectual Property
Rights Materially affecting the Products, (ii) a Material impairment of such
Person's ability to consummate the Transaction; (iii) a greater than five
percent (5%) detrimental deviation between
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the 2003 Draft Financial Statements and the 2003 Final Financial Statements, the
2004 Draft Financial Statements and the 2004 Final Financial Statements, and the
September 30, 2005 Sirius management financial statements and the 2005 Final
Financial Statements, respectively, with respect to net sales and/or profit/loss
with the exception of variances caused by adjustments related to revenue
recognition, compensation expense, and reserves for returns and allowances, or
(iv) the failure by Sirius to deliver the Final Financial Statements as provided
for herein.
1.74 "Material Contracts" has the meaning defined in Section 3.17(a).
1.75 "Milestone Payments" means the payments to be made upon the
satisfaction of the conditions and the absence of certain events set forth in
Section 2.2(c), subject to adjustments, if any.
1.76 "Milestone Termination Date" means the date that is forty-two (42)
months after the Closing Date.
1.77 "Minimum Marketing Standards" means Commercially Reasonable Efforts
to sell and/or promote the New Products selected for development pursuant to
this Agreement (including to achieve marketing launch and/or regulatory approval
of such New Products subject to the terms of Section 10.4(c) permitting DUSA to
cease development of any New Product candidate) and the Products (as applicable)
in a manner consistent with Sirius's past practices (including merely sampling
certain Products) or the customary practices within the industry, including,
without limitation, sales force promotion, sales incentive bonuses, product
sampling and non-personal promotion, all at levels consistent with good faith
operations of DUSA aimed at providing Sirius Shareholders with a realistic
opportunity to achieve the sales milestones described in Section 2.2(c);
provided, however, that it is understood and agreed that (a) the sales force
used in working towards achieving the Minimum Marketing Standards will not be
required to exclusively promote the New Products and the Products and may
simultaneously promote DUSA's other existing and future products and services,
and (b) the monetary amounts expended and activity levels applied to such
marketing efforts by DUSA may be greater or less than the amounts and levels
currently expended and applied by Sirius.
1.78 "Multi-Employer Plan" has the meaning defined in Section 3.13(a).
1.79 "Net Sales" means with respect to any Product and New Product, the
gross amount invoiced by DUSA to unrelated third parties for such Product and
New Product less deductions for: (a) sales and excise taxes and duties and any
other governmental charges imposed upon the production, importation, use or sale
of any Product or New Product; (b) trade, quantity and cash discounts actually
allowed; (c) allowances or credits to customers on account of rejection or
return of any Product or New Product or on account of retroactive price
reductions affecting any Product or New Product; and (d) product rebates and
charge backs, including those granted to governmental agencies, managed care
entities and pharmaceutical benefit management service entities; in each case,
as accounted for in accordance with United States Generally Accepted Accounting
Principles, as applicable, or their equivalents in other countries, as
applicable, but in any case, consistently applied.
1.80 "New Products" means the product candidates set forth on Schedule
1.80 hereto.
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1.81 "Organizational Documents" means the articles or certificate of
incorporation (including without limitation certificate(s) of designation),
bylaws, certificate(s) of authority to conduct business, and any amendment to
any of the foregoing, of a corporation.
1.82 "Other Benefit Obligation" has the meaning defined in Section
3.13(a).
1.83 "Paid Sirius Expenses" means any Sirius Transaction Expenses which
have been or will be paid by Sirius prior to the Closing.
1.84 "Participating Shareholders" means the Principal Shareholders and
other Sirius Shareholders who exchange their Sirius Shares for DUSA Shares at
the Closing and who collectively hold greater than ninety percent (90%) of the
issued and outstanding Sirius Shares on a fully diluted basis on the Closing
Date, and, if approved by the requisite number of Sirius Shareholders at the
meeting of Sirius Shareholders described in Section 6.6, those holders of Sirius
Options who elect to exercise their options, respectively, with or without cash,
in exchange for the right to participate in the Transaction prior to Closing.
1.85 "Party" and "Parties" has the meaning defined in the opening
paragraph of this Agreement.
1.86 "Patents" means the patents and patent applications in any country in
the world, together with any patents that may issue therefrom in any country in
the world, including any and all extensions, renewals, continuations,
continuations-in-part, divisions, patents-of-additions, reissues, supplementary
protection certificates or foreign counterparts of any of the foregoing and any
patents based on applications that claim priority from any of the foregoing; and
a "Patent" shall be any one of the foregoing.
1.87 "Pension Plan" has the meaning defined in Section 3.13(a).
1.88 "Perrigo" means Perrigo Company, a Michigan company.
1.89 "Perrigo Agreement" means the Supply Agreement, dated October 21,
2005, by and between Perrigo and Sirius.
1.90 "Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability partnership,
limited liability company, joint venture, estate, trust, association,
organization, labor union, Governmental Body or other entity.
1.91 "Plan" has the meaning defined in Section 3.13(a).
1.92 "Plan of Merger" has the meaning defined in the Recitals to this
Agreement.
1.93 "Principal Shareholders" means those shareholders of Sirius whose
names are set forth on the signature pages attached to this Agreement, who are
the holders of greater than eighty-eight percent (88%) of the issued and
outstanding Sirius Shares as of the date of this Agreement.
8
1.94 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, inquiry or suit (whether civil, criminal,
administrative or investigative) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.95 "Products" means those products of Sirius set forth on Schedule 1.95
to this Agreement.
1.96 "Qualified Plan" has the meaning defined in Section 3.13(a).
1.97 "Regulation D" has the meaning defined in the Securities Act.
1.98 "Representation and Warranties Insurance" has the meaning defined in
Section 9.7.
1.99 "Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.100 "Restricted Payment" means any acceleration or increase by Sirius of
any salaries, or any acceleration, payment or increase by Sirius of any bonuses
or other compensation, severance or similar payments to any service provider,
shareholder, director or officer since the Interim Balance Sheet, except for any
payment or prepayment of any Sirius Debt Obligations or payments made in the
ordinary course of business; provided, however, Restricted Payments shall not
include Sirius's 2005 Management Bonus Program attached hereto as Schedule
1.100, or payment of Expenses as contemplated herein.
1.101 "SEC" means the United States Securities and Exchange Commission.
1.102 "Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder.
1.103 "Shareholder Representatives" has the meaning defined in Section
6.4.
1.104 "Shareholders Escrow Agent" shall have the meaning defined in
Section 2.9(a).
1.105 "Shareholders Escrow Agreement" shall have the meaning defined in
Section 2.9(a).
1.106 "Sirius" has the meaning defined in the opening paragraph of this
Agreement.
1.107 "Sirius Debt Obligations" means, as of a particular date, the
following obligations of Sirius: Sirius's Expenses other than the Sirius
Transaction Expenses, and up to One Million Dollars ($1,000,000) of outstanding
liabilities with respect to The PrivateBank and Trust Company Obligation,
subject to the terms and conditions set forth in Section 2.4(a)(vii).
9
1.108 "Sirius Facility" means any offices, land or other facilities now or
formerly owned, operated, leased, managed, used, controlled or occupied by or on
behalf of Sirius in connection with Sirius's business or any
predecessor-in-interest of Sirius.
1.109 "Sirius Options" has the meaning defined in Section 3.3(b).
1.110 "Sirius Shareholders" means all shareholders of Sirius on a fully
diluted, as converted to common stock, basis.
1.111 "Sirius Shares" means the shares of common stock, $.01 par value per
share, of Sirius.
1.112 "Sirius Transaction Expenses" has the meaning defined in Section
6.3(a)(ii).
1.113 "Tax" and "Taxes" means any federal, state, local or foreign income,
gross receipts, franchise, excise, transfer, severance, value added, ad valorem,
sales, use, wage, payroll, workmen's compensation, employment, occupation,
estimated, withholding, social security, unemployment, disability, and real and
personal property taxes; taxes measured by or imposed on capital; levies,
imports, duties, license and legislation fees; and any other tax of any kind
whatsoever imposed by any Governmental Body, including assessments in the nature
of taxes; interest, penalties, fines, assessments and deficiencies relating to
any tax or taxes; any transferee or secondary liability for taxes and any taxes
due as a result of being a member of any affiliated, consolidated, combined or
unitary group or any liability in respect of taxes under a tax sharing, tax
allocation, tax indemnity or other agreement.
1.114 "Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
1.115 "The PrivateBank and Trust Company Obligations" means all
indebtedness and obligations owed by Sirius to The PrivateBank and Trust Company
under (a) that certain Business Loan Agreement, dated August 1, 2005, between
Sirius and The PrivateBank and Trust Company; and (b) that certain Promissory
Note, dated August 1, 2005, in the principal amount of $2,000,000, payable by
Sirius to the order of The PrivateBank and Trust Company.
1.116 "Third Party" means any Person other than DUSA, Sirius and the
Principal Shareholders.
1.117 "Third Party Manufacturer" has the meaning defined in Section
3.14(c)(iv).
1.118 "Title IV Plans" has the meaning defined in Section 3.13(a).
1.119 "Transaction" has the meaning defined in the Recitals of this
Agreement.
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ARTICLE II
MERGER; CLOSING
2.1 MERGER. Subject to the terms and conditions of this Agreement and the
Plan of Merger, at the Closing, Sirius shall merge with and into DUSA Sub and
the Sirius Shareholders shall receive the Consideration set forth below.
2.2 CONSIDERATION. The aggregate consideration paid to the Sirius
Shareholders shall be up to Thirty Million Dollars ($30,000,000), which amount
shall be adjusted as provided for herein (the "Consideration"). The
Consideration shall be paid as follows:
(a) Eight Million Dollars ($8,000,000) in cash, less (i) the Sirius
Transaction Expenses, which shall be paid at Closing as provided in Section 6.3,
(ii) the Expense Escrow Amount, which shall be paid at Closing as provided in
Sections 2.2(f) and 2.9(b), and (iii) the Dissenters Escrow Amount, which shall
be paid to the Shareholders Escrow Agent at Closing, as provided in Section
2.9(a), shall be paid on a pro rata basis within five (5) Business Days
following the Closing Date (or such shorter time period as may be reasonably
practicable with respect to any Participating Shareholder who provides valid
wire transfer instructions for such payments to DUSA in advance of the Closing)
directly to the Participating Shareholders in accordance with their respective
ownership percentages of the Sirius Shares set forth in Schedule 3.3(a), as
shall be confirmed as of the Closing Date.
(b) Subject to Section 2.5, a number of DUSA Shares having a Fair
Market Value of Seventeen Million Dollars ($17,000,000) as of the date of the
official public announcement of the Transaction shall be paid on a pro rata
basis on the Closing Date directly to the Participating Shareholders, in
accordance with their respective ownership percentages of the Sirius Shares set
forth in Schedule 3.3(a).
(c) An aggregate amount of up to Five Million Dollars ($5,000,000)
shall be paid when due following the Closing to the Participating Shareholders
on a pro rata basis with respect to the following milestone events that are
achieved prior to the date that is forty-two (42) months from the Closing Date:
(i) One Million Five Hundred Thousand Dollars ($1,500,000) in
cash will be paid on a pro rata basis to the Sirius Shareholders in Five Hundred
Thousand Dollar ($500,000) increments within ten (10) Business Days of each of
the following milestone events (in each case subject to Section 10.4): (A) the
marketing launch of New Product No. 1 as set forth on Schedule 1.80 being
developed pursuant to the Perrigo Agreement, which does not require FDA
pre-marketing approval; (B) the receipt of FDA pre-marketing approval of New
Product No. 2 as set forth on Schedule 1.80 being developed pursuant to the
Altana Agreement, which requires FDA approval; and (C) the marketing launch of
any other New Product (i.e., other than those identified with respect to the
Milestone Payments triggered by clause (A) or (B)), to be selected as provided
in Section 10.4 below, whether or not FDA approval is required for such New
Product.
(ii) Three Million Five Hundred Thousand Dollars ($3,500,000)
to be paid, in cash or DUSA Shares, as determined by DUSA in its sole
discretion, within ten (10)
11
Business Days following the month in which a respective milestone is satisfied,
if at all, of each of the following milestone events (in each case subject to
Section 10.4): (A) One Million Five Hundred Thousand Dollars ($1,500,000) when
cumulative Net Sales of the Products and the New Products reach Twenty Five
Million Dollars ($25,000,000); (B) One Million Dollars ($1,000,000) when
cumulative Net Sales of the Products and the New Products reach Thirty Five
Million Dollars ($35,000,000); and (C) One Million Dollars ($1,000,000) when
cumulative Net Sales of the Products and the New Products reach Forty Five
Million Dollars ($45,000,000).
In the event DUSA chooses to make any or all such Milestone Payments in
DUSA Shares, such DUSA Shares shall have a Fair Market Value as close as is
reasonably possible to the amount of the Milestone Payment after taking into
account that no fractional DUSA Shares shall be issued in accordance with
Section 2.2(e).
(d) No interest shall accrue on any Milestone Payments, if any, to
be paid, hereunder; provided such Milestone Payments are timely made in
accordance with the terms of this Agreement. Interest on Milestone Payments not
timely made in accordance with the terms hereof will accrue at an annual rate
equal to the prime rate published in the Wall Street Journal (or a successor
publication in the event the Wall Street Journal is no longer available) on the
applicable due date of the late payment, plus five percent (5%). DUSA's
obligation to pay each Milestone Payment, respectively, shall terminate if the
aforementioned approvals, launches or cumulative Net Sales target amounts
applicable to such Milestone Payments are not achieved by the Milestone
Termination Date; provided, however, that, in the event of any sale, merger,
dissolution, liquidation, winding-up, change of control or similar transaction
involving DUSA (any such event being referred to as a "DUSA Change of Control")
prior to the Milestone Termination Date, each Milestone Payment not already due
and payable hereunder shall become immediately due and payable upon the
effective date of such transaction, (i) in an amount equal to fifty percent
(50%) of the amount of such Milestone Payment specified herein, or (ii) if such
transaction occurs on or after the second (2nd) anniversary of the Closing Date
and the cumulative Net Sales with respect to the Products and the New Products
equals or exceeds Twenty Million Dollars ($20,000,000) for the period beginning
on the Closing Date through the effective dates of such transaction, in an
amount equal to one hundred percent (100%) of the amount of such Milestone
Payment specified herein. Upon payment in-full of such amount under subparagraph
(d)(i) or (ii) above in connection with a DUSA Change of Control, neither DUSA
nor its successors or assigns shall have any further obligation or liability
with respect to any of the Milestone Payments hereunder.
(e) No fractional DUSA Shares shall be issued in satisfaction of the
Consideration. DUSA shall be entitled to pay cash for any pro rata DUSA Share
that is less than one whole DUSA Share.
(f) The Expense Escrow Amount, in immediately available funds, shall
be delivered to the Expense Escrow Agent on the Closing Date and held on behalf
of the Participating Shareholders as provided for in Section 2.9(b) below. The
Expense Escrow Amount shall be used to pay, unless paid prior to or at Closing,
the legal expenses of Sirius in connection with the Transaction (other than such
amounts to be paid by DUSA pursuant to Section 6.3(a)(ii) of this Agreement),
any payments due to Elorac as a result of a change of control of Sirius under
the Elorac Agreement, the premiums in connection with the extended
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reporting endorsement for each claims-made insurance policy as provided for in
Section 3.18(d), and other Sirius Shareholder post-Closing expenses, all of
which in the aggregate are estimated to be Six Hundred Fifty Thousand Dollars
($650,000), in accordance with the terms of this Agreement and the Expense
Escrow Agreement.
(g) The Dissenters Escrow Amount, in immediately available funds,
shall be delivered to the Shareholders Escrow Agent on the Closing Date and held
on behalf of the Dissenting Shareholders as provided for in Section 2.9(a)
below. The Dissenters Escrow Amount shall be used to pay the Dissenting
Shareholders in accordance with the terms of this Agreement and the Shareholders
Escrow Agreement.
2.3 CLOSING. Subject to the satisfaction of all of the Closing conditions
set forth in this Agreement, unless waived, the closing of the Transaction (the
"Closing") will take place at the offices of Xxxx Xxxxx LLP at 000 Xxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxx Xxxxxx 00000 at 10:00 a.m. (EST) (a) on or before
February 7, 2006, or (b) on such later date as mutually agreed upon by Sirius
and DUSA, but in no event later than the date which is six (6) months from the
date of the execution of this Agreement. (the "Closing Date").
2.4 CLOSING OBLIGATIONS.
(a) On or prior to the Closing Date, the Principal Shareholders or
Sirius, as appropriate, shall deliver or cause to be delivered to DUSA in a form
satisfactory to DUSA and its counsel the following (the "Closing Deliverables"):
(i) stock certificates representing all of the Sirius Shares
being exchanged in connection with the Transaction, duly endorsed with
signatures guaranteed (or accompanied by duly executed stock powers) for
conversion to DUSA Shares;
(ii) a certificate executed by Sirius to the effect that each
of the representations and warranties of Sirius contained in this Agreement were
true and correct when made and are true and correct as of the Closing Date; and
that the Participating Shareholders hold ninety (90%) percent or more of the
issued and outstanding shares of Sirius Stock on a fully diluted as converted to
common stock basis on the Closing Date.
(iii) a certificate executed by each Principal Shareholder
holding in excess of five percent (5%) of the Sirius shares to the effect that
each of the representations and warranties of the Principal Shareholders
contained in this Agreement, were true and correct when made and are true and
correct as of the Closing Date;
(iv) a fully completed and executed subscription agreement,
substantially in the form attached hereto as Exhibit A, from each Participating
Shareholder;
(v) a certificate as to the incumbency of officers;
(vi) a legal opinion from counsel of Sirius in form and
substance reasonably satisfactory to DUSA and its counsel;
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(vii) written confirmation from The PrivateBank and Trust
Company that the Transaction, and, if necessary, the assumption by DUSA of The
PrivateBank and Trust Company Obligations, will not result in a default under
The PrivateBank and Trust Company Obligations;
(viii) written confirmation, in form and substance reasonably
satisfactory to DUSA, that as of the Closing the aggregate outstanding amount of
The PrivateBank and Trust Company Obligations does not exceed One Million
Dollars ($1,000,000) and that such amount does not exceed the cost of the
Inventory then held by Sirius.
(ix) an executed counterpart of the Articles of Merger to be
filed with the Secretary of State of Illinois and the Certificate of Merger to
be filed with the Secretary of State of New Jersey; and
(x) an executed Plan of Merger adopted by the responsible
officers of Sirius and meeting the requirements of IRC Reg. 1.368-3.
(xi) audited consolidated financial statements of Sirius for
the years ended December 31, 2003, 2004 and 2005, respectively, that meet the
requirements of Item 9.01 of Form 8-K and the applicable provisions of
Regulation S-X.
(b) On or prior to the Closing Date, DUSA shall, in a form
satisfactory to Sirius and its counsel, deliver to:
(i) the Participating Shareholders and the Escrow Agent, those
portions of the Consideration due pursuant to Sections 2.2(a), 2.2(b), 2.2(f)
and 2.2(g);
(ii) Sirius, a certificate executed by DUSA to the effect that
each of the representations and warranties of DUSA contained in this Agreement
were true and correct when made and are true and correct as of the Closing Date;
(iii) Sirius, an executed counterpart of the Articles of
Merger to be filed with the Secretary of State of Illinois and the Certificate
of Merger to be filed with the Secretary of State of New Jersey;
(iv) Sirius, an executed Plan of Merger adopted by the
responsible officers of DUSA and meeting the requirements of IRC Reg. 1.368-3.
(v) Sirius, an Assignment and Assumption of Sirius Debt
Obligations.
(c) On or prior to the Closing Date, the Parties shall execute and
deliver to each other the Liability Escrow Agreement, the Shareholders Escrow
Agreement, the Registration Rights Agreement, any consulting agreements and all
other agreements, certifications, and other documents, as necessary and
appropriate.
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2.5 LIABILITY ESCROW.
(a) At the Closing, DUSA shall withhold a number of DUSA Shares
having a Fair Market Value of Three Million Dollars ($3,000,000) (the "Liability
Escrow Amount") from that portion of the Consideration to be issued pursuant to
Section 2.2(b) and shall instead deliver the Liability Escrow Amount to American
Stock Transfer and Trust Company, who shall act as escrow agent (the "Liability
Escrow Agent"), for deposit into an escrow account (the "Liability Escrow
Account"). The Liability Escrow Amount shall be withheld from the Consideration
to be issued pursuant to Section 2.2(b) on a pro rata basis among all of the
Participating Shareholders in proportion to the aggregate amount of the
Consideration each such Participating Shareholder would otherwise be entitled to
receive at Closing. The Liability Escrow Amount shall be held pursuant to the
provisions of an escrow agreement (the "Liability Escrow Agreement"),
substantially in the form attached as Exhibit B.
(b) The Liability Escrow Amount will be available to satisfy the
indemnification obligations of Sirius and the Sirius Shareholders hereunder
pursuant to the terms of Article XIII to compensate DUSA for any Damages
incurred by DUSA pursuant to (i) any undisclosed liabilities of Sirius arising
prior to the Closing Date, (ii) subject to Section 2.5(f), a court order,
temporary restraining order, permanent injunction, cease and desist letter or
other notice containing a significant threat to the continued manufacturing,
production and/or marketing of a Product with respect to any Third Party
Intellectual Property Rights relating to any of the Products; provided, however,
that for purposes of indemnification hereunder, the maximum portion of the
Liability Escrow Amount available to satisfy any claim with respect to a Product
pursuant to Section 2.5(b)(ii) shall be equal to the Liability Escrow Amount
reduced on a Dollar for Dollar basis by the amount of the revenue recognized by
DUSA or DUSA Sub from such Product referenced in this clause (ii) from and after
the Closing, and, subject to Section 2.5(f) below, as of the date upon which
DUSA retains litigation counsel to defend any claim in connection with this
clause (ii) (the "Claim Date"), the amount of revenue recognized with respect to
such Product following the Claim Date will be offset by the amount of Damages
incurred by DUSA from and after the Claim Date, (iii) any Material breach of any
representation, warranty or covenant made by Sirius or a Principal Shareholder
made in this Agreement or otherwise in connection with the Transaction, (iv) any
tort claim, including, but not limited to, negligence and strict liability
claims, and claims for intentional misconduct or wrongdoing; and (v) any Taxes
to the extent provided in Article XIV. The value per share of each of the DUSA
Shares used to satisfy a claim, if any, shall equal the same value per share as
calculated for purposes of Section 2.2(b). For purposes of clarity, this means
that in the event a claim is made, the value per DUSA Share as calculated
pursuant to Section 2.2(b) of this Agreement shall be used notwithstanding the
fact that the fair market value of a share of the common stock of DUSA at the
time of the claim may be lower or higher than the value calculated in accordance
with Section 2.2(b) of this Agreement.
(c) No claims may be offset against the Liability Escrow Amount
after two (2) years following the Closing Date. In addition, notwithstanding
anything herein to the contrary, DUSA may not make any claim against the
Liability Escrow Amount and the Liability Escrow Agent shall not release any
Liability Escrow Amount to DUSA unless and until any individual claim or group
of like claims is equal to or exceeds the Floor and all cumulative claims exceed
One Hundred Thousand Dollars ($100,000), and shall be otherwise subject to the
15
limits set forth in Article XIII hereof; provided, however, for purposes of
determining whether any individual claim equals or exceeds the Floor, DUSA shall
be permitted to aggregate "like claims" falling within the following specified
categories: (i) contractual claims with respect to any and all contracts assumed
by DUSA in connection with the Transaction, (ii) unpaid taxes and other
governmental claims, (iii) tort claims, including, but not limited to,
negligence and strict liability claims, and (iv) claims for intentional
misconduct or wrongdoing. In consideration of the foregoing, all claims shall be
considered to fall within one of the four categories specified above. In the
event a claim could fit into 2 or more categories, it shall be applied in its
entirety to the category that is most applicable. For purposes of clarity,
individual claims each falling below the Floor shall be eligible to be offset
against the Liability Escrow Amount if, when grouped together in the
aforementioned categories, such claims in the aggregate equal or exceed the
Floor and all claims cumulatively exceed One Hundred Thousand Dollars
($100,000). Further, once cumulative claims exceed One Hundred Thousand Dollars
($100,000), it will not be necessary for subsequent claims to again cumulatively
exceed One Hundred Thousand Dollars ($100,000) so long as claims including
aggregated "like claims" exceed the Floor as set forth above.
(d) To the extent that there are any DUSA Shares remaining in the
Liability Escrow Account which have not been reserved for asserted claims under
the Liability Escrow Agreement on the date that is two (2) years after the
Closing Date, such DUSA Shares will be released on a pro rata basis to the
Participating Shareholders.
(e) Notwithstanding the foregoing, upon the effective date of any
DUSA Change of Control, the Liability Escrow Amount shall be immediately
released from the Liability Escrow Account by the Liability Escrow Agent. DUSA
shall be entitled to pay cash for any pro rata DUSA Share that is less than one
whole DUSA Share and shall not issue any fractional shares as provided in
Section 2.2(e).
(f) DUSA shall notify the Shareholder Representatives of any matter
described in Section 2.5(b)(ii) as promptly as practicable after DUSA obtains
Knowledge thereof. DUSA shall consult with the Shareholder Representatives and
shall take such Commercially Reasonable Efforts as may be appropriate,
including, without limitation, entering into litigation with respect thereto
after reasonably considering the circumstances with regard to such potential
litigation, including, but not limited to, the cost to DUSA to enter into and
maintain such litigation, the estimated time period necessary to successfully
conclude such litigation, and the amount of the Liability Escrow Amount
remaining available for indemnification purposes; provided, however, that DUSA
shall not be required to spend any amount in excess of the available Liability
Escrow Amount on any defense of its rights with respect to such Products. DUSA
may only make a claim with respect to the Liability Escrow Amount under Section
2.5(b)(ii) in the event DUSA has, in its commercially reasonable discretion
after consulting with the Shareholder Representatives, engaged litigation
counsel directly in response thereto.
2.6 LOCK-UP. DUSA Shares to be issued as provided for in Section 2.2(b) to
any Sirius Shareholder who owns directly or beneficially five percent (5%) or
more of the issued and outstanding Sirius Shares shall be subject to a lock-up
of the DUSA Shares (the "Escrowed Shares"). The Escrowed Shares shall be held in
escrow by the Shareholders Escrow Agent in an
16
account separate from the Dissenters Escrow Account with fifty percent (50%) of
such Escrowed Shares being released on the first anniversary of the Closing Date
and the balance being released on the second anniversary of the Closing Date. In
addition, each other Sirius Shareholder receiving DUSA Shares hereunder who also
receives (as determined by Sirius in advance of the Closing) the estimated 2006
revenue and loss ranges for DUSA (following the consummation of the Transaction)
shall agree to be subject to a lock-up of such DUSA Shares until the earlier of
(i) the first anniversary of the Closing Date, or (ii) the date on which such
estimated 2006 revenue and loss ranges for DUSA (following the consummation of
the Transaction) is announced to the public by DUSA or such information is
deemed by DUSA in its reasonable discretion (in which case it will so notify
such locked-up Sirius Shareholders) no longer Material to the business and
operations of DUSA and/or DUSA Sub. If either the first or second anniversary of
the Closing Date shall not fall on a Business Day, the respective Escrowed
Shares shall be released as provided for herein on the next succeeding Business
Day. Notwithstanding the foregoing, upon the effective date of any DUSA Change
of Control, the Escrowed Shares shall be released from the escrow account by the
Shareholders Escrow Agent and all of the obligations of the Sirius Shareholders
pursuant to this Section 2.6 shall immediately terminate and cease to be of
further force or effect, subject to applicable securities laws.
2.7 REGISTRATION RIGHTS. At Closing, to the extent the Form S-4 has not
been prepared in accordance with this Agreement, the Parties shall execute a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit C (the "Registration Rights Agreement"), pursuant to which DUSA shall
provide certain registration rights with respect to the DUSA Shares under the
Securities Act and applicable state securities laws which shall provide each
Participating Shareholder with rights to have his, her or its DUSA Shares
registered promptly after Closing as further provided in the Registration Rights
Agreement.
2.8 ASSUMPTION OF SIRIUS LIABILITIES. Effective as of the Closing, DUSA
shall assume all liabilities of Sirius as shown on Schedule 2.8 (to be updated
by Sirius prior to the Closing to include all liabilities incurred in the
ordinary course between the date hereof and the Closing Date),the outstanding
liabilities shown on the Interim Balance Sheet and all Sirius Debt Obligations,
except as otherwise specifically provided for herein; provided, however, that
DUSA shall have the right in its reasonable discretion to reject any Restricted
Payments or liabilities otherwise accruing outside of the ordinary course
between the date hereof and the Closing Date.
2.9 SHAREHOLDERS AND EXPENSE ESCROW.
(a) The Dissenters Escrow Amount shall be delivered to American
Stock Transfer and Trust Company, who will act as escrow agent with respect to
the Dissenters Escrow Amount (the "Shareholders Escrow Agent"), in immediately
available funds on the Closing Date for deposit into a designated account (the
"Dissenters Escrow Account"). The Dissenters Escrow Amount shall be held
pursuant to the provisions of an escrow agreement (the "Shareholders Escrow
Agreement"), substantially in the form attached hereto as Exhibit D, to be
entered into at or prior to the Closing.
(b) The Expense Escrow Amount shall be delivered to Chicago Title
and Trust Company, who will act as escrow agent with respect to the Sirius
Shareholders (the "Expense Escrow Agent"), in immediately available funds on the
Closing Date for deposit into a
17
designated account (the "Expense Escrow Account"). The Expense Escrow Amount
shall be held pursuant to the provisions of an escrow agreement (the "Expense
Escrow Agreement"), substantially in the form attached hereto as Exhibit E, to
be entered into at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING SIRIUS
Sirius hereby represents and warrants to DUSA as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) Sirius is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Illinois, with full corporate power
and authority to conduct its business as it is now being conducted and to own or
use the properties and assets that it purports to own or use. Schedule 3.1(a)
sets forth the current directors and executive officers of Sirius. Except as set
forth on Schedule 3.1(a), Sirius is duly qualified and authorized to transact
business as a foreign corporation and is in good standing under the laws of each
jurisdiction where such qualification is required or where failure to be so
qualified would not have a Material Adverse Effect on Sirius. To the extent
reasonably practicable, Sirius shall have paid in advance of Closing any fees
and penalties arising as a result of any such failure to qualify.
(b) Sirius does not own any shares of capital stock or any interest
in, or does not control, and is not controlled by, directly or indirectly, any
other corporation, limited liability company, partnership, association, joint
venture or other business entity.
(c) Sirius has provided to DUSA true and correct copies of the
Organizational Documents of Sirius, as currently in effect.
3.2 AUTHORITY; NO CONFLICT; CONSENTS.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sirius, enforceable against Sirius in accordance with its terms.
Sirius has all corporate right, power and authority to execute and deliver this
Agreement and the other documents to be executed in connection herewith and to
perform its obligations under this Agreement and the documents to be executed in
connection herewith.
(b) Except as set forth in Schedule 3.2(b), the execution, delivery
and performance of this Agreement will not (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of (1)
any provision of the Organizational Documents of Sirius, or (2) any resolution
of Sirius adopted by its board of directors or shareholders;
(ii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Sirius; or
18
(iii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any contract, to which Sirius is a party or by
which Sirius may be bound.
(c) Except as set forth in Schedule 3.2(c), Sirius is not, and will
not be, required to give any notice to or obtain any Consent from any Person in
connection with the execution, delivery or performance of this Agreement.
3.3 CAPITALIZATION.
(a) The total authorized capital stock of Sirius consists of
25,000,000 shares of Common Stock, of which 20,737,079 are issued and
outstanding and no shares are held in treasury. Sirius has no other authorized
classes of capital stock. The Sirius Shares have been duly authorized and are
validly issued and are fully paid and nonassessable and, except as set forth on
Schedule 3.3(a), are not subject to preemptive rights created by statute, the
Organizational Documents of Sirius or any Contract. Except as referenced in
Schedule 3.3(a), there are no Contracts for the issuance, sale or transfer of
any equity securities or other securities of Sirius. All of the issued and
outstanding Sirius Shares are held of record by the Persons with the addresses
of record and in the amounts and pro rata percentages set forth in Schedule
3.3(a).
(b) Schedule 3.3(b) contains a list of (i) any and all equity
incentive plans that are currently in effect, (ii) the total number of Sirius
Shares authorized for issuance under each equity incentive plan, and (iii) the
total number of Sirius Shares underlying issued and outstanding grants under
each such equity incentive plan. Except for the transactions contemplated by
this Agreement and except as otherwise set forth in Schedule 3.3(b), there are
no options, warrants, calls, rights, exchangeable or convertible securities,
commitments or agreements of any character, written or oral, to which Sirius is
a party or by which it is bound obligating Sirius to (i) issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any securities, or (ii) grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
call, right, exchangeable or convertible securities, commitment or agreement.
All issued and outstanding options (each, an "Sirius Option," and collectively,
the "Sirius Options") to purchase equity securities have been offered, sold and
delivered by Sirius in compliance with the applicable equity incentive plan and
with applicable law, including federal and state securities laws. Schedule
3.3(b) sets forth for each outstanding Sirius Option, the name of the holder of
such Sirius Option, the domicile address of such holder, the number of shares
issuable upon the exercise of such Sirius Option, the exercise price of such
Sirius Option, the vesting schedule for such Sirius Option, including the extent
vested to date, and whether such Sirius Option is intended to qualify as an
incentive stock option as defined in Section 422 of the IRC. Schedule 3.3(b)
sets forth all outstanding Sirius Shares that constitute unvested restricted
stock or that are otherwise subject to a repurchase or redemption right,
indicating the name of the applicable shareholder, the vesting schedule
(including any acceleration provisions with respect thereto), and the repurchase
price payable by Sirius, if any.
(c) Except for the transactions contemplated by this Agreement and
except as otherwise set forth in Schedule 3.3(c), there are no shareholder
agreements, investor rights
19
agreements, registration rights agreements, voting trusts or other agreements or
understandings to which Sirius is a party or to which it is bound relating
directly or indirectly to any capital stock of Sirius.
(d) Schedule 3.3(d) contains a list of the beneficial ownership,
including number of shares and percentage of ownership, of all stockholders and
option holders of Sirius on a fully diluted basis, assuming the vesting in full
of all shares underlying outstanding options. Schedule 3.3(d) shall also contain
a list of those holders of Sirius Options who elect to exercise their options,
respectively, with or without cash, in exchange for the right to participate in
the Transaction prior to Closing, including the number of options held and the
percentage ownership attributable to such holder, assuming such options were
exercised on a cashless basis.
3.4 FINANCIAL STATEMENTS. Prior to the date hereof, Sirius shall have
delivered to DUSA draft financial statements, attached hereto as Schedule 3.4
(the "Draft Financial Statements"), of: (a) audited consolidated balance sheets
of Sirius as of December 31, 2004 and 2003, respectively, and the related
audited consolidated statements of income, changes in shareholders' equity, and
cash flow for each of the fiscal years then ended, together with the notes
thereto (the December 31, 2004 consolidated balance sheet together with notes is
referred to herein as the "Balance Sheet") and (b) an unaudited consolidated
balance sheet of Sirius as of the latest calendar quarter ended prior to the
date hereof (the "Interim Balance Sheet") and the related unaudited consolidated
statements of income. Such consolidated financial statements and notes fairly
present in all Material respects the financial condition and the results of
operations, changes in shareholders' equity, and cash flow of Sirius as at the
respective dates of and for the periods referred to in such consolidated
financial statements, all in accordance with GAAP, subject, in the case of
interim consolidated financial statements, to normal recurring year-end
adjustments (including, but not limited to, normal year-end current and deferred
income tax adjustments); the consolidated financial statements referred to in
this Section 3.4 reflect the consistent application of GAAP throughout the
periods involved, except as otherwise disclosed in the notes to such
consolidated financial statements or in Schedule 3.4. As soon as is practicable,
but in no event less than five (5) Business Days prior to the Closing, Sirius
shall provide DUSA with the final, audited financial statements for the three
years ended December 31, 2005, 2004 and 2003, respectively (the "Final Financial
Statements") as well as reasonable access to the management, financial
consultants and auditors of Sirius for purposes of verifying such Final
Financial Statements.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of Sirius, all of which have been provided to DUSA for
review and have been or at Closing will be delivered to DUSA, are complete and
correct in all Material respects.
3.6 TITLE TO ASSETS; ENCUMBRANCES. Sirius owns, leases or licenses all
buildings, machinery, equipment, Products, inventory, marketing materials, other
tangible assets, Intellectual Property Rights and other intangible assets
necessary or desirable for the conduct of the business of Sirius as presently
conducted and as conducted since its incorporation, and a complete and accurate
list of all such assets are included on Schedule 3.6. All assets reflected on
Schedule 3.6 are owned, leased or licensed (as applicable) (i) free and clear of
all Encumbrances, except for The PrivateBank and Trust Company Obligations, (ii)
free from Material defects, (iii)
20
in good operating condition and repair, normal wear and tear excepted, and. (iv)
suitable for the purposes for which each is presently used.
3.7 REVOLVING CREDIT AND OTHER DEBT. Other than The PrivateBank and Trust
Company Obligations, Sirius has no other revolving line of credit, short-term or
long-term capital leases or other long-term debt.
3.8 SUBSIDIARIES. Except as otherwise set forth on Schedule 3.8, Sirius
has no subsidiaries, whether wholly or partially owned, nor has Sirius had any
subsidiaries since its inception.
3.9 INTELLECTUAL PROPERTY MATTERS.
(a) Schedule 3.9(a) sets forth an accurate and complete list of all
Sirius Intellectual Property Rights, including, but not limited to, the
following:
(i) all patents and patent applications owned or filed by, or
on behalf of, Sirius or used in the business or operations of Sirius, including
the country of filing, owner, filing number, date of issue, expiration date and
title;
(ii) all registered trademarks and applications for
registration of trademarks owned or filed by, or on behalf of, or used by
Sirius, including country of filing, description of goods or services,
registration or application number and date of issue;
(iii) all registered copyrights and applications for
registration of copyrights owned or filed by, or on behalf of, or used by
Sirius, including country of filing, owner, filing number, date of issue and
expiration date;
(iv) all common law trademarks, service marks, trade names,
slogans, trade dress and the like owned by Sirius or used in the business or
operations of Sirius;
(v) all license agreements pursuant to which Sirius has
outstanding rights to any Intellectual Property Rights of others and all
agreements, oral or written, pursuant to which Sirius is obligated to pay
royalties to Third Parties with respect to such Intellectual Property Rights;
and
(vi) all license agreements, oral or written, pursuant to
which Sirius has granted to any Person any outstanding right to any Intellectual
Property Rights and all agreements, oral or written, pursuant to which Sirius is
entitled to receive royalties from Third Parties with respect to such
Intellectual Property Rights, including licenses or other rights in unpatented
formulations, manufacturing methods and other know-how and proprietary
information of Sirius.
(b) Complete and accurate copies of all patents, trademarks,
copyrights, applications and agreements referenced in subsection (a) above have
been delivered to DUSA. Complete and accurate summaries of verbal agreements
referenced in subsection (a) above have been delivered to DUSA.
21
(c) Except as otherwise set forth on Schedule 3.9(c):
(i) all the Intellectual Property Rights, to the extent owned
by or licensed to Sirius, are not subject to any pending or, to Sirius's
Knowledge, threatened claim, judgment or dispute of any nature;
(ii) Sirius has not: (A) consented to the use by another
Person of Sirius's name, trademarks, trade names or service marks or a name that
is substantially similar thereto; or (B) entered into any license, agreement, or
granted any other permission by which Sirius has granted to any Third Party
rights with respect to any of its Intellectual Property Rights;
(iii) there are no conflicts with the asserted rights of
others with respect to any of the Sirius Intellectual Property Rights;
(iv) to Sirius's Knowledge, the conduct of Sirius's business
as currently conducted, including the manufacture and sale of Sirius's Products
and the provision of Sirius's services as such activities are currently
conducted, does not infringe, misappropriate or violate the Intellectual
Property Rights of any other Person;
(v) Sirius has received no invitations or offers to license
the Intellectual Property of any Third Party;
(vi) Sirius has received no notification from any Third Party
stating that it believes any act of Sirius infringes such Third Party's
Intellectual Rights; and
(vii) with respect to Sirius's trademarks, trade names and
service marks used by Sirius in connection with its Products and services (A)
all such marks are valid and enforceable and in compliance with all formal legal
requirements, (B) no such xxxx has been or is currently involved in any
opposition or cancellation proceeding in the United States Patent and Trademark
Office or the corresponding trademark authority of any foreign jurisdiction, (C)
there has been no prior use of any such xxxx by any Third Party which would
confer upon such Third Party superior rights in such xxxx, and (D) Sirius has
received no written notice or claim contesting Sirius's ownership of such marks
or the validity or enforceability thereof.
3.10 RELATED PARTY TRANSACTIONS. Schedule 3.10 sets forth a description of
all transactions since Sirius's inception between Sirius and a Person who was at
the time a related party. For purposes of this Section 3.10, "related party"
means any present or former officer, director or Affiliate of Sirius, any
present or former beneficial holder of five percent (5%) or more of the Sirius
Shares, and any member of the immediate family of the foregoing.
3.11 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.11,
Sirius has no liabilities or obligations of any nature arising outside of the
ordinary course of business (whether absolute, accrued, contingent, or
otherwise), except for The PrivateBank and Trust Company Obligations and the
liabilities or obligations reflected or reserved against in the Interim Balance
Sheet.
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3.12 TAXES.
(a) Except as set forth in Schedule 3.12(a), Sirius has filed all
Tax Returns that it was required to file under applicable laws and regulations.
To the extent reasonably practicable, Sirius shall have paid in advance of
Closing any Taxes and fees, including interest, arising as a result of any such
failure to file and any required restatements of previous filings. All such Tax
Returns were correct and complete in all respects and were prepared in
substantial compliance with all applicable laws and regulations. All Taxes due
and owing by Sirius (whether or not shown on any Tax Return) have been paid.
Sirius is not currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Sirius does not file Tax Returns that Sirius is or may be
subject to taxation by that jurisdiction. There are no Liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of Sirius.
(b) Sirius has withheld and paid all Taxes required to have been
withheld and paid in connection with any amounts paid or owing to any employee,
director, independent contractor, creditor, stockholder, or other Third Party.
(c) Neither the IRS nor any other Governmental Body has threatened
or to Sirius' Knowledge otherwise intends to assess Sirius any additional Taxes
for any period for which Tax Returns have been filed. No foreign, federal,
state, or local tax audits or administrative or judicial Tax proceedings are
pending or being conducted with respect to Sirius. Sirius has not received from
the IRS or any other Governmental Body (including jurisdictions where Sirius has
not filed Tax Returns) any (i) notice indicating an intent to open an audit or
other review, (ii) request for information related to Tax matters, or (iii)
notice of deficiency or proposed adjustment for any amount of Tax proposed,
asserted, or assessed by any taxing authority against Sirius. Schedule 3.12(c)
lists all federal, state, local, and foreign income Tax Returns filed with
respect to Sirius for taxable periods ended on or after January 1, 2002,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Sirius has delivered to DUSA
correct and complete copies of all federal, state, local and foreign income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by Sirius filed or received since January 1, 2002.
(d) Sirius has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Sirius has not filed a consent under IRC Section 341(f)
concerning collapsible corporations. Sirius is not a party to any agreement,
contract, arrangement or plan that has resulted or could result, separately or
in the aggregate, in the payment of (i) any "excess parachute payment" within
the meaning of IRC Section 280G (or any corresponding provision of state, local
or foreign Tax law) and (ii) any amount that will not be fully deductible as a
result of IRC Section 162(m) (or any corresponding provision of state, local or
foreign Tax law). Sirius has not been a United States real property holding
corporation within the meaning of IRC Section 897(c)(2) during the applicable
period specified in IRC Section 897(c)(1)(A)(ii). Sirius has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of IRC
Section 6662. Sirius is not a party to or bound by any Tax allocation or sharing
agreement. Sirius (A) has not been a member of an
23
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Sirius) or (B) has no liability for the
Taxes of any Person (other than Sirius) under Reg. Section.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(f) Except as set forth on Schedule 3.12(a) with respect to the
returns that have not been filed as of the date hereof or that will be restated,
the unpaid Taxes of Sirius (i) did not, as of the Interim Balance Sheet, exceed
the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Interim Balance Sheet (rather than in any notes thereto) and
(ii) do not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Sirius in filing
their Tax Returns. Since the date of the Interim Balance Sheet, Sirius has not
incurred any liability for Taxes arising from extraordinary gains or losses, as
that term is used in GAAP, outside the ordinary course of business consistent
with past custom and practice.
(g) Sirius will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any:
(i) change in method of accounting for a taxable period ending
on or prior to the Closing Date;
(ii) "closing agreement" as described in IRC Section.7121 (or
any corresponding or similar provision of state, local or foreign income Tax
law) executed on or prior to the Closing Date;
(iii) installment sale or open transaction disposition made on
or prior to the Closing Date; or
(iv) prepaid amount received on or prior to the Closing Date.
(h) Sirius has not distributed stock of another Person, or has had
its stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by IRC Section.355 or IRC
Section.361.
3.13 EMPLOYEE BENEFITS.
(a) As used in this Section 3.13, the following terms have the
meanings set forth below:
"ERISA Affiliate" means, with respect to Sirius, any other Person
that, together with Sirius, would be treated as a single employer under IRC
Section. 414 or Section 4001 of ERISA.
"Multi-Employer Plan" has the meaning given in ERISA Section.
3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements,
policies, programs, contracts, agreements, or practices, whether or not legally
enforceable, which is or has
24
been maintained, contributed to, or required to be contributed to, by Sirius or
any ERISA Affiliate to provide benefits or remuneration of any kind, other than
salary, to Employees, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements, sabbatical
policies, severance payment policies which are not Plans, fringe benefits within
the meaning of IRC Section 132, performance awards, stock or stock related
awards.
"Pension Plan" has the meaning given in ERISA Section 3(2)(A) other
than a Multi-Employer Plan.
"Plan" has the meaning given in ERISA Section 3(3) whether written
or unwritten or otherwise, funded or unfunded, which is or has been maintained,
contributed to, or required to be contributed to, by Sirius or any ERISA
Affiliate for the benefit of any of their respective Employees.
"Qualified Plan" means any Pension Plan that meets or purports to
meet the requirements of IRC Section 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title
IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer Plans.
(b) Schedule 3.13(b) contains a complete and accurate list of all
Plans and Other Benefit Obligations. Neither Sirius nor any ERISA Affiliate has
any plan or commitment to establish any new Plan or Other Benefit Obligation, to
modify any Plan or Other Benefit Obligation (except to the extent required by
law or to conform any such Plan or Other Benefit Obligation to the requirements
of any applicable law, in each case as previously disclosed to DUSA in writing,
or as required by this Agreement), or to adopt or enter into any Plan. Sirius
has delivered or made available to DUSA a true and correct copy of the governing
plan document (or a description, in the case of any unwritten Plan) for each
Plan (including all amendments thereto), its summary plan description and the
three (3) most recent Form 5500s with all schedules and attachments (if
applicable), if the Plan is funded, the most recent annual and periodic
accounting of Plan assets, all correspondence to or from any governmental agency
relating to any Plan, the three (3) most recent plan years discrimination tests
for each Plan, and any trust agreement, insurance contract or other document
under which Plan assets are held and invested or benefits provided. Sirius has
further delivered or made available to DUSA a written description of each Other
Benefit Obligation, and a copy of any document furnished to participants which
summarizes or describes each Other Benefit Obligation. Sirius and its ERISA
Affiliates have performed in all respects all obligations required to be
performed by them under, are not in default or violation of, and have no
knowledge of any default or violation by any other party, to each Plan and Other
Benefit Obligation, and each Plan and other Benefit Obligation complies in form
and operation in all respects with the applicable requirements of ERISA, the IRC
and other applicable Legal Requirements. Any Plan intended to be qualified under
Section 401(a) of the IRC and each trust intended to qualify under Section
501(a) of the IRC incorporates or has been amended to incorporate all provisions
required to comply with the Tax Reform Act of 1986 and subsequent legislation
with respect to which the period for adopting complying amendments has expired.
Neither Sirius nor any ERISA Affiliate has at any time through the date hereof
sponsored, maintained, contributed to or been obligated to contribute to
25
any Title IV Plan or Multi-Employer Plan, or any "funded welfare plan" within
the meaning of Section 419 of the IRC. Neither Sirius or, to the Knowledge of
Sirius, any fiduciary with respect to any Plan has engaged in any nonexempt
prohibited transaction under ERISA Section 406 or Section 407, or incurred any
liability for breach of fiduciary duty or any other failure to comply with any
Legal Requirement in connection with the administration or investment of assets
of any Plan. No action, suit, proceeding, hearing, audit or investigation with
respect to the administration or investment of assets of any Plan (other than
routine claims for benefits) is pending or, to Sirius's Knowledge, threatened.
Except as otherwise disclosed on Schedule 3.13(b), Sirius does not provide
health or other welfare benefits for any Employee and is not obligated to
provide health or welfare benefits to any active Employee, following such
individual's retirement or other termination of service (other than "COBRA"
continuation coverage required under ERISA Sections 601 et seq. and IRC Section
4980B or similar state law). Neither Sirius nor its ERISA Affiliate has incurred
any liability for excise, income or other taxes or penalties with respect to a
Plan (other than employment and/or tax withholding that has been properly paid
or paid over to the applicable government agency), and no event has occurred and
no circumstances exists which could give rise to such liability. All persons
classified by Sirius or its ERISA Affiliates as independent contractors satisfy
and have at all times satisfied the requirements of applicable law to be so
classified. Sirius and its ERISA Affiliates have fully and accurately reported
their compensation on IRS Form 1099 when required to do so, and Sirius and its
ERISA Affiliates have no obligations to provide benefits with respect to such
persons under the Plans or otherwise. Neither Sirius nor its ERISA Affiliates
employ any "leased employees" as defined in Section 414(n) of the IRC. Except as
otherwise disclosed on Schedule 3.13(b), Sirius has not declared or paid any
bonus compensation in contemplation of the transaction contemplated by this
Agreement. No payments under any Plan or Other Benefit Obligation, as any such
Plan, program or arrangement may be amended prior to December 31, 2006, will
result in adverse tax treatment to Sirius or its successor, or any of its or
their employees, under IRC Section 409A.
(c) Effect of Transaction.
(i) Except as disclosed on Schedule 3.13(c), the execution of
this Agreement and the consummation of the transactions contemplated hereby will
not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Plan, Other Benefit Obligation, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any present or former
employee, director or consultant of Sirius or any ERISA Affiliate.
(ii) No payment or benefit which will or may be made by Sirius
or its ERISA Affiliates with respect to any Employee or any other "disqualified
individual" (as defined in IRC Section 280G and the regulations thereunder) will
be characterized as an "excess parachute payment," within the meaning of Section
280G of the IRC.
(d) Sirius is in compliance in all respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Employees. There are no pending, or, to
Sirius's Knowledge, threatened or reasonably anticipated claims or actions
against Sirius under any worker's compensation policy or long-term disability
policy.
26
There is no direct or indirect liability with respect to any misclassification
of any Person as an independent contractor rather than as an employee, or with
respect to any employee leased from another employer.
(e) There are no actions, suits, claims, labor disputes or
grievances pending, or, to Sirius's Knowledge, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Employee, which, if adversely determined, would, individually or in the
aggregate, result in any Material liability to Sirius. Sirius has not incurred
any liability or obligation under the Worker Adjustment and Retraining
Notification Act or any similar state or local law which remains unsatisfied.
(f) Since its incorporation, Sirius has not been a general partner
of any general partnership.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.14(a) or Schedule 3.19:
(i) Other than with respect to matters covered by Section
3.14(c)(i), Sirius is in compliance in all Material respects with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets, including, but not
limited to, the Products;
(ii) to Sirius's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
constitute or result in a Material violation by Sirius of, or a Material failure
on the part of Sirius to comply with, any Legal Requirement; and
(iii) Sirius has not received any written notice or other
communication from any Governmental Body regarding: (1) any actual or alleged
violation of, or failure to comply with, any Legal Requirement, or (2) any
actual or alleged, obligation on the part of Sirius to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature.
(b) Schedule 3.14(b) and Schedule 3.19, taken together, contain a
list that is complete and accurate in all Material respects of each Governmental
Authorization that is held by Sirius or that otherwise relates to the business
of, or to any of the assets owned or used by, Sirius, including, but not limited
to, the Products. Each Governmental Authorization listed in Schedule 3.14(b) or
Schedule 3.19 is valid and in full force and effect. Except as set forth in
Schedule 3.14(b) or Schedule 3.19:
(i) Sirius is in compliance in all Material respects with all
of the terms and requirements of each Governmental Authorization identified or
required to be identified in Schedule 3.14(b) or Schedule 3.19;
(ii) No event has occurred or to Sirius's Knowledge no
circumstance exists that may (with or without notice or lapse of time): (A)
constitute or result in a violation of or a Material failure to comply with any
term or requirement of any Governmental Authorization identified or required to
be identified in Schedule 3.14(b) or Schedule 3.19, or (B) result in the
27
revocation, withdrawal, suspension, cancellation, or termination of, any
Governmental Authorization identified or required to be identified in Schedule
3.14(b) or Schedule 3.19;
(iii) Sirius has not received any written notice or other
communication from any Governmental Body regarding: (1) any actual or alleged
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (2) any actual or threatened revocation,
withdrawal, suspension, cancellation, termination of any Governmental
Authorization; and
(iv) all applications required to have been filed for the
renewal of any Material Governmental Authorizations identified or required to be
identified in Schedule 3.14(b) or Schedule 3.19 have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
(c) Except as set forth in Schedule 3.14(c):
(i) as to each prescription and non-prescription Product of
Sirius for which a new or abbreviated new drug application has been or is
required to be approved by the FDA, which Product is described in Schedule
3.14(c), Sirius and all Persons undertaking activities covered by such an
application, or which would be covered by such an application if approved, are
in compliance in all Material respects with applicable provisions of the FDCA
and all terms and conditions of any approved application, and where any Product
is marketed without an approved application, it is marketed in such a manner
that does not give rise to an FDA enforcement action pursuant to current FDA
enforcement policies for products marketed without an approved application.
(ii) Sirius has not filed any biological product license
application pursuant to Section 351 of the Public Health Service Act, 42 U.S.C.
262, for any Product;
(iii) Sirius is in compliance in all Material respects with
all applicable registration and listing requirements set forth in 21 U.S.C. 360
and 21 C.F.R. Part 207;
(iv) Sirius does not conduct any manufacturing operations. All
manufacturing operations relating to the business of Sirius are conducted by
third parties (each a "Third Party Manufacturer"). To Sirius's Knowledge, all
operations conducted on Sirius's behalf by Third Party Manufacturers have been
and are being conducted in compliance with the good manufacturing practice
regulations set forth in 21 C.F.R. Parts 210 and 211. Sirius has not received
any notice that, and has no Knowledge that, any manufacturing operations
conducted on behalf of Sirius by Third Party Manufacturers have not been or are
not being conducted in compliance with the good manufacturing practice
regulations set forth in 21 C.F.R. Parts 210 and 211;
(v) Sirius has not nor, to Sirius's Knowledge, have any of its
officers, employees or agents acting on its behalf, made an untrue or fraudulent
statement to the FDA, failed to disclose a 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
28
the FDA to cause Sirius or DUSA subsequent to Closing, to withdraw any Product
from the marketplace or invoke its policy respecting "Fraud, Untrue Statements
of Material Facts, Bribery, and Illegal Gratuities" as set forth in 56 Fed. Reg.
46191 (September 10, 1991);
(vi) Sirius has delivered to DUSA copies of any and all
reports in its possession of inspectional observations, establishment inspection
reports, untitled letters, warning letters and any other documents received by
Sirius or, to Sirius's Knowledge any other Person with respect to the Products,
from the FDA that indicate or suggest lack of compliance, in any Material
respect, with the FDA regulatory requirements by any one of the above or any
Third Party Manufacturer;
(vii) Sirius has not received, nor to Sirius's Knowledge has
any Third Party Manufacturer 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, or commenced or threatened to initiate any
action to enjoin production at any Sirius Facility or any facility at which a
Third Party Manufacturer conducts manufacturing operations on behalf of Sirius;
(viii) as to each article of drug or consumer Product
manufactured and/or distributed by Sirius, which Products are described in
Schedule 3.14(c), to Sirius's Knowledge such article is not adulterated or
misbranded within the meaning of the FDCA, 21 U.S.C. 301 et seq. in any manner
that will give rise to any regulatory enforcement action pursuant to current FDA
enforcement policies;
(ix) as to each Product referred to in Schedule 3.14(c),
Sirius has included or caused to be included in the application for such
Product, where required, the certification described in 21 U.S.C. 335a(k)(l) and
the list described in 21 U.S.C. 335a(k)(2), and such certification and such list
was in each case true and accurate when made and remained true and accurate
thereafter;
(x) neither Sirius nor its officers, directors, or employees,
has been convicted of any crime or engaged in any conduct for which debarment is
mandated by 21 U.S.C. 335a(a) or authorized by 21 U.S.C. 335a(b); and
(xi) as to each new or abbreviated new drug application
submitted to but not approved by the FDA, and not withdrawn by Sirius or any
applicant acting on its behalf as of the date of this Agreement, Sirius has
complied in all Material respects with the applicable requirements of the FDCA,
including without limitation, 21 C.F.R. Parts 312 and 314 and have provided all
additional information and taken all additional action requested by the FDA in
connection with the application.
3.15 LEGAL PROCEEDINGS. Except as set forth in Schedule 3.15, no
Proceeding:
(a) has been commenced by or against Sirius or any of the assets
owned or used by Sirius; or
(b) is, to Sirius's Knowledge, threatened or pending by or against
Sirius or any of the Material assets, including, but not limited to, the
Products, owned or used by Sirius; or
29
(c) challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, the Transaction.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.16, since the most recent fiscal year end, there has not been any
Material Adverse Change involving the business or the assets of Sirius. Without
limiting the generality of the foregoing, since that date there has not been a
Material Adverse Change involving any:
(a) change in Sirius's authorized or issued capital stock (other
than pursuant to any exercise of stock options); grant of any stock option or
right to purchase shares of capital stock of Sirius other than Sirius Options
disclosed to DUSA; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by Sirius of any shares of any such capital stock;
(b) split, combination, or reclassification any shares of its
capital stock; or declaration or payment of any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(c) amendment to the Organizational Documents of Sirius;
(d) increase in the salaries, bonuses or other compensation to any
shareholder, director, officer, or employee of Sirius outside the ordinary
course of business or entry into any employment, severance, or similar Contract
with any director, officer, or employee of Sirius outside the ordinary course of
business;
(e) grant of any severance or termination pay (cash, equity or
otherwise) to any officer or employee except pursuant to written agreements
outstanding, or policies existing, on the date hereof and as previously
disclosed in writing to DUSA, or adopt any new severance plan, or amend or
modify or alter in any respect any severance plan, agreement or arrangement
existing on the date hereof (other than as may be required or necessary to
comply with or ensure non-applicability of Section 409A of the IRC), or grant
any equity-based compensation;
(f) adoption or amendment of any employee benefit plan, policy or
arrangement, or employee stock purchase or stock option plan (other than as may
be required or necessary to comply with or ensure non-applicability of Section
409A of the IRC), or execution of any employment contract outside the ordinary
course of business or collective bargaining agreement, payment of any special
bonus or special remuneration (cash, equity or otherwise) to any director or
employee, or increase in the salaries or wage rates or fringe benefits (cash,
equity or otherwise) (including rights to severance or indemnification) of its
directors, officers, employees or consultants outside the ordinary course of
business;
(g) waiver of any stock repurchase rights, acceleration, amendment
or change in or to the period of exercisability of options, restricted stock or
any other equity or similar incentive awards (including without limitation any
long term incentive awards), or repricing of options granted under any employee,
consultant, director or other stock plans (other than as may be required or
necessary to comply with or ensure non-applicability of Section 409A of the
IRC);
30
(h) damage to or destruction or loss of any asset or property of
Sirius, whether or not covered by insurance;
(i) sale, other than in the ordinary course of business, lease, or
other disposition of any asset or property of Sirius or mortgage, pledge, or
imposition of any lien or other encumbrance on any asset or property of Sirius;
(j) change in the accounting methods used by Sirius; or
(k) agreement, whether oral or written, by Sirius to do any of the
foregoing.
3.17 MATERIAL CONTRACTS; NO DEFAULTS.
(a) Schedule 3.17(a) contains a complete and accurate list, and
Sirius has delivered or by Closing will deliver to DUSA true and complete
copies, of the following Contracts (the "Material Contracts"):
(i) each employment, consulting, services, severance,
confidentiality, and non-compete agreement, contract or commitment;
(ii) each Contract that involves performance of services or
delivery of goods or materials by or to Sirius in an amount or value in excess
of $25,000 during any twelve-month period prior to and/or following the date
hereof;
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and/or conditional sales agreements having a value per item or
aggregate payments of less than $25,000);
(iv) each joint venture, partnership, and other similar
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by Sirius with any other Person;
(v) each Contract containing covenants that restrict the
business activity of Sirius or limit the freedom of Sirius to engage in any line
of business or to compete with any Person;
(vi) each power of attorney that is currently effective and
outstanding;
(vii) each Contract for capital expenditures in excess of
$25,000;
(viii) each agreement between Sirius and any of its
Third-Party Manufacturers;
(ix) each agreement between Sirius and any of its
distributors; and
31
(x) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 3.17(b):
(i) no Principal Shareholder has or may acquire any rights
under, and no Principal Shareholder has or may become subject to any obligation
or liability under, any Contract that relates in any Material respect to the
business of, or any of the assets owned or used by, Sirius; and
(ii) to Sirius's Knowledge, no officer, director, agent,
employee, consultant, or contractor of Sirius is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to: (1) engage in or continue any conduct, activity,
or practice relating to the business of Sirius or DUSA; or (2) assign to Sirius
or to any other Person any of Sirius' Intellectual Property Rights.
(c) Except as set forth in Schedule 3.17(c), each Material Contract
identified or required to be identified in Schedule 3.17(a) is in full force and
effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in Schedule 3.17(d):
(i) Sirius is in compliance in all Material respects with all
applicable terms and requirements of each Material Contract;
(ii) to Sirius's Knowledge, each other Person that has any
obligation or liability under any Material Contract is in compliance in all
Material respects with all applicable terms and requirements of such Material
Contract;
(iii) to Sirius's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give Sirius
or other Person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Material Contract; and
(iv) Sirius has not given to or received from any other
Person, at any time, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Material Contract.
3.18 INSURANCE.
(a) Sirius has delivered to DUSA:
(i) true and complete copies of all policies of insurance to
which Sirius is a party or under which Sirius, or any officer or director of
Sirius, is or has been covered at any time within the two (2) years preceding
the date of this Agreement;
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(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) true and complete copies of all documentation pertaining
to any claim(s) made by Sirius pursuant to all policies of insurance with
respect to the two (2) year time period preceding the date of this Agreement.
(b) Schedule 3.18(b) describes:
(i) any self-insurance arrangement by or affecting Sirius,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by Sirius; and
(iii) all obligations of Sirius to third parties with respect
to insurance (including such obligations under leases and service agreements)
and identifies the policy under which such coverage is provided.
(c) Except as set forth on Schedule 3.18(c):
(i) Sirius has not received: (1) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or (2)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder;
(ii) Sirius has paid all premiums due (or has accrued for such
on its financial statements), and has otherwise performed all of its
obligations, under each policy to which Sirius is a party or that provides
coverage to Sirius or any director thereof;
(iii) Sirius has notified its insurance carriers of any and
all claims or potential claims known to Sirius with regard to any event or
omission which could give rise to coverage under any insurance policy now in
effect.
(d) Sirius shall purchase at Sirius's expense an extended reporting
endorsement, or a "tail," for each claims-made insurance policy now in effect
and identified on Schedule 3.18(d) to provide continued coverage for any event
or omission which may have occurred during the policy period which could give
rise to coverage under such policy. Sirius shall name DUSA as an additional
insured with respect to each such extended reporting endorsement.
(e) Sirius has no Knowledge of or has not received any notice,
correspondence or other documentation indicating that any formulary has dropped
coverage for any Product or that any insurance provider will no longer provide
reimbursement in connection with the purchase of any Product currently being
reimbursed.
33
3.19 ENVIRONMENTAL MATTERS.
(a) As used in this Section 3.19, the following terms have the
meanings set forth below:
"Environmental Claim" means any written complaint, notice, claim,
demand, action, suit or judicial, administrative or arbitral proceeding by any
Person to Sirius asserting liability or potential liability (including without
limitation, liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on or
resulting from: (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any Sirius Facilities, (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental
Laws or Environmental Permits, or (iii) otherwise relating to obligations or
liabilities under any Environmental Law.
"Environmental Laws" means all applicable foreign, federal, state
and local statutes, rules, regulations, ordinances, orders and decrees relating
in any manner to pollution or protection of the environment, to the extent and
in the form that such exist at the date hereof.
"Environmental Permits" means all permits, licenses, registrations,
exemptions and other governmental authorizations required under Environmental
Laws for Sirius to conduct its operations as presently conducted.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated byphenyls, urea formaldehyde,
pollutants, contaminants and all other materials and substances, including but
not limited to radiologically contaminated materials and infectious materials
defined or regulated pursuant to any Environmental Laws or that could result in
liability under any Environmental Laws.
"Off-Site Facilities" shall mean any facilities used for the
treatment, storage or disposal of any Hazardous Materials associated with or
resulting from either Sirius business or generated at any Sirius Facilities.
"Release" shall mean any intentional or unintentional release,
discharge, spill, leaking, leaching, pumping, pouring, emitting, emptying,
injection, disposal or dumping.
(b) Set forth in attached Schedule 3.19(b) are all of the Sirius
Facilities and Off-Site Facilities known to Sirius. Except as set forth in
Schedule 3.19(b):
(i) Sirius is and at all times has been in Material compliance
with all applicable Environmental Laws, if any, and, to Sirius's Knowledge,
there is no condition that is reasonably likely to prevent or Materially
interfere with compliance by Sirius with Environmental Laws;
(ii) Sirius possesses all Environmental Permits, if any,
applicable to Sirius. Each Environmental Permit issued to Sirius is in full
force and effect. Sirius is in Material compliance with all requirements, terms
and provisions of the Environmental Permits
34
issued to it and has filed on a timely basis (and updated as required) all
reports, notices, applications or other documents required to be filed pursuant
to the Environmental Permits. Sirius has submitted to DUSA true and complete
copies of all of the Environmental Permits issued to or held by Sirius which by
their terms or by operation of law will expire or otherwise become ineffective
on or before the Closing Date. Sirius shall take all necessary actions to have
such Environmental Permits renewed or reissued to them prior to the Closing
Date. As for those Environmental Permits which by their terms or by operation of
law will not expire or otherwise become ineffective on or before the Closing
Date, no modification, revocation, reissuance, alteration, transfer or amendment
of such Environmental Permit, or any review by, or approval of, any Third Party
of any Environmental Permit is required in connection with the execution or
delivery of this Agreement or the consummation by Sirius of the transactions
contemplated hereby or the operation of the business of Sirius on the date of
the Closing;
(iii) Sirius has neither received any Environmental Claim,
nor, to the Knowledge of Sirius, has any Environmental Claim been threatened
against Sirius;
(iv) Sirius has not entered into, agreed to or is subject to
any outstanding judgment, decree, order or consent arrangement with any
Governmental Body under any Environmental Laws, including without limitation
those relating to compliance with any Environmental Laws or to the
investigation, response, removal or remediation of Hazardous Materials;
(v) Sirius is not and has never been a small or large quantity
generator of Hazardous Materials under any Environmental Law.
(vi) To Sirius's Knowledge, no Hazardous Materials have been
Released on any Sirius Facility, requiring government notification,
investigation, response, removal or remedial activity under any Environmental
Law or otherwise in violation of any Environmental Law.
(vii) No Federal, state, local, or municipal governmental
agency or authority has obtained or asserted an encumbrance or lien upon any
Sirius Facility as a result of any Release, use or cleanup of any Hazardous
Material for which either Sirius is legally responsible, nor has any such
Release, use or remediation occurred which could result in the assertion or
creation of such a lien or encumbrance.
(viii) (A) There is not now nor has there ever been located at
any Sirius Facility any areas or vessels used or intended for the treatment,
storage or disposal of Hazardous Materials, including, but not limited to, drum
storage areas, surface impoundments, incinerators, landfills, tanks, lagoons,
ponds, waste piles or deep well injunction systems.
(B) Sirius has not transported any Hazardous Materials
for storage, treatment or disposal, or arranged for the transportation, storage,
treatment or disposal of any Hazardous Materials by contract, agreement or
otherwise, at or to any location including, without limitation, any Off-Site
Facilities.
(ix) Sirius has delivered to DUSA (or before Closing will
deliver) all reports, records, tests, evaluations, governmental agency and Third
Party correspondence, and
35
other documents in Sirius's possession and relating to Sirius's use, storage,
treatment, transport and disposal of Hazardous Materials or the presence of any
Hazardous Material at any Sirius Facility.
3.20 BROKERS OR FINDERS. Sirius has incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
3.21 ACCOUNTS RECEIVABLE. All Accounts Receivable of Sirius listed on
Schedule 3.21, are reflected properly on its books and records, are valid
receivables and are collectible in accordance with their terms at their recorded
amounts, subject only to the reserve for bad debts set forth in the Interim
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
Sirius.
3.22 INVENTORY. All Inventory, taken as a whole, is useable and saleable,
except for obsolete items of below-standard quality, all of which have been or
will be prior to Closing written off or written down to estimated net realizable
value (or reserves have been established for such Inventory) in the books and
records of Sirius. The Inventory is free from Material defects in materials
and/or workmanship. The Inventory is not excessive in kind or amount, or slow
moving, in light of Sirius's business. All Inventory reflected in the financial
statements is valued at the lower of cost or market with cost determined by the
first in first out accounting method. Since the most recent fiscal year end,
there has not been a Material increase in the level of Inventory outside the
ordinary course of business.
3.23 WARRANTIES. Except as set forth on Schedule 3.23, Sirius has not made
any oral or written warranties to its customers with respect to the quality or
absence of defects of its Products which are in force as of the date hereof or
with respect to which claims are outstanding as of the date hereof. There are no
Material claims pending, anticipated or, to Sirius's Knowledge, threatened
against Sirius with respect to the quality of, or existence of defects in, such
Products and, to the Knowledge of Sirius, there is no legitimate basis for any
such claim. Sirius has made available to DUSA information in its possession
which is accurate in all Material respects, regarding all Material returns of
defective or expired Products (other than Products damaged in transit) during
the period beginning February 9, 2000 and ending on the date hereof, and all
credits and allowances for such defective or expired Products given or promised
to customers during said period, and such information in each case accurately
describes the cause which resulted in the return, allowance or credit. Sirius
has not paid or been required to pay any direct, incidental or consequential
damages to any Person in connection with any of such Products.
3.24 PRODUCT LIABILITY. Except as set forth in Schedule 3.24, Sirius has
filed with its insurance carrier all notices of claims or potential claims with
respect to any Product manufactured, licensed, produced, distributed or sold by
or on behalf of Sirius. Except as provided in Schedule 3.24, Sirius has not
received any notice or claim involving any Product manufactured, licensed,
produced, distributed or sold by or on behalf of Sirius 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;
nor, to the Knowledge of Sirius, is
36
there any basis for any such notice or claim. Products sold by Sirius since
February 9, 2000 (i) have been sold and marketed in compliance in all Material
respects with all Applicable Laws and (ii) have been fit for the purposes for
which they were intended to be used and conformed in all Material respects to
any promises or affirmations of fact made by Sirius, or with the authorization
or consent of Sirius, (x) on the containers or labels therefor or (y) in
connection with their sale. Sirius has not received any statement, citation or
decision by any Governmental Body that any Product is defective or fails to meet
any standards promulgated by such Governmental Body. There have been no recalls
ordered by any Governmental Body with respect to any Product. To Sirius's
Knowledge, there is no (i) fact relating to any Product that may impose upon
Sirius a duty to recall the same or to warn customers of a defect therein, or
(ii) latent or overt design, manufacturing or other defect in any Product.
Schedule 3.24 sets forth all of the express product warranty, repair and
replacement policies and obligations, of Sirius relating to the Products
manufactured or sold since February 9, 2000. To Sirius's Knowledge, there is no
(i) fact relating to any Product that may impose upon Sirius any duty to recall
such Product or duty to warn customers of any defect in such Product, or (ii)
latent or overt defect in any Product sold by Sirius. All Products sold by
Sirius contained adequate warnings presented in accordance with then Applicable
Laws.
3.25 CUSTOMERS AND SUPPLIERS. All Material customers and suppliers of
Sirius are set forth on Schedule 3.25. Except as set forth on Schedule 3.25,
Sirius has not received any indication from any Material supplier and has no
knowledge or reason to believe that any Material supplier will stop, or
Materially decrease the rate of supplying materials, products or services to
Sirius. Sirius has not received any indication from any Material customer to the
effect that, and to the Knowledge of Sirius that, there is no reason to believe
that such customer will stop, or Materially decrease the rate of, buying
materials, products or services from Sirius.
3.26 PRODUCT TREATMENTS; PRODUCT RETURNS. Except as set forth on Schedule
3.26, Sirius has not offered any promotional allowance to any customer nor has
Sirius or its agents provided any customer-specific packaging or value added
services (other than displays) with respect to the Products of Sirius outside
the ordinary course of business. Sirius has processed all Product returns or
requests for returns of Product of which Sirius is aware. No customer of Sirius
has refused to accept further shipments of Products of Sirius. Sirius does not
have outstanding any authorization to any of its customers to destroy any
Product in lieu of returning such Product to it.
3.27 COMPLETE COPIES OF MATERIALS. Sirius has delivered true and complete
copies of each document (or detailed summaries of same) in its possession or
under its control that has been requested by DUSA or its counsel, including all
Contracts and other documents listed on the schedules attached to this
Agreement.
3.28 DISCLOSURES. Sirius has received all information and materials
requested by the board of directors of Sirius relating to the business, finances
and operations of DUSA and materials relating to the offer and sale of the DUSA
Shares.
3.29 PRINCIPAL SHAREHOLDERS. As of the date of this Agreement, the
Principal Shareholders hold greater than eighty-eight percent (88%) of the
issued and outstanding Sirius Shares.
37
3.30 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Sirius (as modified by the schedules attached to this Agreement) in this
Agreement, and none of the statements made in any exhibit, schedule or
certificate furnished by Sirius pursuant to this Agreement contains any untrue
statement of a Material fact or omits to state any Material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SHAREHOLDERS
The Principal Shareholders represent and warrant to DUSA as follows:
4.1 LEGAL CAPACITY, ORGANIZATION AND GOOD STANDING. Principal Shareholder
that is a natural Person has the legal capacity and all requisite power and
authority to enter into this Agreement and to comply with the provisions hereof.
Each Principal Shareholder that is not a natural Person, including any
corporation, limited partnership, limited liability company, trust or other
entity, is duly organized, validly existing and in good standing under the laws
of the jurisdiction of such entity's incorporation or formation and has all
requisite power and authority to enter into this Agreement and to comply with
the provisions hereof.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of such Principal Shareholder, enforceable against such Principal
Shareholder in accordance with its terms. Each Principal Shareholder has the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the other documents to be executed in connection
herewith and to perform its obligations under this Agreement and the documents
to be executed in connection herewith.
(b) Except as set forth in Schedule 4.2(b), neither the execution
and delivery of this Agreement by any Principal Shareholder nor the consummation
or performance of the Transaction by a Principal Shareholder will give any
Person the right to prevent, delay, or otherwise Materially interfere with any
of the transactions contemplated by this Agreement pursuant to:
(i) any provision of any Principal Shareholder's
Organizational Documents, if applicable;
(ii) any resolution or consent adopted by the board of
directors or shareholders of any Principal Shareholder, if applicable;
(iii) any Legal Requirement to which a Principal Shareholder
may be subject; or
(iv) any Material Contract to which a Principal Shareholder is
a party or by which a Principal Shareholder may be bound.
38
(c) Except as set forth in Schedule 4.2(c), each Principal
Shareholder is not, and will not be, required to give any notice to or obtain
any Consent from any Person in connection with the execution, delivery or
performance of this Agreement.
4.3 OWNERSHIP OF SHARES. Each Principal Shareholder is and will be on the
Closing Date the record and beneficial owner and holder of the Sirius Shares set
forth opposite his/her/its name in Schedule 3.3(a) as shall be confirmed as of
the Closing Date, and amended as required to accurately reflect any and all
exercises of Sirius Options between the date hereof and the Closing Date.
4.4 NO PUBLIC SALE OR DISTRIBUTION. Each Principal Shareholder is
acquiring the DUSA Shares in the ordinary course of business for its own account
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under
the Securities Act, and such Principal Shareholder does not have a present
arrangement to effect any distribution of the DUSA Shares to or through any
person or entity; provided, however, that by making the representations herein,
such Principal Shareholder does not agree to hold any of the DUSA Shares for any
minimum or other specific term (unless such Principal Shareholder is subject to
the lock up of his/her/its DUSA Shares under Section 2.6 above) and reserves the
right to dispose of the DUSA Shares at any time in accordance with or pursuant
to the Registration Rights Agreement.
4.5 RELIANCE ON EXEMPTIONS. Each Principal Shareholder understands that
the DUSA Shares are being offered and sold in reliance on specific exemptions
from the registration requirements of federal and state securities laws and that
DUSA is relying upon the truth and accuracy of, and such Principal Shareholder's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Principal Shareholder set forth herein in order to
determine the availability of such exemptions and the eligibility of DUSA to
acquire the DUSA Shares.
4.6 INFORMATION. Each Principal Shareholder and his/her/its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of DUSA and materials relating to the offer and sale of the DUSA
Shares which have been requested by such Principal Shareholder including, but
not limited to: (i) the DUSA SEC Documents; (ii) DUSA's Annual Report to
Shareholders, which includes DUSA's Annual Report on Form 10-K and audited
financial statements for the year ended December 31, 2004, and (iii) DUSA's
definitive proxy statement, delivered in connection with DUSA's 2005 Annual
Meeting of Shareholders. Such Principal Shareholder and his/her/its advisors, if
any, have been afforded the opportunity to ask questions of DUSA. Neither such
inquiries nor any other due diligence investigations conducted by such Principal
Shareholder or his/her/its advisors, if any, or his/her/its representatives
shall modify, amend or affect such Principal Shareholder's right to rely on
DUSA's representations and warranties contained herein. Such Principal
Shareholder understands that his/her/its investment in the DUSA Shares involves
a high degree of risk including, without limitation, the risks set forth in the
SEC Documents under the captions "Risk Factors," "Factors Affecting Future
Operating Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and is able to afford a complete loss of
such investment. Such Principal Shareholder has sought such accounting, legal
and tax advice
39
as he/she/it has considered necessary to make an informed investment decision
with respect to the acquisition of the DUSA Shares.
4.7 NO GOVERNMENTAL REVIEW. Such Principal Shareholder understands that no
Governmental Body has passed on or made any recommendation or endorsement of the
DUSA Shares or the fairness or suitability of the investment in the DUSA Shares
nor have such authorities passed upon or endorsed the merits of the offering of
the DUSA Shares.
4.8 TRANSFER OR RESALE. Such Principal Shareholder understands that except
as provided in the Registration Rights Agreement: (i) the DUSA Shares have not
been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Principal Shareholder
shall have delivered to DUSA an opinion of counsel, in a form reasonably
acceptable to DUSA, to the effect that such DUSA Shares to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration; (ii) any sale of the DUSA Shares made in reliance on Rule 144
or Rule 144A promulgated under the Securities Act (collectively, "Rule 144") may
be made only in accordance with the terms of Rule 144 and further, if Rule 144
is not applicable, any resale of the DUSA Shares under circumstances in which
DUSA may be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither DUSA nor any other Person is under any obligation to register the DUSA
Shares under the Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder (except as provided in the
Registration Rights Agreement).
4.9 LEGENDS. Each Principal Shareholder understands that the certificates
or other instruments representing the DUSA Shares, until such time as the resale
of the DUSA Shares have been registered under the Securities Act as contemplated
by the Registration Rights Agreement or such legend is not otherwise required
pursuant to applicable law, shall bear any legend as required by the "Blue Sky"
laws of any state and a restrictive legend in substantially the following form
(and a stop transfer order may be placed against transfer of such stock
certificates):
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
40
4.10 BROKERS OR FINDERS. No Principal Shareholder has incurred any
obligation or liability, contingent or otherwise, for brokerage, finders' fees,
agents' commissions or other similar payment(s) in connection with this
Agreement.
4.11 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by the Principal Shareholders in this Agreement, and none of the statements
made in any exhibit, schedule or certificate furnished by the Principal
Shareholders pursuant to this Agreement, contain any untrue statement of a
Material fact or omits to state any Material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DUSA
DUSA represents and warrants to Sirius and the Principal Shareholders as
follows:
5.1 ORGANIZATION AND GOOD STANDING. DUSA is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New
Jersey, with full corporate power and authority to conduct its business as it is
now being conducted. DUSA is duly qualified and authorized to transact business
as a foreign corporation and is in good standing under the laws of each
jurisdiction where such qualification is required or where failure to be so
qualified would not have a Material Adverse Effect on DUSA.
5.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of DUSA, enforceable against DUSA in accordance with its terms. DUSA
has all corporate right, power and authority to execute and deliver this
Agreement and the other documents to be executed in connection herewith and to
perform its obligations under this Agreement and the documents to be executed in
connection herewith.
(b) Neither the execution and delivery of this Agreement by DUSA,
nor the consummation or performance of the Transaction by DUSA or DUSA Sub, when
formed, will give any Person the right to prevent, delay, or otherwise
Materially interfere with the Transaction pursuant to:
(i) any provision of any applicable Organizational Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of DUSA or DUSA Sub when formed; or
(iii) any Material Contract to which DUSA is or DUSA Sub when
formed will be a party or by which DUSA may be bound.
Neither DUSA nor DUSA Sub, when formed, are required to obtain any Consent
from any Person, except for consents from their respective Boards of Directors,
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the transactions contemplated in this
Agreement.
41
(c) Except as contemplated by this Agreement or in the attachments
hereto, neither DUSA not DUSA Sub, when formed, is not a party to any other
agreement or understanding with any of the Sirius Shareholders, Sirius or any of
Sirius's employees.
5.3 INVESTMENT INTENT. DUSA is acquiring the Sirius Shares for its own
account and not with a view to their distribution within the meaning of Section
2(a)(11) of the Securities Act.
5.4 CERTAIN PROCEEDINGS. No Proceeding or action by any of DUSA's
shareholders has been commenced against DUSA or DUSA Sub, when formed, that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with the performance of this Agreement or the transactions
contemplated herein. To DUSA's Knowledge, no such Proceeding or shareholder
action has been threatened.
5.5 BROKERS OR FINDERS. None of DUSA or DUSA Sub, when formed, nor any of
their respective officers and agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
5.6 DUSA SUB. As of the Closing, DUSA Sub shall be a duly organized and
validly existing corporation in good standing under the laws of the State of New
Jersey with corporate power to own its property, carry on its business as being
conducted as of the Closing, and consummate the transaction. Prior to Closing,
DUSA Sub will have engaged only in the transactions contemplated under this
Agreement, will have no Material liabilities, and will have incurred no
obligations except in connection with its performance of the transactions
provided for in this Agreement.
5.7 NO UNDISCLOSED LIABILITIES. Except as set forth in Exhibit F, the DUSA
SEC Documents and/or as reflected in DUSA's most recent financial statements set
forth therein, DUSA has no Material liabilities or obligations of any nature
arising outside of the ordinary course of business (whether absolute, accrued,
contingent, or otherwise).
5.8 REPRESENTATIONS COMPLETE. None of the statements made in any exhibit,
schedule or certificate furnished by DUSA pursuant to this Agreement contains
any untrue statement of a Material fact or omits to state any Material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
5.9 COMPLIANCE WITH LEGAL REQUIREMENTS. DUSA is in Material compliance
with each applicable requirement of the SEC, National Association of Securities
Dealers, the Ontario Securities Commission and applicable state securities
commissions. DUSA has not received any written notice or other communication
from any Governmental Body regarding: (a) any actual or alleged Material
violation of or Material failure to comply with any term or requirement of any
Governmental Authorization where such violation or failure would cause a
Material Adverse Change, or (b) any actual or threatened revocation, withdrawal,
suspension, cancellation, termination of any Governmental Authorization.
5.10 SEC COMPLIANCE. Except as otherwise treated or requested to be
treated as confidential pursuant to a confidential treatment application
submitted to the SEC, DUSA has
42
made available to Sirius and the Sirius Shareholders (by public filing with the
SEC or otherwise) a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by DUSA, with the
SEC since January 1, 2004 (the "DUSA SEC Documents"), which are all of the
documents required to have been filed by DUSA with the SEC since that date. As
of their respective dates, the DUSA SEC Documents complied in all Material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and all rules and regulations of the SEC promulgated thereunder
applicable to such DUSA SEC Documents and none of the DUSA SEC Documents
contained any untrue statement of a Material fact or omitted to state a Material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, except
to the extent such statements have been modified or superseded by later DUSA SEC
Documents filed and publicly available prior to the date of this Agreement. DUSA
has no outstanding and unresolved comments from the SEC with respect to the DUSA
SEC Documents. The consolidated financial statements of DUSA included in the
DUSA SEC Documents complied as to form in all Material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, and have been prepared in accordance with
generally accepted accounting principals applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
under the Exchange Act) and fairly present, in accordance with the applicable
requirements of generally accepted accounting principles and the applicable
rules and regulations of the SEC (subject, in the case of unaudited statements,
to normal, recurring adjustments, none of which are Material), the consolidated
financial position of DUSA, as of their respective dates and the consolidated
statements of income and the consolidated cash flows of DUSA for the periods
presented therein.
5.11 NO CONTEMPLATED SALE OF DUSA. Except as contemplated by this
Agreement, no transaction or series of transactions, including, without
limitation, a merger, consolidation, share exchange, reorganization or
recapitalization, is under consideration by the management or Board of Directors
of DUSA, which transaction is likely to result in a change in the ownership of
fifty percent (50%) or more of the outstanding capital stock of DUSA.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 APPROVALS OF GOVERNMENTAL BODIES. Subject to the receipt of the
Investor Questionnaires, DUSA will make all filings required by the SEC,
National Association of Securities Dealers, the Ontario Securities Commission
and applicable state securities commissions necessary to consummate the
transactions contemplated by this Agreement as promptly as practicable after the
date of this Agreement. Between the date of this Agreement and the Closing Date,
DUSA will cooperate with Sirius and the Sirius Shareholders with respect to all
filings that are required by Legal Requirements to be made in connection with
the transactions contemplated herein. DUSA will cooperate with Sirius and the
Sirius Shareholders and Sirius will exercise Commercially Reasonable Efforts to
obtain all consents identified in Schedule 3.2(c) and Schedule 4.2(c).
43
6.2 TAX MATTERS. Sirius will file all Tax Returns related to periods
ending on or prior to Closing consistent with past practice. DUSA will, or will
cause Sirius to, file Sirius's Tax Returns for tax periods ending after the
Closing Date.
6.3 EXPENSES.
(a) Subject to provisions set forth herein, whether or not the
transactions contemplated hereby are consummated, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby,
including all investment banking, legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties incurred by a Party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby ("Expenses"), shall
be the obligation of the respective party incurring such fees and expenses;
except as otherwise expressly provided herein, and provided that:
(i) So long as the Closing occurs, DUSA shall bear full
responsibility for (A) all costs and expenses of Sirius's accountants incurred
in connection with the auditing of Sirius for the three prior fiscal years and
the transactions contemplated hereby, and (B) the costs and expenses of the
Representation and Warranties Insurance; and
(ii) the Sirius Shareholders shall bear full responsibility
for (A) the costs of maintaining the insurance policy described in Section 10.2
from the Closing Date until the date that is three (3) years after the Closing
Date, as further provided in Section 10.2, (B) the legal fees and expenses of
Sirius incurred in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, the preparation of a
Registration Statement on Form S-4 as provided in Section 6.8; provided,
however, DUSA shall bear the first Twenty-five Thousand Dollars ($25,000) of the
cost of such legal fees and expenses incurred by Sirius in connection with the
preparation of a Registration Statement on Form S-4, (C) any payments due to
Elorac as a result of a change of control of Sirius under the Elorac Agreement,
(D) any severance payments to employees of Sirius provided for in any written
agreement in existence prior to the Closing, unless such employee is hired as an
employee or retained as a consultant of DUSA, DUSA Sub, Sirius or any Affiliate
thereof following the Closing, and (E) any of the PrivateBank and Trust Company
Obligations in excess of the Sirius Debt Obligations (collectively, the "Sirius
Transaction Expenses").
(b) At least five (5) Business Days prior to the Closing Date,
Sirius shall provide DUSA with a statement of the Expenses described in clauses
6.3(a)(i) and (ii) above and all other Expenses of Sirius to be incurred prior
to the Closing, such statement showing detail of both the previously paid and
currently unpaid Expenses of Sirius incurred in connection with this Agreement
and the transactions contemplated hereby, as well as the Expenses that have been
incurred or are expected to be incurred by Sirius in connection with this
Agreement and the transactions contemplated hereby, all in form reasonably
satisfactory to DUSA and certified as true and correct in all Material respects
by Sirius's President. Sirius's Expenses, other than the Sirius Transaction
Expenses, shall constitute Sirius Debt Obligations and be assumed by DUSA.
44
6.4 SIRIUS SHAREHOLDERS' REPRESENTATIVES.
Pursuant to the Subscription Agreement the Sirius Shareholders shall have
constituted and appointed Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx, either acting
alone or together, to serve as their representative (collectively, "Shareholder
Representatives") for and on behalf of all of the Sirius Shareholders, to give
and receive notices and communications, waive Closing conditions, accept
delivery of Closing documents, agree to negotiate, enter into settlements and
compromises of, and comply with orders of courts with respect to such claims, to
take all other actions on behalf of the Sirius Shareholders as is explicitly
contemplated by this Agreement, the Liability Escrow Agreement, the Expense
Escrow Agreement, the Shareholders Escrow Agreement and/or the Registration
Rights Agreement and to take all actions necessary or appropriate in the
judgment of the Shareholder Representatives for the accomplishment of the
foregoing. No bond shall be required of the Shareholder Representatives, and the
Shareholder Representatives shall receive no compensation for their services
from the Expense Escrow Amount. Notices or communications to or from the
Shareholders' Representatives shall constitute notice to or from each Sirius
Shareholder.
6.5 SIRIUS INFORMATION STATEMENT. Subsequent to the execution of this
Agreement, Sirius shall prepare an information or proxy statement (the
"Information Statement") for the purpose of calling a special meeting of the
Sirius Shareholders to obtain approval of this Agreement and the Transaction.
The Parties shall reasonably cooperate with each other in the preparation of the
Information Statement. DUSA shall provide all information reasonably requested
by Sirius in connection with the preparation of the Information Statement, and
agrees that the information provided by it for inclusion in such Information
Statement and each amendment thereto, at the time of the delivery thereof to the
Sirius Shareholders and at the time of the Sirius Shareholders' meeting, will
not include an untrue statement of a Material fact or omit to state a Material
fact required to be stated or necessary to make the statements therein, in light
of the circumstances under which they are made, not misleading. Sirius shall
provide DUSA with a reasonable opportunity to review and comment upon the
Information Statement prior to the distribution thereof to the Sirius
Shareholders. Sirius shall reasonably consider all comments made by DUSA with
respect to the Information Statement and revise the Information Statement as
Sirius may determine to be necessary or appropriate.
6.6 SIRIUS SHAREHOLDER MEETING. As promptly as practicable after
distribution of the Information Statement, but in any event prior to the Closing
Date, Sirius shall duly call, give notice of, convene and hold a special meeting
of the Sirius Shareholders for the purpose of approving the Transaction and
amending the option plans.
6.7 INVESTOR QUESTIONNAIRES. Sirius shall use all efforts reasonably
necessary to timely receive the highest possible return of completed investor
questionnaires from each Sirius Shareholder in connection with the issuance of
the DUSA Shares required to be issued to such Participating Shareholders as
Consideration hereunder (collectively, the "Investor Questionnaires"),
indicating whether each such Participating Shareholder meets the status of an
"accredited investor," as that term is defined pursuant to the Securities Act.
Each Principal Shareholder agrees to provide to DUSA a completed Investor
Questionnaire.
45
6.8 UNACCREDITED INVESTORS. The parties understand and acknowledge that
pursuant to Regulation D of the Securities Act, there can be no more than
thirty-five (35) unaccredited Participating Shareholders taking part in the
Transaction if the DUSA Shares to be issued as Consideration hereunder are to be
issued in a Regulation D private placement. As such, promptly upon the receipt
of the Investor Questionnaires, DUSA shall determine in its reasonable, good
faith business judgment, based upon the information provided in the Investor
Questionnaires or otherwise available to DUSA, whether to proceed with a
Regulation D offering in connection with the Transaction. If DUSA determines not
to proceed with such a Regulation D offering, then DUSA shall promptly notify
Sirius thereof and, at its sole option and expense, except with respect to
Sirius' legal fees as provided for in Section 6.3(a)(ii), promptly prepare or
cause to be prepared and submitted to the SEC a registration statement on Form
S-4, in conformity with all applicable Legal Requirements, for the purpose of
registering the DUSA Shares to be issued as Consideration hereunder (the "Form
S-4"). Should DUSA decide to register the DUSA Shares on Form S-4, Sirius and
the Sirius Shareholders (or the Shareholders Representatives) shall cooperate
with DUSA in its preparation and filing of such Form S-4. DUSA shall use its
Commercially Reasonable Efforts to cause such Form S-4 to become effective as
soon as practicable thereafter, provided, however, that the limitation with
respect to Material expenditures shall not apply. For purposes of determining
the investor status of each Participating Shareholder, the Parties expressly
acknowledge and agree that any Sirius Shareholder that does not provide adequate
information in a timely fashion in his/her/its Investor Questionnaire or in a
follow-up response to Sirius subsequent to returning such Investor
Questionnaire, shall be deemed by DUSA to be unaccredited for purposes of this
Agreement.
6.9 TRANSITION. Sirius and those Principal Shareholders who are also
officers of Sirius shall cooperate from the date hereof and for a reasonable
period of time following the Closing, to plan and effect the transition of
Sirius' business to DUSA Sub and shall reasonably consult with DUSA and/or DUSA
Sub in connection therewith.
6.10 DUE DILIGENCE. Sirius shall permit DUSA to continue its due diligence
with respect to the matters contemplated herein through and until the Closing.
DUSA shall have to its satisfaction completed its due diligence review in
connection with the Transaction and all matters related thereto and shall have
concluded that no documentation or other information discovered during such due
diligence review affects DUSA's understanding of the business of Sirius, DUSA's
ability to conduct the business of Sirius, or the structure or effect of the
Transaction by or on DUSA as of the date of this Agreement.
6.11 MICANOL LICENSE AGREEMENT. At or prior to Closing, the 2006 Micanol
License Agreement, substantially in the form attached hereto as Exhibit G, shall
be executed.
ARTICLE VII
CONDITIONS PRECEDENT TO DUSA'S OBLIGATION TO CLOSE
DUSA's obligation to proceed with the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by DUSA, in whole or in part):
46
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties of Sirius and the Sirius Shareholders, respectively, contained in
this Agreement shall be true and correct when made and as of the Closing, with
the same force and effect as if made as of the Closing (except where the failure
of a representation or warranty to be so true and correct would not reasonably
be likely to have a Material Adverse Effect). DUSA shall have received
certificates in accordance with Section 2.4 signed on behalf of Sirius by each
of Sirius's chief executive officer and chief financial officer with respect to
the foregoing.
7.2 COVENANTS. Each of the covenants contained in this Agreement to be
complied with by Sirius and the Shareholders on or before the Closing shall have
been complied with (except where the failure to do so would not reasonably be
likely to have a Material Adverse Effect).
7.3 BOARD AND SHAREHOLDER APPROVAL. The Sirius Board of Directors and
Sirius Shareholders, as necessary, shall have approved the Transaction and the
terms and conditions of this Agreement.
7.4 CLOSING DELIVERABLES. Sirius and the Shareholders, as appropriate,
shall have delivered the required Closing Deliverables to DUSA.
7.5 CONSENTS. Except as may be otherwise agreed to by Sirius and DUSA,
each of the Consents identified in Schedule 3.2(c) and Schedule 4.2(c) must have
been obtained and a copy of each such Consent identified in Schedule 3.2(c) and
Schedule 4.2(c) provided to DUSA prior to the Closing. Each such Consent must be
in full force and effect on and after the Closing Date, except where the failure
to obtain such Consents were not due to a breach of DUSA of its obligation to
cooperate to obtain such Consents under the standard outlined by the last
sentence of Section 6.1.
7.6 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been threatened in writing or commenced against DUSA and/or Sirius, or against
any Affiliate of Sirius, any Proceeding that, in the reasonable good faith
judgment of DUSA, based on the advice of outside counsel, would (a) enjoin,
restrain or otherwise prohibit the Transaction; (b) impose criminal penalties in
connection with the consummation of the Transaction; or (c) impose a Material
Adverse Effect, including, without limitation, preventing, delaying, making
illegal, or otherwise interfering with the consummation of the Transaction.
7.7 TERMINATION OF SIRIUS EMPLOYEE PLANS. Subject to all of the current
employees of Sirius who are to be employed by DUSA being fully covered by
benefit plans maintained by DUSA effective as of the Closing (and not subject to
any waiting periods), Sirius shall have provided DUSA with evidence, reasonably
satisfactory to DUSA, as to the termination (to occur prior to or simultaneously
with the Closing unless otherwise expressly agreed to by Sirius and DUSA with
respect to a particular plan, program and/or arrangement) of Sirius plans,
programs and arrangements referred to in Section 9.6.
7.8 FINANCIAL STATEMENTS. Sirius shall have delivered to DUSA, as soon as
practicable, but in no event later than five (5) Business Days prior to the
Closing Date, drafts of the Final Financial Statements and shall have provided
DUSA with reasonable access to the
47
management, financial consultants and auditors of Sirius for the purpose of
verifying such Final Financial Statements. There shall not have been a greater
than five percent (5%) detrimental deviation between the 2003 Draft Financial
Statements and the 2003 Final Financial Statements, the 2004 Draft Financial
Statements and the 2004 Final Financial Statements, and the September 30, 2005
Sirius management financial statements and the 2005 Final Financial Statements,
respectively, with respect to net sales and/or profit/loss with the exception of
variances caused by adjustments related to revenue recognition, compensation
expense, and reserves for returns and allowances. All financial statements shall
be prepared in accordance with generally accepted accounting principals to the
reasonable satisfaction of DUSA and its independent accountants.
7.9 MINIMUM PARTICIPATION. At Closing, DUSA must receive not less than
ninety percent (90%) of the issued and outstanding Sirius Shares as of the
Closing Date. Each Participating Shareholder must have returned to Sirius: (a) a
fully executed Subscription Agreement, substantially in the form attached hereto
as Exhibit A; (b) a completed and signed investor questionnaire previously
distributed by Sirius; and (c) one or more stock certificates, with completed
confirmed stock powers endorsed to DUSA, representing all of the Sirius Shares
beneficially owned by the Sirius Shareholder.
7.10 FIRPTA AFFIDAVIT. Sirius shall deliver to DUSA an affidavit, under
penalties of perjury stating that Sirius is not and has not been a United States
real property corporation, dated as of the Closing Date, and in the form and
substance required under Treasury Regulation 1.897-2(h) so that DUSA is exempt
from withholding any portion of the Consideration thereunder (the "FIRPTA
Affidavit").
7.11 NON-COMPETITION. DUSA shall have entered into non-competition
agreements with Xxxxx X. Xxxxxxx and Xxxx Xxxxxxxxx, M.D. in the applicable form
of Exhibits H1 and H2, respectively, hereto.
7.12 ACCESS TO MANUFACTURING AND DISTRIBUTION FACILITIES. Promptly
following the execution of this Agreement, Sirius shall obtain the necessary
consents to enable representatives of DUSA to thoroughly inspect, prior to the
Closing Date, any and all (i) Third Party Manufacturer facilities used by or on
behalf of Sirius to manufacture one or more of the Products and (ii)
distribution facilities used by or on behalf of Sirius to distribute one or more
of the Products. As a condition to Closing, DUSA, in its reasonable discretion,
must determine that the Third Party Manufacturer facilities and distribution
facilities are in Material compliance with all applicable Legal Requirements and
that the Third Party Manufacturer facilities have the reasonable capability of
continuing to manufacture the Products in compliance with cGMP and all
applicable laws. DUSA shall promptly notify Sirius in the event DUSA reasonably
determines that such conditions may not be satisfied prior to Closing.
7.13 NO DROPPED COVERAGE. Prior to the Closing, Sirius shall not have
become aware or received any notice, correspondence or other documentation
indicating that any formulary has dropped coverage for any Product or that any
insurance provider will no longer provide reimbursement in connection with the
purchase of any Product currently being reimbursed such that such event has a
Material Adverse Effect. Immediately upon receipt by Sirius of any such notice,
correspondence or other documentation, Sirius shall provide a copy of same to
DUSA.
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7.14 EXTENDING REPORTING ENDORSEMENT. DUSA shall have received evidence of
Sirius's purchase of an extended reporting endorsement, or a "tail," for each
insurance policy as provided for in Section 3.18(d).
7.15 WAIVER OF RIGHT OF FIRST REFUSAL TO PURCHASE BIOGLAN SHARES.
Provisions in Section 2, "Restrictions on Transfer," contained in the
Stockholders' Agreement, dated December 1, 2000, by and among Bioglan, Sirius,
Xxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxxx X. Xxxxxxx, shall be waived by
Sirius and the shareholders named therein.
7.16 KEY CONTRACTS. Sirius shall have caused the completion and execution
of the following agreements and amendments to agreements:
(a) Harmony Supply and Development Agreement. The Harmony Supply and
Development Agreement shall be amended substantially in the form of the
amendment attached hereto as Exhibit I, with such modifications as may be
approved by DUSA, which approval shall not be unreasonably withheld, conditioned
or delayed.
(b) Amide Supply Agreement. The Amide Supply Agreement shall be
amended substantially in the form of the amendment attached hereto as Exhibit J,
with such modifications as may be approved by DUSA, which approval shall not be
unreasonably withheld, conditioned or delayed.
7.17 ADVERSE EVENT REPORTING. Sirius shall complete all required filings
with the FDA of MedWatch forms for adverse events and any other events
discovered by DUSA or Sirius from the date hereof through the date of Closing
pursuant to 21 C.F.R. Parts 312 and 314, and shall have notified its product
liability insurance carriers of the occurrence of such events.
7.18 PRODUCT REGISTRATIONS. DUSA shall have determined to its reasonable
satisfaction and in good faith that, from the date of this Agreement through the
Closing Date, Sirius shall have completed all drug product registrations with
the FDA and that Sirius has no reason to believe that the FDA will not accept
such registrations for listing.
7.19 EFFECTIVE FORM S-4. If DUSA shall have decided to register the DUSA
Shares to be issued as part of the Consideration on a Form S-4 as contemplated
in Section 6.8, the Form S-4 shall have been declared effective by the SEC prior
to the Closing Date.
7.20 QUALIFICATION FEES. To the extent reasonably practicable, Sirius
shall have paid any fees and penalties arising as a result of any failure to
qualify to transact business as a foreign corporation under the laws of each
jurisdiction where such qualification is or was required by Sirius, as disclosed
in Schedule 3.1(a).
7.21 SCHEDULES. The Schedules attached to this Agreement shall be complete
at or prior to Closing to the reasonable satisfaction of DUSA.
7.22 DISCLOSURES. Sirius shall have provided all information and materials
in Sirius's possession reasonably requested in writing by DUSA prior to the
Closing Date.
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ARTICLE VIII
CONDITIONS PRECEDENT TO SHAREHOLDERS
AND SIRIUS'S OBLIGATION TO CLOSE
Sirius's and the Principal Shareholders' obligation to proceed with the
Closing is subject to the satisfaction, at or prior of the Closing, of each of
the following conditions (any of which may be waived by the Shareholder
Representatives, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties of DUSA contained in this Agreement shall be true and correct when
made and as of the Closing, with the same force and effect as if made as of the
Closing (except where the failure of a representation or warranty to be so true
and correct would not reasonably be deemed to have a Material Adverse Effect).
DUSA shall have delivered a certificate signed on behalf of DUSA by each of the
chief executive officer and chief financial officer with respect to the
foregoing to the Shareholder Representatives and Sirius.
8.2 COVENANTS. Each of the covenants contained in this Agreement to be
complied with by DUSA on or before the Closing shall have been complied with
(except where the failure to do so would not be reasonably likely to have a
Material Adverse Effect).
8.3 BOARD APPROVAL. The Board of Directors of DUSA shall have approved the
consummation of the Transaction and the terms and conditions of this Agreement.
8.4 CLOSING DELIVERABLES. DUSA shall have delivered the required Closing
Deliverables to the Shareholders.
8.5 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced against DUSA and/or Sirius, or against any Affiliate of Sirius,
any Proceeding that, in the reasonable good faith judgment of Sirius, based on
the advice of outside counsel, would (a) enjoin, restrain or otherwise prohibit
the Transaction; (b) impose criminal penalties in connection with the
consummation of the Transaction; or (c) impose a Material Adverse Effect,
including, without limitation, preventing, delaying, making illegal, or
otherwise interfering with the consummation of the Transaction.
8.6 DISCLOSURES. Sirius acknowledges that as of the date hereof, DUSA has
provided to Sirius all information and materials which have been requested in
writing by Sirius. Following the date of this Agreement and prior to the Closing
Date, DUSA shall have provided all information and materials in DUSA's
possession reasonably requested in writing by Sirius in order for Sirius to
satisfy its delivery obligations to the Sirius Shareholders under Section 6.5
hereof.
ARTICLE IX
COVENANTS OF SIRIUS PRIOR TO CLOSING DATE
9.1 ACCESS AND INVESTIGATIONS. Between the date of this Agreement and the
Closing Date, Sirius and its Representatives will cooperate with DUSA and,
during normal business hours, will: (a) afford DUSA and its Representatives
reasonable access to Sirius's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish DUSA and
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DUSA's Representatives with copies of all such contracts, books and records, and
other existing documents and data as DUSA may reasonably request, and (c)
furnish DUSA and DUSA's Representatives with such additional financial,
operating, and other data and information as DUSA may reasonably request.
9.2 OPERATION OF SIRIUS. Between the date of this Agreement and the
Closing Date, Sirius will:
(a) conduct the business of Sirius only in the ordinary course of
business;
(b) not amend any of its Organization Documents;
(c) not issue any shares of its stock or rights to acquire shares of
its stock, except with respect to preexisting obligations under the Sirius
Options;
(d) not make any Restricted Payment;
(e) not enter into any Contract, or otherwise expense or distribute
funds, that involve obligations of Sirius in an aggregate amount greater than
$25,000 without the prior written approval of an officer of DUSA (other than as
may be required or necessary to comply with or ensure non-applicability of
Section 409A of the IRC);
(f) not amend any Material Contract except as contemplated and
disclosed to DUSA;
(g) use Commercially Reasonable Efforts to maintain the goodwill of
Sirius's customers, suppliers, distributors, employees, agents and consultants;
and
(h) file all appropriate MedWatch forms in consultation with DUSA
with respect to any Product complaint or adverse event.
9.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sirius will
not, without the prior written consent of DUSA, take any affirmative action, or
fail to take any reasonable action within its control, as a result of which any
of the changes or events listed in Section 3.14 is likely to occur.
9.4 REQUIRED APPROVALS. Sirius shall make all filings required by Legal
Requirements to be made in order to consummate the transactions contemplated
herein as promptly as practicable after the date of this Agreement and in any
event prior to, in the case of filings required in the United States pursuant to
such Legal Requirements, the tenth (10th) day following execution of this
Agreement. Between the date of this Agreement and the Closing Date, Sirius will:
(a) cooperate with DUSA with respect to all filings that DUSA elects to make or
is required by Legal Requirements to make in connection with the transactions
contemplated herein, and (b) cooperate with DUSA and will exercise Commercially
Reasonable Efforts to obtain all consents identified in Schedule 3.2(c) and
Schedule 4.2(c).
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9.5 STANDSTILL.
(a) From and after the date of this Agreement until the earlier to
occur of the Closing or termination of this Agreement pursuant to Article XI,
Sirius and the Principal Shareholders will not, and Sirius will not permit its
Representatives to, directly or indirectly (a) initiate, solicit, encourage or
entertain any inquiries, offers or proposals for any "Acquisition Proposal" (as
defined below) by any Person (other than DUSA or its Representatives); (b)
participate in any discussions or negotiations with, or disclose any non-public
information not customarily disclosed consistent with Sirius's past practices
concerning Sirius to, or afford access to the properties, books, or records of
Sirius to, or otherwise assist or facilitate, or enter into any agreement or
understanding with, any Person (other than DUSA and its Affiliates and
Representatives) for the purpose of making, or take any other action to
facilitate the making of, an Acquisition Proposal; (c) agree to approve or
recommend any Acquisition Proposal; and/or (d) entertain or negotiate the sale
of or offer to sell any shares of Sirius capital stock, whether or not presently
issued.
(b) For the purposes of this Agreement, "Acquisition Proposal" shall
mean any one of the following (other than the Transactions contemplated
hereunder) involving Sirius: (i) a proposal for any transaction pursuant to
which a Third Party proposes to acquire beneficial ownership of at least ten
percent (10%) of the outstanding equity securities of Sirius, whether from
Sirius or pursuant to a tender offer, exchange offer, recapitalization,
reorganization or otherwise, (ii) a proposal for any merger, consolidation or
other business combination involving Sirius pursuant to which any Third Party
proposes to acquire beneficial ownership of at least ten percent (10%) of the
outstanding equity securities of Sirius, or the entity surviving such merger,
consolidation or other business combination, (iii) a proposal for any other
transaction or series of related transactions (including any license) pursuant
to which any Third Party proposes to acquire control of the assets of Sirius,
including, but not limited to, the Products, outside the normal course of
Sirius' business as such business has been conducted prior to the date of this
Agreement or which would otherwise have the effect of undermining the
negotiations contemplated by this Agreement, or (iv) any public announcement of
a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(c) The Principal Shareholders and Sirius will, and Sirius will
cause its Representatives to, promptly cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal.
(d) Notwithstanding the foregoing, no provision of this Section 9.5
shall be construed (i) to prohibit any of Sirius, the Principal Shareholders or
their respective Representatives from responding to any proposal, inquiry or
request for information in connection with an Acquisition Proposal or potential
Acquisition Proposal for the sole purpose of advising the Person making such
proposal, inquiry or request of Sirius' and the Principal Shareholders'
obligations under this Section 9.5 or (ii) to require any of Sirius, the
Principal Shareholders or their respective Representatives to disclose to DUSA
any terms and conditions of any such proposal, inquiry or request, including the
identity of the party making an Acquisition Proposal.
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9.6 EMPLOYEE PLANS. Except as may otherwise expressly be agreed to by
Sirius and DUSA and provided that all current employees of Sirius who are to be
employed by DUSA following the Closing will be fully covered by benefit plans
maintained by DUSA effective as of the Closing (and not subject to any waiting
period), Sirius shall terminate, effective simultaneously with the Closing: (i)
any and all group severance, separation or salary continuation plans, programs,
or arrangements, and (ii) any and all other Plans (as defined in Section 3.13 of
this Agreement), except with respect to such other plans as set forth on
Schedule 9.6. DUSA shall receive from Sirius evidence that Sirius's Plan(s)
and/or program(s), as applicable, have been terminated pursuant to resolutions
of its Board of Directors (the form and substance of such resolutions shall be
subject to review by and approval of DUSA), effective as of the Closing. Sirius
shall also take such other actions in furtherance of terminating such Plans,
policies and arrangements as DUSA may reasonably require. In the event that
termination of a 401(k) plan is reasonably anticipated to trigger liquidation
charges, surrender charges, or other fees to be imposed upon the account of any
participant or beneficiary of such terminated plan or upon Sirius or the plan
sponsor, then Sirius shall take such actions as are necessary to reasonably
estimate the amount of such charges and/or fees and provide such estimate in
writing to DUSA no later than fifteen (15) days prior to the Closing Date.
9.7 REPRESENTATION AND WARRANTY INSURANCE. Prior to Closing, DUSA shall
determine in its discretion whether to negotiate and obtain a policy of
representation and warranty insurance (the "Representation and Warranty
Insurance") covering the representations and warranties made by Sirius and the
Principal Shareholders pursuant to this Agreement. DUSA in its discretion shall
approve the terms and conditions of any policy of Representation and Warranty
Insurance obtained as provided for herein. Should DUSA decide to obtain a policy
of Representation and Warranty Insurance, DUSA shall be fully responsible for
all costs and expenses in connection therewith. Sirius and the Principal
Shareholders shall reasonably cooperate and assist DUSA as necessary in
obtaining such Representation and Warranty Insurance prior to Closing.
ARTICLE X
POST-CLOSING COVENANTS
10.1 SIRIUS BOARD NOMINEE. DUSA shall increase the size of its board of
directors by one (1) director and shall cause Xxxx Xxxxxxx, M.D. (the "Board
Nominee") to be appointed to fill such vacant board position until the date of
the next applicable meeting of DUSA Shareholders. DUSA shall recommend that its
Nominating and Corporate Governance Committee of the Board of Directors select
the Board Nominee to be included as a nominee to serve as a member of the board
of directors of DUSA on the slate of nominees to be voted upon at the next
annual meeting of the DUSA shareholders following the Closing. DUSA's
recommendation with respect to such nomination shall continue through the
expiration of the period of time any Milestone Payment may be paid pursuant to
the terms hereof, provided that during such period the Board Nominee (or such
substitute board nominee as may be recommended by the Shareholder
Representatives and selected by DUSA's Corporate Governance Committee should the
Board Nominee become unable or unwilling to serve) qualifies to serve on DUSA's
Board of Directors pursuant to its governance documents and applicable law.
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10.2 MAINTENANCE OF SIRIUS D&O INSURANCE. DUSA shall, at the Sirius
Shareholders expense, cause Sirius to maintain policies of director and officer
liability insurance in amounts not less than Five Million Dollars ($5,000,000)
covering the officers and directors of Sirius as of the date hereof until the
later of (a) the date that is three (3) years after the Closing Date, or (b) the
date after which the statutes of limitations for any claims that may be made
thereunder have passed and all outstanding claims for liability with respect
thereto have been finally resolved. The cost of maintaining the insurance
coverage described in this Section 10.2 for a period of three (3) years shall,
unless otherwise paid at the Closing, be paid by the Shareholders Escrow Agent
from the Expense Escrow Amount, as soon as reasonably practicable following the
Closing, and as otherwise provided in the Shareholders Escrow Agreement.
10.3 CONTINUITY OF SIRIUS BUSINESS. Following the Closing, for a period of
at least twelve (12) months, DUSA shall continue Sirius's historic business
and/or continue to use a significant portion of Sirius's historic assets in its
ongoing business as provided for in this Agreement as necessary to satisfy the
continuity of business enterprise requirements under Regulation 1.368-1(d) of
the IRC.
10.4 PRODUCT DEVELOPMENT AND MARKETING REQUIREMENTS.
(a) Promptly following the Closing, the Shareholder Representatives
and DUSA shall each appoint one (1) representative to discuss product
development and marketing activities relating to the Products and New Products
as they determine. The initial appointees shall be Xxxxx Xxxxxxx and Xxxxxx
Xxxxx, respectfully. The appointees shall consult with each other within six (6)
months after the Closing Date with respect to the selection of the New Products
to be used for purposes of determining the trigger for the applicable Milestone
Payments pursuant to paragraph 2.2(c)(i).
(b) Except as provided in Section 10.4(c), DUSA shall at all times
prior to the Milestone Termination Date promote the Products and the New
Products in accordance with the Minimum Marketing Standards.
(c) If at any time DUSA determines, in its reasonable business
judgment, that it is not commercially reasonable to initiate development,
further develop or promote any New Product identified or selected with respect
to any Milestone Payment pursuant to Section 2.2(c)(i) at the level required by
the Minimum Marketing Standards, DUSA shall promptly notify Xx. Xxxxxxx of such
determination and provide him with all relevant information regarding the
reasons for such determination. Within thirty (30) days of such notification,
Xx. Xxxxxxx shall consult with DUSA in its selection of an alternative New
Product to be developed by DUSA for purposes of the Milestone Payments. DUSA
shall promptly provide any information related to the marketing of any potential
alternative New Products as Xx. Xxxxxxx may reasonably request. In the event
DUSA declines to select an alternative New Product reasonably acceptable to Xx.
Xxxxxxx within such thirty (30) day period, DUSA shall immediately be obligated
to pay on a pro rata basis to the Sirius Shareholders Two Hundred Fifty Thousand
Dollars ($250,000) in lieu of continuing the Minimum Marketing Standards with
respect to the applicable New Product and all of its obligations with respect to
the applicable Milestone Payment in such event shall, upon payment in full of
such amount, be satisfied. In the event that Xx. Xxxxxxx becomes unable or
54
unwilling to serve in the capacity provided in this Section 10.4, the
Shareholder Representatives may select another person to succeed Xx. Xxxxxxx in
such role.
ARTICLE XI
TERMINATION
11.1 TERMINATION EVENTS. This Agreement may be terminated and the
Transaction abandoned at any time prior to or at the Closing, whether before or
after approval of the matters presented in connection with the Transaction by
the Sirius Shareholders:
(a) by either DUSA, or Sirius if a Material breach of any provision
of this Agreement has been committed by the other Party and such breach has not
been waived, provided that written notice has been given to the other Party of
the intention to terminate under this Section 11.1(a) due to such breach and the
other party has not cured such breach within thirty (30) days of receipt of such
notice;
(b) (i) by DUSA if any of the conditions in Article VII have not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of DUSA to comply with its
obligations under this Agreement) and DUSA has not waived such condition on or
before the Closing Date;
(ii) by Sirius or the Principal Shareholders, if any of the
conditions in Article VIII have not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of the Principal Shareholders to comply with their obligations under
this Agreement) and the Principal Shareholders have not waived such condition on
or before the Closing Date;
provided that in each case written notice has been given to the other party of
the intention to terminate under this Section 11.1(b) for failure to satisfy a
specified condition and the other party has not cured such failure within thirty
(30) days of receipt of such notice;
(c) by either DUSA or Sirius if a Governmental Body of competent
jurisdiction shall have issued an order, decree or ruling or taken any other
action, in any case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Transactions;
(d) by DUSA or Sirius upon the occurrence of a Material Adverse
Effect to Sirius or DUSA; provided, however, that for purposes of this Section
11.1(d), Material Adverse Effect shall not include any effect or change solely
related to the price per share of DUSA's common stock such as, without
limitation, a general market or industry decline;
(e) by DUSA should DUSA decide to obtain Representation and Warranty
Insurance as provided for in Section 9.7 but such insurance is not reasonably
satisfactory to DUSA in DUSA's reasonable determination prior to the Closing
Date;
(f) by DUSA, if Sirius shall fail to (i) recommend, or fails to
continue its recommendation, that the Sirius Shareholders vote in favor of the
adoption of this Agreement and the consummation of the Transaction; or (ii) hold
a shareholders' meeting or otherwise
55
obtain the written consent of the Sirius Shareholders approving the adoption of
this Agreement and the consummation of the Transaction;
(g) by DUSA should the FDA notify Sirius of (i) any enforcement
action with respect to the marketing of any Product; (ii) any recall, voluntary
or otherwise, or (iii) any action which would undermine the ability of DUSA to
conduct Sirius's business in the manner it is conducted as of the date of this
Agreement and which result in a Material Adverse Effect;
(h) by DUSA should, prior to the Closing, the price per share of
DUSA common stock fall to a level which would require approval by the
shareholders of DUSA prior to the issuance of any shares in satisfaction of the
Consideration;
(i) by DUSA after receipt of the written legal opinion of counsel
detailing that terminating the Agreement is required in order for the Board of
Directors of DUSA to comply with its fiduciary duties under the applicable laws
of the State of New Jersey;
(j) by mutual written consent of DUSA and Sirius; or
(k) by either DUSA or Sirius if the Closing has not occurred (other
than through the failure of the party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before (i)
February 7, 2006, if the terminating party has satisfied all of its obligations
hereunder and the non-terminating party has not satisfied all of its obligations
hereunder, or (ii) in the event that the DUSA Shares to be issued hereunder are
to be registered pursuant to a registration statement on Form S-4, as provided
for in Section 6.8, the date which is six (6) months from the date of the
execution of this Agreement.
Notwithstanding 11.1(d), the Parties expressly agree that DUSA shall not
have the right to terminate this Agreement as a result of a court order,
temporary restraining order, cease and desist letter or other claim with respect
to any Third Party Intellectual Property Rights.
11.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 11.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 11.1, all
further obligations of the parties under this Agreement will terminate; provided
that if this Agreement is terminated by a Party because of the breach of the
Agreement by another Party or because one or more of the conditions to the
terminating Party's obligations under this Agreement is not satisfied as a
result of the other Party's failure to comply with its obligations under this
Agreement, the terminating Party's right to pursue all legal remedies will
survive such termination unimpaired for a period of six (6) months after such
termination.
11.3 BREAK-UP FEE. In the event this Agreement is terminated by Sirius or
the Shareholders pursuant to Section 11.1(a) or 11.1(b)(ii), or by DUSA pursuant
to 11.1(e), 11.1(g) or 11.1(h), then DUSA shall pay to Sirius within five (5)
business days following such termination, the Break-Up Fee. In the event this
Agreement is terminated by DUSA pursuant to Section 11.1(a), 11.1(b)(i) or
11.1(f), then Sirius shall pay to DUSA within five (5) business days following
such termination, the Break-Up Fee. With respect to the foregoing, the parties
shall use their reasonable efforts to close the Transaction on or before
February 7, 2006. Without
56
limiting the foregoing, a Material breach for purposes of Section 11.1(a) shall
include, but not be limited to, Sirius' failure to deliver the Final Financial
Statements to DUSA as required herein.
ARTICLE XII
SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
12.1 REPRESENTATIONS AND WARRANTIES. Except as otherwise provided for
herein, all representations, warranties and covenants in this Agreement, the
certificates delivered hereunder, and any other certificate or document
delivered pursuant to this Agreement shall expire on the date which is
twenty-four (24) months after the Closing Date.
12.2 LIMITATION OF LIABILITY. Notwithstanding anything herein to the
contrary, the liability of each Sirius Shareholder for any claim for Damages
made by DUSA or its Affiliates with respect to any matter arising out of or
related to this Agreement or the Transaction shall be limited to DUSA's rights
under Article XIII.
ARTICLE XIII
INDEMNIFICATION
13.1 INDEMNIFICATION OF DUSA INDEMNITEES. The Sirius Shareholders shall
protect, defend, indemnify, and hold harmless DUSA and DUSA Sub and their
respective Representatives, Affiliates, successors and permitted assigns
(collectively, the "DUSA Indemnitees") from and against any and all Damages
actually sustained or incurred by any of them, directly or indirectly, as a
result of, in connection with, related to or arising out of:
(a) any undisclosed liabilities of Sirius arising prior to the
Closing Date;
(b) subject to Sections 2.5(b) and 2.5(f), a court order, temporary
restraining order, permanent injunction, cease and desist letter or other notice
containing a significant threat to the continued manufacturing, production
and/or marketing of a Product with respect to any Third Party Intellectual
Property Rights relating to any of the Products.
(c) any Material breach of any representation, warranty or covenant
made by Sirius or a Principal Shareholder in this Agreement;
(d) any tort claim, including, but not limited to, negligence and
strict liability claims, and any claim for intentional misconduct or wrongdoing;
and
(e) any Taxes to the extent provided in Article XIV.
Any assertion by the DUSA Indemnitees (or any of them) that the Sirius
Shareholders are liable under the terms of this Section 13.1 must be made in a
writing delivered to the Shareholders' Representatives and shall be subject to
the limitations set forth below.
13.2 INDEMNIFICATION OF THE SIRIUS SHAREHOLDERS. DUSA shall protect,
defend, indemnify and hold harmless each Sirius Shareholder from and against any
and all Damages actually sustained or incurred by any of them, directly or
indirectly, as a result of, in connection
57
with, related to or arising out of (a) a Material breach of any representation,
warranty or covenant made by DUSA in this Agreement, (b) any action taken by
DUSA, whether prior to or after the Closing, resulting in the failure of the
transaction to qualify as a tax-free reorganization, or (c) all Taxes of Sirius
(and claims with respect to such Taxes) with respect to all taxable periods
beginning after the Closing Date as further provided in Article XIV.
13.3 LIMITATIONS.
(a) No claims for breaches of representations, warranties, covenants
or obligations may be brought by any DUSA Indemnitee or Sirius Shareholder after
two (2) years following the Closing Date. No Person shall have any obligation to
indemnify any other Person pursuant to this Agreement, unless the amount of
Damages sustained or incurred with respect to a particular claim satisfy the
criteria set forth in Section 2.5(c) hereof If this Agreement is terminated and
the Closing does not occur, no Party shall have any obligation to indemnify any
Person hereunder except with respect to any breaches of the covenants contained
in Section 9.5 and Section 15.3 of this Agreement.
(b) Any claim for indemnification made by any DUSA Indemnitee
pursuant to Section 13.1 shall be satisfied, subject to the terms and conditions
provided elsewhere herein, (i) first, from any applicable insurance policies
covering Sirius or covering Sirius' Representatives, other than the
Representation and Warranty Insurance, and (ii) second, from the Liability
Escrow Account pursuant to the terms of Section 2.5 and as provided below, and
(iii) thereafter, from the Representation and Warranty Insurance, if secured by
DUSA. Notwithstanding the foregoing, nothing contained herein shall be deemed to
prohibit or restrict application of the amounts held in the Liability Escrow
Account from being applied to the deductible amounts with respect to any
applicable insurance policies to be used for indemnification pursuant to clause
(i) and (iii) hereof.
(c) The indemnification provisions of this Article XIII shall
constitute the exclusive remedy of the DUSA Indemnitees and the Sirius
Shareholders, except for fraud and equitable remedies, with respect to any
matter arising out of, related to or in connection with this Agreement.
(d) If the DUSA Principal Officers (as defined below) have any
Actual Knowledge (as defined below) as of the date of this Agreement as proven
by Sirius in a court of competent jurisdiction or by other trier of fact as
provided for in Article XVI that any Material representation or warranty made by
Sirius or any Sirius Shareholder contained herein is incorrect in any Material
respect as of the date of this Agreement, DUSA shall have no remedy or recourse
with respect thereto. If, after the date of this Agreement and prior to the
Closing Date, any of the DUSA Principal Officers are notified in writing or
otherwise obtains any Actual Knowledge as proven by Sirius in a court of
competent jurisdiction or by other trier of fact that any Material
representation or warranty made by Sirius or any Sirius Shareholder is incorrect
in any Material respect as of the date of this Agreement or the Closing Date,
DUSA shall have as its sole remedy under this Agreement the option (i) to
terminate this Agreement (upon providing ten (10) Business Days' written notice
to Sirius and the Shareholders' Representative, during which period Sirius may
cure such Material misrepresentation or Material breach of representation or
warranty), or (ii) to proceed with the Closing and, upon the Closing, DUSA shall
be conclusively
58
deemed to have waived all claims under this Agreement relating only to such
Material misrepresentation or Material breach of representation or warranty. For
purposes of this Section 13.3(d), "DUSA Principal Officers" means the following
officers and/or employees of DUSA: (i) Xx. Xxxxxxxx Xxxxxxx, Chairman and Chief
Executive Officer, (ii) Xx. Xxxxxx Xxxxx, President and Chief Operating Officer,
(iii) Xx. Xxxxxxx Xxxxxxxxxxx, Vice President, Finance and Chief Financial
Officer, (iv) Xx. Xxxxxxx Xxxxxxx, Controller, and (v) Xx. Xxxxx Xxxxxxx, Vice
President, Regulatory Affairs and Intellectual Property. Also for purposes of
this Section 13.3(d), "Actual Knowledge" means information that comes to such
Principal Officers without obligation to make any investigation or inquiry of
any kind by or on behalf of such Principal Officers.
13.4 GENERAL PROVISIONS.
(a) All payments made by DUSA or any Sirius Shareholder, as the case
may be, under this Article XIII shall be treated as adjustments to the
Consideration for all Tax purposes.
(b) The obligations of DUSA and the Sirius Shareholders in respect
of a claim for indemnification under this Agreement shall not include any
special, exemplary or consequential damages, including business interruption or
lost profits, or any punitive damages.
(c) DUSA and the Sirius Shareholders shall take all reasonable steps
to mitigate their respective Damages upon and after becoming aware of any event
which could reasonably be expected to give rise to any Damages that are
indemnifiable hereunder.
(d) Upon making any indemnification payment, the indemnitor will, to
the extent of such payment, be subrogated to all rights of the indemnitee
against any third party in respect of the Damages to which the payment relates.
Without limiting the generality of any other provision hereof, each such
indemnitor and indemnitee will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation
rights.
(e) DUSA agrees that the aggregate amount of indemnification to
which it is entitled from one or more Sirius Shareholders in connection with any
or all claims made by DUSA under this Article XIII shall be expressly and
exclusively limited to the Liability Escrow Amount.
(f) The Sirius Shareholders expressly agree that any indemnification
obligation of Sirius may be, to the extent provided for in this Article XIII,
satisfied from the Liability Escrow Account.
13.5 PROCEDURES FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) For the purposes of this Section 13.5, the term "Indemnitee"
shall refer to the Person(s) being indemnified, or entitled or claiming to be
entitled to be indemnified pursuant to Section 2.5, 13.1 or 13.2 and
"Indemnitor" shall refer to the Person(s) having the obligation to indemnify
pursuant to such provisions.
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(b) An Indemnitee shall, promptly after receiving notice of or
becoming aware of any claim, including Third Party claims against it, but in any
event within one hundred twenty (120) days thereof, give written notice to the
Indemnitor. Such notification shall describe in reasonable detail (to the extent
known by the Indemnitee) the facts constituting the basis for such claim and the
amount of the claimed Damages; provided, however, that the failure to notify any
Indemnitor will relieve the Indemnitor of any liability or obligation that it
may have to such Indemnitee. A DUSA Indemnitee shall have satisfied this written
notice requirement by giving such notice to the Shareholder Representatives on
behalf of the Sirius Shareholders.
(c) An Indemnitor will be entitled to participate in any Proceeding
in connection with its obligations hereunder and, to the extent that the
Indemnitor wishes (unless the Indemnitor is also a party to such Proceeding and
the Indemnitee determines in good faith that joint representation would be
inappropriate), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the Indemnitee and, after notice from the Indemnitor to the
Indemnitee of its election to assume the defense of such Proceeding, the
Indemnitor will not, as long as it diligently conducts such defense, be liable
to the Indemnitee under this Agreement for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnitee in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the Indemnitor
assumes the defense of a Proceeding:
(i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification;
(ii) the Indemnitor will have no liability with respect to any
compromise or settlement of such claims effected without its consent, other than
reasonable, documented costs of investigation.
(iii) the Indemnitee shall cooperate with the Indemnitor in
such defense and make available to the Indemnitor all witnesses, pertinent
records, materials and information in its possession or under its control
relating thereto as is reasonably required by the Indemnitor;
(iv) the Indemnitee may participate by its own counsel and at
its own expense in the defense of such Third Party claim.
(d) In the event the Indemnitee is, directly or indirectly,
conducting the defense against any claim, the Indemnitor shall cooperate with
the Indemnitee in such defense and make available to it all such witnesses,
records, materials and information in its possession or under its control
relating thereto as is reasonably required by the Indemnitee, and the Indemnitor
may participate by its own counsel at its own expense in the defense of such
Third Party claim.
(e) Except for the settlement of a Third Party claim which involves
the payment of money only, with respect to which the Indemnitor has agreed to
indemnify the Indemnitee, no Third Party claim may be settled by the Indemnitor
without the written consent of the Indemnitee, which consent shall not be
unreasonably withheld, conditioned or delayed. No
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Third Party claim may be settled by an Indemnitee without the written consent of
the Indemnitor, which consent shall not be unreasonably withheld, conditioned or
delayed.
13.6 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a Third Party claim may be asserted
by notice to the Person from whom indemnification is sought.
ARTICLE XIV
TAX MATTERS
14.1 TAX ALLOCATION. The following provisions shall govern the allocation
of responsibility as between DUSA and the Sirius Shareholders for certain tax
matters following the Closing Date:
(a) In the case of any taxable period that includes (but does not
end on) the Closing Date (a "Straddle Period"), the amount of any Taxes based on
or measured by income or receipts of Sirius for the Pre-Closing Tax Period shall
be determined based on an interim Closing of the books as of the close of
business on the Closing Date (and for such purpose, the taxable period of any
partnership or other pass-through entity in which Sirius holds a beneficial
interest shall be deemed to terminate at such time) and the amount of other
Taxes of Sirius for a Straddle Period that relates to the Pre-Closing Tax Period
shall be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in such Straddle Period.
(b) DUSA shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for Sirius that are filed after the Closing Date. At
the written request of the Sirius Shareholders, DUSA shall permit the Sirius
Shareholders (through the Shareholder Representatives) to review and comment on
each such Tax Return covering a Straddle Period prior to filing.
(c) DUSA, Sirius and the Sirius Shareholders shall cooperate fully,
as and to the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns pursuant to Section 14.1(d) and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party's request) the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any Material provided
hereunder. Sirius and the Sirius Shareholders agree (A) to retain all books and
records with respect to Tax matters pertinent to Sirius relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by DUSA or the Sirius Shareholders, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other Party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other Party so requests,
Sirius or the Sirius Shareholders, as the case may be, shall allow the other
Party to take possession of such books and records. DUSA shall have
responsibility for handling any audits of pre-Closing tax periods which occur
after the Closing Date.
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(i) DUSA and the Sirius Shareholders further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(ii) DUSA and the Sirius Shareholders further agree, upon
request, to provide the other Party with all information that either Party may
be required to report pursuant to Code Section 6043 and all Treasury Regulations
promulgated thereunder.
(d) All tax-sharing agreements or similar agreements with respect to
or involving Sirius shall be terminated as of the Closing Date and, after the
Closing Date, Sirius shall not be bound thereby or have any liability
thereunder.
ARTICLE XV
GENERAL PROVISIONS
15.1 EXPENSES. DUSA will bear its expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the transactions
contemplated herein, including all fees and expenses of agents, representatives,
counsel, and accountants. Additionally, DUSA shall be responsible to pay when
due all transfer, documentary, sales, use, value added, stamp, registration,
goods and services taxes, as well as all conveyance fees, recording charges and
other fees and charges, incurred in connection with the transactions
contemplated by this Agreement, regardless of whether the obligation to pay any
such taxes, fees or charges would otherwise be the obligation of Sirius or the
Sirius Shareholders under applicable law or by custom or practice. The parties
hereto acknowledge that Sirius shall pay all Expenses in connection with this
Agreement as provided in Section 6.3(a)(ii).
15.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated herein will be
issued, if at all, at such time and in such manner as DUSA and Sirius shall
reasonably determine. Sirius and DUSA will consult with each other concerning
the means by which the public and Sirius's employees, distributors, customers,
and suppliers and others having dealings with Sirius will be informed of the
transactions contemplated herein and no announcement shall be made by any party
without the prior written consent of DUSA in the case of a proposed announcement
by Sirius or of Sirius in the case of a proposed announcement by DUSA; provided,
however, that this Section 15.2 shall not apply to DUSA's obligations to comply
with applicable state and federal securities laws and the rules and regulations
of the National Association of Securities Dealers and the NASDAQ National
Market.
15.3 CONFIDENTIALITY. The provisions of the Mutual Confidential Agreement
Disclosure between Sirius and DUSA dated June 20, 2005 ("Confidentiality
Agreement") will continue in full force and effect and will survive the
execution and delivery of this Agreement.
15.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when: (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c)
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when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by written notice to the other parties):
If to Sirius: With a copy to:
Sirius Laboratories, Inc. Seyfarth Xxxx LLP
000 Xxxxxxx Xxxxx, Xxxxx 000 55 East Monroe Street, Suite 4200
Xxxxxx Xxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: President and CEO Attention: Xxxxxxx Xxxxxx, Esq.
Telephone: No.: (000) 000-0000 Telephone: No.: (000) 000-0000
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
or, at such other address as Sirius or the Sirius Shareholders may designate by
advance written notice to the other parties hereto; and
If to the Shareholders Representative(s): and to:
Xxxxx Xxxxxxx Xxxxxxx Xxxxxxxxx
3615 RFD 00 X. Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000 Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to: Seyfarth Xxxx LLP (set forth above); or, in each case, at such
other address such Shareholder Representatives or the Sirius Shareholders may
designate by advance written notice to the other parties hereto; and
If to DUSA: With a copy to:
DUSA Pharmaceuticals, Inc. Xxxx Xxxxx LLP
25 Upton Drive Princeton Xxxxxxxxx Village
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000 000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx: President and COO X.X. Xxx 0000
Telephone: No.: (000) 000-0000 Xxxxxxxxx, Xxx Xxxxxx 00000-0000
Facsimile No.: (000) 000-0000 Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
or at such other address as DUSA may designate by advance written notice to the
other parties hereto.
15.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of New
York, or, if it has or can acquire jurisdiction, in the United States District
Court for the Southern District of New York, and each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
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15.6 FURTHER ASSURANCES. The parties agree before and after Closing: (a)
to furnish upon request to each other such further information, (b) to execute
and deliver to each other such other documents, and (c) to do such other acts
and things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in this
Agreement.
15.7 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law: (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
15.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter (other
than the Confidentiality Agreement, which shall survive the execution and/or
termination of this Agreement in accordance with its terms) and constitutes
(along with the documents referred to in this Agreement and the Confidentiality
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by all parties.
15.9 DISCLOSURE SCHEDULES.
(a) If and to the extent any information required to be furnished in
any Schedule is contained in another Schedule, such information will be deemed
to be included in all Schedules in which such information is required to be
included, to the extent such disclosure is reasonably apparent on its face to be
applicable to such other Schedule.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedules, the statements in
the body of this Agreement shall control.
15.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
assign any of its rights or delegate its obligations under this Agreement
without the prior consent of the other parties, except that DUSA may assign its
rights or delegate its obligations hereunder to its Affiliates so long as DUSA
remains ultimately liable for all of DUSA's obligations hereunder. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement
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or any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
15.11 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
15.12 ARTICLE AND SECTION HEADINGS, CONSTRUCTION. The headings of Sections
in this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Article," "Articles,"
"Section" or "Sections" refer to the corresponding Article, Articles, Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
15.13 GOVERNING LAW. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
15.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
ARTICLE XVI
DISPUTE RESOLUTION
16.1 ARBITRATION. Except as specified in Section 16.2 below, any dispute,
controversy or other claim, including for indemnification pursuant to Article
XIII, whether based on contract, tort, statute or other legal theory (including
but not limited to claims of fraud or misrepresentation), arising out of or
relating to this Agreement (including but not limited to its validity,
interpretation, performance or breach) shall be resolved exclusively by
arbitration pursuant to the then-current Commercial Rules and supervision of the
American Arbitration Association ("AAA"). The arbitration shall be held in New
York, New York. Each Party (the applicable Sirius Shareholders, as one party,
and DUSA (and any applicable Person claiming by or through DUSA, including the
DUSA Indemnitees), as one party) shall appoint one arbitrator within thirty (30)
days after receipt by the respondent of the notice of arbitration. The two
arbitrators appointed pursuant to the preceding sentence shall, within thirty
(30) days after their appointment, appoint a third, presiding arbitrator. If
either Party fails to nominate an arbitrator, or the two arbitrators appointed
by the parties are unable to appoint a presiding arbitrator within the stated
periods, the second or presiding arbitrator, as the case may be, shall be
appointed by the AAA. All arbitrators shall be fluent in English and all
hearings shall be conducted in the English language and shall have knowledge of
the pharmaceutical industry and relevant markets. The arbitrators shall, by
majority vote, render a written decision stating reasons therefor. The
arbitrators shall not have the power to award punitive or exemplary damages, or
any damages excluded by, or in excess of any limitations expressed in this
Agreement. The arbitrators' decision and award shall be final and binding and
may be entered in any court having jurisdiction
65
thereof. Issues of arbitrability shall be determined in accordance with the
federal substantive and procedural laws relating to arbitration; all other
aspects of this Agreement shall be interpreted in accordance with, and the
arbitrators shall apply and be bound to follow the laws set forth in this
Section 16.1. The costs and expenses of the arbitration shall be paid as the
arbitrators determine. Any cash award shall be payable in United States dollars
through a bank in the United States.
16.2 JUDICIAL PROCEEDINGS. Each Party shall have the right to institute
judicial proceedings against the other Party or anyone acting by, through or
under such other Party in order to enforce the instituting party's rights
hereunder through specific performance, injunction or similar equitable relief.
[Signature Page Follows.]
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EXECUTION COPY
IN WITNESS WHEREOF, the parties have executed and delivered this Merger
Agreement as of the date first written above.
SIRIUS LABORATORIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice Chairman
DUSA PHARMACEUTICALS, INC.
By:/s/ D. Xxxxxxxx Xxxxxxx
---------------------------------------
Name: D. Xxxxxxxx Xxxxxxx, MD, FRCPC
Title: Chairman and Chief Executive Officer
THE SHAREHOLDERS
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxx
-------------------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxxx Ph.D.
/s/ Xxxxxx Xxxxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxx Xxxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxxx, M.D.
/s/ Xxxxx Xxxxxxxxx
-------------------------------------------
Xxxxx Xxxxxxxxx
/s/ Xxxxxxx Xxxxxx
-------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx, Xx.
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxx
-------------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxxxx Xxxxxxx
-------------------------------------------
Xxxxxxxxx Xxxxxxx
For Xxxxx Xxxxxxx
-------------------------------------------
Xxxxx Xxxxxxx
Power of attorney copy enclosed
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx
Schedules and exhibits omitted pursuant to item 601(b)(2) of Regulation S-K.
The Company agrees to furnish supplementally a copy of any omitted schedule or
exhibit to the Commission upon request.
2
