Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PENEDERM INCORPORATED
AND
MLI ACQUISITION CORP.
AND
MYLAN LABORATORIES INC.
June 24, 1998
TABLE OF CONTENTS
Page
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1. NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION, BYLAWS......................................2
1.1 Name of Surviving Corporation...................................................................2
1.2 Certificate of Incorporation....................................................................2
1.3 Bylaws; Directors and Officers..................................................................2
1.4 Filing of Certificate of Merger; Effective Date; Effective Time.................................3
1.5 Effects of Merger...............................................................................3
1.6 Tax-Free Reorganization.........................................................................3
2. STATUS AND CONVERSION OF SECURITIES......................................................................3
2.1 Company Capital Stock...........................................................................3
(a) Conversion of Company Common Stock Into Parent Common Stock............................3
(b) Delivery of Certificates...............................................................4
(c) Dividends; Transfer Taxes; Withholding.................................................5
(d) No Fractional Shares...................................................................6
(e) Return of Exchange Fund................................................................6
(f) Adjustment of Exchange Ratio...........................................................7
(g) No Further Ownership Rights in Company Common Stock....................................7
(h) Closing of the Company Transfer Books..................................................7
(i) Further Assurances.....................................................................7
2.2 Subsidiary Common Stock.........................................................................8
2.3 Assumption of Stock Options; Company Warrant; Employee Stock Purchase Plan......................8
2.4 Closing.........................................................................................9
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS...............................................................9
3.1 Representations, Warranties and Agreements of the Company.......................................9
(a) Organization, Standing and Power......................................................10
(b) Capital Structure.....................................................................10
(c) Authority.............................................................................12
(d) Consents and Approvals; No Violation..................................................13
(e) SEC Documents and Other Reports.......................................................14
(f) Registration Statement and Prospectus/Proxy Statement.................................15
(g) Absence of Certain Changes or Events..................................................15
(h) Permits and Compliance................................................................16
(i) Tax Matters...........................................................................17
(j) Actions and Proceedings...............................................................18
(k) FDA and Related Matters...............................................................19
(l) Certain Agreements....................................................................20
(m) Material Contracts....................................................................21
(n) Opinion of Financial Advisor..........................................................21
(o) Takeover Provisions Inapplicable......................................................21
(p) Required Vote of the Company Stockholders.............................................21
(q) Finders and Investment Bankers........................................................22
(r) Authorized Stock......................................................................22
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(s) Company Affiliates....................................................................22
(t) Owned Real Property...................................................................22
(u) Leased Real Estate....................................................................22
(v) Owned and Leased Tangible Personal Property...........................................23
(w) Physical Condition of Property........................................................23
(x) Patents and Certain Other Intellectual Property Rights................................23
(y) Accounts Receivable...................................................................24
(z) Insurance and Bonds...................................................................24
(aa) Product Warranties and Liability......................................................24
(bb) Contracts, Proposals and Bids.........................................................25
(cc) Labor and Employment Matters..........................................................25
(dd) Insider Contracts.....................................................................27
(ee) Other Material Contracts..............................................................27
(ff) Export of Products and Technologies...................................................28
(gg) Absence of Illegal Payments...........................................................28
(hh) Absence of Anti-Boycott Violations....................................................29
(ii) Environmental Matters.................................................................29
(jj) No Adverse Actions....................................................................31
3.2 Representations, Warranties and Agreements of the Parent.......................................31
(a) Organization, Standing and Power......................................................31
(b) Capital Structure.....................................................................32
(c) Authority.............................................................................33
(d) Consents and Approvals; No Violation..................................................34
(e) SEC Documents and Other Reports.......................................................35
(f) Registration Statement and Prospectus/Proxy Statement.................................36
(g) Absence of Certain Changes or Events..................................................36
(h) Permits and Compliance................................................................36
(i) Actions and Proceedings...............................................................37
(j) FDA Matters...........................................................................38
(k) Labor Relations.......................................................................39
(l) Patents and Certain Other Intellectual Property Rights................................39
(m) Parent Common Stock...................................................................39
(n) Opinion of Financial Advisor..........................................................39
(o) Finders and Investment Bankers........................................................40
(p) Parent Affiliate Agreements...........................................................40
3.3 Representations and Warranties as to the Merger Subsidiary.....................................40
(a) Organization, Standing, Power and Capitalization of the Merger Subsidiary.............40
(b) Business of the Merger Subsidiary.....................................................40
(c) Authorization; Binding Agreement......................................................40
(d) Compliance With Other Instruments, Etc................................................41
(e) Governmental and Other Consents, Etc..................................................41
4. COVENANTS...............................................................................................41
4.1 Covenants of the Company.......................................................................41
(a) Action in Furtherance of Merger.......................................................41
(b) Maintenance of Properties.............................................................42
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(c) Access and Information................................................................42
(d) Conduct of Business...................................................................43
(e) Capital Stock.........................................................................44
(f) No Solicitation.......................................................................45
(g) No Final Put Notice...................................................................47
(h) Compensation Matters..................................................................47
(i) Contracts.............................................................................47
(j) Tax Matters...........................................................................47
(k) Amendments to the Schedules...........................................................47
(l) Notification of Certain Matters.......................................................48
(m) Stockholder Approval..................................................................48
(n) Financial Statements..................................................................49
(o) Proxy Statement.......................................................................49
(p) Company Affiliates....................................................................49
(q) Takeover Statutes.....................................................................49
(r) Prohibited Transactions...............................................................49
(s) Accounting Changes....................................................................50
(t) Compliance With Law...................................................................50
(u) Company Affiliates Agreements.........................................................50
4.2 Covenants of the Parent........................................................................50
(a) Action in Furtherance of Merger.......................................................50
(b) Maintenance of Properties.............................................................51
(c) Access and Information................................................................51
(d) Listing Application...................................................................51
(e) Public Filings........................................................................51
(f) Registration Statement................................................................51
(g) Conduct of Business...................................................................51
4.3 Covenants as to the Merger Subsidiary..........................................................52
(a) No Business...........................................................................52
(b) Access................................................................................52
(c) Actions in Furtherance of Merger......................................................52
4.4 Covenants of the Company and the Parent........................................................52
(a) Registration Statement................................................................52
(b) Tax-Free Reorganization Treatment.....................................................52
5. CONDITIONS TO CLOSING; ABANDONMENT AND TERMINATION......................................................53
5.1 Conditions to Each Party's Obligation to Effect the Merger.....................................53
(a) Company Stockholder Approval..........................................................53
(b) Consents..............................................................................53
(c) Effectiveness.........................................................................53
(d) Listing...............................................................................53
(e) No Legal Restraints...................................................................53
5.2 Conditions to the Company's Closing and Its Right to Abandon...................................53
(a) No Material Adverse Effect............................................................54
(b) No Material Adverse Change............................................................54
(c) Officer's Certificate.................................................................54
(d) Tax Opinion...........................................................................54
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(e) Tax Certificate.......................................................................55
5.3 Conditions to the Parent's and the Merger Subsidiary's Closing and Right of the Parent
and the Merger Subsidiary to Abandon...........................................................56
(a) No Material Adverse Effect............................................................56
(b) No Material Adverse Change............................................................57
(c) Officer's Certificate.................................................................57
(d) Tax Opinion...........................................................................57
(e) Tax Certificates......................................................................58
(f) Outstanding Shares of Preferred Stock.................................................58
(g) FIRPTA Statement......................................................................58
6. ADDITIONAL PROVISIONS FOR ABANDONMENT AND TERMINATION...................................................58
6.1 Provisions of Abandonment and Termination......................................................58
(a) Mutual Agreement......................................................................59
(b) Violation of Order....................................................................59
(c) Other Transactions Involving Company..................................................59
(d) Superior Proposal.....................................................................60
6.2 Termination of Agreement.......................................................................61
6.3 Effect of Abandonment or Termination...........................................................61
7. EXPENSES................................................................................................61
7.1 Costs and Expenses.............................................................................61
(a) Payment of Own Expenses...............................................................61
(b) Termination Fee.......................................................................61
8. MISCELLANEOUS...........................................................................................63
8.1 Certification of the Company's Shareholder Votes, Etc..........................................63
8.2 Certification of the Parent's Stockholder Votes, Etc...........................................63
8.3 Termination of Covenants, Representations and Warranties.......................................63
8.4 Certain Tax Matters............................................................................63
8.5 Execution in Counterparts......................................................................67
8.6 Waivers and Amendments.........................................................................67
8.7 Confidentiality................................................................................67
8.8 Indemnification; Directors and Officers Insurance..............................................67
8.9 Notices........................................................................................68
8.10 Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership............................69
8.11 Governing Law..................................................................................69
8.12 Partial Invalidity.............................................................................69
8.13 Publicity......................................................................................69
8.14 Defined Terms..................................................................................69
8.15 Benefit Plans..................................................................................70
8.16 Enforcement of Agreement.......................................................................70
8.17 Waiver of Jury Trial...........................................................................70
8.18 No Presumption Against the Draftsman...........................................................71
APPENDIX A GLOSSARY OF DEFINED TERMS/SECTION REFERENCES
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LIST OF EXHIBITS
----------------
EXHIBIT
EXHIBIT A COMPANY OPTION AGREEMENT Recital 7
EXHIBIT B-1 FORM OF VOTING AGREEMENT Recital 8
EXHIBIT B-2 FORM OF ALTERNATE VOTING AGREEMENT Recital 8
EXHIBIT C FORM OF COMPANY AFFILIATE AGREEMENT 4.1(p), 4.1(u),
4.4(c)(i), 3.1(t)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated June 24,
1998, by and among PENEDERM INCORPORATED, a Delaware corporation (hereinafter
called the "Company"), and MLI ACQUISITION CORP., a Delaware corporation
(hereinafter called the "Merger Subsidiary") (the Company and the Merger
Subsidiary being hereinafter sometimes called the "Constituent Corporations"),
and MYLAN LABORATORIES INC., a Pennsylvania corporation (hereinafter called the
"Parent"), which is joining as a third party and is not a Constituent
Corporation.
RECITALS:
1. The Boards of Directors of each of the Parent and the Merger
Subsidiary have determined that it is in the best interests of the Parent and
the Merger Subsidiary and the Board of Directors of the Company has determined
that it is advisable and in the best interests of the Company and is fair to the
stockholders of the Company, for the Parent to acquire the Company upon the
terms and subject to the conditions set forth herein;
2. In furtherance of such acquisition, the Boards of Directors of the
Company and the Merger Subsidiary have resolved and approved that the Merger
Subsidiary be merged with and into the Company under and pursuant to the
Delaware General Corporation Law (the "DGCL") into a single corporation (the
"Merger") existing under the laws of the State of Delaware, and the Company
shall be the surviving corporation in the Merger (the Company in its capacity as
such surviving corporation being sometimes referred to herein as the "Surviving
Corporation");
3. The Parent, as sole shareholder of the Merger Subsidiary, and the
respective Boards of Directors of each of the Constituent Corporations and the
Parent have approved the Merger upon the terms and conditions hereinafter set
forth and have approved this Agreement;
4. The Merger is permitted pursuant to the DGCL;
5. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
6. For accounting purposes, it is intended that the Merger shall be
accounted for under the purchase method;
7. Simultaneously with the execution and delivery of this Agreement and
as a condition and inducement to the Parent's and the Merger Subsidiary's
willingness to enter into this Agreement, the Parent is entering into a Stock
Option Agreement dated the date hereof in the form of Exhibit A (the "Company
---------
Option Agreement") with the Company pursuant to which the Company is granting to
the Parent the right and option to purchase 1,717,878 shares of common
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stock, par value $.01 per share, of the Company (the "Company Common Stock")
from the Company; and
8. Simultaneously with the execution and delivery of this Agreement and
as a condition and inducement to the Parent's and the Merger Subsidiary's
willingness to enter into this Agreement, the Parent is entering into Voting
Agreements in the form of Exhibit B-1 with certain members of the Board of
-----------
Directors of the Company in their respective capacities as stockholders of the
Company and a Voting Agreement in the form of Exhibit B-2 with a member of the
-----------
Board of Directors of the Company in his capacity as the general partner of a
limited partnership which is a stockholder of the Company (together, the "Voting
Agreements").
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree that the Merger
Subsidiary shall be merged with and into the Company at the Effective Time in
accordance with the DGCL, the Company shall be the Surviving Corporation, and
the parties hereto adopt and agree to the following agreements, terms and
conditions relating to the Merger and the mode of carrying the same into effect.
1. NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION, BYLAWS.
-------------------------------------------------------------------
1.1 Name of Surviving Corporation.
-----------------------------
The name of the Surviving Corporation from and after the Effective
Time shall be [Moon].
1.2 Certificate of Incorporation.
----------------------------
The Certificate of Incorporation of the Company as in effect on the
date hereof shall from and after the Effective Time be and continue to
be the Certificate of Incorporation of the Surviving Corporation until
changed or amended as provided by law, except that at the Effective
Time and upon filing of the Certificate of Merger, the Certificate of
Incorporation of the Company shall be amended and restated in its
entirety to read identically with the Certificate of Incorporation of
the Merger Subsidiary except that the name of the Surviving
Corporation shall be "Penederm Incorporated" (the "Amended and
Restated Certificate of Incorporation").
1.3 Bylaws; Directors and Officers.
------------------------------
The Bylaws of the Company as in effect immediately prior to the
Effective Time shall from and after the Effective Time be and continue
to be the Bylaws of the Surviving Corporation until amended as
provided therein. The directors and officers of the Merger Subsidiary
at the Effective Time shall, from and after the
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effectiveness of the Merger, be the directors and officers,
respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Amended and Restated Certificate of Incorporation and
Bylaws.
1.4 Filing of Certificate of Merger; Effective Date; Effective Time.
---------------------------------------------------------------
Upon fulfillment of the conditions set forth in Article 5 hereof (or
at such time thereafter as provided in the Certificate of Merger), and
if this Agreement is not thereafter, and has not theretofore been,
terminated or abandoned as permitted by the provisions hereof, then a
Certificate of Merger shall be filed in accordance with Section 103
and Section 251 of the DGCL. Said Certificate of Merger shall be
submitted for filing in accordance with the DGCL as soon as
practicable after the Closing. The Merger shall become effective
immediately upon such filing with the Secretary of State of the State
of Delaware, which time is herein referred to as the "Effective Time"
and which date is herein referred to as the "Effective Date."
1.5 Effects of Merger.
-----------------
The Merger shall have the effects set forth in Section 259 of the
DGCL.
1.6 Tax-Free Reorganization.
-----------------------
The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Code, and this Agreement is intended to be a
"plan of reorganization" within the meaning of the regulations
promulgated under Section 368 of the Code.
2. STATUS AND CONVERSION OF SECURITIES.
-----------------------------------
The manner and basis of converting the shares of the capital stock of the
Constituent Corporations in the Merger and the nature and amount of
securities of the Parent which the holders of shares of Company Common
Stock are to receive in exchange for such shares in the Merger are as
follows:
2.1 Company Capital Stock.
---------------------
(a) Conversion of Company Common Stock Into Parent Common Stock. At
the Effective Time, the shares of Company Common Stock, other than Company
Common Stock (if any) owned by the Company, the Parent or the Merger Subsidiary,
shall, by virtue of the Merger and without any action on the part of the Parent,
the Merger Subsidiary, the Company, the Surviving Corporation or the holder
thereof, automatically be cancelled
3
and be converted into shares of common stock, par value $.50 per share, of the
Parent (the "Parent Common Stock") at a ratio equal to 0.68 shares of Parent
Common Stock for each share of Company Common Stock (the "Exchange Ratio"),
subject to the provisions of Sections 2.1(b) and 2.1(d). Any shares of Company
Common Stock (if any) owned by the Company, the Parent or the Merger Subsidiary
shall be cancelled and no Parent Common Stock or other consideration shall be
delivered in exchange therefor.
(b) Delivery of Certificates.
(i) The Parent shall authorize American Stock Transfer and Trust Company
(or such other Person or Persons as shall be reasonably acceptable to
the Parent and the Company) to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective Time,
the Parent shall deposit with the Exchange Agent, in trust for the
holders of shares of Company Common Stock converted in the Merger,
certificates representing the shares of Parent Common Stock issuable
pursuant to Section 2.1(a) in exchange for outstanding shares of
Company Common Stock and cash as required to make payments in lieu of
any fractional shares pursuant to Section 2.1(d) (such cash and shares
of Parent Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall deliver the Parent Common Stock
contemplated to be issued pursuant to Section 2.1(a) out of the
Exchange Fund.
(ii) The Parent shall instruct the Exchange Agent, as soon as practicable
after the Effective Time, to mail to each record holder of a
certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock converted
in the Merger (the "Certificates") a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent, and shall contain instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock and cash in
lieu of fractional shares in accordance with Section 2.1(d)). Upon
surrender for cancellation to the Exchange Agent of all Certificates
held by any record holder of a Certificate, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock into which the
shares
4
represented by the surrendered Certificate shall have been converted
at the Effective Time pursuant to this Article 2, cash in lieu of any
fractional share in accordance with Section 2.1(d) and certain
dividends and other distributions in accordance with Section 2.1(c),
and any Certificate so surrendered shall forthwith be cancelled.
(c) Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, shall be paid to any Person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock until such Person surrenders the
related Certificate or Certificates, as provided in Section 2.1(b), and no cash
payment in lieu of fractional shares shall be paid to any such Person pursuant
to Section 2.1(d) until such Person shall so surrender the related Certificate
or Certificates. Subject to the effect of applicable law, there shall be paid
to each record holder of a new certificate representing such Parent Common
Stock: (A) at the time of such surrender or as promptly as practicable
thereafter, the amount of any dividends or other distributions theretofore paid
with respect to the shares of Parent Common Stock represented by such new
certificate and having a record date on or after the Effective Time and a
payment date prior to such surrender; (B) at the appropriate payment date or as
promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Parent Common Stock and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or subsequent to such surrender; and (C) at the time of
such surrender or as promptly as practicable thereafter, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.1(d). In no event shall the Person
entitled to receive any such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. If any cash or
certificate representing shares of Parent Common Stock is to be paid to or
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the Person requesting such exchange shall pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such shares of Parent Common Stock in a name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. The Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as the
5
Parent or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code or under any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the Parent or
the Exchange Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by the Parent
or the Exchange Agent.
(d) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issuable upon the surrender
for exchange of Certificates pursuant to this Article 2, and no dividend or
other distribution or stock split of the Parent shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of the Parent. In lieu of any such fractional
share, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to this Article 2 shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the per-share closing price on the New York Stock Exchange, Inc. (the
"NYSE") of Parent Common Stock (as reported in the NYSE Composite Transactions)
on the Effective Date (or, if the shares of Parent Common Stock do not trade on
the NYSE on such date, the first date of trading of shares of Parent Common
Stock on the NYSE after the Effective Time) by (ii) the fractional interest to
which such holder would otherwise be entitled. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional share interests, the Exchange Agent shall so notify the Parent, and
the Parent shall deposit such amount with the Exchange Agent and shall cause the
Exchange Agent to forward payments to such holders of fractional share interests
subject to and in accordance with the terms of Section 2.1(c) and this Section
2.1(d).
(e) Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of the Company for twelve (12)
months after the Effective Time shall be delivered to the Parent, upon demand of
the Parent, and any such former stockholders who have not theretofore complied
with this Article 2 shall thereafter look only to the Parent for payment of
their claims for Parent Common Stock, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions with respect to Parent
Common Stock. Neither the Parent nor the Surviving Corporation shall be liable
to any former holder of Company Common Stock for any such shares of Parent
Common Stock, cash and dividends and distributions held in the Exchange
6
Fund which are delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Adjustment of Exchange Ratio. In the event of any
reclassification, stock split, stock dividend, or other subdivision or
combination, with respect to the Parent Common Stock, any change or conversion
of Parent Common Stock into other securities of the Parent or any other dividend
or distribution with respect to the Parent Common Stock other than normal
quarterly cash dividends as the same may be adjusted from time to time pursuant
to the terms of this Agreement (or if a record date with respect to any of the
foregoing should occur) prior to the Effective Time, appropriate and
proportionate adjustments, if any, shall be made to the Exchange Ratio, and all
references to the Exchange Ratio in this Agreement shall be deemed to be to the
Exchange Ratio as so adjusted.
(g) No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
2.1(d)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of Company Common Stock represented by such
Certificates.
(h) Closing of the Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
cancelled and exchanged as provided in this Article 2.
(i) Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such
7
Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
2.2 Subsidiary Common Stock.
-----------------------
Each share of common stock, par value $.50 per share, of the Merger
Subsidiary (the "Subsidiary Common Stock") outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and be
one share of the Common Stock of the Surviving Corporation.
2.3 Assumption of Stock Options; Company Warrant; Employee Stock
------------------------------------------------------------
Purchase Plan.
-------------
(a) Except as expressly provided in this Section 2.3, all rights under any
stock option granted by the Company pursuant to its Equity Incentive Plan,
Employee Stock Option Plan, Consultant Stock Option Plan or Nonemployee
Directors Stock Option Plan (collectively, the "Company Stock Option
Plans") that remains unexercised immediately prior to the Effective Time
("Unexercised Options") shall, together with the Company Stock Option
Plans, be assumed by the Parent, but shall thereafter represent the right
to acquire that number of shares of Parent Common Stock to which the
optionee would have been entitled pursuant to the Exchange Ratio if,
immediately prior to the Effective Time, the optionee had fully exercised
the option and had been a stockholder of record of the Company. The option
price per share of Parent Common Stock shall be equal to the exercise price
per share of the Company Common Stock under each option divided by the
Exchange Ratio, rounded up to the nearest cent. The Parent and the Company
shall each take all action necessary to assure that the rights and benefits
of the optionee under each such option shall not be increased or decreased
by reason of this Section 2.3, and in addition, each option which is an
incentive stock option shall be adjusted as required by Section 424 of the
Code and the regulations promulgated thereunder so as not to constitute a
modification, extension or renewal of the option within the meaning of
Section 424(h) of the Code. The duration and other terms of the options
shall be the same as the original Company options, except that reference to
the Company in the Company Stock Option Plans shall be deemed to be
references to the Parent.
(b) In the event that the Common Stock Purchase Warrant issued by the Company
to Promethean Investment Group, L.L.C. (the "Warrant Holder"), dated
January 21, 1998 (the "Company Warrant"), exercisable for 25,000 shares of
Company Common Stock (the "Company Warrant Shares") has not been fully
exercised at the Effective Time, the Company Warrant shall terminate in
accordance with its terms. Upon tender to the
8
Surviving Corporation of the aggregate Purchase Price (as defined in the
Company Warrant) then in effect under the Company Warrant, the Warrant
Holder shall be entitled, in accordance with the terms of the Company
Warrant, to receive that number of shares of Parent Common Stock to which
the Warrant Holder would have been entitled pursuant to the Exchange Ratio
if, immediately prior to the Effective Time, the Warrant Holder had fully
exercised the Company Warrant and had been a stockholder of record of the
Company.
(c) On the Effective Date, the Parent shall file, and thereafter shall maintain
the effectiveness of, a registration statement with the Securities and
Exchange Commission (the "SEC") covering the Unexercised Options and the
shares issuable under the Company Employee Stock Purchase Plan and the
Company Warrant Shares and the sale of the Parent Common Stock issued upon
exercise of the Unexercised Options and, if applicable, the termination of
the Company Warrant.
(d) The Employee Stock Purchase Plan of the Company (the "Company Employee
Stock Purchase Plan") shall remain in effect, without amendment or
modification, through the Effective Time.
2.4 Closing.
-------
After all conditions set forth in Article 5 hereof have been satisfied
(other than those which have been expressly waived), the closing of
the Merger (the "Closing") shall occur at the offices of Xxxxxxxx
Ingersoll Professional Corporation, 00xx Xxxxx, Xxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx, at which the documents to be delivered on
the Effective Date as described in Article 5 shall be delivered by the
respective parties. The Closing shall be scheduled to occur on the
date set for the Stockholders Meeting as described in Section 4.1(m)
hereof and immediately after the Stockholders Meeting but in no event
later than 3:00 p.m., Eastern time (the "Scheduled Closing Date").
The Closing shall occur on the Scheduled Closing Date unless, on such
date, any party has a right not to close the Merger and refuses to
close, in which event the Closing shall be adjourned from Business Day
to Business Day thereafter until the Closing occurs or until 5:01
p.m., Eastern time, on November 30, 1998. As used in this Agreement,
the term "Business Day" shall mean any day on which the NYSE is open
for trading.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------
3.1 Representations, Warranties and Agreements of the Company.
---------------------------------------------------------
The Company represents and warrants to the Parent and the Merger
Subsidiary as follows:
9
(a) Organization, Standing and Power.
(i) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with all
requisite corporate power and authority to own, operate and lease its
properties, to carry on its business as now being conducted, to enter
into this Agreement and, subject to the approval of the Company's
stockholders in accordance with the DGCL, to perform its obligations
hereunder. The Company is duly qualified or licensed to do business
and in good standing in the state of California and in each other
jurisdiction which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified or so
licensed would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. For purposes of this Agreement,
"Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to the Parent or the Company, as the case may be,
any event, circumstance, change or effect that is or could reasonably
be expected (as far as can be foreseen at the time) to be so adverse
as to result in a severe and critical impairment of the business,
assets, liabilities, financial condition or results of operations of
the Parent and its Subsidiaries, taken as a whole, or the Company and
PL, taken as a whole, as the case may be.
(ii) The Company has only one subsidiary, Penederm Limited (Company No.
3076653), a company incorporated in England and Wales ("PL"). PL is a
corporation duly organized and validly existing under the laws of
England and Wales with all corporate power and authority to own,
operate and lease its properties and to carry on its business as now
being conducted. The authorized share capital of PL is (Pounds)1,000
divided into 1,000 shares of (Pounds)1 each. All of the issued and
outstanding shares of PL are allotted to the Company free and clear of
all security interests, liens, claims, pledges, charges or other
encumbrances of any nature whatsoever, and all such shares have been
validly issued, fully paid and nonassessable and free of preemptive
rights. There are no outstanding rights, options, warrants, conversion
rights or agreements for the purchase or acquisition from, or the sale
or issuance by, PL of any of its shares.
(b) Capital Structure.
(i) As of the date hereof, the authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock and
10
10,000,000 shares of preferred stock, par value $.01 per share (the
"Company Preferred Stock"). At the close of business on June 15, 1998,
8,620,203 shares of Company Common Stock were issued and outstanding,
all of which were validly issued, fully paid and nonassessable, and
free of preemptive rights. As of the date hereof: (A) no shares of
Company Common Stock are held in the treasury of the Company or PL;
(B) 1,487,664 shares of Company Common Stock are reserved for future
issuance pursuant to the Company Stock Option Plans; (C) 25,000 shares
are reserved for issuance under the Company Warrant; (D) 727,518
shares are reserved for issuance under that certain Common Stock
Investment Agreement dated as of January 21, 1998 between Promethean
Investment Group L.L.C. (the "Investor") and the Company (the "Common
Stock Investment Agreement"); (E) 70,516 shares are reserved for
issuance under the Company Employee Stock Purchase Plan; and (F)
30,000 shares are reserved for issuance under the 401(k) Plan of the
Company (the "Company 401(k) Plan"). The Company Stock Option Plans,
the Company Warrant, the Common Stock Investment Agreement, the
Company Employee Stock Purchase Plan and the Company 401(k) Plan are
the only benefit plans or arrangements of the Company or PL under
which any securities of the Company or PL are issuable. No shares of
Company Preferred Stock are issued and outstanding. As of the date of
this Agreement, except as set forth above, no shares of capital stock
or other voting securities of the Company or PL are issued, reserved
for issuance or outstanding. As of the date of this Agreement, except
for stock options covering not in excess of 1,220,097 shares of
Company Common Stock issued under the Company Stock Option Plans
(collectively, the "Company Stock Options"), the Company Warrant and
rights to purchase covering approximately 10,000 shares of Company
Common Stock under the Company Employee Stock Purchase Plans and the
Company's matching contribution obligations under the 401(k) Plan,
there are no options, warrants, calls, rights or agreements to which
the Company or PL is a party or by which either of them is bound
obligating the Company or PL to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the
Company or PL or obligating the Company or PL to grant, extend or
enter into any such option, warrant, call, right or agreement. The
Company does not have any outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter. There are no
obligations, contingent or otherwise, of the Company to (x)
repurchase, redeem or otherwise acquire any
11
shares of Company Common Stock or other capital stock of the Company,
or the capital stock or other equity interests of PL; (y) (other than
advances to PL in the ordinary course of business) provide material
funds to, or make any material investment in (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with
respect to the obligations of, PL or any other Person; or (z) make
payment of any Shortfall Compensation (as defined in the Common Stock
Investment Agreement) to the Investor. The Company contributed 4,651
shares of Company Common Stock to the Company 401(k) Plan in respect
of the plan year ended December 31, 1997.
(ii) The Company has made available to the Parent complete and correct
copies of the Company Stock Option Plans, the Company Employee Stock
Purchase Plan, the Common Stock Investment Agreement, the Company
401(k) Plan and the Company Warrant. Schedule 3.1(b) sets forth a
---------------
complete and accurate list of (A) all Company Stock Options
outstanding as of the date of this Agreement and (B) the exercise
price of each outstanding Company Stock Option.
(c) Authority. On or prior to the date of this Agreement, the Board of
Directors of the Company has determined the Merger to be advisable and fair
to and in the best interest of the Company and its stockholders, approved
this Agreement in accordance with the DGCL, resolved (subject to its
fiduciary duties) to recommend the approval of this Agreement by the
Company's stockholders and directed that this Agreement be submitted to the
Company's stockholders for approval. The Company has all requisite
corporate power and authority to enter into this Agreement and the Company
Option Agreement, to consummate the transactions contemplated by the
Company Option Agreement and, subject to approval by the stockholders of
the Company of this Agreement, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the Company Option
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject, in the
case of this Agreement, to (x) approval of this Agreement by the
stockholders of the Company and (y) the filing of a Certificate of Merger
as required by the DGCL. This Agreement and the Company Option Agreement
have been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by the Parent
and the Merger Subsidiary and the Company Option Agreement by the Parent
and the validity and binding effect of this Agreement on the Parent and the
Merger Subsidiary and the Company Option Agreement on the Parent)
constitute
12
the valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms, except to the extent
that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by principles of equity regarding the
availability of remedies. The Company has taken all necessary action to
render its Shareholders Rights Plan dated November 20, 1996 (the "Company
Rights Plan") inapplicable to the transactions contemplated by this
Agreement. The filing of a combined prospectus and proxy statement to be
included in the Registration Statement (together with any amendments or
supplements thereto, the "Prospectus/Proxy Statement") with the SEC and the
issuance of the shares of Company Common Stock pursuant to the Company
Option Agreement have been duly authorized by the Company's Board of
Directors.
(d) Consents and Approvals; No Violation. Assuming that all consents,
approvals, authorizations and other actions described in this Section
3.1(d) have been obtained and all filings and obligations described in this
Section 3.1(d) have been made, except as set forth on Schedule 3.1(d), the
---------------
execution and delivery of this Agreement and the Company Option Agreement
do not, and the consummation of the transactions contemplated hereby and
thereby and compliance with the provisions hereof and thereof will not,
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company
or PL under, any provision of (i) the Certificate of Incorporation or
Bylaws of the Company, (ii) any provision of the charter or organization
documents of PL, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or PL, including, without
limitation, the intellectual property listed on Schedule 3.1(x) and the in-
---------------
licenses, out-licenses, co-promotion and co-marketing agreements listed on
Schedule 3.1(bb), or (iv) any judgment, order, decree, statute, law,
----------------
ordinance, rule or regulation applicable to the Company or PL or any of
their respective properties or assets, other than, in the case of clauses
(ii), (iii) or (iv), any such violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company, materially impair
the ability of the Company to perform its obligations hereunder or under
the Company Option Agreement or prevent the consummation of any of the
transactions contemplated hereby or thereby. No filing or registration
with, or authorization, consent or approval of, any domestic (federal and
state), foreign or supranational court, commission, governmental body,
13
regulatory agency, authority or tribunal (a "Governmental Entity") is
required by or with respect to the Company or PL in connection with the
execution and delivery of this Agreement or the Company Option Agreement by
the Company or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement or the Company Option
Agreement, except for (i) in connection, or in compliance, with the
provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act of 1933, as amended (together
with the rules and regulations promulgated thereunder, the "Securities
Act") and the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), (ii)
the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business, (iii)
such filings, registrations, authorizations, consents or approvals as may
be required with respect to PL, (iv) applicable requirements, if any, of
the National Association of Securities Dealers ("NASD") and the National
Association of Securities Dealers Automated Quotation National System
("NASDAQ"), (v) as may be required under foreign laws, (vi) the consents
and approvals listed on Schedule 3.1(d), and (vii) such other consents,
---------------
orders, authorizations, registrations, declarations and filings the failure
of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair
the ability of the Company to perform its obligations hereunder or under
the Company Option Agreement or prevent the consummation of any of the
transactions contemplated hereby or thereby.
(e) SEC Documents and Other Reports. The Company has filed all required
documents with the SEC since January 1, 1995 (the "Company SEC Documents").
As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were
filed, none of the Company 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. The consolidated
financial statements (including, in each case, any notes thereto) of the
Company included in the Company SEC Documents (the "Company Financial
Statements") as of their respective dates complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved
14
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position of
the Company and PL as at the respective dates thereof and the consolidated
results of their operations and their consolidated cash flows for the
periods then ended. Except as disclosed in the Company SEC Documents or as
required by generally accepted accounting principles, the Company has not,
since March 31, 1998, made any change in the accounting practices or
policies applied in the preparation of the Company Financial Statements.
Neither the Company nor PL had as of March 31, 1998 any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by generally accepted accounting principles to be
reflected on the consolidated balance sheet of the Company and PL at March
31, 1998 (including the notes thereto) included in the Company Financial
Statements that are not so reflected.
(f) Registration Statement and Prospectus/Proxy. None of the information to
be supplied by the Statement Company (as to the Company) for inclusion or
incorporation by reference in the Registration Statement or the
Prospectus/Proxy Statement will (i) in the case of the Registration
Statement, at the time it becomes effective, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading
or (ii) in the case of the Prospectus/Proxy Statement, at the time of the
mailing of the Prospectus/Proxy Statement, at the time of the Stockholders
Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If, at any
time prior to the Effective Time, any event with respect to the Company,
its officers and directors or PL shall occur which is required at that time
to be described in the Prospectus/Proxy Statement, such event shall be so
described, and an appropriate amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. The Prospectus/Proxy Statement will comply
(with respect to the Parent) as to form in all material respects with the
provisions of the Securities Act, and (with respect to the Company) as to
form in all material respects with the provisions of the Exchange Act.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed with the SEC prior to the date of this
Agreement, since March 31, 1998 and except as set forth on Schedule 3.1(g),
----------------
(i) the Company and PL have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material
oral or written agreement or other transaction, that is not in the ordinary
course of business consistent with past practice or that would
15
result in a Material Adverse Effect on the Company; (ii) the Company and PL
have not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether
or not covered by insurance) that has had a Material Adverse Effect on the
Company; (iii) there has been no change in the capital stock of the Company
except for the issuance of shares of Company Common Stock pursuant to
Company Stock Options and the Company Employee Stock Purchase Plan and no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its stock; (iv) there has not been (A) any granting by the
Company or PL to any executive officer of the Company or PL of any increase
in compensation, except in the ordinary course of business consistent with
prior practice or as was required under employment agreements in effect as
of the date of the most recent audited financial statements included in the
Company SEC Documents, (B) any granting by the Company or PL to any such
executive officer of any increase in severance or termination agreements in
effect as of the date of the most recent audited financial statements
included in the Company SEC Documents, or (C) any entry by the Company or
PL into any employment, severance or termination agreement with any such
executive officer; (v) any delivery of a "put notice," as defined in the
Common Stock Investment Agreement, or any issuance of any shares of Company
Common Stock pursuant to the Common Stock Investment Agreement; and (vi)
there has been no event causing a Material Adverse Effect on the Company or
any developments that would, individually or in the aggregate, result in a
Material Adverse Effect on the Company.
(h) Permits and Compliance. Each of the Company and PL is in possession of
all franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for the Company or PL to own, lease and
operate its properties or to carry on its business as it is now being
conducted (the "Company Permits"), except where the failure to have any of
the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and, as of the date of this
Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened, except where the
suspension or cancellation of any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. Neither the Company nor PL is in violation of (i) its charter, by-
laws or other organizational documents, (ii) any applicable law, ordinance,
administrative or governmental rule or regulation, or (iii) any order,
decree or judgment of any Governmental Entity having jurisdiction over the
Company or PL, except, in the case of clauses (i), (ii) and (iii), for any
violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. Except as set forth in the
16
Company SEC Documents filed prior to the date of this Agreement, no event
of default or event that, but for the giving of notice or the lapse of time
or both, would constitute an event of default exists or, upon the
consummation by the Company of the transactions contemplated by this
Agreement or the Company Option Agreement, will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, contractual license or other agreement or instrument to
which the Company or PL is a party or by which the Company or PL is bound
or to which any of the properties, assets or operations of the Company or
PL is subject, other than any defaults that, individually or in the
aggregate, would not have a Material Adverse Effect to on the Company. On
May 13, 1998, the Company's revolving credit facility with Silicon Valley
Bank terminated in accordance with the terms thereof, the Company having
satisfied in full all of its obligations thereunder.
(i) Tax Matters. Except as set forth on Schedule 3.1(i), (i) the
---------------
Company and PL have filed all federal, and all material state, local,
foreign and provincial, Tax Returns required to have been filed or
appropriate extensions therefor have been properly obtained, and such Tax
Returns are correct and complete, except to the extent that any failure to
so file or any failure to be correct and complete would not, individually
or in the aggregate, have a Material Adverse Effect on the Company; (ii)
all Taxes shown to be due on such Tax Returns have been timely paid or
extensions for payment have been properly obtained; (iii) the Company and
each of its Subsidiaries have complied in all material respects with all
rules and regulations relating to the withholding of Taxes except to the
extent that any failure to comply with such rules and regulations would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (iv) neither the Company nor PL has waived or extended any
statute of limitations in respect of its Taxes; (v) to the knowledge of the
Company, no Tax Returns referred to in clause (i) relating to federal and
state income Taxes have been examined by the Internal Revenue Service
("IRS") or the appropriate state taxing authority for any period; (vi) no
issues have been raised in writing by the relevant taxing authority in
connection with the examination of the Tax Returns referred to in clause
(i); (vii) all deficiencies asserted or assessments made as a result of any
examination of such Tax Returns by any taxing authority have been paid in
full or are being timely and properly contested; and (viii) the Company is
not a "United States real property holding company" as defined in Section
897(c) of the Code. The Company has not filed a consent of the type
described in Section 341(f) of the Code. The Company is not and has never
been a member of an affiliated group of corporations (within the meaning of
Section 1504 of the Code). The
17
Company is not a party to, is not bound by and does not have any obligation
under any tax sharing, tax indemnity or similar agreement. For purposes of
this Agreement: (i) "Taxes" means any federal, state, local, foreign or
provincial income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or added minimum,
ad valorem, value-added, transfer or excise tax, or other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any
Governmental Entity, and (ii) "Tax Return" means any return, report or
similar statement (including the attached schedules) required to be filed
with respect to any Tax, including, without limitation, any information
return, claim for refund, amended return or declaration of estimated Tax.
(j) Actions and Proceedings. Except as set forth in the Company SEC
Documents filed prior to the date of this Agreement or on Schedule 3.1(j),
---------------
there are no outstanding orders, judgments, injunctions, awards or decrees
of any Governmental Entity against or involving the Company or PL, or
against or involving any of its or their present or, to the knowledge of
the Company, former directors, officers, employees, consultants or agents
of the Company or PL, in their capacities as such, any of its or their
properties, assets or business or any Employee Benefit Plan of the Company
that, individually or in the aggregate, would have a Material Adverse
Effect on the Company or materially impair the ability of the Company to
perform its obligations hereunder or under the Company Option Agreement. As
of the date of this Agreement, there are no actions, suits, labor disputes
or claims or legal, administrative or arbitrative proceedings or
governmental investigations pending or, to the knowledge of the Company,
threatened against or involving the Company or PL or any of its or their
present or, to the knowledge of the Company, former directors, officers,
employees, consultants or agents in their capacities, as such, or any of
its or their properties, assets or business or any Employee Benefit Plan of
the Company that, individually or in the aggregate, would have a Material
Adverse Effect on the Company or materially impair the ability of the
Company to perform its obligations hereunder or under the Company Option
Agreement. As of the date hereof, there are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the knowledge of the Company,
threatened against or affecting the Company or PL or any of its or their
present or, to the knowledge of the Company, former officers, directors,
employees, consultants or agents, in their capacities as such, or any of
its or their properties, assets or business relating to the transactions
contemplated by this Agreement and the Company Option Agreement. For
purposes of this Agreement, the term "knowledge of the Company" shall mean
the actual knowledge of the officers and directors of the Company.
18
(k) FDA and Related Matters.
(i) Schedule 3.1(k) sets forth a list, for the period between January 1, 1993
---------------
and the date hereof, of (A) all Regulatory or Warning Letters, Notices of
Adverse Findings and Section 305 Notices and similar letters or notices
issued by the Food and Drug Administration ("FDA") (or any other federal,
state, local or foreign governmental entity that is concerned with the
safety, efficacy, reliability or manufacturing of drug products (each, a
"Drug Regulatory Agency")) to the Company or PL that, individually or in
the aggregate, would have a Material Adverse Effect on the Company, (B) all
product recalls, notifications and safety alerts conducted by the Company
or PL, whether or not required by the FDA, and any request from the FDA or
any Drug Regulatory Agency requesting the Company or PL to cease to
investigate, test or market any product, which recalls, notifications,
safety alerts or requests would, individually or in the aggregate, have a
Material Adverse Effect on the Company, and (C) any criminal, injunctive,
seizure or civil penalty actions begun or threatened by the FDA or any Drug
Regulatory Agency against the Company or PL and known by the Company or PL
and all related consent decrees (including plea agreements) issued with
respect to the Company or PL. Copies of all documents referred to in
Schedule 3.1(k) have been made available to the Parent.
---------------
(ii) The Company has made submissions to obtain material approvals,
certifications, authorizations, clearances and permits for marketing, and
has made filings with, or notifications to, the FDA and Drug Regulatory
Agencies (or has documented a basis for not making such filings or
notifications) pursuant to applicable requirements of the Federal Food,
Drug and Cosmetics Act, as amended (the "FDA Act"), and applicable laws,
regulations and rules with respect to each of the products sold by the
Company or PL that is listed on Schedule 3.1(k). The products listed on
---------------
Schedule 3.1(k) collectively constitute in excess of 95% of the gross
---------------
revenues generated during the twelve (12)-month period ending December 31,
1997 by that portion of the business of the Company and PL which is subject
to the jurisdiction of the FDA or any Drug Regulatory Agency. The Company
and PL have no reason to believe that any of the material approvals,
clearances, authorizations, registrations, certifications, permits, filings
or notifications that it or any of its Subsidiaries has received or made to
the FDA or any Drug Regulatory Agency that relate to the marketing of the
products listed on Schedule 3.1(k) have been or are being revoked;
---------------
provided, however, the FDA or any other Drug
19
Regulatory Agency may disagree with the Company's or PL's assessment and
undertake actions, at any time, to remove from commercial distribution any
such product.
(iii) Except as disclosed on Schedule 3.1(k), neither the Company nor PL
---------------
has knowledge (or has been notified by the Contract Manufacturer) of any pending
regulatory action of any sort (other than non-material routine or periodic
inspections or reviews) against any of the Company, PL or the contract
manufacturer of the Company's products (the "Contract Manufacturer") by the FDA
or any Drug Regulatory Agency or any other duly authorized governmental
authority which regulates the sale of drugs in any jurisdiction which could have
a Material Adverse Effect on the Company or in any material way limit or
restrict the ability of the Company or PL to market existing products. Except
as set forth on Schedule 3.1(k), none of the Company, PL or, to the knowledge of
---------------
the Company, the Contract Manufacturer has knowingly committed or permitted to
exist any violation of the rules and regulations of the FDA or any Drug
Regulatory Agency or any other duly authorized governmental authority which
regulates the sale of drugs which has not been cured by the Company, PL or, to
the knowledge of the Company, the Contract Manufacturer or waived by the FDA or
any such regulatory authority; provided, however, the FDA or any other Drug
Regulatory Agency may disagree with the Company's assessment and undertake
enforcement actions at any time.
(l) Certain Agreements. Except as set forth in Schedule 3.1(l), neither
---------------
the Company nor PL is a party to any oral or written employment agreement
or plan, including any employment agreement, severance agreement, stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which shall be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the Company
Option Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or the Company Option Agreement (collectively, "Transaction
Agreements"). No holder of any option to purchase shares of Company Common
Stock, or shares of Company Common Stock granted in connection with the
performance of services for the Company or PL, is or will be entitled to
receive cash from the Company or PL in lieu of or in exchange for such
option or shares as a result of the transactions contemplated by this
Agreement or the Company Option Agreement. Schedule 3.1(l) sets forth (i)
--------------
for each officer, director or employee who is a party to, or will receive
benefits (other than as a result of Section 2.3)
20
under, any Transaction Agreement, the total amount that each such Person
may receive, or is eligible to receive, assuming that the transactions
contemplated by this Agreement are consummated on the date hereof, and (ii)
the total amount of indebtedness owed to the Company or PL from each
officer or director of the Company and PL. Except as set forth in the
Certificate of Incorporation and Bylaws of the Company or PL, neither the
Company nor PL is a party to any indemnification agreement with any of its
present or future directors, officers, employees, agents or other Persons
who serve or served in any other capacity with any other enterprise at the
request of the Company or of PL.
(m) Material Contracts. Except as set forth in Schedule 3.1(m) or on any
---------------
other Schedule hereto, as of the date hereof, neither the Company nor PL is
a party to, or is bound by, (i) any material agreement, indenture or other
instrument relating to the borrowing of money by the Company or PL or the
guarantee by the Company or PL of any such obligation (other than trade
payables and instruments relating to transactions entered into in the
ordinary course of business) or (ii) any other material contract or
agreement or amendment thereto that (A) is not described in, or filed as an
exhibit to, a Form 10-K, a Form 10-Q or a Form 8-K filed by the Company
with the SEC, (B) places any material restrictions on the ability of the
Company to engage in any material business activity currently conducted, or
(C) is material to the business, properties, assets, liabilities, financial
condition, results of operations or prospects of the Company and PL, taken
as a whole (collectively, the "Company Contracts"). Neither the Company nor
PL is in default under any Company Contract, which default is reasonably
likely to have, either individually or in the aggregate, a Material Adverse
Effect on the Company, and there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a
default.
(n) Opinion of Financial Advisor. The Company has received the written
opinion of Xxxxxx Brothers Inc., dated the date hereof, to the effect that,
as of the date hereof, from a financial point of view, the Exchange Ratio
to be offered to the stockholders of the Company is fair to the Company's
stockholders, a copy of which opinion has been delivered to the Parent.
(o) Takeover Provisions Inapplicable. As of the date hereof and at all times
on or prior to the Effective Time, Section 203 of the DGCL is, and shall
be, inapplicable to the Merger, the Company Option Agreement, the Voting
Agreements and the transactions contemplated thereby.
(p) Required Vote of the Company Stockholders. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is
required to adopt this Agreement. No other vote of the
21
securityholders of the Company is required by law, the Certificate of
Incorporation or Bylaws of the Company or otherwise in order for the
Company to consummate the Merger and the transactions contemplated hereby
and in the Company Option Agreement.
(q) Finders and Investment Bankers. Except for Xxxxxx Brothers, Inc., whose
fees will be paid by the Company, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to
act on behalf of the Company or PL who might be entitled to any fee or
commission in connection with the transactions contemplated by this
Agreement.
(r) Authorized Stock. The Company has taken all necessary corporate
and other action to authorize and reserve and to permit it to issue, and,
at all times from the date hereof until the obligation to deliver Common
Stock when the Company Option Agreement terminates, will have reserved for
issuance, upon exercise of the Option (as defined in the Company Option
Agreement), shares of Common Stock necessary for the Parent to exercise the
Option, and the Company shall take all necessary corporate action to
authorize and reserve for issuance all additional shares of Common Stock or
other securities which may be issued pursuant to the Company Option
Agreement upon exercise of the Option. The shares of Common Stock to be
issued upon due exercise of the Option, including all additional shares of
Common Stock or other securities which may be issuable pursuant to the
Company Option Agreement, upon issuance pursuant thereto, shall be duly and
validly issued, fully paid and nonassessable and shall be delivered free
and clear of all liens or encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder.
(s) Company Affiliates. Schedule 3.1(s) contains a list (reasonably
---------------
satisfactory to counsel for the Parent) identifying all Persons who may be
deemed to be "affiliates" of the Company on the date hereof as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Company Affiliates").
(t) Owned Real Property. The Company owns no real property.
(u) Leased Real Estate. The Company is the lessee under the real estate
leases described on Schedule 3.1(u). Schedule 3.1(u) contains the number of
--------------- ---------------
square feet leased by the Company under each lease, the current rent
payable thereunder and the expiration date of each lease. True, correct and
complete copies of said leases have been delivered by the Company to the
Parent. The Company now enjoys quiet and undisturbed possession under each
of said leases. To the knowledge of the Company, such leased real estate is
free and clear of any zoning, use or building restriction or any
22
pending, proposed or threatened zoning or use or building restriction which
would, either singly or in the aggregate, adversely interfere with the
present or any intended use of any of such leased real estate. To the
knowledge of the Company, said leases are valid and binding and in full
force and effect. The Company is not in default as to the payment of rent
and has not received written notice of any other default thereunder.
(v) Owned and Leased Tangible Personal Property. Title to all of the
Company's owned equipment, vehicles, furniture and fixtures and other items
of owned tangible personal property is held by the Company free and clear
of any claim, lease, mortgage, security interest, conditional sale
agreement or other title retention agreement, restriction or lien or
encumbrance of any kind or nature whatsoever, except as set forth on
Schedule 3.1(v). The Company has a valid leasehold interest in all tangible
---------------
personal property material to its business held by it under lease, and
true, correct and complete copies of said leases have been delivered by the
Company to the Parent. To the knowledge of the Company, said leases are
valid and binding and in full force and effect. The Company is not in
default as to the payment of rent and has not received written notice of
any other default thereunder.
(w) Physical Condition of Property. To the knowledge of the Company, all of
the leased real estate of the Company and the structures erected thereon
and all of the owned and leased tangible personal property of the Company
are in good repair and condition and are suitable for the conduct of the
present business of the Company.
(x) Patents and Certain Other Intellectual Property Rights.
(i) Schedule 3.1(x) lists all of the patents (including all reissues,
---------------
divisions, continuations and extensions thereof), patent applications,
patent disclosures, docketed inventions, trademarks, trademark
applications, trade names and copyrights owned by the Company.
(ii) The Company owns, or possesses the right to use, all of the intellectual
property rights necessary to the conduct of the business of the Company as
presently conducted except for rights which, if not so owned or possessed,
would not individually or in the aggregate have a Material Adverse Effect
on the Company. Such ownership or right to use, as the case may be, is
free and clear of all liens, security interests, claims and rights to use
of third parties except those which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
23
(iii)Except pursuant to licenses listed in Schedule 3.1(bb) or in the Company
----------------
SEC Documents, there are no material royalties, honoraria, fees or other
payments payable as of the date hereof by the Company to any person by
reason of the ownership, use, license, sale or disposition of any of the
Company's intellectual property rights.
(iv) The Company is not, to the knowledge of the Company, infringing the right
of any other party with respect to any intellectual property rights which
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on the Company.
(y) Accounts Receivable. No customer(s) representing 10% or more of the
total revenues of the Company is (are) delinquent in the payment of its
(their) accounts with the Company.
(z) Insurance and Bonds. Attached hereto, made part hereof and marked
Schedule 3.1(z) is a true and correct listing of all of the policies of
---------------
insurance and all surety and other bonds to which the Company now is a
party, or during the immediately preceding sixty (60) months was a party.
All of such policies and bonds which have expired were valid and in full
force and effect during their respective terms, all other of such policies
and bonds are valid and in full force and effect at the present time, and
no claim has been made, or notice given, to cancel or avoid any of said
policies or bonds or to reduce the coverage provided thereby, except where
the existence of any claim or notice of cancellation, avoidance or
reduction of coverage, or invalidity, unenforceability or ineffectiveness,
would not have a Material Adverse Effect on the Company.
(aa) Product Warranties and Liability.
(i) No reserves have been provided for by the Company to cover potential claims
under existing customer indemnification agreements.
(ii) Except as to claims, actions, proceedings or investigations which have been
asserted but as to which no notice has been given to the Company, and
except as set forth on Schedule 3.1(aa), there are no product liability
----------------
claims, actions, proceedings or investigations pending or, to the knowledge
of the Company, threatened against the Company or its assets or state of
facts existing which could give rise to any such product liability claim,
action, proceeding or investigation.
(iii)To the knowledge of the Company, no claims have been made that the
products sold by the Company are not effective for the uses
24
such products purport to serve. To its knowledge, the Company has not
received any written notice that any product manufactured by it has not
been manufactured in accordance with "current Good Manufacturing Practices"
(as such term is commonly understood within the Company's industry) or has
not been properly labeled for its approved use.
(bb) Contracts, Proposals and Bids. Schedule 3.1(bb) is a list of all of the
----------------
in-license, out-license, co-promotion and co-marketing agreements and
similar agreements relating to the intellectual property rights of the
Company necessary for the conduct of the business of the Company as
currently conducted, customer contracts for product sales and all bids or
proposals for product or customer contracts not yet received, bid or
awarded.
(cc) Labor and Employment Matters. Except as set forth on Schedule 3.1(cc):
----------------
(i) The Company is not a party to or obligated to contribute to any employee
benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") (an "Employee Benefit Plan"), guaranteed
annual income plan, fund or arrangement, or any incentive, bonus, profit
sharing, deferred compensation, stock option or purchase plan, agreement or
arrangement, or any written or, to the knowledge of the Company, oral
employment or consulting agreement (except employment offer letters), or
any non-competition agreement, or any severance or written, or to the
knowledge of Company, oral termination pay plans or policies, any
hospitalization, disability or other insurance plans, or any other employee
fringe benefit plans, or any collective bargaining agreement, or any other
agreement, plan or arrangement similar to or in the nature of the
foregoing, oral or written, whether or not an Employee Benefit Plan, except
those set forth on Schedule 3.1(cc). True, correct and complete copies of
----------------
all of the written Employee Benefit Plans and other written plans and
agreements and true, correct and complete written descriptions of all of
such oral arrangements described in Schedule 3.1(cc) have heretofore been
----------------
delivered by the Company to the Parent. The Company does not have any
unfunded liabilities on account of or in connection with any such Employee
Benefit Plan, other plan, agreement or arrangement which is a non-
multiemployer plan.
(ii) With respect to any non-multiemployer Employee Benefit Plan, (A) neither
such Employee Benefit Plan nor any fiduciary has engaged in a prohibited
transaction as defined in Section 406 of ERISA (for which no individual or
class exemption exists under
25
Section 408 of ERISA) or any prohibited transaction as defined in Section
4975 of the Code (for which no individual or class exemption exists under
Section 4975 of the Code), which may reasonably be expected to have a
Material Adverse Effect on the Company; (B) all filings and reports as to
such Employee Benefit Plan required to have been made on or before the date
hereof to the IRS, to the United States Department of Labor or, if
applicable, to the Pension Benefit Guaranty Corporation have been made on
or before the date hereof (to the extent not granted a valid extension of
the date of filing); (C) all disclosures to plan participants relating to
such Employee Benefit Plan required by ERISA to have been made on or before
the date hereof have been or will be duly made on or before that date; (D)
there is no litigation, disputed claim (other than routine claims for
benefits), governmental proceeding or investigation pending or threatened
with respect to any such Employee Benefit Plan, its related trust or any
fiduciary, administrator or sponsor of such Employee Benefit Plan; (E) each
Employee Benefit Plan has been established, maintained, funded and
administered materially in accordance with its governing documents and any
applicable provisions of ERISA, the Code, other applicable law and all
regulations and rulings promulgated thereunder; and (F) the Company has
delivered to the Parent a true, correct and complete copy of (1) the most
recent Form 5500 for each such Employee Benefit Plan filed with the IRS and
the Department of Labor and, with respect to each Employee Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA, the most recent determination letter received from the IRS,
(2) each trust or custodial agreement and each deposit administration,
group annuity, insurance or other funding contract associated with such
Employee Benefit Plan, (3) the most recent financial information for each
Employee Benefit Plan, (4) where applicable, the most recent actuarial
report or valuation relating to each such Employee Benefit Plan which has
been delivered to the Company by its actuaries, and (5) where applicable, a
summary of any "reportable event" within the meaning of Section 4043(b) of
ERISA.
(iii)The Company has never been a party to or obligated to contribute to any
multiemployer Employee Benefit Plan.
(iv) There has not been any (A) termination or partial termination of any
Employee Pension Benefit Plan maintained by the Company (or by any Person
which is or was under common control, within the meaning of Section 414(b),
(c), (m) or (o) of the Code, with the Company (a "Section 414 Affiliate")
during the period of such
26
common control, at a time when Title IV of ERISA applied to such Plan, (B)
commencement of any proceeding to terminate any such Plan pursuant to ERISA
or otherwise, or (C) written notice given to the Company or any affiliate
of the intention to commence or seek the commencement of any such
proceeding, which (under (A)) resulted or (under (B) or (C)) would result
in an insufficiency of plan assets necessary to satisfy benefit commitments
under Title IV of ERISA or benefits vested under the Plan. Neither the
Company nor any Section 414 Affiliate has incurred withdrawal liability,
complete or partial, contingent or otherwise, under the Multiemployer
Pension Plan Amendments Act of 1980.
(v) The Company (A) is not a party to any collective bargaining agreement or
discussions or negotiations with any Person or group looking toward any
such agreement, (B) has not within the last three (3) years experienced any
strike, lockout, work stoppage, slowdown, unfair labor practice claim or
other labor difficulty (other than grievances and unfair labor practice
claims in which the Company's only exposure was to monetary damages of
$50,000 or less), and (C) to the knowledge of the Company, is not aware of
a threatened strike, lockout, work stoppage, slowdown, unfair labor
practice claim or other such labor difficulty. The Company has no
knowledge of any facts which would form the basis for the assertion of any
grievance or unfair labor practice claim or other charge or complaint
against the Company by or before the National Labor Relations Board or any
state labor relations board or commission or representative thereof, and is
not aware of any filing by any employee or employee group seeking
recognition as a collective bargaining representative or unit.
(dd) Insider Contracts. Except as set forth in the Company SEC Documents or on
Schedule 3.1(dd) or as set forth and identified as such on any other
----------------
Schedule hereto, there are no contracts, agreements, purchase orders,
commitments, leases, understandings or arrangements, including loan
arrangements, between the Company and any of its respective officers
(except employment offer letters), directors or shareholders, or any
related or affiliated Person, corporation or other entity (a true, correct
and complete copy of each such written document and a true, correct and
complete written description of each such oral relationship having
heretofore been delivered by the Company to the Parent).
(ee) Other Material Contracts. Schedule 3.1(ee) is a true, correct and
---------------
complete list of all other (i.e., not identified on one or more of the
foregoing Schedules hereto) material contracts, agreements, understandings
and arrangements, oral and written, to which the Company is a party or by
27
which the Company is bound. For purposes of this Section 3.1(ee),
"material" shall mean containing an obligation (i) requiring, or reasonably
anticipated to require, payment of more than $100,000 in any one (1) year
period, or (ii) not terminable by or on the Company's behalf, without
penalty, within ninety (90) days after the Closing, or (iii) terminable by
or on behalf of the other party on ninety (90) days' notice or less, or
(iv) having a term of more than twenty-four (24) months, or (v) of guaranty
or suretyship, irrespective of the term or amount involved. True, correct
and complete copies of such written material contracts have heretofore been
delivered by the Company to the Parent. All material contracts are valid
and binding, in full force and effect and enforceable in accordance with
their terms, and there exists no default, and to the knowledge of the
Company, no event has occurred which through notice or the passage of time
or otherwise may result in a default, under the terms of any of the
material contracts, except as set forth on Schedule 3.1(ee) and except
----------------
where the invalidity, nonbinding nature, unenforceability, ineffectiveness
or default would not have a Material Adverse Effect on the operations or
financial condition of the Company taken as a whole.
(ff) Export of Products and Technologies. To the knowledge of the Company,
there are no United States government restrictions prohibiting or, except
for export licensing requirements which the Company has fulfilled or
satisfied to date, otherwise affecting the Company in exporting its
existing products and know-how to the foreign countries to which such are
currently being exported (a description of all of such products and know-
how and foreign countries being listed on Schedule 3.1(ff)).
----------------
(gg) Absence of Illegal Payments. The Company has not authorized any of its
officers, directors, employees or non-employee agents to make, and to the
knowledge of the Company, no officer, director, employee or non-employee
agent of the Company has authorized or made, any offer, payment or promise
to pay any money, or offered, given or promised to give anything of value,
to any domestic or foreign government official, political party or official
thereof or any candidate for political office (domestic or foreign), or to
any other Person, while knowing or having reason to know that all or a
portion of such money or thing of value would be offered, given or
promised, directly or indirectly, to any of such Person(s) for purposes of
(A) influencing any act or decision of such entity or Person, including a
decision to fail to perform his or her official functions, or (B) inducing
such entity or Person to use his or her influence with a domestic or
foreign government or instrumentality thereof to affect or influence any
act or decision of such government or instrumentality in order to assist
the Company in obtaining or retaining business for or with, or directing
business to, any Person, which offer, payment or promise
28
constitutes a violation by the Company of the Foreign Corrupt Practices Act
of 1977, as amended.
(hh) Absence of Anti-Boycott Violations. To the knowledge of the Company, the
Company has not violated or is not in violation of any statute, law,
decree, order, rule or regulation of any governmental body of the United
States which prohibits or regulates the boycotting of or refusal to deal
with any Person or entity, including without limitation the Export
Administration Amendments of 1977 (50 U.S.C. App. (S) 2401 et seq.), the
-------
Ribicoff Amendments to the Tax Reform Act of 1976 (Internal Revenue Code
(S) 999) or the Xxxxxxx Act (15 U.S.C. (S) l et seq.), or any rule or
-------
regulation promulgated pursuant thereto.
(ii) Environmental Matters.
(i) Except as disclosed in Schedule 3.1(ii): (A) the Company is currently in
----------------
compliance with all applicable Environmental Laws, and has obtained all
permits and other authorizations needed to operate its facilities, except
where failure to comply with applicable Environmental Laws or where failure
to obtain such permits and other authorizations would not have a Material
Adverse Effect on the Company; (B) the Company has not violated any
applicable Environmental Law, except where such violation would not have a
Material Adverse Effect; (C) there are no present requirements of any
applicable Environmental Laws which will increase materially the Company's
costs of complying with the Environmental Laws nor to the Company's
knowledge are any such requirements currently threatened to be imposed; (D)
all past on-site generation, treatment, storage, disposal and other
management of Regulated Substances by the Company and, to the knowledge of
Company, by any prior owner, operator or occupant of any property presently
or previously owned, leased or occupied by the Company was, when done, in
compliance with then applicable Environmental Laws, except where failure of
compliance would not have a Material Adverse Effect on the Company; (E) no
past on-site generation, treatment, storage, disposal or other management
of Regulated Substances: (1) has resulted in the presence of Regulated
Substances on, in, under or migrating from any property of the Company in
violation of applicable Environmental Laws, except where such violation
would not have a Material Adverse Effect on the Company; or (2) requires
the investigation, cleanup, removal or remediation of any Regulated
Substances, in order to comply with Environmental Laws, except where such
investigation, cleanup, removal or remediation would not have a Material
Adverse Effect on the Company; (F) all past
29
off-site transportation, treatment, storage, disposal and other management
of Regulated Substances generated by the Company was, when done, in
compliance with then applicable Environmental Laws, except where failure of
compliance would not have a Material Adverse Effect on the Company; (G) the
Company did not, directly or indirectly, arrange for the treatment, storage
or disposal of any Regulated Substances at any property or facility
identified or, to the knowledge of the Company, is proposed to be
identified on any list of contaminated properties or other properties which
pursuant to Environmental Laws are the subject of an investigation or
remediation action by any federal, state or, to the knowledge of the
Company, local, government agency or instrumentality; (H) no property
currently owned, leased or otherwise occupied by the Company and no
property previously owned, leased or otherwise occupied by the Company is
identified, or to the knowledge of the Company is proposed to be
identified, on any list of contaminated properties or other properties
which pursuant to Environmental Laws are the subject of an investigation or
remediation action by any federal, state or, to the knowledge of the
Company, local government agency or instrumentality; (I) the Company has
not received any notice of any kind that the Company is or may be
considered a party with potential responsibility under Environmental Laws
for the costs of responding to a release or threatened release of any
Regulated Substance which has not been resolved; (J) the Company has not
filed or failed to file any notice required under any applicable
Environmental Law reporting a release of any Regulated Substance; (K) no
environmental lien and no unrecorded environmental lien has attached to any
property of the Company, nor, to the knowledge of the Company, is there a
reasonable basis to believe that such a lien may be attached to any
property of the Company; and (L) during the period when the Company
occupied any property now or formerly owned, leased or operated by the
Company or, to the knowledge of the Company, during any period prior to its
ownership, occupation or operation of such property: (1) there were no
underground storage tanks or surface impoundments, (2) there was no
asbestos-containing material in friable form, and (3) there were no
polychlorinated biphenyls ("PCBs") other than those used, maintained or
disposed of in compliance with all applicable Environmental Laws.
(ii) As used in this Section 3.1(ii), the following terms shall be defined as
follows: (A) "Environmental Laws" include but are not limited to any
federal, state, local or foreign laws (including the common law), statutes,
charters, ordinances, codes, rules or regulations,
30
permits or permit conditions, licenses or authorizations, consent or
administrative orders, agreements or understandings (whether previously
existing, now existing or hereafter enacted, promulgated, issued or entered
into) which pertain to the protection of human health or the environment or
worker safety, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901
-- ----
et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801
-- ----
et seq.; the Toxic Substance Control Act, 15 U.S.C. (S) 2601 et seq.; the
-- ---- -- ---
Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq.; the
-- ----
Federal Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f-300j; the Federal
Air Pollution Control Act, 42 U.S.C. (S) 7401 et seq.; the Oil Pollution
-- ----
Act, 33 U.S.C. (S) 2701 et seq.; the Federal Insecticide, Fungicide and
-- ----
Rotenticide Act, 7 U.S.C. (S)(S) 136-136y; and the Occupational Safety
and Health Act, 29 U.S.C. (S) 651 et seq., as each may be amended from
-- ----
time to time, regulations promulgated under the foregoing or any equivalent
state statutes and regulation, and any judicial or administrative
interpretation of such laws, statutes, charters, ordinances, codes, rules
or regulations, permits or permit conditions, consent or administrative
orders, agreements or understandings, including, without limitation, any
judicial or administrative orders or judgments; and (B) "Regulated
Substance" includes any substance the manufacturing, processing, sale,
generation, treatment, storage, disposal, transportation, labeling,
removal, remediation or other management of which is regulated by any
applicable Environmental Law.
(jj) No Adverse Actions. There is no existing, pending or, to the
knowledge of the Company, threatened termination, cancellation, limitation,
modification or change in the business relationship of the Company with any
supplier, customer or other Person or entity, except such actions which would
not have a Material Adverse Effect on the Company.
3.2 Representations, Warranties and Agreements of the Parent.
--------------------------------------------------------
The Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Power. The Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania with all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business as now being
conducted and to enter into this Agreement and perform its obligations
hereunder. Each Subsidiary of the Parent is duly organized,
31
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority would
not, individually or in the aggregate, have a Material Adverse Effect on the
Parent. The Parent and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Parent. For purposes of this Agreement, a "Subsidiary" of the Parent means
any corporation, partnership, limited liability company, joint venture or other
legal entity of which the Parent (either alone or through or together with any
other Subsidiary) owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, limited liability company, joint venture or other
legal entity.
(b) Capital Structure.
(i) The Parent. As of the date hereof, the authorized capital stock of the
Parent consists of 300,000,000 shares of Parent Common Stock, par value
$.50 per share, and 5,000,000 shares of preferred stock, par value $.50 per
share ("Parent Preferred Stock"). At the close of business on May 29,
1998, (A) 122,341,004 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and
nonassessable, and free of preemptive rights, (B) 850,328 shares of Parent
Common Stock were held in the treasury of the Parent, and (C) 12,576,826
shares of Parent Common Stock were reserved for future issuance pursuant to
stock option arrangements of the Parent (collectively, the "Parent Stock
Option Plans"), of which 3,512,826 shares were reserved for future issuance
under stock options granted as of May 29, 1998. The Parent Stock Option
Plans are the only benefit plans of the Parent or its Subsidiaries under
which any securities of the Parent or any of its Subsidiaries are issuable.
No shares of Parent Preferred Stock are outstanding. As of the date of
this Agreement, except as set forth above, no shares of capital stock or
other voting securities of the Parent were issued, reserved for issuance or
outstanding. As of the date of this Agreement, except for stock options
covering not in excess of 3,512,826 shares of Parent Common Stock issued
under the Parent Stock Option Plans (collectively, the "Parent Stock
Options"), there are no options,
32
warrants, calls, rights or agreements to which the Parent or any of its
Subsidiaries is a party or by which any of them is bound obligating the
Parent or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Parent
or any of its Subsidiaries or obligating the Parent or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right or agreement. Each outstanding share of capital stock of each
Subsidiary of the Parent that is a corporation is duly authorized, validly
issued, fully paid and nonassessable, and each such share is owned by the
Parent or another Subsidiary of the Parent free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of
any nature whatsoever. The Parent does not have any outstanding bonds,
debentures, notes or other obligations the holders of which have the right
to vote (or convertible into or exercisable for securities having the right
to vote) with the stockholders of the Parent on any matter.
(ii) The Merger Subsidiary. The Merger Subsidiary has, as of the date hereof,
authorized capital stock consisting of 1,000 shares of Subsidiary Common
Stock, of which 1,000 shares are issued and outstanding and owned by the
Parent. The Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. All
of the issued and outstanding shares of the Merger Subsidiary have been
validly issued, are fully paid and nonassessable and are free of preemptive
rights. There are no outstanding rights, options, warrants, conversion
rights or agreements for the purchase or acquisition from, or the sale or
issuance by, the Merger Subsidiary of any shares of its capital stock,
other than this Agreement. Since its organization, the Merger Subsidiary
has conducted no business activities, except such as are related to this
Agreement and the performance of its obligations hereunder.
(c) Authority. On or prior to the date of this Agreement, the Board of
Directors of the Parent has declared the Merger advisable and fair to and in the
best interest of the Parent and its shareholders. The Parent has all requisite
corporate power and authority to enter into this Agreement and the Company
Option Agreement, to consummate the transactions contemplated by the Company
Option Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Company Option Agreement by the
Parent and the consummation by the Parent of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the
33
part of the Parent, subject, in the case of this Agreement, to the filing
of a Certificate of Merger as required by the DGCL. This Agreement and the
Company Option Agreement have been duly executed and delivered by the Parent and
(assuming the valid authorization, execution and delivery of this Agreement and
the Company Option Agreement by the Company and the validity and binding effect
of this Agreement and the Company Option Agreement on the Company) constitute
the valid and binding obligation of the Parent enforceable against the Parent in
accordance with their respective terms, except to the extent that enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by principles of equity regarding the availability of remedies. The issuance of
shares of Parent Common Stock to be issued in the Merger and the filing of a
registration statement on Form S-4 with the SEC by the Parent under the
Securities Act for the purpose of registering the shares of Parent Common Stock
to be issued in the Merger (together with any amendments or supplements thereto,
whether prior to or after the effective date thereof, the "Registration
Statement") have been duly authorized by the Parent's Board of Directors.
(d) Consents and Approvals; No Violation. Assuming that all consents,
approvals, authorizations and other actions described in this Section 3.2(d)
have been obtained and all filings and obligations described in this Section
3.2(d) have been made, the execution and delivery of this Agreement and the
Company Option Agreement do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Parent or any of its
Subsidiaries under, any provision of (i) the Articles of Incorporation or Bylaws
of the Parent, (ii) any provision of the comparable charter or organization
documents of any of the Parent's Subsidiaries, (iii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Parent or
any of its Subsidiaries, or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Parent, materially
impair the ability of the Parent to perform its obligations hereunder or under
the Company Option Agreement or prevent the consummation of any of the
34
transactions contemplated hereby or thereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to the Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Company Option Agreement by the
Parent or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement or the Company Option Agreement,
except for (i) in connection, or in compliance, with the provisions of the HSR
Act, the Securities Act and the Exchange Act, (ii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (iii) applicable
requirements, if any, of state securities or "blue sky" laws and the NYSE, (iv)
approval for listing the Parent Common Stock to be issued in the Merger on the
NYSE, and (v) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on the Parent,
materially impair the ability of the Parent to perform its obligations hereunder
or under the Company Option Agreement or prevent the consummation of any of the
transactions contemplated hereby or thereby.
(e) SEC Documents and Other Reports. The Parent has filed all required documents
with the SEC since January 1, 1995 (the "Parent SEC Documents"). As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and, at the respective times they were filed, none of the Parent 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. The consolidated financial statements (including, in each case,
any notes thereto) of the Parent included in the Parent SEC Documents (the
"Parent Financial Statements") complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of the Parent and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended. Except as disclosed in the
Parent SEC Documents or as required by generally accepted accounting principles,
the Parent has not, since March 31, 1998, made any change in the accounting
practices or policies applied in the preparation of the Parent Financial
Statements. Neither the
35
Parent nor any of its Subsidiaries had as of March 31, 1998 any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to be reflected on
the consolidated balance sheet of the Parent and its Subsidiaries (including the
notes thereto) included in the Financial Statements that are not so reflected.
(f) Registration Statement and Prospectus/Proxy Statement. None of
the information to be supplied by the Parent for inclusion or incorporation by
reference in the Registration Statement or the Prospectus/Proxy Statement will
(i) in the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Prospectus/Proxy Statement, at
the time of the mailing of the Prospectus/Proxy Statement, at the time of each
of the Stockholders Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Parent, its officers
and directors or any of its Subsidiaries shall occur which is required at that
time to be described in the Prospectus/Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Parent. The Registration Statement will
comply (with respect to the Parent) as to form in all material respects with the
provisions of the Securities Act, and the Prospectus/Proxy Statement will comply
(with respect to the Parent) as to form in all material respects with the
provisions of the Exchange Act.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Documents filed with the SEC prior to the date of this Agreement,
since March 31, 1998, there has been no event causing a Material Adverse Effect
on the Parent, or any development that would, individually or in the aggregate,
result in a Material Adverse Effect on the Parent.
(h) Permits and Compliance. The Parent is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for the Parent to own, lease and operate its properties or to carry on
its business as it is now being conducted (the "Parent Permits"), except where
the failure to have any of the Parent Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Parent, and, as of the date of
this Agreement, no suspension or cancellation of any of the
36
Parent Permits is pending or, to the knowledge of the Parent, threatened, except
where the suspension or cancellation of any of the Parent Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the Parent.
Parent is not in violation of (i) its charter, by-laws or other organizational
documents, (ii) any applicable law, ordinance, administrative or governmental
rule or regulation, or (iii) any order, decree or judgment of any Governmental
Entity having jurisdiction over the Parent, except, in the case of clauses (i),
(ii) and (iii), for any violations that, individually or in the aggregate, would
not have a Material Adverse Effect on the Parent. As of the date hereof, there
is no contract or agreement, not entered into in the ordinary course of
business, that is material to the business, properties, assets, liabilities,
financial condition, results of operations or prospects of the Parent and its
Subsidiaries, taken as a whole. Except as set forth in the Parent SEC Documents
filed prior to the date of this Agreement, no event of default or event that,
but for the giving of notice or the lapse of time or both, would constitute an
event of default exists or, upon the consummation by the Parent of the
transactions contemplated by this Agreement or the Company Option Agreement,
will exist under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which the Parent is a party or by which the Parent is
bound or to which any of the properties, assets or operations of the Parent is
subject, other than any defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on the Parent.
(i) Actions and Proceedings. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Parent or any of its Subsidiaries, or against or
involving any of the present or, to the knowledge of the Parent, former
directors, officers, employees, consultants or agents of the Parent or any of
its Subsidiaries, in their capacities as such, any of its or their properties,
assets or business or employee benefit plan of the Parent that, individually or
in the aggregate, would have a Material Adverse Effect on the Parent or
materially impair the ability of the Parent to perform its obligations hereunder
or under the Company Option Agreement. As of the date of this Agreement, there
are no actions, suits, labor disputes or claims or legal, administrative or
arbitrative proceedings or governmental investigations pending or, to the
knowledge of the Parent, threatened against or involving the Parent or any of
its Subsidiaries or any of its or their present or, to the knowledge of the
Parent, former directors, officers, employees, consultants, agents or
stockholders, in their capacities as such, or any of its or their properties,
37
assets or business or any employee benefit plan of the Parent that, individually
or in the aggregate, would have a Material Adverse Effect on the Parent or
materially impair the ability of the Parent to perform its obligations hereunder
or under the Company Option Agreement. As of the date hereof, there are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the knowledge of the
Parent, threatened against or affecting the Parent or any of its Subsidiaries or
any of its or their present or, to the knowledge of the Parent, former officers,
directors, employees, consultants, agents or stockholders, in their capacities
as such, or any of its or their properties, assets or business relating to the
transactions contemplated by this Agreement and the Company Option Agreement.
For purposes of this Agreement, the term "knowledge of the Parent" shall mean
the actual knowledge of the officers and directors of the Parent.
(j) FDA Matters. Neither the Parent nor any of its Subsidiaries (i)
is a party to any pending investigation or proceeding by or before the FDA or
any other duly authorized Drug Regulatory Agencies or any other duly authorized
governmental authority which regulates the sale of drugs and controlled
substances in any jurisdiction; (ii) has knowledge of any pending regulatory
action of any sort (other than non-material routine or periodic inspections or
reviews) against the Parent or any of its Subsidiaries by the FDA or any other
duly authorized Drug Regulatory Agencies or any other governmental authority
which regulates the sale of drugs and controlled substances in any jurisdiction
which could have a Material Adverse Effect on the Parent, or in any material way
limit or restrict the ability of the Parent or any of its Subsidiaries to market
existing products; (iii) has knowingly committed or permitted to exist any
violation of the rules and regulations of the FDA or any other duly authorized
Drug Regulatory Agencies or any other governmental authority which regulates the
sale of drugs and controlled substances in any jurisdiction which has not been
cured by the Parent or any of its Subsidiaries or waived by the FDA or any such
regulatory authority; (iv) has received notice from any third party (whether or
not in writing), or has knowledge of, any claim, dispute or controversy relating
to the supply of regulated materials used in the products of the Parent or any
of its Subsidiaries, or the quality, formulation, potency, toxicity or efficacy
of such materials; or (v) anticipates, or knows of any pending, threatened or
potential action by any duly authorized Drug Regulatory Agencies or any other
governmental authority which regulates the sale of drugs and controlled
substances in any jurisdiction which could have a Material Adverse Effect on the
Parent or in any material way limit or restrict the ability of the Parent or any
of its Subsidiaries to market existing products. To the knowledge of the
Parent, it and each of its Subsidiaries have
38
fulfilled in all material respects all regulatory requirements necessary or
requisite to the continued marketing of their existing products.
(k) Labor Relations. To the knowledge of the Parent, the Parent has a
good relationship with its employees and has no reason to believe that there
will be any adverse change in any such relationship, whether as a result of the
consummation of the transactions provided for by this Agreement or otherwise.
(l) Patents and Certain Other Intellectual Property Rights.
(i) The Parent owns, or possesses the right to use, all of the necessary
intellectual property rights to the conduct of the business of the Parent
as presently conducted except for rights to which, if not so owned or
possessed, would not individually or in the aggregate have a Material
Adverse Effect on the Parent. Such ownership or right to use, as the case
may be, is free and clear of all liens, security interests, claims and
rights to use of third parties except those which would not, individually
or in the aggregate have a Material Adverse Effect on the Parent.
(ii) There are no material royalties, honoraria, fees or other payments,
incurred outside the ordinary course of business, payable as of the date
hereof by the Parent to any person by reason of the ownership, use,
license, sale or disposition of any of the Parent's intellectual property
rights.
(iii)The Parent is not, to the knowledge of the Parent, infringing the right of
any other party with respect to any intellectual property rights which
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on the Parent.
(m) Parent Common Stock. The shares of Parent Common Stock to be issued in
accordance with this Agreement will be, upon issuance, duly authorized, validly
issued, fully paid and nonassessable, with no personal liability attaching to
the ownership thereof. Such issuance of shares of Parent Common Stock will be
free of any restrictions on transfer imposed by the Parent, other than those
contemplated by this Agreement. There are no preemptive rights or other anti-
dilution rights which would become effective upon or prohibit such issuance of
shares of Parent Common Stock.
(n) Opinion of Financial Advisor. The Parent has received the written
opinion of SBC Warburg Dillon Read Inc. ("Xxxxxx Read"), dated the date hereof,
to the effect that, as of the date hereof, the Exchange Ratio is fair to the
39
Parent from a financial point of view, a copy of which opinion has been
delivered to the Company.
(o) Finders and Investment Bankers. Except for Xxxxxx Read, whose
fees will be paid by the Parent, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Parent or the Merger Subsidiary who might be entitled to any fee
or commission in connection with the transactions contemplated by this
Agreement.
(p) Parent Affiliate Agreements. Schedule 3.2(p) contains a list
---------------
(reasonably satisfactory to counsel for the Company) identifying those Persons
who may be deemed to be "affiliates" of the Parent on the date hereof, as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Parent Affiliates").
3.3 Representations and Warranties as to the Merger Subsidiary.
----------------------------------------------------------
The Parent and the Merger Subsidiary represent and warrant to the
Company as follows:
(a) Organization, Standing, Power and Capitalization of the Merger
Subsidiary. The Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware with all
requisite corporate power and authority to carry on the business to be conducted
by it prior to the Effective Date and to enter into this Agreement and perform
its obligations hereunder. The Merger Subsidiary is not, and is not required to
be, qualified to do business in any jurisdiction other than the state of
Delaware. The Merger Subsidiary has duly authorized capital stock consisting of
1,000 shares of common stock, par value $.50 per share, all of which are issued
and outstanding and owned by the Parent. All of such issued and outstanding
shares have been validly issued, are fully paid and nonassessable, and are free
of preemptive rights. There are no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from, or the
sale or issuance by, the Merger Subsidiary of any shares of its capital stock
other than in connection with this Agreement.
(b) Business of the Merger Subsidiary. Since its organization, the
Merger Subsidiary has not engaged in any business activities, entered into any
transactions or incurred any liabilities whatsoever, except such as are related
to the transactions contemplated by this Agreement. The Merger Subsidiary has
no subsidiaries.
(c) Authorization; Binding Agreement. Pursuant to its Certificate of
Incorporation, the Merger Subsidiary has requisite corporate power and
40
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, including but not
limited to the Merger, have been duly and validly authorized by the Parent as
sole stockholder of the Merger Subsidiary and by the Merger Subsidiary's Board
of Directors and no other corporate proceedings on the part of the Merger
Subsidiary are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly authorized, executed and delivered by the Merger
Subsidiary and constitutes the legal, valid and binding agreement of the Merger
Subsidiary, enforceable against it in accordance with its terms, except to the
extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
(d) Compliance With Other Instruments, Etc. Neither the execution or
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will conflict with, result in any violation of or constitute a default
under the Certificate of Incorporation or Bylaws of the Merger Subsidiary or any
judgment, decree, order or any material law or regulation by which the Merger
Subsidiary is bound or affected.
(e) Governmental and Other Consents, Etc. No consent, approval or
authorization of or designation, declaration or filing with any Governmental
Entity on the part of the Merger Subsidiary is required in connection with the
execution or delivery of this Agreement by the Merger Subsidiary or the Merger
Subsidiary's consummation of the transactions contemplated hereby other than (i)
filings in the State of Delaware in accordance with the DGCL and (ii) filings
under the HSR Act.
4. COVENANTS.
---------
4.1 Covenants of the Company.
------------------------
The Company agrees that prior to the Effective Date:
(a) Action in Furtherance of Merger. Subject to the terms and
conditions herein provided, the Company agrees to use commercially reasonable
efforts to take, or cause to be taken, such action, and to do, or cause to be
done, such things as are necessary, proper or advisable to consummate and make
effective as promptly as practicable the Merger and the transactions
contemplated by this Agreement, including (i) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative,
41
challenging this Agreement or the consummation of the transactions contemplated
hereby, (ii) obtaining all governmental consents required for the consummation
of the Merger and the transactions contemplated thereby, and (iii) making all
necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, the Company agrees to use commercially reasonable efforts to
take, or cause to be taken, such actions and to do, or cause to be done, such
things as are necessary to satisfy the other conditions of the Closing set forth
herein. The Company shall consult with counsel for the Parent as to, and shall
permit such counsel, at the Parent's expense, to participate in the decision-
making process as to the strategy to be employed in, any lawsuits or proceedings
referred to in clause (i) above brought against the Company, but not against the
Parent, provided that counsel for the Company shall retain control of any such
lawsuits or proceedings.
(b) Maintenance of Properties. The Company shall, and shall cause PL
to, maintain all of its and their respective properties in customary repair,
order and condition, reasonable wear and use and damage by fire or other
casualty excepted, and shall maintain, and shall cause PL to maintain, insurance
upon all of its and their properties and with respect to the conduct of its and
their businesses in amounts and kinds comparable to that in effect on the date
of this Agreement.
(c) Access and Information. Between the date of this Agreement and
the Effective Date, upon reasonable notice, the Company and PL shall give the
Parent and its authorized representatives (including its financial advisors,
accountants and legal counsel) access, at all reasonable times and in a manner
which shall not cause unreasonable disturbance, to all plants, offices,
warehouses and other facilities and to all contracts, agreements, commitments,
books and records (including Tax Returns) of the Company and PL (except to the
extent any such agreements or contracts by their terms restrict access to third
parties and the consent of the other party(ies) thereto cannot be obtained after
commercially reasonable efforts to do so), shall permit the Parent to make such
inspections as it may reasonably require and shall cause its officers and those
of PL promptly to furnish the Parent with such financial and operating data and
other information with respect to the business and properties of the Company and
PL, as may from time to time be reasonably requested. All data and information
so received from the Company shall be deemed received pursuant to the
Confidentiality Agreement, and the Parent shall cause its officers, directors,
employees, auditors, counsel, financial advisors and agents to comply with the
provisions of the Confidentiality Agreement with respect to such data and
information.
42
(d) Conduct of Business. Except as expressly contemplated by this
Agreement or as otherwise agreed in writing by the Parent, during the period
from the date of this Agreement through the Effective Time, the Company shall,
and the Company shall cause PL to, conduct its business in the ordinary course
consistent with past practice, and the Company shall, and the Company shall
cause PL to, use commercially reasonable efforts to (i) preserve intact its
business organization, (ii) keep available the services of its officers and
employees, (iii) preserve its relationships with customers and suppliers, and
(iv) maintain satisfactory relationships with all other Persons with which it
does business. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or otherwise agreed to in writing
by the Parent, prior to the Effective Time, neither the Company nor PL shall,
without the prior written consent of the Parent:
(i) amend or propose to amend its Certificate of Incorporation or Bylaws;
(ii) other than in the ordinary course of business consistent with past
practice: (A) create, incur or assume any indebtedness for borrowed money
or obligations in respect of capital leases; (B) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any other Person except
the Company or PL; (C) make any loans, advances or capital contributions
to, or investments in, any other Person (other than customary travel or
business advances to employees made in the ordinary course of business
consistent with past practice); (D) make any capital expenditure or
expenditures which, individually, is in excess of $10,000 or, in the
aggregate, are in excess of $50,000; (E) enter into or amend any agreement
or contract material to the Company; or (F) incur any material liability or
obligation (absolute, accrued, contingent or otherwise);
(iii)sell, transfer, lease, license or otherwise dispose of, or mortgage
or encumber, or agree to sell, transfer, lease, license or otherwise
dispose of, or mortgage or encumber, any assets or properties, real,
personal, intangible or mixed, other than the sale, transfer or disposition
of the Company's products in the ordinary course of business;
(iv) in the case of the Company, except as expressly provided in this Agreement,
amend or terminate the Company Rights Plan prior to the earlier of the
Effective Time or the termination of this
43
Agreement, unless required to do so by a court of competent jurisdiction;
(v) in the case of the Company, deliver any "put notices" under the Common
Stock Investment Agreement or issue any shares of Company Common Stock
pursuant thereto; or
(vi) authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
(e) Capital Stock. Between the date hereof and the Effective Time,
except as specifically contemplated by this Agreement or the Company Option
Agreement, neither the Company nor PL shall, unless otherwise agreed to in
writing by Parent, (i) make any changes in its authorized capital stock; (ii)
authorize or issue any securities convertible into, or exchangeable with, the
capital stock of the Company or PL; (iii) issue any stock options, warrants or
other rights calling for the issue, transfer, sale or delivery of its capital
stock or other securities except pursuant to the Company Stock Option Plans, the
Company Employee Stock Purchase Plan or the Company 401(k) Plan consistent with
past practice; provided, however, the Company shall not issue any "performance
share awards" and "stock purchase rights" under the Equity Incentive Plan of the
Company; (iv) declare or pay any stock dividend or effect any recapitalization,
split-up, combination, exchange of shares or other reclassification in respect
of its outstanding shares of capital stock; (v) issue, transfer, sell or deliver
any shares of its capital stock, except Company Common Stock to be issued: (A)
upon the exercise of stock options previously granted pursuant to existing
Company Stock Option Plans or granted in accordance with this Section 4.1(e),
(B) pursuant to the exercise of the Company Warrant, or (C) as required by the
terms of the Company Employee Stock Purchase Plan or the Company 401(k) Plan;
(vi) purchase, redeem or otherwise acquire any outstanding shares of its capital
stock or any other securities of the Company or any rights, warrants or options
to acquire any such shares or securities; or (vii) declare, pay or set apart for
payment any dividends on, or make any other actual, constructive or deemed
distributions in respect of its capital stock or otherwise make any payments to
its stockholders in their capacity as such. Except in a manner consistent with
past practice, no award or grant under the Company Stock Option Plans or any
other benefit plan or program shall be made without the consent of the Parent.
Except as specifically contemplated by this Agreement, the Company shall not
make any material amendment to any of (i) the Company Stock Option Plans or
options outstanding thereunder, or (ii) any other option or warrant agreement,
including, without limitation, the Company Warrant.
44
(f) No Solicitation.
(i) The Company shall cease, and shall cause PL to cease and shall use
commercially reasonable efforts to cause its and PL's respective officers,
directors, employees, counsel, investment bankers, financial advisers,
accountants, other representatives and agents (collectively, the "Company
Representatives") to cease, in each case immediately after the date hereof,
any discussions or negotiations with any parties that may be ongoing with
respect to a Takeover Proposal. Neither the Company nor the Board of
Directors of the Company shall, nor shall either of them authorize or
permit PL or any Company Representative to: (A) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Takeover
Proposal; (B) participate in any discussion or negotiations regarding any
Takeover Proposal; (C) approve or agree to or endorse any Takeover
Proposal; (D) enter into any agreement with respect to any Takeover
Proposal; or (E) other than as permitted by Section 4.1(m), withdraw or
modify, or propose to withdraw or modify in a manner adverse to Parent, the
approval or recommendation of this Agreement or the Merger; provided,
however, that, notwithstanding any other provision hereof, the Company and
the Board of Directors of the Company may, at any time prior to the time
the stockholders of the Company shall have approved the Merger, engage in
the actions prohibited by this Section 4.1(f)(i) in response to an
unsolicited Takeover Proposal which did not result from a breach of this
Section 4.1(f)(i) and subject to compliance with Section 4.1(f)(ii) if, and
only to the extent that, (x) the Board of Directors of the Company
determines in good faith, based upon the advice of its legal counsel as to
legal matters, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, (y)
the Board of Directors of the Company determines that the Takeover Proposal
is a Superior Proposal, and (z) the party who submitted the Takeover
Proposal executes a customary confidentiality agreement (as determined by
the Company after receiving such Takeover Proposal and after consultation
with its outside legal counsel), the benefits of the terms of which if more
favorable to the other party than those contained in the confidentiality
agreement in place with Parent, shall be extended to Parent,
(ii) In addition to the obligations of the Company set forth in Section
4.1(f)(i), the Company shall promptly advise Parent orally and in
45
writing of any Takeover Proposal received by Company or any request for
information stated by the proponent to be in contemplation of any Takeover
Proposal, or any inquiry which could reasonably be expected to lead to any
Takeover Proposal, the material terms and conditions of such Takeover
Proposal or request or inquiry and the identity of the Person making such
Takeover Proposal, request or inquiry. The Company shall keep the Parent
reasonably informed of any material amendment or modification to such
Takeover Proposal, request or inquiry.
(iii) "Takeover Proposal" means any inquiry, proposal or offer from any
Person relating to any: (A) tender or exchange offer, merger,
consolidation or similar transaction involving the Company or PL, (B)
sale, lease or other disposition directly or indirectly by merger,
consolidation, or share exchange of assets of the Company or PL
representing 10% or more of the consolidated assets of the Company or PL,
(C) issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into,
such securities) representing 10% or more of the voting power of the
Company, (D) transaction in which any Person shall acquire beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act),
or the right to acquire beneficial ownership or any "group" (as such term
is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 25%
or more of the outstanding Common Stock, in each case, other than the
transactions with Parent contemplated by this Agreement or the Company
Option Agreement referred to in the recitals to this Agreement.
(iv) "Superior Proposal" means any Takeover Proposal on terms which the Board of
Directors of the Company determines in its good-faith judgment, based in
part on the advice of a financial advisor of nationally recognized
reputation (which opinion shall be provided promptly to Parent), to be more
favorable to the stockholders of the Company than the Merger from a
financial point of view and for which financing is then committed or
reasonably likely to be available.
(v) For purposes of this Agreement, the term "Person" shall mean any
individual, corporation, partnership, trust, unincorporated association,
limited liability company, governmental agency or any other entity.
46
(g) No Final Put Notice. The Company shall refrain from delivering a
"final put notice" in respect of the "put notice" delivered under the Common
Stock Investment Agreement on June 4, 1998.
(h) Compensation Matters. Except with the prior written consent of
the Parent, neither the Company nor PL shall (i) pay, agree to pay or accelerate
the payment of any bonus, severance or other compensation to any officer or
employee not currently required under an existing agreement or employee benefit
plan or arrangement (and with respect to officers and directors, only to the
extent such agreement, plan or arrangement is described in the Company's 1998
Proxy Statement) except for increases in compensation of employees who are not
officers or directors of the Company consistent with past practices, (ii) make
payment of any bonus, severance or other compensation to any officer or employee
which is permitted hereunder in any property other than cash, (iii) create any
new employee benefit plan or arrangement, (iv) modify any existing employee
benefit plan, arrangement or agreement in any respect which would materially
increase the compensation payable thereunder to employees, or (v) enter into any
new employment agreement or modify any existing employment agreement of any
employee who is an officer or director of the Company or PL.
(i) Contracts. Except as otherwise agreed to in writing by the
Parent, neither the Company nor PL shall enter into, terminate or modify in any
material respect any contract, agreement or commitment material to the Company
without the prior written consent of the Parent, which consent shall not be
unreasonably withheld.
(j) Tax Matters. The Company and PL shall continue to file when due
all federal, state, local, foreign and other tax returns, reports and
declarations required to be filed by them, and shall pay or make full and
adequate provision for the payment of all taxes and governmental charges due or
payable by them. Neither the Company nor PL shall prepare or file any Tax
Return inconsistent with past practice or, on any such Tax Return, take any
position, make any election, or adopt any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods or make any tax election or settle or compromise
any material federal, state, local or foreign income tax liability.
(k) Amendments to the Schedules. The Company shall make such
amendments to the Schedules referred to in Section 3.1 as are necessary to
reflect therein the occurrence of events or transactions occurring after the
date hereof and shall deliver a copy of each such amendment to the Parent on the
same date as the date of the amendment. The Company shall
47
deliver such additional amendments from time to time as are necessary to reflect
any material event occurring between the date hereof and the Effective Date.
(l) Notification of Certain Matters. The Company shall give prompt
notice to the Parent of: (i) any notice of, or other communication relating to,
a default or event which, with notice or lapse of time or both, would become a
default under any agreement, indenture or instrument to which the Company or PL
is a party or is subject which default could reasonably be expected to have a
Material Adverse Effect on the Company; (ii) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement
including the Merger; (iii) any notice or other communication from any
regulatory authority or national securities exchange in connection with the
transactions contemplated by this Agreement; (iv) any Material Adverse Change
suffered by the Company, or the occurrence of an event which would be reasonably
expected to have a Material Adverse Effect on the Company; and (v) any claims,
actions, proceedings or investigations commenced or threatened in writing
involving or affecting the Company or PL, or any of their respective property or
assets, or any employee, consultant, director or officer, in his or her capacity
as such, of the Company or PL, which, if pending on the date hereof, would have
been required to have been disclosed pursuant to this Agreement or which relates
to the consummation of the Merger.
(m) Stockholder Approval. The Company shall take all steps necessary
to duly call, give notice of, convene and hold, no later than thirty-five (35)
days after the Registration Statement has been declared effective by the SEC, a
special meeting of its stockholders in accordance with the DGCL to consider and
vote upon the adoption and approval of this Agreement and the Merger and the
transactions contemplated hereby (the "Stockholders Meeting"). The Company,
through its Board of Directors, shall adopt a recommendation to the stockholders
of the Company that they adopt and approve this Agreement, shall use
commercially reasonable efforts, consistent with its legal obligations, to
obtain any necessary approval by its stockholders of the transactions
contemplated hereby and shall not withdraw or modify such recommendation, except
as permitted by Section 4.1(f)(i) or on the basis of the occurrence of a
Material Adverse Change with respect to the Parent or the occurrence of an event
which has, or can reasonably be expected to have, a Material Adverse Effect on
the Parent and the Board of Directors of the Company determines in good faith,
based upon the advice of its counsel as to legal matters, that it is necessary
to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law. Without limiting the
48
generality of the foregoing, the Company agrees that its obligations pursuant to
the first sentence of this Section 4.1(m) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of a Takeover Proposal.
(n) Financial Statements. The Company, promptly after the preparation
thereof, shall send to the Parent any financial statements prepared by or on
behalf of it for periods subsequent to March 31, 1998 as to which the
representations and warranties regarding the Company Financial Statements set
forth in Section 3.1(e) shall apply.
(o) Proxy Statement. The Company shall deliver to the Parent the
final form of proxy statement which the Company intends to distribute to its
stockholders in connection with the adoption and approval of this Agreement and
the Merger.
(p) Company Affiliates. The Company shall deliver to the Parent an
updated Schedule 3.1(s) reflecting any change in the identity of the Company
---------------
Affiliates within five (5) days of the Company having knowledge of such change.
In the event additional Persons become Company Affiliates after the date hereof,
the Company shall use commercially reasonable efforts to cause each such Person
to deliver to the Parent a written agreement in substantially the form of
Exhibit C hereto with each such Person within ten (10) days after the Company
---------
has knowledge that such Person has become a Company Affiliate.
(q) Takeover Statutes. If any "business combination," "fair price,"
"control share acquisition" or "moratorium" statute or other similar statute or
regulation or any state "blue sky" or securities law statute shall become
applicable to the transactions contemplated hereby, the Company and the Board of
Directors of the Company shall, to the extent consistent with applicable law,
grant such approvals and take such actions as are reasonably necessary so that
the transactions contemplated hereby and thereby may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise act to minimize
the effects of such statute or regulations on the transactions contemplated
hereby.
(r) Prohibited Transactions. The Company shall not acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of or equity in, or by any other manner, any business or
any corporation, limited liability company, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than transactions that are in the ordinary course of
business consistent with past practice and not material to the Company and PL
taken as a whole. The Company shall not alter (through
49
merger, liquidation, reorganization, restructuring or in any other fashion) the
corporate structure or ownership of the Company or PL.
(s) Accounting Changes. The Company shall not make any change to
accounting policies or procedures (other than actions required to be taken by
generally accepted accounting principles).
(t) Compliance With Law. The Company shall not knowingly violate or
knowingly fail to perform any obligation or duty imposed upon it or PL by any
applicable federal or state law or regulation, guideline or ordinance.
(u) Company Affiliates Agreements. The Company shall use commercially
reasonable efforts to cause each Company Affiliate to deliver to the Parent
within ten (10) days of the date hereof a written agreement in substantially the
form of Exhibit C hereto, executed by each such Person.
---------
4.2 Covenants of the Parent.
-----------------------
The Parent agrees that prior to the Effective Date:
(a) Action in Furtherance of Merger. Subject to the terms and
conditions herein provided, the Parent agrees to use commercially reasonable
efforts to take, or cause to be taken, such actions, and to do, or cause to be
done, such things as are necessary, proper or advisable to consummate and make
effective as promptly as practicable the Merger and the transactions
contemplated by this Agreement, including (i) defending any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, (ii)
obtaining all governmental consents required for the consummation of the Merger
and the transactions contemplated thereby, (iii) making all necessary filings
under the HSR Act, (iv) filing the Registration Statement and causing the same
to become effective; and (v) to the extent that the shares of Company Common
Stock are not voted in accordance with the terms of the Voting Agreements,
voting the irrevocable proxies granted to the Parent in the Voting Agreements in
favor of approving this Agreement and the transactions contemplated hereby, all
on the terms and conditions provided for herein. Upon the terms and subject to
the conditions hereof, the Parent agrees to use commercially reasonable efforts
to take, or cause to be taken, such actions and to do, or cause to be done, such
things as are necessary to satisfy the other conditions of the Closing set forth
herein. The Parent shall consult with counsel for the Company as to, and shall
permit such counsel, at the Company's expense, to participate in the decision-
making process as to the strategy to be employed in any lawsuits or proceedings
referred to in clause (i) above (which shall not include any such lawsuits or
proceedings to the extent that they relate to the Registration Statement)
brought against
50
the Parent, but not against the Company, provided that counsel for the Parent
shall retain control of any such lawsuits or proceedings. In case at any time
after the Effective Date any further action is necessary or desirable to carry
out the purposes of this Agreement, the officers and directors of the Surviving
Corporation shall take such necessary action and the Parent shall cause them to
do so.
(b) Maintenance of Properties. The Parent shall, and shall cause each
of its Subsidiaries to, maintain all of its and their respective properties in
customary repair, order and condition, reasonable wear and use and damage by
fire or other casualty excepted, and shall maintain, and shall cause each of its
Subsidiaries to maintain, insurance upon all of its and their properties and
with respect to the conduct of its and their businesses in amounts and kinds
comparable to that in effect on the date of this Agreement.
(c) Access and Information. Between the date of this Agreement and
the Effective Date, upon reasonable notice, the Parent shall give the Company
and its authorized representatives (including its financial advisors,
accountants and legal counsel) access, at all reasonable times and in a manner
which shall not cause unreasonable disturbance, to officers and senior
executives of the Parent as well as to financial and operating data and other
information as may from time to time be reasonably requested by the Company.
All data and information so received from the Parent shall be deemed received
pursuant to the Reciprocal Confidentiality Agreement, and the Company shall
cause its officers, directors, employees, auditors, counsel, financial advisors
and agents to comply with the provisions of the Reciprocal Confidentiality
Agreement with respect to such data and information.
(d) Listing Application. The Parent shall use commercially reasonable
efforts to effect listing of the Parent Common Stock to be delivered in
accordance with this Agreement on the NYSE upon notice of issuance.
(e) Public Filings. The Parent shall promptly file all periodic
reports required to be filed with the SEC and provide the Company with a copy of
such reports promptly after such filing.
(f) Registration Statement. The Parent shall deliver to the Company
the final form of Registration Statement which the Parent intends to have
declared effective by the SEC.
(g) Conduct of Business. Except as expressly contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Date, the Parent shall, and the Parent shall cause each of its
51
Subsidiaries to, conduct its business in the ordinary course and consistent with
past practice.
4.3 Covenants as to the Merger Subsidiary.
-------------------------------------
The Parent and the Merger Subsidiary agree that prior to the Effective
Date:
(a) No Business. The Merger Subsidiary shall not engage in any
business activities or enter into any transaction whatsoever, except such as are
related to this Agreement and the performance of its obligations hereunder.
(b) Access. Until the Effective Date or until the abandonment of the
Merger as permitted by this Agreement, the Merger Subsidiary shall give to the
Company and its representatives full access, during normal business hours and
upon reasonable notice, to all of its properties, books, contracts, documents
and records, and shall furnish to the Company such financial and other
information concerning the Merger Subsidiary as the Company and its
representatives may from time to time reasonably request.
(c) Actions in Furtherance of Merger. The Merger Subsidiary shall use
commercially reasonable efforts to obtain such consents and authorizations of
third parties, to make such filings, and to give such notices to third parties,
which may be necessary or reasonably required on the part of the Merger
Subsidiary in order to effect, or in connection with, the transactions
contemplated by this Agreement.
4.4 Covenants of the Company and the Parent.
---------------------------------------
(a) Registration Statement. The Company shall cooperate with the
Parent in the preparation by the Parent of, and the Parent shall file, the
Registration Statement with the SEC and shall use commercially reasonable
efforts to cause it to become effective. The Parent shall use commercially
reasonable efforts to qualify such securities, if required, under applicable
state securities laws and to cause the shares of Parent Common Stock which are
to be delivered pursuant to this Agreement to be listed on the NYSE. The
Prospectus/Proxy Statement shall include the prospectus which forms a part of
the Registration Statement. The obligations of the Company pursuant to this
Section 4.4 shall be limited to providing the information required by items 15
and 18 of Form S-4, and the expense of providing such information shall be borne
by the Company.
(b) Tax-Free Reorganization Treatment. Each of the Company and the
Parent shall use commercially reasonable efforts to cause the Merger to be
treated as a "reorganization" within the meaning of Section 368 of the Code.
52
5. CONDITIONS TO CLOSING; ABANDONMENT AND TERMINATION.
--------------------------------------------------
5.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Effective
Date of the following conditions, and the Company or the Parent shall
(x) not be required to close the Merger if any of the following shall
not be true or shall not have occurred and (y) have the right to
abandon the Merger and terminate this Agreement if any of the
following shall not be true or shall not have occurred, as the case
may be, by 5:00 p.m., Eastern time, on November 30, 1998:
(a) Company Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of at least a majority of
the votes cast by holders of the Company Common Stock entitled to vote thereon.
(b) Consents. Except to the extent such consents are not required at
the Effective Date: (i) the Company shall have received the consents or
exemptions, or made the filings, as the case may be, which are referred to in
Section 3.1(d); (ii) the Parent shall have received the consents or exemptions,
or made the filings, as the case may be, which are referred to in Section 3.2(d)
hereof; and (iii) all notification and report forms required to be filed on
behalf of the parties to this Agreement with the Federal Trade Commission and
the Department of Justice under the HSR Act and rules thereunder shall have been
filed, and the waiting period required to expire under the HSR Act and rules
thereunder, including any extension thereof, shall have expired or early
termination of the waiting period shall have been granted.
(c) Effectiveness. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceeding seeking a stop order.
(d) Listing. The Parent Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE upon notice of issuance.
(e) No Legal Restraints. No temporary restraining order, preliminary
or permanent injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect.
5.2 Conditions to the Company's Closing and Its Right to Abandon.
------------------------------------------------------------
The Company shall (x) not be required to close the Merger if any of
the following shall not be true or shall not have occurred or shall
not have been waived in
53
writing by the Company at the Closing and (y) have the right to
abandon the Merger and terminate this Agreement if any of the
following shall not be true or shall not have occurred, or shall not
have been waived in writing by the Company, as the case may be, by
5:00 p.m., Eastern time, on November 30, 1998:
(a) No Material Adverse Effect. No event or circumstance shall have
occurred which has, or is reasonably expected to have, a Material Adverse Effect
on the Parent, including, without limitation, any Material Adverse Effect caused
by any of the following:
(i) The failure of the representations and warranties of the Parent and Merger
Subsidiary herein contained to be true and correct in all respects on and
as of the Effective Date with the same force and effect as though made on
and as of the Effective Date except as affected by transactions
specifically contemplated by this Agreement;
(ii) The failure of either the Parent or the Merger Subsidiary to have performed
all its obligations and agreements and complied with all covenants
contained in this Agreement to be performed and complied with by it on or
prior to the Effective Date; and
(iii)The execution, delivery and performance by the Parent of this
Agreement and the consummation of the Merger having, directly or
indirectly, resulted in a breach of, constituted an event of default under
or resulted in the acceleration of, with or without the giving of notice,
lapse of time or both, an obligation under any agreement of the Parent.
(b) No Material Adverse Change. Between the date hereof and the
Effective Date, there shall have been no Material Adverse Change with respect to
the Parent.
(c) Officer's Certificate. The Company shall have received a
certificate of the Chairman of the Board, the President or any Vice-President of
each of the Parent and the Merger Subsidiary, dated the Effective Date,
certifying as to the absence of any of the matters mentioned in Sections 5.2(a)
and (b).
(d) Tax Opinion. The Company shall have received an opinion of Xxxxxx
Xxxxxx White & XxXxxxxxx, in form and substance reasonably satisfactory to the
Company, dated the Effective Time, substantially to the effect that on the basis
of facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
54
(i) the Merger shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, the Merger Subsidiary and the
Parent shall each be a party to that reorganization within the meaning of
Section 368(b) of the Code;
(ii) no gain or loss shall be recognized by the Parent, the Merger Subsidiary or
the Company as a result of the Merger;
(iii)no gain or loss shall be recognized by stockholders of the Company
who exchange their shares of Company Common Stock solely for shares of
Parent Common Stock pursuant to the Merger, except to the extent of cash,
if any, received in lieu of fractional shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger
(including any fractional share of Parent Common Stock deemed to have been
received) shall be the same as the aggregate tax basis of such shares of
Company Common Stock surrendered in exchange therefor;
(v) the holding period for shares of Parent Common Stock received in exchange
for shares of Company Common Stock pursuant to the Merger shall include the
holder's holding period for such shares of Company Common Stock surrendered
in exchange therefor, provided such shares of Company Common Stock were
held as capital assets by the holder at the Effective Time; and
(vi) the receipt of cash in lieu of a fractional share of Parent Common Stock by
a stockholder of the Company will be treated as if the fractional share
were distributed as part of the exchange and then redeemed by the Parent,
and the cash payment will be treated as having been received as a
distribution in full payment in exchange for the fractional shares redeemed
and taxed as provided in Section 302(a) of the Code.
In rendering such opinion, Xxxxxx Xxxxxx White & XxXxxxxxx may rely as to
matters of fact upon the representations contained herein and may require and
rely upon representations from the Parent, the Company and others.
(e) Tax Certificate. The Parent shall have delivered to the Company a
certificate confirming the accuracy of the representations and warranties and
the performance of the covenants on the part of the Parent and the Merger
Subsidiary as set forth in Section 8.4(a) hereof.
55
5.3 Conditions to the Parent's and the Merger Subsidiary's Closing and
------------------------------------------------------------------
Right of the Parent and the Merger Subsidiary to Abandon.
--------------------------------------------------------
The Parent and Merger Subsidiary shall (x) not be required to close
the Merger if any of the following shall not be true or shall not have
occurred or shall not have been waived in writing by the Parent at the
Closing and (y) have the right to abandon the Merger and terminate
this Agreement if any of the following shall not be true or shall not
have occurred, or shall not have been waived in writing by the Parent,
as the case may be, by 5:00 p.m., Eastern time, on November 30, 1998:
(a) No Material Adverse Effect. No event or circumstance shall have
occurred which has, or is reasonably expected to have, a Material Adverse Effect
on the Company, including, without limitation, any Material Adverse Effect
caused by any of the following:
(i) The failure of the representations and warranties of the Company herein
contained to be true and correct in all respects on and as of the Effective
Date;
(ii) The failure of the Disclosure Schedules, as amended immediately prior to,
but on the same day as, the Merger on the Effective Date for events or
transactions occurring after the date of this Agreement, to be true and
correct in all respects on and as of the Effective Date with the same force
and effect as though made on and as of the Effective Date;
(iii)The disclosure by any amendment to the Disclosure Schedules of the
existence of any adverse change in the business, assets, financial
condition or the results of operation of the Company and PL, taken as a
whole;
(iv) The failure of the Company to have performed all its obligations and
agreements and complied with all covenants contained in this Agreement to
be performed and complied with by it on or prior to the Effective Date; and
(v) The execution, delivery and performance by the Company of this Agreement
and the consummation of the Merger having, directly or indirectly, resulted
in a breach of, constituted an event of default under or resulted in the
acceleration of, with or without the giving of notice, lapse of time, or
both, an obligation under any agreement of the Company.
56
(b) No Material Adverse Change. Between the date hereof and the
Effective Date, there shall have been no Material Adverse Change with respect to
the Company.
(c) Officer's Certificate. The Parent and the Merger Subsidiary shall
have received a certificate of the Chairman of the Board, the President or any
Vice-President of the Company, dated the Effective Date, certifying as to:
(i) the absence of any of the matters mentioned in Sections 5.3(a) and (b);
(ii) the number of shares of Company Preferred Stock issued and outstanding;
(iii)the number of Outstanding Shares of Company Common Stock; and
(iv) the information relating to the Company supplied by the Company in writing
specifically for inclusion in the Registration Statement.
(d) Tax Opinion. The Parent shall have received an opinion of
Xxxxxxxx Xxxxxxxxx Professional Corporation, in form and substance reasonably
satisfactory to the Parent, dated the Effective Date, substantially to the
effect that on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing as of the
Effective Time, for federal income tax purposes:
(i) the Merger shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, the Merger Subsidiary and the
Parent shall each be a party to that reorganization within the meaning of
Section 368(b) of the Code;
(ii) no gain or loss shall be recognized by the Parent, the Merger Subsidiary or
the Company as a result of the Merger;
(iii)no gain or loss shall be recognized by stockholders of the Company
who exchange their shares of Company Common Stock solely for shares of
Parent Common Stock pursuant to the Merger, except to the extent of cash,
if any, received in lieu of fractional shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger
(including any fractional share of Parent Common Stock deemed to have been
received) shall be the same
57
as the aggregate tax basis of such shares of Company Common Stock
surrendered in exchange therefor;
(v) the holding period of the shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger shall
include the holder's holding period for such shares of Company Common Stock
surrendered in exchange therefor, provided such shares of Company Common
Stock were held as capital assets by the holder at the Effective Time; and
(vi) the receipt of cash in lieu of a fractional share of Parent Common Stock by
a stockholder of the Company will be treated as if the fractional share
were distributed as part of the exchange and then redeemed by the Parent,
and the cash payment will be treated as having been received as a
distribution in full payment in exchange for the fractional shares redeemed
and taxed as provided in Section 302(a) of the Code.
In rendering such opinion, Xxxxxxxx Ingersoll Professional Corporation may rely
as to matters of fact upon the representations contained herein and may require
and rely upon representations from the Parent, the Company and others.
(e) Tax Certificate. The Company shall have delivered to the Parent a
certificate confirming the accuracy of the representations and warranties and
the performance of the covenants on the part of the Company and the Surviving
Corporation as set forth in Section 8.4(b) hereof.
(f) Outstanding Shares of Preferred Stock. No shares of the Company
Preferred Stock shall be issued or outstanding.
(g) FIRPTA Statement. The Company shall have delivered to the Parent
a statement that the interest in Company is not a United States real property
interest as contemplated by Section 1.1445-2(c)(3) of the regulations
promulgated under the Code.
6. ADDITIONAL PROVISIONS FOR ABANDONMENT AND TERMINATION.
-----------------------------------------------------
6.1 Provisions of Abandonment and Termination.
-----------------------------------------
In addition to the provisions of Article 5 hereof, the Merger may be
abandoned and this Agreement may be terminated at any time on or
before the Effective Time, whether before or after approval by the
stockholders of the Company:
58
(a) Mutual Agreement. By mutual agreement of the Boards of Directors
of the Parent, the Merger Subsidiary and the Company pursuant to resolutions
adopted by such Boards, notwithstanding any prior adoption of this Agreement or
approval of the Merger by the respective stockholders of the Merger Subsidiary
or the Company;
(b) Violation of Order. By either the Parent or the Merger
Subsidiary, on the one hand, or the Company, on the other, if consummation of
the Merger would violate any preliminary injunction or restraining order or
final, nonappealable order, decree, injunction, restraining order or judgment of
any United States court or other tribunal of competent jurisdiction;
(c) Other Transactions Involving the Company. By the Parent if any of
the following shall have occurred:
(i) Any Person (other than the Parent or any Subsidiary of the Parent) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), a tender offer or exchange offer to purchase any Company Common Stock
or securities convertible into such shares such that, upon consummation of
such offer, such Person would own or control 50% or more of the then
outstanding Company Common Stock and the Board of Directors of the Company,
within ten (10) Business Days after such tender or exchange offer shall
have been so commenced, fails to recommend against acceptance of such
tender or exchange offer by its stockholders;
(ii) The Company or PL shall have authorized, recommended, proposed or publicly
announced an intention to authorize, recommend or propose, or entered into,
an agreement with any Person (other than the Parent or any Subsidiary of
the Parent) to (A) effect a merger, consolidation or similar transaction
involving the Company or PL, (B) sell, lease or otherwise dispose of assets
of the Company or PL representing 10% or more of the consolidated assets of
the Company and PL, (C) issue, sell or otherwise dispose of (including by
way of merger, consolidation, share exchange or any similar transaction)
securities (or options, rights or warrants to purchase), or securities
convertible into, such securities) representing 10% or more of the voting
power of the Company, or (D) grant to such Person a license of any
intellectual property of the Company other than licenses in the ordinary
course of business relating to the sale of the Company's products;
(iii)Any Person (other than the Parent or any Subsidiary of the Parent)
shall have acquired beneficial ownership (as such term is defined
59
in Rule 13d-3 under the Exchange Act) or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 25% or more of the then outstanding
Company Common Stock; or
(iv) The Company's Board of Directors shall have withdrawn or modified in a
manner adverse to the Parent the recommendation of the Company's Board of
Directors that the stockholders approve this Agreement and the Merger (it
being understood and agreed that any communication by the Company or its
Board of Directors to the stockholders of the Company that the Company's
Board of Directors had determined not to withdraw or modify such
recommendation, in whole or in part, because such action would or might
give rise to a right on the part of the Parent to terminate this Agreement
and/or obligate the Company to pay the Termination Fee shall nevertheless
be deemed an adverse modification of such recommendation for purposes of
this Section 6.1(c)(iv)).
(d) Superior Proposal. By the Company, in connection with entering
into an agreement for a Superior Proposal as expressly permitted by Section
4.1(f), provided that: (i) the Company has complied with all provisions
thereof; (ii) immediately following such termination the Company executes a
definitive agreement to consummate the Superior Proposal; (iii) prior to any
such termination: (x) the Company shall have provided the Parent with four (4)
days' notice of the terms of the Superior Proposal, and (y) the Company shall
have, and shall have caused the Company Representatives to have, negotiated in
good faith, during such four (4) day period, with respect to any proposal made
by the Parent to adjust the terms and conditions of this Agreement as would
enable the Company, consistent with the fiduciary duties of its Board of
Directors, to proceed with the Merger; and (iv) the Company shall have paid the
Parent the Termination Fee.
(e) By either the Parent or the Company if the Merger shall have not been
consummated on or before November 30, 1998 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 6.1(e)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before Termination Date.
(f) By the Company ten (10) days after the Stockholders Meeting (including any
adjournment thereof) if at the Stockholders Meeting (including any adjournment
thereof) this Agreement and the Merger shall fail to be
60
approved and adopted by the affirmative vote of the stockholders of the Company
as required under DGCL.
6.2 Termination of Agreement.
------------------------
Subject to the provisions of Section 6.1(e), the Merger shall be
abandoned and this Agreement shall be automatically terminated on the
Termination Date, or such later date as the Board of Directors of the
Parent, the Merger Subsidiary and the Company may mutually agree
pursuant to resolutions adopted by such Boards.
6.3 Effect of Abandonment or Termination.
------------------------------------
In the event of termination of this Agreement by either the Parent or
the Company, as provided in Section 6.1, Section 6.2 or in Article 5
of this Agreement, this Agreement shall forthwith become void and of
no further force and effect; provided, however, that: (a) each of the
parties shall be entitled to pursue, exercise and enforce any and all
remedies, rights, powers and privileges available to it at law or in
equity for any breach of this Agreement ("Remedies") which occurred
prior to such termination, which, in the case of the Parent, shall be
in addition to its rights under Section 7.1(b); and (b) Sections
3.1(d), 3.1(o) and 4.1(a) (insofar as such representations and
warranties relate to the Company Option Agreement and the transactions
contemplated thereby), Section 4.1(c), Section 4.2(c), Article 7,
Section 8.7, Section 8.9, Section 8.10, Section 8.11 and Section 8.12
shall survive the termination of this Agreement.
7. EXPENSES.
--------
7.1 Costs and Expenses.
------------------
(a) Payment of Own Expenses. Except as set forth in Section 7.1(b),
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense, and in connection therewith, each of
the Parent and the Company shall pay, with its own funds, any and all property
or transfer taxes imposed on such party, except that expenses incurred in
connection with printing and mailing the Prospectus/Proxy Statement to the
holders of Company Common Stock shall be shared equally by the Parent and the
Company and that the expenses incurred by either the Parent or the Company
pursuant to the Company Option Agreement shall be borne as provided therein.
(b) Termination Fee.
(i) If this Agreement is terminated by the Parent pursuant to Section 6.1(c)(i)
or (iii) or, at the time of the termination of this
61
Agreement, the Parent had the right to so terminate, and within 12 months
after such termination the Company executes a definitive agreement to
implement a Takeover Proposal (whether or not such Takeover Proposal
triggered the termination right), then the Company shall pay to the Parent
Termination Fee in an amount equal to $9 million (the "Termination Fee")
within two (2) Business Days after the execution of such definitive
agreement.
(ii) If this Agreement is terminated by the Parent pursuant to Section
6.1(c)(ii), or, at the time of the termination of this Agreement, the
Parent had the right to so terminate, then within two (2) Business Days
after any of the conditions set forth in Section 6.1(c)(ii) are satisfied,
the Company shall pay to the Parent the Termination Fee.
(iii)If this Agreement is terminated by the Parent pursuant to Section
6.1(c)(iv), or at the time of the termination of this Agreement, the Parent
had the right to so terminate, then within two (2) Business Days after such
termination, the Company shall pay to the Parent the Termination Fee;
provided, however, that the Company shall not be obligated to pay the
Parent the Termination Fee pursuant to this Section 7.1(b)(iii) in the
event that (y) the actions of Board of Directors of the Company that gave
rise to the Parent's right to terminate under Section 6.1(c)(iv) were the
result of the occurrence of an event which had, or was reasonably expected
to have, a Material Adverse Effect on the Parent or had caused, or was
reasonably expected to cause, the Parent to suffer a Material Adverse
Change and (z) the Board of Directors of the Company made a good faith
determination, based upon the advice of its legal counsel as to legal
matters, that such actions were necessary in order to comply with its
fiduciary duties to the Company stockholders under applicable law. (iv) If
this Agreement is terminated by the Company pursuant to Section 6.1(d),
then the Company shall pay to the Parent the Termination Fee prior to such
termination as provided in Section 6.1(d).
(v) If following a Takeover Proposal, this Agreement is terminated by either
the Parent or the Company pursuant to Section 6.1(e), and within 12 months
after such termination the Company executes with a third party a definitive
agreement to implement a Takeover Proposal, then the Company shall pay to
the Parent the Termination Fee within two (2) Business Days after the
execution of such agreement.
62
(vi) If following a Takeover Proposal, this Agreement is terminated by the
Company pursuant to Section 6.1(f), and within 12 months after such
termination the Company executes with a third party a definitive agreement
to implement a Takeover Proposal, then the Company shall pay to the Parent
the Termination Fee within two (2) Business Days after the execution of
such agreement.
(vii)For purposes of this Section 7.1(b), whenever the Company shall be
obligated to pay the Termination Fee, the Company shall pay the Parent by
wire transfer to an account specified by the Parent.
8. MISCELLANEOUS.
-------------
8.1 Certification of the Company's Shareholder Votes, Etc.
-----------------------------------------------------
Prior to the Effective Date, the Company shall deliver to the Parent
and the Merger Subsidiary a certificate of its Secretary or Assistant
Secretary setting forth (a) the number of shares of its capital stock
outstanding and entitled to vote on the adoption of this Agreement,
(b) the number of votes pertaining to such shares of capital stock,
and (c) the number of votes cast in favor of and against the approval
of this Agreement.
8.2 Certification of the Parent's Stockholder Votes, Etc.
----------------------------------------------------
Prior to the Effective Date, the Parent shall deliver to the Company
and the Merger Subsidiary a certificate of its Secretary or Assistant
Secretary setting forth that the Parent, in its capacity as sole
stockholder of the Merger Subsidiary, has adopted this Agreement and
approved the Merger in accordance with the DGCL.
8.3 Termination of Covenants, Representations and Warranties.
--------------------------------------------------------
The respective covenants, representations and warranties of the
parties hereto contained in Articles 3 and 4 hereof and in the
Schedules shall expire and be terminated and extinguished at the
Effective Time, and none of the parties hereto shall thereafter be
under any liability whatsoever with respect to such covenants,
representations and warranties. This Section 8.3 shall have no effect
upon any other obligations hereunder of any of the parties hereto,
whether to be performed before or after the effectiveness of the
Merger.
8.4 Certain Tax Matters.
-------------------
(a) The Parent and the Merger Subsidiary hereby jointly and severally
represent, warrant and covenant to the Company and the Surviving
Corporation as follows:
63
(i) The fair market value of Parent Common Stock and other consideration
received by each Company stockholder will be approximately equal to the
fair market value of Company Common Stock surrendered in the exchange;
(ii) Following the Merger, the Surviving Corporation will hold at least 90
percent of the fair market value of the Company's net assets and at least
70 percent of the fair market value of the Company's gross assets and at
least 90 percent of the fair market value of the Merger Subsidiary's net
assets and at least 70 percent of the fair market value of the Merger
Subsidiary's gross assets held immediately prior to the Merger. For
purposes of the preceding sentence, amounts paid by the Company or the
Merger Subsidiary to stockholders who receive cash or other property,
amounts used by the Company or the Merger Subsidiary to pay reorganization
expenses and all redemptions and distributions (except for regular, normal
dividends) made by the Company will be included as assets of the Company or
the Merger Subsidiary, respectively, immediately prior to the Merger;
(iii)Prior to the Merger, the Parent will be in control of the Merger
Subsidiary within the meaning of Section 368(c) of the Code;
(iv) The Surviving Corporation has no plan or intention to issue additional
shares of its stock that would result in the Parent's losing control of the
Surviving Corporation within the meaning of Section 368(c)(1) of the Code;
(v) The Parent has no plan or intention to reacquire any of the shares of
Parent Common Stock to be issued in the Merger, nor does the Parent have
any knowledge of a plan or intention on the part of a "related party" to
the Parent (as such term is defined in the regulations under Section 368 of
the Code) to acquire any of the shares of Parent Common Stock to be issued
in the Merger;
(vi) The Parent has no plan or intention to liquidate the Surviving Corporation,
to merge the Surviving Corporation with or into another corporation, to
sell or otherwise dispose of the stock of the Surviving Corporation, except
for transfers of stock to corporations controlled by the Parent, or to
cause the Surviving Corporation to sell or otherwise dispose of any of its
assets or of any of the assets acquired from the Merger Subsidiary, except
for dispositions made in the ordinary course of business or transfers of
assets to a corporation controlled by the Surviving Corporation;
64
(vii) The Merger Subsidiary will have no liabilities assumed by the
Surviving Corporation, and it will not transfer to the Surviving
Corporation any assets subject to liabilities, in the Merger;
(viii)Following the Merger, the Surviving Corporation will continue the
historic business of the Company or use a significant portion of its
historic business assets in a business;
(ix) The Parent, the Merger Subsidiary, the Company and the shareholders of the
Company will pay their respective expenses, if any, incurred in connection
with the Merger;
(x) There is no intercorporate indebtedness existing between the Parent and
the Company or between the Merger Subsidiary and the Company that was
issued, acquired or will be settled at a discount;
(xi) The Parent does not own, nor has it owned during the past five (5) years,
any shares of the stock of the Company;
(xii) No two parties to the Merger are investment companies as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code; and
(xiii)None of the compensation to be received by any shareholder-employees
of the Company under any employment agreement will be separate
consideration for, or allocable to, any of their shares of Company Common
Stock; none of the shares of Parent Common Stock received by any
shareholder-employees will be separate consideration for, or allocable to,
any employment agreement; and the compensation paid to any shareholder-
employees under any employment agreement will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
(b) The Company and PL hereby jointly and severally represent, warrant and
covenant to the Parent and the Merger Subsidiary as follows:
(i) The fair market value of Parent Common Stock and other consideration
received by each Company stockholder will be approximately equal to the
fair market value of Company Common Stock surrendered in the exchange;
(ii) Following the Merger, the Surviving Corporation will hold at least 90
percent of the fair market value of the Company's net assets and at least
70 percent of the fair market value of the Company's gross assets and at
least 90 percent of the fair market value of Merger Subsidiary's net assets
and at least 70 percent of the fair market
65
value of Merger Subsidiary's gross assets held immediately prior to the
Merger. For purposes of the preceding sentence, amounts paid by the
Company or the Merger Subsidiary to stockholders who receive cash or other
property, amounts used by the Company or the Merger Subsidiary to pay
reorganization expenses and all redemptions and distributions (except for
regular, normal dividends) made by the Company will be included as assets
of the Company or the Merger Subsidiary, respectively, immediately prior
to the Merger;
(iii) Prior to the Merger, neither the Company nor PL will take any action
which would disqualify the Merger for treatment as a tax-free transaction
under the Code;
(iv) Neither the Company nor PL has any knowledge of a plan or intention on the
part of the holders of Company Common Stock to sell or transfer to the
Parent or to a "related party" to the Parent (as such term is defined in
the regulations under Section 368 of the Code) any of the shares of Parent
Common Stock to be received by such holders in the Merger;
(v) The Parent, the Merger Subsidiary, the Company and the shareholders of the
Company will pay their respective expenses, if any, incurred in connection
with the Merger;
(vi) There is no intercorporate indebtedness existing between the Parent and
the Company or between the Merger Subsidiary and the Company that was
issued, acquired or will be settled at a discount;
(vii) At the time of the Merger, the Company will not have outstanding any
warrants, options, convertible securities or any other type of right
pursuant to which any person could acquire stock in the Company that, if
exercised or converted, would affect the Parent's acquisition or retention
of control of the Company, as defined in Section 368(c) of the Code;
(viii)On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject; and
(ix) No two parties to the Merger are investment companies as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(c) Neither the Parent nor the Surviving Corporation shall have any liability
to the holders of the Company Common Stock with respect to the tax
consequences resulting from the transactions contemplated by this
66
Agreement except to the extent that: (A) the representations and warranties
of the Parent and the Merger Subsidiary set forth in Section 8.4(a) hereof
are not true and correct on the Effective Date or (B) the covenants of the
Parent and the Merger Subsidiary set forth in Section 8.4(a) are not
performed on and after the Effective Date.
8.5 Execution in Counterparts.
-------------------------
For the convenience of the parties, this Agreement and any amendments,
supplements, waivers and modifications may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
8.6 Waivers and Amendments.
----------------------
Prior to the Effective Date, this Agreement may be amended, modified
and supplemented in writing by the parties hereto, and any failure of
any of the parties hereto to comply with any of its obligations,
agreements or conditions as set forth herein may be expressly waived
in writing by the other parties hereto.
8.7 Confidentiality.
---------------
The Company and the Parent agree that they shall abide by the terms of
the Confidentiality Agreement between them dated March 27, 1998 (as
supplemented) (the "Confidentiality Agreement") and the Reciprocal
Confidentiality Agreement between them dated _________________, 1998
(the "Reciprocal Confidentiality Agreement"), respectively, and such
confidentiality agreements shall continue in effect notwithstanding
the execution of this Agreement.
8.8 Indemnification; Directors and Officers Insurance.
--------------------------------------------------
For six (6) years from and after the Effective Time, the Parent agrees
to cause the Surviving Corporation to, and shall guarantee the
obligation of the Surviving Corporation to, indemnify and hold
harmless all past and present officers and directors of the Company to
the same extent such Persons are indemnified as of the date of this
Agreement by the Company and PL pursuant to their Company's
Certificate of Incorporation, Bylaws or agreements in existence on the
date hereof for acts or omissions occurring at or prior to the
Effective Time (including, without limitation, acts or omissions
relating to the negotiation, execution and performance of this
Agreement and the Company Option Agreement and the transactions
contemplated hereby and thereby). The Parent shall provide, or shall
cause the Surviving Corporation to provide, for an aggregate period of
not less than six (6) years from the Effective Time, the Company's
current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective
Time (the "D&O Insurance") that is
67
substantially similar (with respect to limits and deductibles) to the
Company's existing policy or, if substantially equivalent insurance
coverage is unavailable, the best available coverage; provided,
however, that the Surviving Corporation shall not be required to pay
any annual premium for D&O Insurance which is greater than 200% of the
most recent annual premiums paid by the Company for D&O Insurance.
8.9 Notices.
-------
All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given upon receipt when delivered by hand against receipt,
telecopied (upon confirmation of receipt thereof) or mailed, certified
or registered mail, return receipt requested, postage prepaid:
To the Company:
Xxxxx X. Xxxxxxx, President and CEO
000 Xxxxxxxx Xxxxx
Xxxxx X
Xxxxxx Xxxx, Xxxxxxxxxx
with a copy to:
Xxxxx Xxxxxx, Esquire
Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telecopy Number: (000) 000-0000
To the Parent or the Merger Subsidiary:
Xxxxxxxx X. Xxxxxxx, Senior Vice President
Xxxxxxxx Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Telecopy Number: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx, Esquire/XxXxxxx Xxxxx, Esquire
Xxxxxxxx Ingersoll Professional Corporation
One Oxford Centre
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
68
or to such other address as specified in a notice given in like
manner.
8.10 Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership.
-------------------------------------------------------------------
This Agreement (including the documents and the instruments referred
to herein) (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof, and (b)
is not intended to confer upon any Person other than the parties
hereto or thereto and the indemnitees under Section 8.8 any rights or
remedies hereunder or thereunder.
8.11 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to any applicable
conflicts of laws provisions.
8.12 Partial Invalidity.
-------------------
Wherever possible, each provision hereof shall be interpreted in such
a manner as to be effective and valid under applicable law, but in
case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any
respect, it shall, to the extent possible, be construed in such manner
as to be legal, valid and enforceable but so as to most nearly retain
the intent of the parties. The invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect
any other provisions of this Agreement and such provisions shall
remain in full force and effect.
8.13 Publicity.
---------
Except as otherwise required by law or the rules of the SEC, the NYSE
(with respect to the Parent) or the NASD (with respect to the
Company), for so long as this Agreement is in effect, neither the
Parent nor the Company shall, nor shall either permit any of its
respective subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to the
transactions contemplated by this Agreement without the consent of the
other party as to the nature, contents and dissemination thereof, in
which case the party proposing such publication shall deliver a copy
of such release or announcement to the other party along with its
request for consent, which consent shall not be unreasonably withheld.
8.14 Defined Terms.
-------------
All capitalized terms used herein without definition shall have the
meanings given them at the places in this Agreement indicated in
Appendix A.
----------
69
8.15 Benefit Plans.
-------------
(a) The eligibility of each employee of the Company (and his or her spouse and
dependents) to participate in the welfare benefit plans of the Parent or
the Surviving Corporation after the Effective Time and the coverage of each
such participant in each such plan shall be determined without regard to
any preexisting condition, waiting period, actively-at-work or similar
exclusion or condition, except for any such condition or exclusion to which
the employee is subject under the applicable welfare plan of the Company as
of the Effective Time. Participants in such plans of the Company shall
receive credit, under the welfare benefit plans of the Parent or the
Surviving Corporation in which they participate after the Effective Time,
toward annual co-insurance and deductible limitations and requirements for
any payments made for eligible charges incurred by them during the calendar
year in which the Effective Time occurs under the applicable welfare plans
of the Company. In addition, employees of the Surviving Corporation shall
receive credit, for purposes of determining vesting and eligibility under
its retirement, welfare, vacation and similar plans or policies, for
service with the Company prior to the Effective Time.
(b) The Persons employed by the Company immediately prior to the Effective Time
shall be eligible to participate in the employment severance programs
provided by the Parent or the Surviving Corporation from time to time, and
such persons shall receive credit under such programs for services with the
Company prior to the Effective Date.
8.16 Enforcement of Agreement.
------------------------
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement was not performed
in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction
to prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof in any Delaware Chancery Court, this being
in addition to any other remedy to which they are entitled at law or
equity. Notwithstanding the foregoing, if jurisdiction does not
properly lie in the Delaware Chancery Court, the parties shall submit
to the jurisdiction of the United States Federal District Court for
the District of Delaware. The parties agree that such courts shall
have exclusive jurisdiction to consider any claims hereunder or
relating hereto.
8.17 Waiver of Jury Trial.
--------------------
Each party acknowledges and agrees that any controversy which may
arise under this Agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such
70
party may have to a trial by jury in respect of any litigation
directly or indirectly arising out of or relating to this Agreement,
or the transactions contemplated by this Agreement. Each party
certifies and acknowledges that (i) no representative, agent or
attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to
enforce the foregoing waiver, (ii) each party understands and has
considered the implications of this waiver, (iii) each party makes
this waiver voluntarily, and (iv) each party has been induced to enter
into this Agreement by, among other things, the mutual waivers and
certifications in this Section 8.17.
8.18 No Presumption Against the Draftsman.
------------------------------------
Each party having been represented in the negotiation of this
Agreement, and having had ample opportunity to review the language
hereof, there shall be no presumption against any party on the ground
that such party was responsible for preparing this Agreement or any
part thereof.
71
IN WITNESS WHEREOF, this Agreement has been executed by each of the
Constituent Corporations and the Parent, all on the date first above written.
PENEDERM INCORPORATED
Attest: By:
---------------------------- ----------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxx X. Xxxxxxx
Title: Vice President, Finance and Title: President and CEO
Administration, Chief Financial
Officer
MLI ACQUISITION CORP.
Attest: By:
---------------------------- ----------------------------
Name: Xxxxxx X. Xxxxxxxxx Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President Finance Title: President
MYLAN LABORATORIES INC.
Attest: By:
---------------------------- ----------------------------
Name: Xxxxxx X. Xxxxxxxxx Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President Finance Title: Senior Vice President
72
APPENDIX A
GLOSSARY OF
DEFINED TERMS/SECTION REFERENCES
IN
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
[MOON]
AND
MLI ACQUISITION CORP.
AND
[EARTH]
DEFINED TERM SECTION REFERENCE
------------ -----------------
Agreement Preamble
--------- --------
Amended and Restated Certificate of Incorporation Section 1.2
Business Day Section 2.4
Certificates Section 2.1(b)(ii)
Closing Section 2.4
Code Recital 5
Common Stock Investment Agreement Section 3.1(b)(i)
Company Preamble
Company Affiliates Section 3.1(s)
Company Common Stock Recital 7
Company Contracts Section 3.1(m)
Company Employee Stock Purchase Plan Section 2.3(d)
Company Financial Statements Section 3.1(e)
Company 401(k) Plan Section 3.1(b)(i)
73
DEFINED TERM SECTION REFERENCE
------------ -----------------
Company Option Agreement Recital 7
Company Permits Section 3.1(h)
Company Preferred Stock Section 3.1(b)(i)
Company Representatives Section 4.1(f)(i)
Company Rights Plan Section 3.1(c)
Company SEC Documents Section 3.1(e)
Company Stock Option Plans Section 2.3(a)
Company Stock Options Section 3.1(b)(i)
Company Warrant Section 2.3(b)
Company Warrant Shares Section 2.3(b)
Confidentiality Agreement Section 8.7
Constituent Corporations Preamble
Contract Manufacturer Section 3.1(k)(iii)
D&O Insurance Section 8.8
DGCL Recital 2
Xxxxxx Read Section 3.2(n)
Drug Regulatory Agency Section 3.1(k)(i)
Effective Date Section 1.4
Effective Time Section 1.4
Employee Benefit Plan Section 3.1(cc)(i)
Environmental Laws Section 3.1(ii)(ii)
ERISA Section 3.1(cc)(i)
Exchange Act Section 3.1(d)
Exchange Agent Section 2.1(b)(i)
Exchange Fund Section 2.1(b)(i)
Exchange Ratio Section 2.1(a)
FDA Section 3.1(k)(ii)
FDA Act Section 3.1(k)(i)
Governmental Entity Section 3.1(d)
74
DEFINED TERM SECTION REFERENCE
------------ -----------------
HSR Act Section 3.1(d)
Investor Section 3.1(b)(i)
IRS Section 3.1(i)
knowledge of the Company Section 3.1(j)
knowledge of the Parent Section 3.2(i)
material Section 3.1(ee)
Material Adverse Change Section 3.1(a)(i)
Material Adverse Effect Section 3.1(a)(i)
Merger Recital 2
Merger Subsidiary Preamble
NASD Section 3.1(d)
NASDAQ Section 3.1(d)
NYSE Section 2.1(d)
Parent Preamble
Parent Affiliates Section 3.2(p)
Parent Common Stock Section 2.1(a)
Parent Financial Statements Section 3.2(e)
Parent Permits Section 3.2(h)
Parent Preferred Stock Section 3.2(b)(i)
Parent SEC Documents Section 3.2(e)
Parent Stock Option Plans Section 3.2(b)(i)
Parent Stock Options Section 3.2(b)(i)
PCBs Section 3.1(ii)(i)
Person Section 4.1(f)(v)
PL Section 3.1(a)(ii)
Prospectus/Proxy Statement Section 3.1(c)
Reciprocal Confidentiality Agreement Section 8.7
Registration Statement Section 3.2(c)
Regulated Substance Section 3.1(ii)(ii)
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DEFINED TERM SECTION REFERENCE
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Remedies Section 6.3
Scheduled Closing Date Section 2.4
SEC Section 2.3(c)
Section 414 Affiliate Section 3.1(cc)(iv)
Securities Act Section 3.1(d)
Stockholders Meeting Section 4.1(m)
Subsidiary Section 3.2(a)
Subsidiary Common Stock Section 2.2
Superior Proposal Section 4.1(f)(iv)
Surviving Corporation Recital 2
Takeover Proposal Section 4.1(f)(iii)
Tax Return Section 3.1(i)
Taxes Section 3.1(i)
Termination Date Section 6.1(e)
Termination Fee Section 7.1(b)(i)
Transaction Agreements Section 3.1(l)
Unexercised Options Section 2.3(a)
Voting Agreements Recital 8
Warrant Holder Section 2.3(b)
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