EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of
March 20, 2005
by and among
MEDICIS PHARMACEUTICAL CORPORATION,
MASTERPIECE ACQUISITION CORP.,
and
INAMED CORPORATION
TABLE OF CONTENTS
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ARTICLE I THE MERGER..............................................................................................1
Section 1.01. The Merger............................................................................1
Section 1.02. Closing...............................................................................1
Section 1.03. Effect of the Merger..................................................................2
Section 1.04. Certificate of Incorporation of the Surviving Corporation.............................2
Section 1.05. Bylaws of the Surviving Corporation...................................................2
Section 1.06. Directors and Officers of the Surviving Corporation...................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES...................................................................................2
Section 2.01. Conversion of Securities..............................................................2
Section 2.02. Adjustment to Merger Consideration....................................................4
Section 2.03. Dissenting Stockholders...............................................................5
Section 2.04. Exchange of Certificates..............................................................6
Section 2.05. Stock Transfer Books..................................................................8
Section 2.06. Stock Options.........................................................................9
Section 2.07. Employee Stock Purchase Plan.........................................................10
Section 2.08. Restricted Stock.....................................................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................11
Section 3.01. Organization and Qualification.......................................................12
Section 3.02. Capitalization.......................................................................12
Section 3.03. Subsidiaries.........................................................................14
Section 3.04. Authority; Non-Contravention; Approvals..............................................14
Section 3.05. Reports and Financial Statements.....................................................16
Section 3.06. Absence of Undisclosed Liabilities...................................................17
Section 3.07. Litigation...........................................................................17
Section 3.08. Absence of Certain Changes or Events.................................................18
Section 3.09. Registration Statement, Etc..........................................................18
Section 3.10. Compliance with Applicable Law; Permits..............................................19
Section 3.11. Company Material Contracts; Defaults.................................................20
Section 3.12. Taxes................................................................................21
Section 3.13. Employee Benefit Plans; ERISA........................................................23
Section 3.14. Labor and Other Employment Matters...................................................25
Section 3.15. Environmental Matters................................................................26
Section 3.16. Intellectual Property................................................................27
Section 3.17. Real Property........................................................................30
Section 3.18. Regulatory Compliance................................................................32
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Section 3.19. Insurance............................................................................34
Section 3.20. Opinion of Financial Advisor.........................................................34
Section 3.21. Brokers and Finders..................................................................34
Section 3.22. Foreign Corrupt Practices and International Trade Sanctions..........................35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT..............................................................35
Section 4.01. Organization and Qualification.......................................................35
Section 4.02. Capitalization.......................................................................35
Section 4.03. Subsidiaries.........................................................................37
Section 4.04. Authority; Non-Contravention; Approvals..............................................37
Section 4.05. Reports and Financial Statements.....................................................39
Section 4.06. Absence of Undisclosed Liabilities...................................................40
Section 4.07. Litigation...........................................................................40
Section 4.08. Absence of Certain Changes or Events.................................................41
Section 4.09. Registration Statement, Etc..........................................................41
Section 4.10. Compliance with Applicable Law; Permits..............................................42
Section 4.11. Parent Material Contracts; Defaults..................................................43
Section 4.12. Taxes................................................................................44
Section 4.13. Employee Benefit Plans; ERISA........................................................46
Section 4.14. Labor and Other Employment Matters...................................................47
Section 4.15. Environmental Matters................................................................49
Section 4.16. Intellectual Property................................................................49
Section 4.17. Real Property........................................................................52
Section 4.18. Regulatory Compliance................................................................53
Section 4.19. Insurance............................................................................56
Section 4.20. Opinion of Financial Advisor.........................................................56
Section 4.21. Brokers and Finders..................................................................56
Section 4.22. Foreign Corrupt Practices and International Trade Sanctions..........................56
Section 4.23. Financing............................................................................57
Section 4.24. Interim Operations of Merger Sub.....................................................57
ARTICLE V COVENANTS..............................................................................................57
Section 5.01. Conduct of Business by the Company Pending the Closing...............................57
Section 5.02. Conduct of Business by Parent Pending the Closing....................................61
Section 5.03. No Solicitation by the Company.......................................................63
Section 5.04. No Solicitation by Parent............................................................66
Section 5.05. Access to Information; Confidentiality...............................................68
Section 5.06. Employee Benefits....................................................................70
Section 5.07. Registration Statement; Joint Proxy Statement; Stockholder Meetings;
Listing of Shares..................................................................71
Section 5.08. Section 16 Matters...................................................................72
Section 5.09. Public Announcements.................................................................73
Section 5.10. Expenses and Fees....................................................................73
Section 5.11. Agreement to Cooperate...............................................................75
Section 5.12. Directors' and Officers' Indemnification.............................................77
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Section 5.13. Rule 145.............................................................................78
Section 5.14. Tax Free Merger......................................................................78
Section 5.15. Stockholder Litigation...............................................................79
Section 5.16. Control of Other Party's Business....................................................79
Section 5.17. Rights Agreements....................................................................80
Section 5.18. Board of Directors...................................................................80
Section 5.19. Financing............................................................................80
Section 5.20. Further Assurances...................................................................81
ARTICLE VI CONDITIONS TO THE MERGER..............................................................................82
Section 6.01. Conditions to the Obligations of Each Party..........................................82
Section 6.02. Conditions to the Obligations of Parent..............................................83
Section 6.03. Conditions to the Obligations of the Company.........................................84
ARTICLE VII TERMINATION..........................................................................................84
Section 7.01. Termination..........................................................................84
Section 7.02. Effect of Termination................................................................86
ARTICLE VIII MISCELLANEOUS.......................................................................................87
Section 8.01. Non-Survival of Representations and Warranties.......................................87
Section 8.02. Notices..............................................................................87
Section 8.03. Defined Terms........................................................................88
Section 8.04. Interpretation.......................................................................98
Section 8.05. Miscellaneous........................................................................98
Section 8.06. Counterparts.........................................................................99
Section 8.07. Amendments; Extensions...............................................................99
Section 8.08. Entire Agreement.....................................................................99
Section 8.09. Severability........................................................................100
Section 8.10. Specific Performance................................................................100
Section 8.11. Disclosure..........................................................................100
Exhibits
Exhibit A -- Form of Affiliate Letter
Exhibit B -- Tax Opinion Certificate of Parent and Merger Sub
Exhibit C -- Tax Opinion Certificate of the Company
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 20, 2005 (this
"AGREEMENT"), by and among Medicis Pharmaceutical Corporation, a Delaware
corporation ("PARENT"), Masterpiece Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ("MERGER SUB"), and Inamed Corporation, a
Delaware corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have approved, and deem it advisable and in the best interests
of their respective stockholders to consummate, the merger of the Company with
and into the Merger Sub (the "MERGER") upon the terms and subject to the
conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL");
WHEREAS, for federal income tax purposes, Parent, Merger Sub and the
Company intend that the Merger qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and that this Agreement shall be, and hereby is, adopted as a plan of
reorganization for purposes of Section 368(a) of the Code; and
WHEREAS, certain capitalized terms used herein are defined in
Section 8.03;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions set forth in this Agreement, and in
accordance with the DGCL, the Company shall be merged with and into Merger Sub
at the Effective Time. Following the Effective Time, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving corporation of the Merger (the "SURVIVING CORPORATION").
Section 1.02. Closing. The closing of the Merger (the "CLOSING")
shall take place on the second Business Day after the satisfaction or waiver
(subject to applicable Law) of the conditions set forth in Article VI (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date,
but subject to the satisfaction or, to the extent provided by Law and this
Agreement, waiver of those conditions), unless this Agreement has been
terminated pursuant to its terms or unless another time or date is agreed to in
writing by the parties hereto (the actual date of the Closing being referred to
herein as the "CLOSING DATE"). The Closing shall be held at the offices of
Xxxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx
00000, unless another place is agreed to in writing by the parties hereto.
Subject to the provisions of this Agreement, as soon as practicable on the
Closing Date, the parties shall file a certificate of merger (the "CERTIFICATE
OF MERGER") executed in accordance
with the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware, or at such later time as Parent and the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being the "EFFECTIVE TIME").
Section 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, at the Effective Time,
except as otherwise provided herein, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, Liabilities and duties of the Company and Merger Sub
shall become the debts, Liabilities and duties of the Surviving Corporation.
Section 1.04. Certificate of Incorporation of the Surviving
Corporation. The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein, by the DGCL or by applicable Law, except that Article I of
the certificate of incorporation of the Surviving Corporation shall be amended
and restated in its entirety to read as follows: "The name of the corporation
shall be Inamed Corporation."
Section 1.05. Bylaws of the Surviving Corporation. At and after the
Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation, until amended
as provided therein, by the DGCL or by applicable Law.
Section 1.06. Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the certificate of
incorporation or bylaws of the Surviving Corporation or as otherwise provided by
Law.
(b) The officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the certificate of
incorporation or bylaws of the Surviving Corporation or as otherwise provided by
Law.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.01. Conversion of Securities.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the Company, Parent, Merger Sub or any holder of any
shares of common stock, par
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value $0.01 per share, of the Company ("COMPANY COMMON STOCK") or any capital
stock of Merger Sub:
(i) Subject to this Article II, each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section
2.01(a)(ii) and Dissenting Shares referred to in Section 2.03) shall
be converted into the right to receive (A) 1.4205 (the "EXCHANGE
RATIO") shares of Class A common stock, par value $0.014 per share
("PARENT COMMON STOCK"), of Parent (the "STOCK MERGER
CONSIDERATION") and (B) $30.00 in cash, without interest (the "CASH
MERGER CONSIDERATION" and, together with the Stock Merger
Consideration, the "MERGER CONSIDERATION"), payable upon the
surrender of the Certificates (as defined in Section 2.04(b)). From
and after the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
Certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive, upon
surrender of such Certificate in accordance with Section 2.04, the
Merger Consideration pursuant to this Section 2.01(a), any cash in
lieu of fractional shares payable pursuant to Section 2.04(e) and
any dividends or other distributions to which such holder is
entitled pursuant to Section 2.04(c), without interest.
(ii) All shares of Company Common Stock that are (A) held by
the Company as treasury shares or (B) owned by Parent or any
wholly-owned Subsidiary of Parent, in each case, immediately prior
to the Effective Time, shall be cancelled and retired and shall
cease to exist, and no cash, securities of Parent or other
consideration shall be delivered in exchange therefor.
(iii) Each share of common stock, par value $0.001 per share,
of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.001 per share, of
the Surviving Corporation.
(b) Change in Shares. If, between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock or Company Common
Stock shall have been changed into, or exchanged for, a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Cash Merger Consideration, the Exchange Ratio and the Option Exchange Ratio
shall be correspondingly adjusted to provide the holders of Company Common Stock
and Company Stock Options the same economic effect as contemplated by this
Agreement prior to such event.
(c) Associated Rights. References in this Agreement to Parent Common
Stock shall include, unless the context requires otherwise, the associated
preference share purchase rights ("PARENT RIGHTS") issued pursuant to the Rights
Agreement dated as of August 15, 1995 between Parent and American Stock Transfer
and Trust Company, as Rights Agent, as amended (the "PARENT RIGHTS AGREEMENT").
References in this Agreement to
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Company Common Stock shall include, unless the context requires otherwise, the
associated preferred share purchase rights ("COMPANY RIGHTS") issued pursuant to
the Amended and Restated Rights Agreement dated as of November 16, 1999 by and
between the Company and U.S. Stock Transfer Corporation, as Rights Agent, as
amended prior to the Effective Time (the "COMPANY RIGHTS AGREEMENT").
Section 2.02. Adjustment to Merger Consideration.
(a) If the amount obtained by dividing (x) the Aggregate Parent
Stock Value by (y) the Closing Transaction Value is less than 0.4500, the
following shall occur:
(i) The Exchange Ratio shall be adjusted to a number, rounded
to the nearest fourth decimal place, equal to (x) the product of 0.4500
and the Closing Transaction Value, divided by (y) the product of the
Aggregate Company Share Number and the Closing Parent Stock Price; and
(ii) The Cash Merger Consideration shall be adjusted to an
amount, rounded to the nearest cent, equal to the quotient obtained by
dividing (x) the amount obtained by subtracting the Aggregate Dissenter's
Value from the product of 0.5500 and the Closing Transaction Value, by (y)
the Aggregate Company Share Number.
(b) In the event that the Exchange Ratio and the Cash Merger
Consideration are adjusted as provided for in this Section 2.02, all references
in this Agreement to the "Exchange Ratio" and the "Cash Merger Consideration"
shall refer to the Exchange Ratio and the Cash Merger Consideration as adjusted
in this Section 2.02 except as may be otherwise specified herein.
(c) For purposes of this Section 2.02, the following terms shall
have the following meanings:
(i) "AGGREGATE DISSENTER'S VALUE" means the product of (x) the
aggregate number of Dissenting Shares determined at Closing, and (y) the
sum of (1) the Cash Merger Consideration (before any adjustment pursuant
to Section 2.02) and (2) the product of the Exchange Ratio (before any
adjustment pursuant to Section 2.02) and the Closing Parent Stock Price.
(ii) "AGGREGATE CASH AMOUNT" means the product of (x) the Cash
Merger Consideration (before any adjustment pursuant to Section 2.02) and
(y) the Aggregate Company Share Number.
(iii) "AGGREGATE COMPANY SHARE NUMBER" means the number
obtained by subtracting (x) the aggregate number of shares of Company
Common Stock to be cancelled in the Merger pursuant to Section 2.01(a)(ii)
and (y) the aggregate number of Dissenting Shares determined at Closing,
from (z) the aggregate number of shares of Company Common Stock
outstanding on the Closing Date.
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(iv) "AGGREGATE PARENT SHARE NUMBER" means the product of (x)
the Exchange Ratio (before any adjustment pursuant to Section 2.02) and
(y) the Aggregate Company Share Number.
(v) "AGGREGATE PARENT STOCK VALUE" means the product of (x)
the Aggregate Parent Share Number (before any adjustment pursuant to
Section 2.02) and (y) the Closing Parent Stock Price.
(vi) "CLOSING PARENT STOCK PRICE" means the mean between the
high and low selling prices, regular way, of the Parent Common Stock on
the NYSE on the date of the Effective Time.
(vii) "CLOSING TRANSACTION VALUE" means the sum of (x) the
Aggregate Cash Amount, (y) the Aggregate Parent Stock Value and (z) the
Aggregate Dissenters Value.
(d) Notwithstanding anything in this Agreement to the contrary, this
Section 2.02 shall have no force and effect, if, prior to the Closing Date,
final or temporary Treasury Regulations are promulgated or other guidance is
issued by the IRS upon which the parties to this Agreement can rely, with an
effective date prior to the Closing Date, in substantially the same form or with
substantially the same effect of Proposed Treasury Regulations Section
1.368-1(e)(2) (REG-129706-04; August 10, 2004).
Section 2.03. Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and held by a holder thereof
who shall not have voted to adopt this Agreement and who properly exercises and
perfects appraisal rights for such shares in accordance with Section 262 of the
DGCL (the "DISSENTING SHARES") will not be converted as described in Section
2.01(a) but shall be converted into the right to receive such consideration as
may be determined to be due pursuant to Section 262 of the DGCL; provided,
however, that if any such holder shall fail to perfect or otherwise shall waive,
withdraw or lose the right to appraisal and payment under the DGCL, the right of
such holder to such appraisal of its shares of Company Common Stock shall cease
and such shares of Company Common Stock shall be deemed converted as of the
Effective Time into the right to receive the Merger Consideration to which any
such holder is entitled pursuant to Section 2.01(a), any cash in lieu of
fractional shares payable to any such holder pursuant to Section 2.04(e) and any
dividends or other distributions to which any such holder is entitled pursuant
to Section 2.04(c). The Company shall give Parent (a) prompt notice of any
written demands for appraisal received by the Company, withdrawals of such
demands, and any other related instruments served pursuant to Section 262 of the
DGCL and received by the Company and (b) the opportunity to direct in compliance
with all applicable Laws all negotiations and proceedings with respect to
demands for appraisals under the DGCL; provided, that any definitive actions
taken by the Company at the direction of Parent in respect of any such
negotiations and proceedings may be conditioned upon occurrence of the Effective
Time. The Company shall not, except with prior written consent of Parent, (i)
voluntarily make any payment with respect to any demands for appraisal for
Dissenting Shares, (ii) offer to settle, or settle, any such demands, (iii)
waive any failure to timely deliver a written demand for appraisal in accordance
with the DGCL or (iv) agree to do any of the foregoing.
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Section 2.04. Exchange of Certificates.
(a) As of the Effective Time, Parent shall deposit, or shall cause
to be deposited, with a bank or trust company designated by Parent and
reasonably satisfactory to the Company (the "EXCHANGE AGENT"), for the benefit
of the holders of shares of Company Common Stock, for exchange in accordance
with this Article II through the Exchange Agent, (i) certificates representing a
number of shares of Parent Common Stock equal to the Exchange Ratio multiplied
by the number of outstanding shares of Company Common Stock held by holders of
record other than Parent, Merger Sub or any wholly-owned Subsidiary of Parent or
Merger Sub, rounded down to the nearest whole number and (ii) an amount of cash
sufficient to deliver to holders of Company Common Stock the Cash Merger
Consideration. For purposes of such deposit, Parent shall assume that there will
not be any fractional shares of Parent Common Stock. Parent further agrees to
provide to the Exchange Agent, from time to time as needed, immediately
available funds sufficient to pay cash in lieu of fractional shares pursuant to
Section 2.04(e) and any dividends and other distributions pursuant to Section
2.04(c). Any cash and certificates representing Parent Common Stock deposited
with the Exchange Agent shall hereinafter be referred to as the "EXCHANGE FUND."
The Exchange Agent shall, pursuant to irrevocable instructions, deliver the
Merger Consideration contemplated to be paid per share of Company Common Stock
pursuant to Section 2.01 out of the Exchange Fund. Except as contemplated by
Sections 2.04(c) and 2.04(e) hereof, the Exchange Fund shall not be used for any
other purpose.
(b) Promptly (and in any event within five (5) Business Days) after
the Effective Time, Parent shall cause the Exchange Agent to mail to each holder
of record of a certificate formerly representing Company Common Stock (a
"CERTIFICATE"), other than Parent or Merger Sub or any wholly-owned Subsidiary
of Parent or Merger Sub, (i) a letter of transmittal that shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent, which
letter shall be in customary form and (ii) instructions for effecting the
surrender of such Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor (A) one or more shares of Parent Common Stock representing, in the
aggregate, the whole number of shares that such holder has the right to receive
pursuant to Section 2.01(a)(i) (after taking into account all shares of Company
Common Stock then held by such holder), (B) the Cash Merger Consideration which
such holder has the right to receive pursuant to Section 2.01(a)(i) in respect
of the shares represented by such Certificate and/or (C) a check in the amount
equal to the cash that such holder has the right to receive with respect to any
fractional shares of Parent Common Stock pursuant to Section 2.04(e) and
dividends and other distributions pursuant to Section 2.04(c), if any, and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or will accrue on any cash payable pursuant to Section 2.01(a)(i), Section
2.04(c) or Section 2.04(e). In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, the
Merger Consideration may be issued and paid with respect to such Company Common
Stock to such a transferee if the Certificate representing such shares of
Company Common Stock is presented to the Exchange Agent in accordance with this
Section 2.04(b), accompanied by all
6
documents required to evidence and effect such transfer and evidence that any
applicable stock transfer taxes have been paid.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock, with a record date after the
Effective Time, shall be paid to the holder of any unsurrendered Certificate,
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.04(e), unless and until the holder of such
Certificate shall surrender such Certificate in accordance with Section 2.04(b).
Subject to the effect of escheat, Tax or other applicable Laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) promptly, 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 2.04(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole shares of Parent Common
Stock.
(d) The Merger Consideration delivered upon surrender of the
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 2.04(c) or Section 2.04(e)) shall be deemed to have been
paid in full satisfaction of all rights pertaining to such share of Company
Common Stock.
(e) No certificates or scrip representing fractional shares of
Parent Common Stock, or book-entry credit of the same, shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution with respect
to Parent Common Stock shall be payable on or with respect to any fractional
share and such fractional share interests shall not entitle the owner thereof to
any rights of a stockholder of Parent. For purposes of this Section 2.04(e), all
fractional shares to which a single record holder would be entitled shall be
aggregated and calculations shall be rounded to the fourth decimal point. In
lieu of any such fractional share of Parent Common Stock, each holder of Company
Common Stock otherwise entitled to a fraction of a share of Parent Common Stock
will be entitled to receive from the Exchange Agent a cash payment in an amount
equal to the product of (i) such fractional part of a share of Parent Common
Stock multiplied by (ii) an amount equal to the average of the closing sale
prices for Parent Common Stock on the NYSE, as reported in The Wall Street
Journal, Northeastern edition, for each of the ten consecutive trading days
ending with the second complete trading day prior to the Effective Time.
(f) Any portion of the Exchange Fund which remains undistributed to
the holders of Company Common Stock for six months after the Effective Time
shall be delivered to Parent, upon demand, and, from and after such delivery to
Parent, any holders of Company Common Stock who have not theretofore complied
with this Article II shall thereafter look only to Parent for the Merger
Consideration payable in respect of such shares of Company Common Stock, any
cash in lieu of fractional shares of Parent Common Stock to which they are
entitled pursuant to Section 2.04(e) and any dividends or other distributions
with respect to Parent Common Stock to which they are entitled pursuant to
Section 2.04(c), in each case, without any interest thereon.
7
(g) Neither Parent, Merger Sub, the Surviving Corporation, the
Exchange Agent nor the Company shall be liable to any holder of shares of
Company Common Stock for any such shares of Parent Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered to
a public official pursuant to any abandoned property, escheat or similar Law.
(h) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such Person of a bond, in such reasonable amount as Parent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent shall pay in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable in respect of
the shares of Company Common Stock represented by such Certificate, any cash in
lieu of fractional shares of Parent Common Stock to which the holders thereof
are entitled pursuant to Section 2.04(e) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.04(c), in each case, without any interest thereon.
(i) 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 Company Common Stock such amounts as Parent or the Exchange Agent
are required to deduct and withhold under the Code, or any Tax Law, with respect
to the making of such payment. To the extent that amounts are so withheld by
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 Company Common
Stock in respect of whom such deduction and withholding was made by Parent or
the Exchange Agent.
(j) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Parent, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Parent upon termination
of the Exchange Fund pursuant to Section 2.04(f). In the event the cash in the
Exchange Fund shall be insufficient to fully satisfy all of the payment
obligations to be made by the Exchange Agent hereunder, Parent shall promptly
deposit cash into the Exchange Fund in an amount which is equal to the
deficiency in the amount of cash required to fully satisfy such payment
obligations.
Section 2.05. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of shares of Company Common Stock theretofore
outstanding on the records of the Company. From and after the Effective Time,
the holders of Certificates representing shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Common Stock except as otherwise
provided herein or by Law. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent, for any reason, in accordance with
Section 2.04(b), shall be canceled against delivery of the Merger Consideration
payable in respect of the shares of Company Common Stock formerly represented by
such Certificates, any cash in lieu of fractional shares of Parent Common Stock
to which the holders thereof are entitled pursuant to Section 2.04(e) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.04(c), in each case, without any interest thereon.
8
Section 2.06. Stock Options.
(a) At the Effective Time and without any action on the part of the
parties hereto, each unexercised and unexpired stock option that is then
outstanding under the Company Stock Plans (other than options outstanding under
the Company's 1999 Stock Option Plan (the "1999 OPTION PLAN") or the Company's
2000 Stock Option Plan (the "2000 OPTION PLAN")), which options shall be treated
as set forth in Section 2.06(b), whether vested or unvested (the "EXCHANGE
OPTIONS"), shall be assumed by Parent in accordance with the terms (as in effect
at the Effective Time) of the Company Stock Plans, the stock option agreement by
which such Exchange Option is evidenced (including any amendments thereto) and
this Agreement, and converted into an option to purchase Parent Common Stock in
accordance with this Section 2.06(a). Each Exchange Option so converted shall
continue to have, and be subject to, the same terms and conditions (including
restrictions on vesting and exercisability) as set forth in the applicable
Company Stock Plan and any applicable agreement thereunder, as in effect
immediately prior to the Effective Time, except that, as of the Effective Time,
(i) the number of whole shares of Parent Common Stock issuable upon exercise of
such Exchange Option shall be equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Exchange Option,
whether or not exercisable, immediately prior to the Effective Time multiplied
by 2.3674 (the "OPTION EXCHANGE RATIO"), rounded down to the nearest whole
number of shares of Parent Common Stock, (ii) the per share exercise price for
the shares of Parent Common Stock issuable upon exercise of such Exchange Option
so converted shall be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Exchange Option was
exercisable immediately prior to the Effective Time by the Option Exchange
Ratio, rounded up to the nearest whole cent, (iii) the vesting requirements
applicable to each Exchange Option which is outstanding as of the date of this
Agreement and remains outstanding at the Effective Time shall automatically
lapse and such Exchange Option shall become immediately vested and exercisable
for all of the shares Parent Common Stock at the time subject to such Exchange
Option and may be exercised for any or all of those shares as fully vested
shares, (iv) all references in the Company Stock Plan and the agreement
evidencing the Exchange Option to the Company shall be deemed to be references
to Parent and (v) all references in the Company Stock Plan and the agreement
evidencing the Exchange Option to Company Common Stock shall be deemed to be
references to Parent Common Stock. Notwithstanding anything to the contrary in
this Section 2.06(a), the conversion of any Company Stock Options (regardless of
whether such options qualify as "incentive stock options" within the meaning of
Section 422 of the Code) into options to purchase Parent Common Stock shall be
made in such a manner as would not constitute a "modification" of such Company
Stock Options within the meaning of Section 424 of the Code.
(b) At the Effective Time and without any action on the part of the
parties hereto, each unexercised and unexpired stock option that is then
outstanding under the 1999 Option Plan or the 2000 Option Plan, whether vested
or unvested (the "CONVERSION OPTIONS" and together with the Exchange Options,
the "COMPANY STOCK OPTIONS"), shall be assumed by Parent in accordance with the
terms (as in effect at the Effective Time) of the 1999 Option Plan or 2000
Option Plan, as applicable, and the stock option agreement by which such
Conversion Option is evidenced (including any amendments thereto) and this
Agreement and converted into an option to purchase a number of shares of Parent
Common Stock and an amount of cash as determined in accordance with this Section
2.06(b). Each Conversion Option so converted shall
9
continue to have, and be subject to, the same terms and conditions (including
restrictions on vesting and exercisability) as set forth in the 1999 Option Plan
or 2000 Option Plan, as applicable, and any applicable agreements thereunder, as
in effect immediately prior to the Effective Time, except that, as of the
Effective Time, (i) each Conversion Option shall be exercisable for the
aggregate amount of Merger Consideration the optionee would have been entitled
to receive in connection with the Merger in the event he or she exercised the
Conversion Option immediately prior to the Effective Time for the number of
shares of Company Common Stock that were issuable upon exercise of such
Conversion Option, whether or not exercisable, (ii) the exercise price per Unit
shall be equal to the sum obtained by dividing the aggregate exercise price
payable for the Company Common Stock for which such Conversion Option was
exercisable immediately prior to the Effective Time by the number of Units
subject to such Conversion Option immediately following the Effective Time,
rounded up to the nearest whole cent, (iii) the vesting requirements applicable
to each Conversion Option which is outstanding as of the date of this Agreement
and remains outstanding at the Effective Time shall automatically lapse and such
Conversion Option shall become immediately vested and exercisable for all of the
Units at the time subject to such Conversion Option and may be exercised for any
or all of such Units without vesting restrictions, (iv) all references in the
1999 Option Plan and the 2000 Option Plan and the agreement evidencing the
Conversion Option to the Company shall be deemed to be references to Parent, and
(v) all references in the 1999 Option Plan and the 2000 Option Plan and the
agreement evidencing the Conversion Option to Company Common Stock shall be
deemed to be references to either Parent Common Stock or Units, as the context
requires. Notwithstanding the foregoing, the adjustments to be made to the
Conversion Options (regardless of whether such options qualify as "incentive
stock options" within the meaning of Section 422 of the Code) shall be made in
such a manner as would not be intended to constitute a "modification" of such
Conversion Options within the meaning of Section 424 of the Code. For purposes
of this Section 2.06, "UNIT" shall mean one share of Parent Common Stock plus an
amount of cash equal to the sum obtained by dividing (x) the aggregate amount of
cash for which the Conversion Option is exercisable immediately following the
Effective Time (as determined pursuant to (i) above) by (y) the whole number of
shares of Parent Common Stock issuable upon exercise of such Conversion Option
immediately following the Effective Time (as determined pursuant to (i) above),
rounded down to the nearest whole cent. In no event will a Conversion Option be
exercisable for a fraction of a Unit.
(c) Parent shall (i) file with the SEC, as promptly as practicable,
and in no event later than three (3) Business Days after the Closing Date, a
registration statement on Form S-8 relating to the Parent Common Stock subject
to the Company Stock Options, (ii) prior to such filing, take such further
actions as may be reasonably necessary to cover under such registration
statement (or on a Form S-3 or any other successor or other appropriate form
reasonably satisfactory to those persons whose shares are not covered by the
Form S-8) shares of Parent Common Stock subject to the Company Stock Options
held by those persons eligible under the Company's registration statement on
Form S-8 immediately prior to the Closing Date, and (iii) maintain the
effectiveness of such registration statement(s) (and maintain the current status
of the prospectus(es) contained in such registration statement(s)) for so long
as the Company Stock Options remain outstanding.
Section 2.07. Employee Stock Purchase Plan. The Company shall take
all requisite action with respect to the Company's 2000 Employee Stock Purchase
Plan, as amended
10
(the "COMPANY ESPP"), to ensure that (i) all Company Purchase Rights (as defined
in Section 3.02) issued and outstanding as of the date of the Company
Stockholder Approval (as defined in Section 3.04) will be exercised on such
date, (ii) no Company Purchase Rights will be issued and outstanding as of the
Effective Time, (iii) conditioned upon the occurrence of the Closing, the
Company ESPP will be terminated no later than the Effective Time, and (iv) the
Company ESPP will be suspended as of the date of the Company Stockholder
Approval and no additional offering periods shall commence on or after the date
of the Company Stockholder Approval. The Company shall deliver to Parent prior
to the Effective Time sufficient evidence that the Company ESPP will be
terminated no later than the Effective Time. In addition, prior to the Company
Stockholder Approval, the Company shall take all actions (including, if
appropriate, amending the terms of the Company ESPP and the terms of any
offering period(s) commencing prior to the Effective Time) that are necessary to
provide that, as of the date of the Company Stockholder Approval, participants
and former participants in the Company ESPP shall cease to have any right or
interest thereunder. Notwithstanding the foregoing, all actions taken and all
amendments made pursuant to this Section 2.07 shall be taken or made in
compliance with Sections 423 and 424 of the Code and so as not to result in a
"modification" under such Sections. All shares of Company Common Stock issued in
connection with the exercise of the Company Purchase Rights shall be, at the
Effective Time, converted into the right to receive the Merger Consideration in
accordance with, and pursuant to, the terms and conditions of this Agreement.
Section 2.08. Restricted Stock. All outstanding rights of the
Company which it may hold immediately prior to the Effective Time to acquire
unvested shares of the Company Common Stock issued pursuant to the Company
Restricted Stock Plan (the "REPURCHASE RIGHTS") shall lapse at the Effective
Time. Notwithstanding the foregoing, all Repurchase Rights which the Company may
hold immediately prior to the Effective Time to acquire unvested shares of the
Company Common Stock issued after March 20, 2005 (the "ASSIGNED REPURCHASE
RIGHTS") shall be assigned to Parent at the Effective Time and shall thereafter
be exercisable by Parent upon the same terms and conditions in effect
immediately prior to the Effective Time, except that (i) the Assigned Repurchase
Rights shall be adjusted to apply to the Merger Consideration received in
exchange for the unvested shares of the Company Common Stock subject to the
Assigned Repurchase Rights and (ii) the repurchase price to be paid (if any) for
the Merger Consideration received in exchange for a share of Company Restricted
Stock shall be an amount determined by dividing the repurchase price per share
of Company Restricted Stock, as determined immediately prior to the Effective
Time, by the Option Exchange Ratio, rounded down to the nearest whole cent. In
the event that the exercise of an Assigned Repurchase Right would result in the
return of Cash Merger Consideration to Parent, Parent shall be entitled to
offset the Cash Merger Consideration to be returned against the repurchase price
(if any) to be paid.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that except as set
forth in the disclosure letter dated as of the date hereof delivered by the
Company to Parent (the "COMPANY DISCLOSURE LETTER"):
11
Section 3.01. Organization and Qualification. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease,
license and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to transact business and, where
applicable, is in good standing in each jurisdiction in which the properties
owned, leased, licensed or operated by it or the nature of the business
conducted by it makes such qualification necessary, except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. True, accurate and complete copies of the certificate
of incorporation and bylaws of the Company, in each case, as amended and in
effect on the date hereof, including all amendments thereto, have heretofore
been filed with the SEC or delivered to Parent.
Section 3.02. Capitalization.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and 1,000,000 shares of preferred
stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"). As of March 10,
2005, (i) 36,189,410 shares of Company Common Stock, including in each case the
associated Company Rights, were issued and outstanding, (ii) no shares of
Company Preferred Stock were issued or outstanding, (iii) no shares of Company
Common Stock were held in the treasury of the Company, (iv) 1,754,870 shares of
Company Common Stock were reserved for issuance upon exercise of Company Stock
Options issued and outstanding, (v) 1,378,395 shares of Company Common Stock
were authorized and reserved for future issuance pursuant to the Company Stock
Plans (other than shares of Company Common Stock authorized and reserved for
future issuance upon exercise of Company Stock Options issued and outstanding)
and the Company ESPP and (vi) 25,000 shares of Company Preferred Stock were
designated as Series A Junior Preferred Stock, par value $0.01 per share, and
were reserved for issuance upon exercise of the Company Rights issued pursuant
to the Company Rights Agreement. The Company has delivered or made available to
Parent a complete and correct copy of the Company Rights Agreement as in effect
on the date hereof. Each issued and outstanding share of capital stock of the
Company is, and each share of Company Common Stock reserved for issuance as
specified above will be, upon issuance on the terms and conditions specified in
the instruments pursuant to which it is issuable, duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Since March 10,
2005 through the date hereof, except as permitted by this Agreement, (i) no
shares of Company Common Stock have been issued, except in connection with the
exercise of purchase rights issued in accordance with the terms of the Company
ESPP ("COMPANY PURCHASE RIGHTS") or Company Stock Options issued and outstanding
and (ii) no options, warrants, securities convertible into, or commitments with
respect to the issuance of, shares of capital stock of the Company have been
issued, granted or made, except Company Rights in accordance with the terms of
the Company Rights Agreement.
(b) Except for Company Rights, Company Purchase Rights and Company
Stock Options issued and outstanding, as of the date hereof, there are no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other anti-takeover
agreement, obligating the Company or any Subsidiary of the Company to issue,
deliver or sell, or
12
cause to be issued, delivered or sold, additional shares of Company Common Stock
or obligating the Company or any Subsidiary of the Company to grant, extend or
enter into any such agreement or commitment. As of the date hereof, there are no
obligations, contingent or otherwise, of the Company to (i) repurchase, redeem
or otherwise acquire any shares of Company Common Stock or the capital stock or
other equity interests of any Subsidiary of the Company or (ii) 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, any Person other than a Subsidiary. There are no outstanding
stock appreciation rights or similar derivative securities or rights of the
Company or any of its Subsidiaries. There are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. There are no voting trusts,
irrevocable proxies or other agreements or understandings to which the Company
or any Subsidiary of the Company is a party or is bound with respect to the
voting of any shares of Company Common Stock. The Company's Board of Directors
has taken all action such that, for so long as this Agreement is in full force
and effect, (i) none of Merger Sub or Parent and its Subsidiaries shall become
an "Acquiring Person" and no "Shares Acquisition Date" shall occur as a result
of the execution, delivery and performance of this Agreement and the
consummation of the Merger, (ii) no "Distribution Date" shall occur as a result
of the announcement of or the execution of this Agreement or any of the
transactions contemplated hereby and (iii) the Company Rights Agreement shall
terminate immediately prior to the Effective Time. As used in this Section
3.02(b), the terms "Acquiring Person," "Distribution Date" and "Shares
Acquisition Date" shall have the meanings ascribed to such terms in the Company
Rights Agreement. The Company has not agreed to register any securities under
the Securities Act or under any state securities law or granted registration
rights to any Person (except rights which have terminated or expired). Neither
the Company nor any of its Subsidiaries has any outstanding obligations in
respect of prior acquisitions of businesses to pay, in the form of securities,
cash or other property, any portion of the consideration payable to the seller
or sellers in such transaction.
(c) The Company has previously made available to Parent complete and
correct copies of each Company Stock Plan and the Company ESPP. Section 3.02(c)
of the Company Disclosure Letter sets forth a complete and correct list as of
March 18, 2005, of (i) all holders of outstanding Company Stock Options, whether
or not granted under the Company Stock Plans, including the date of grant, the
number of shares of Company Common Stock originally granted subject to each such
option, the exercise price per share, the exercise and vesting schedule, the
number of shares of Company Common Stock remaining subject to each such option,
and the maximum term of each such option, (ii) all holders of outstanding shares
of Company Restricted Stock, including the number and kind of shares subject to
the Repurchase Rights, the grant date of such shares, the purchase price per
share at which the Company may repurchase the Company Restricted Stock, and the
period during which each Repurchase Right may be exercised, and (iii) the number
of shares remaining available for purchase under the Company ESPP. Complete and
correct copies of the relevant forms of written agreements, including forms of
amendments thereto, evidencing the grant of Company Stock Options or Company
Restricted Stock and the grant of purchase rights pursuant to the Company ESPP
have been provided to Parent by the Company.
13
Section 3.03. Subsidiaries. Each Subsidiary of the Company is duly
organized, validly existing and, where applicable, in good standing under the
laws of its jurisdiction of organization and has the requisite power and
authority to own, lease, license and operate its assets and properties and to
carry on its business as it is now being conducted, and each Subsidiary of the
Company is qualified to transact business, and is in good standing, in each
jurisdiction in which the properties owned, leased, licensed or operated by it
or the nature of the business conducted by it makes such qualification
necessary, except in all cases as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. All of the
outstanding shares of capital stock or other equity interests of each Subsidiary
of the Company are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned directly or indirectly by the Company. There are
no subscriptions, options, warrants, voting trusts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting or transfer of any shares of capital stock or other
equity interests of any Subsidiary of the Company, including any right of
conversion or exchange under any outstanding security, instrument or agreement.
The Company has no material investment in any entity other than its
Subsidiaries.
Section 3.04. Authority; Non-Contravention; Approvals.
(a) The Company has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and, subject to
obtaining necessary stockholder approval in connection with this Agreement and
the Merger, to consummate the Merger and the other transactions contemplated by
this Agreement. The execution, delivery and performance by the Company of this
Agreement, and the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement, have been duly authorized by all
necessary corporate action on the part of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger or the other transactions contemplated by this
Agreement (other than the approval and adoption of this Agreement and the Merger
by the affirmative votes of the holders of a majority of the outstanding shares
of Company Common Stock and the filing and recordation of appropriate merger
documents as required by the DGCL). This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar Laws relating to or affecting the rights and remedies of
creditors generally and the effect of general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). The affirmative vote of the holders of a majority of the outstanding
Company Common Stock entitled to vote at a duly called and held meeting of the
Company's stockholders is the only vote of the holders of capital stock of the
Company necessary to approve and adopt this Agreement and the Merger (the
"COMPANY STOCKHOLDER APPROVAL").
(b) At a meeting duly called and held on March 20, 2005, the Board
of Directors of the Company unanimously (i) determined that this Agreement and
the other transactions contemplated hereby, including the Merger, are advisable
and in the best interests of the Company and the Company's stockholders, (ii)
approved and adopted this Agreement and the transactions contemplated hereby,
including the Merger and (iii) resolved to recommend
14
approval and adoption of this Agreement and the Merger by the Company's
stockholders. The actions taken by the Board of Directors of the Company
constitute approval of the Merger, this Agreement and the other transactions
contemplated hereby by the Board of Directors of the Company under the
provisions of Section 203 of the DGCL such that the restrictions on "business
combinations" as set forth in Section 203 of the DGCL do not apply to this
Agreement or the transactions contemplated hereby. No other takeover statute or
other similar statute or regulation relating to the Company is applicable to the
Merger or the transactions contemplated by this Agreement. Without giving effect
to the execution of this Agreement, neither the Company nor any affiliate or
associate of the Company is, or has been during the last three years, an
"interested stockholder" (as defined in Section 203 of the DGCL) of Parent.
(c) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger and the other transactions
contemplated hereby do not and will not violate, conflict with, give rise to the
right to modify or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or require any offer to purchase or any prepayment of any debt, or result
in the creation of any Lien, security interest or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under any of the
terms, conditions or provisions of (i) the respective certificate of
incorporation or bylaws or similar governing documents of the Company or any of
its Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any Governmental Entity
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, subject in the case of consummation, to obtaining the
Company Required Statutory Approvals and the Company Stockholder Approval, or
(iii) any Company Permit or Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties or assets may be bound or affected, other
than, in the case of (ii) and (iii) above, such violations, conflicts, rights to
modify, breaches, defaults, terminations, accelerations or creations of Liens,
security interests or encumbrances that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(d) Except for (i) the filings by the Company required by the HSR
Act, (ii) the filings by the Company required by Antitrust Laws of foreign
jurisdictions, (iii) the applicable requirements of the Exchange Act, (iv) the
filing of the Certificate of Merger and (v) any required filings under the rules
and regulations of the NASDAQ National Market (the filings and approvals
referred to in clauses (i) through (v) collectively, the "COMPANY REQUIRED
STATUTORY APPROVALS"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the Merger and the other transactions
contemplated hereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or obtained,
as the case may be, would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
15
Section 3.05. Reports and Financial Statements.
(a) Since January 1, 2001, the Company has filed with the SEC all
material forms, registration statements, prospectuses, reports, schedules and
documents (including all exhibits, post-effective amendments and supplements
thereto) (the "COMPANY SEC DOCUMENTS") required to be filed by it under each of
the Securities Act and the Exchange Act, all of which, as amended if applicable,
complied in all material respects as to form with all applicable requirements of
the appropriate Act, SOX and the rules and regulations thereunder. As of their
respective dates (taking into account any amendments or supplements filed prior
to the date hereof), the Company SEC Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the principal executive officer of the Company and the
principal financial officer of the Company (or each former principal executive
officer of the Company and each former principal financial officer of the
Company, as applicable) has made all certifications required by Rule 13a-14 or
15d-14 under the Exchange Act or Sections 302 and 906 of SOX and the rules and
regulations of the SEC promulgated thereunder with respect to the Company SEC
Documents, and to the knowledge of the Company, the statements contained in such
certifications are true and correct. For purposes of this Section 3.05(b),
"principal executive officer" and "principal financial officer" shall have the
meanings given to such terms in SOX. Neither the Company nor any of its
Subsidiaries has outstanding, or has arranged any outstanding, "extensions of
credit" to directors or executive officers within the meaning of Section 402 of
SOX.
(c) The consolidated financial statements of the Company included in
the Company SEC Documents comply as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q or 8-K or the applicable rules
of the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments which are not material). The books and records
of the Company and its Subsidiaries are maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements.
(d) Neither the Company nor any of its Subsidiaries is a party to,
or has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar contract or arrangement (including any contract or
arrangement relating to any transaction or relationship between or among the
Company and any of its Subsidiaries, on the one hand, and any unconsolidated
Affiliate, including any structured finance, special purpose or limited purpose
entity or Person, on the other hand or any "off-balance sheet arrangements" (as
defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose
or intended effect of such contract or arrangement is to avoid disclosure of any
material transaction involving, or
16
material Liabilities of, the Company or any of its Subsidiaries in the Company's
or such Subsidiary's published financial statements or other of the Company SEC
Documents.
(e) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(f) The Company has in place the "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
required in order for the Chief Executive Officer and Chief Financial Officer of
the Company to engage in the review and evaluation process mandated by the
Exchange Act and the rules promulgated thereunder. The Company's "disclosure
controls and procedures" are reasonably designed to ensure that all information
(both financial and non-financial) required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC, and that all such information is accumulated and
communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the
Chief Executive Officer and Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports.
(g) Since December 31, 2000, the Company has not received from its
independent auditors any oral or written notification of a (x) "reportable
condition" or (y) "material weakness" in the Company's internal controls. For
purposes of this Agreement, the terms "reportable condition" and "material
weakness" shall have the meanings assigned to them in the Statements of Auditing
Standards 60, as in effect on the date hereof.
Section 3.06. Absence of Undisclosed Liabilities. Except as
disclosed in the audited financial statements included in the Company's Form
10-K for the year ended December 31, 2004 (the "COMPANY 10-K"), neither the
Company nor any of its Subsidiaries has as of the date hereof any Liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature,
except Liabilities, obligations or contingencies (a) which are accrued or
reserved against in the financial statements in the Company 10-K or reflected in
the notes thereto, (b) which were incurred in the ordinary course of business
and consistent with past practices, (c) which would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or
(d) which are of a nature not required to be reflected in the consolidated
financial statements of the Company and its Subsidiaries prepared in accordance
with GAAP consistently applied.
Section 3.07. Litigation. Except as disclosed in the Company SEC
Documents prior to the date hereof, as of the date hereof, there are no Actions
pending, or, to the knowledge of the Company, threatened in writing against,
which relate to or affect the Company or any of its Subsidiaries, before any
court or other Governmental Entity or any arbitrator that would,
17
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. As of the date hereof, neither the Company nor any of
its Subsidiaries is subject to any judgment, decree, injunction, rule or order
of any Governmental Entity or any arbitrator which would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
There has not, within the last four years, been nor, as of the date hereof, are
there any internal investigations or inquiries being conducted by the Company,
the Board of Directors of the Company (or any committee thereof) or any other
Person at the request of any of the foregoing concerning any financial,
accounting, Tax, conflict of interest, self-dealing, fraudulent or deceptive
conduct or other misfeasance or malfeasance issues.
Section 3.08. Absence of Certain Changes or Events.
(a) Except as disclosed in the Company SEC Documents prior to the
date hereof, since December 31, 2004 through the date hereof:
(i) the Company and its Subsidiaries have conducted their
business only in the ordinary course consistent with past practice;
(ii) there has not been any split, combination or
reclassification of any of the Company's capital stock or any declaration,
setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, in lieu of, or in
substitution for, shares of the Company's capital stock;
(iii) except as required by a change in GAAP, there has not
been any change in accounting methods, principles or practices by the
Company materially affecting the consolidated financial position or
results of operations of the Company; and
(iv) the Company and its Subsidiaries have not made any
material Tax election or settled or compromised any material Tax liability
or refund, other than Tax elections required by Law, or changed any annual
Tax accounting period or method of Tax accounting, filed any material
amendment to a Tax Return, entered into any closing agreement relating to
any material Tax, surrendered any right to claim a material Tax refund, or
consented to any extension or waiver of the statute of limitations period
applicable to any material Tax claim or assessment; and
(v) no action has been taken by the Company or its
Subsidiaries to amend or waive any performance or vesting criteria or
accelerate vesting, exercisability or funding under any Company Benefit
Plan or Company Stock Option.
(b) Since December 31, 2004, there has not occurred any circumstance
or event, or series of circumstances or events, that, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect.
Section 3.09. Registration Statement, Etc. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (a) the Registration Statement to be filed by Parent with the SEC
to register the shares of Parent Common Stock to be issued in the Merger (the
"REGISTRATION STATEMENT"), (b) the Joint Proxy Statement/Prospectus (the "JOINT
PROXY STATEMENT") to be mailed to the Company's
18
stockholders in connection with the meeting of the Company's stockholders (the
"COMPANY STOCKHOLDERS' MEETING") to be called to consider this Agreement and to
Parent's stockholders in connection with the meeting of Parent's stockholders
(the "PARENT STOCKHOLDERS' MEETING") to be called to consider the Share Issuance
and (c) any other documents to be filed with the SEC in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed and at the time such documents become effective or at the time any
amendment or supplement thereto becomes effective, contain any untrue statement
of a material fact, or omit to state any material fact required or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading; and, in the case of the Registration Statement,
when it becomes effective or at the time any amendment or supplement thereto
becomes effective, will cause the Registration Statement or such supplement or
amendment to contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or which is necessary in order
to make the statements therein not misleading, or, in the case of the Joint
Proxy Statement, when first mailed to the stockholders of the Company and the
stockholders of Parent, or in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Company
Stockholders' Meeting or the time of the Parent Stockholders' Meeting, will
cause the Joint Proxy Statement or any amendment thereof or supplement thereto
to contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, no representation is made by the
Company with respect to statements made in any such documents based on
information supplied by Parent or with respect to information concerning Parent
which is incorporated by reference in such documents.
Section 3.10. Compliance with Applicable Law; Permits.
(a) The Company, its Subsidiaries and their employees hold all
authorizations, permits, licenses, certificates, easements, concessions,
franchises, variances, exemptions, orders, consents, registrations, approvals
and clearances of all Governmental Entities (including, without limitation, all
those that may be required by the FDA or any other Governmental Entity engaged
in the regulation of the Company's products) which are required for the Company
and its Subsidiaries to own, lease, license and operate its properties and other
assets and to carry on their respective business in the manner described in the
Company SEC Documents filed prior to the date hereof and as they are being
conducted as of the date hereof (the "COMPANY PERMITS"), and all the Company
Permits are valid, and in full force and effect, except where the failure to
have, or the suspension or cancellation of, or the failure to be valid or in
full force and effect of, any such Company Permits would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
(b) The Company and its Subsidiaries are, and have been at all times
since January 1, 2001, in compliance with the terms of the Company Permits and
all applicable Laws relating to the Company and its Subsidiaries or their
respective businesses, assets or properties, except where the failure to be in
compliance with the terms of the Company Permits or such applicable Law would
not, individually or in the aggregate, reasonably be expected to have an Company
Material Adverse Effect. Since January 1, 2001, neither the Company nor any of
its Subsidiaries has received any notification from any Governmental Entity (i)
asserting that the Company or any of its Subsidiaries is not in material
compliance with, or at any time since such
19
date has failed to materially comply with, applicable Law or (ii) threatening to
revoke any material Company Permit. As of the date hereof, no material
investigation or review by any Governmental Entity is pending or, to the
knowledge of the Company, has been threatened against the Company or any of its
Subsidiaries.
Section 3.11. Company Material Contracts; Defaults.
(a) As of the date hereof and except as filed as exhibits to the
Company's SEC Documents, neither the Company nor any of its Subsidiaries is a
party to, and none of their respective assets, businesses or operations is bound
by, any Contract (whether written or oral) that (i) is a "material contract" (as
such term is defined in Item 601(a)(10) of Regulation S-K promulgated under the
Securities Act), (ii) relates to any indebtedness in excess of $500,000, (iii)
provides for aggregate payments from it or any of its Subsidiaries in excess of
$500,000, has an unexpired term exceeding six months, cannot be terminated
without penalty upon not more than sixty (60) days' prior written notice, and
which has yet-to-be performed executory obligations, (iv) materially limits its
freedom or the freedom of any of its Subsidiaries to compete in any line of
business or with any Person or in any geographical area or which would so
materially limit its freedom or the freedom of any of its Subsidiaries so to
compete after the Effective Time, (v) relates to the research, development,
distribution, supply, license, co-promotion or manufacturing by other Persons of
Company Key Products which Contract, if terminated or non-renewed, would
reasonably be expected to have a material adverse effect on any Company Key
Product; (vi) that relates to a Company Key Product and purports to prohibit the
Company or any Subsidiary from contesting the validity or ownership of any other
Person's patent or from challenging the inventorship of any other Person's
invention; (vii) which relates to a Company Key Product and where, in settlement
of an actual or threatened action for patent infringement, trade secrets
misappropriation or similar intellectual property action, the Company or any
Subsidiary purports to acknowledge or agree that certain acts infringe or
misappropriate the rights of another Person; (viii) where, in settlement of an
actual or threatened action for patent infringement, trade secret
misappropriation or similar intellectual property action, another Person agrees
in writing not to contest the validity or ownership of Company Owned
Intellectual Property which relates to a Company Key Product; (ix) relating to
the right of the Company or any Subsidiary to use the name "XxXxxx"; or (x) to
the extent not included within the foregoing, each Company Material License
(collectively, the "COMPANY MATERIAL CONTRACTS"). Except for Company Material
Contracts which have expired pursuant to their terms after the date hereof, each
of the Company Material Contracts is valid and binding on the Company or its
Subsidiary party thereto and, to the Company's knowledge, each other Person
thereto, and is in full force and effect and enforceable against the Company or
such Subsidiary, as the case may be, in accordance with its terms (except as
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles and (ii) to the extent applicable, securities laws limitations on the
enforceability of provisions regarding indemnification in connection with the
sale or issuance of securities).
(b) Neither the Company nor any of its Subsidiaries is in violation,
breach or default under any of the Company Material Contracts, and there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a violation, breach or default, except for such breaches
or defaults that would not, individually or in the aggregate,
20
reasonably be expected to result in a Company Material Adverse Effect. No other
Person has alleged or claimed that the Company or any of its Subsidiaries or, to
the Company's knowledge, any sublicensee of the Company or any of its
Subsidiaries, is in violation, breach or default under any Company Material
Contract, except for such breaches or defaults that would not, individually or
in the aggregate, reasonably be expected to result in a Company Material Adverse
Effect.
Section 3.12. Taxes.
(a) Each of the Company and its Subsidiaries has (i) duly and timely
filed with the appropriate Tax authority all Tax Returns required to be filed by
it through the date hereof, and all such Tax Returns are true, correct and
complete in all respects and (ii) paid all Taxes due and owing (whether or not
shown due on any Tax Returns), except in each case where the failure to pay such
Taxes or the failure of such Tax Returns to be true, correct or complete in all
respects would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any material Tax Return. No written claim has ever been made by a Tax
authority in a jurisdiction where the Company and its Subsidiaries do not file
Tax Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction.
(b) The unpaid Taxes of the Company and its Subsidiaries did not, as
of the date of the financial statements contained in the most recent Company SEC
Filings, exceed the reserve for Tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the balance sheets (rather than in any notes
thereto) contained in such financial statements. Since the date of the financial
statements in the most recent Company SEC Filings, neither the Company nor any
of its Subsidiaries has incurred any liability for Taxes outside the ordinary
course of business or otherwise inconsistent with past custom and practice,
except for any liability for Taxes which would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(c) There are no Liens for Taxes upon any property or asset of the
Company or any Subsidiary thereof, except for Liens (i) for Taxes contested in
good faith and reserved against in accordance with GAAP and reflected in the
Company SEC Reports filed prior to the date hereof or (ii) that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(d) No deficiencies for Taxes with respect to any of the Company and
its Subsidiaries have been set forth or claimed in writing, or proposed or
assessed by a Tax authority. There are no pending or, to the knowledge of the
Company, proposed or threatened audits, investigations, disputes or claims or
other actions for or relating to any Liability for Taxes with respect to any of
the Company and its Subsidiaries, and there are no matters under discussion with
any Tax authority, or known to the Company, with respect to Taxes that are
likely to result in a material additional Liability for Taxes with respect to
any of the Company and its Subsidiaries. No issues relating to Taxes of the
Company or its Subsidiaries were raised by the relevant Tax authority in any
completed audit or examination that would reasonably be
21
expected to recur with a Company Material Adverse Effect on Taxes in a later
taxable period. The Company has delivered or made available to Parent true and
complete copies of federal, state and local income Tax Returns of each of the
Company and its Subsidiaries and their predecessors for the years ended December
31, 2001, 2002, 2003 and promptly upon their availability, 2004, and true and
complete copies of all examination reports and statements of deficiencies
assessed against or agreed to by any of the Company and its Subsidiaries or any
predecessor, with respect to Taxes. None of the Company, any of its Subsidiaries
or any predecessor has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency,
or has made any request in writing for any such extension or waiver.
(e) Each of the Company and its Subsidiaries has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and all Tax Returns (including without
limitation all IRS Forms W-2 and 1099) required with respect thereto have been
properly completed and timely filed in all material respects. Neither the
Company nor any of its Subsidiaries has classified any individual as an
"independent contractor" or similar non-employee status who, according to any
Company Benefit Plan or applicable Law, should have been classified as an
employee.
(f) There are no Tax sharing agreements or similar arrangements
(including indemnity arrangements) with respect to or involving any of the
Company and its Subsidiaries, and, after the Closing Date, none of the Company
and its Subsidiaries shall be bound by any such Tax sharing agreements or
similar arrangements or have any Liability thereunder for amounts due in respect
of periods prior to the Closing Date.
(g) Except for the affiliated group of which the Company is the
common parent, each of the Company and its Subsidiaries is not and has never
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code or any group that has filed a combined, consolidated or
unitary Tax Return. Neither the Company nor any of its Subsidiaries has
Liability for the Taxes of any Person (including an individual, corporation,
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union or other entity or
Governmental Entity) other than the Company and its Subsidiaries (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise.
(h) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two (2) years
prior to the date of this Agreement, or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) that includes the Merger.
(i) Neither the Company nor any of its Subsidiaries has taken any
action or knows of any fact that is reasonably likely to prevent the Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
22
(j) None of the Company and its Subsidiaries (i) has consented at
any time under former Section 341(f)(1) of the Code to have the provisions of
former Section 341(f)(2) of the Code apply to any disposition of the assets of
the Company (or under any similar provision of state, local or foreign law);
(ii) has agreed, or is or was required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise (or
by reason of any similar provision of state, local or foreign law); (iii) has
ever been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code; (iv) has been a stockholder of a "controlled
foreign corporation" as defined in Section 957 of the Code (or any similar
provision of state, local or foreign law), (v) has ever made an election under
Section 338 of the Code (or under any similar provisions of state, local or
foreign Law), (vi) has been a "personal holding company" as defined in Section
542 of the Code (or any similar provision of state, local or foreign law); (vii)
has had a material Liability with respect to Taxes as a result of being a
stockholder of a "passive foreign investment company" within the meaning of
Section 1297 of the Code; or (viii) has engaged in a trade or business, had a
permanent establishment (within the meaning of an applicable Tax treaty) or has
otherwise become subject to Tax jurisdiction in a country other than the country
of its formation.
(k) Neither the Company nor any of its Subsidiaries has been a party
to a "reportable transaction," as such term is defined in Treasury Regulations
Section 1.6011-4(b)(1) or to a transaction that is or is substantially similar
to a "listed transaction," as such term is defined in Treasury Regulations
Section 1.6011-4(b)(2), or any other transaction requiring disclosure under
analogous provisions of state, local or foreign Tax law. The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
Section 3.13. Employee Benefit Plans; ERISA.
(a) Section 3.13(a) of the Company Disclosure Letter includes a
complete list, as of the date hereof, of each material employee benefit plan,
program or policy providing benefits to any current or former employee, officer
or director of the Company or any of its Subsidiaries or any beneficiary or
dependent thereof that is sponsored or maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries contributes or
is obligated to contribute, or with respect to which the Company or any of its
Subsidiaries has or may have any Liability or obligations, including any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA or any
employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any material bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit or similar
arrangement, agreement, plan, program or policy (collectively, the "COMPANY
BENEFIT PLANS"). The Company has made available to Parent a copy of each of the
Company Benefit Plans, including any amendments thereto, and where applicable,
any related trust agreement, annuity or insurance contract, the most recent
actuarial valuation, the most recent summary plan description, the most recent
prospectus, the most recent IRS determination letter, and the most recent annual
report (Form 5500) and audited financial statements.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect: (i) the
Company and its Subsidiaries have
23
complied, and are now in compliance, with all provisions of all laws and
regulations applicable to Company Benefit Plans and each Company Benefit Plan
has been administered in accordance with its terms, including the making of all
required contributions and the reflection by the Company of all required
accruals on its financial statements; (ii) no event or condition exists which
would reasonably be expected to subject the Company or any of its Subsidiaries
to Liability in connection with the Company Benefit Plans or any plan, program,
or policy sponsored or contributed to by any of their respective ERISA
Affiliates other than the provision of benefits thereunder in the ordinary
course; and (iii) there are no pending or, to the Company's knowledge,
threatened Actions (other than claims for benefits in the ordinary course)
relating to Company Benefit Plans which have been asserted or instituted and
which would reasonably be expected to result in any Liability of the Company or
any of its Subsidiaries.
(c) In no event will the execution and delivery of this Agreement or
any other related agreement, the consummation of the transactions contemplated
hereby or thereby, or the stockholder approval of the Merger (either alone or in
conjunction with any other event, such as termination of employment) result in,
cause the accelerated vesting, exercisability, funding or delivery of, or
increase the amount or value of, any material payment or benefit to any current
or former employee, officer or director of the Company or any of its
Subsidiaries or any beneficiary or dependent thereof or result in a limitation
on the right of the Company or any of its Subsidiaries to amend, merge,
terminate or receive a reversion of assets from any Company Benefit Plan or
related trust.
(d) Section 3.13(d) of the Company Disclosure Letter identifies each
Company Benefit Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code or is intended to be similarly qualified
or registered under applicable foreign law (collectively, the "COMPANY QUALIFIED
PLANS"). Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, the IRS (or other relevant
foreign regulatory agency) has issued a favorable determination letter (or
similar approval under foreign law) with respect to each Company Qualified Plan
and the related trust that has not been revoked, and the Company knows of no
existing circumstances or events that have occurred that would reasonably be
expected to adversely affect the qualified status of any Company Qualified Plan
or the related trust, which cannot be cured without a Company Material Adverse
Effect.
(e) No Company Benefit Plan or Company ERISA Affiliate Plan is, or
has ever been, subject to Title IV or Section 302 of ERISA or Section 412 or
4971 of the Code.
(f) No Company Benefit Plan or Company ERISA Affiliate Plan is, or
has ever been, a Multiemployer Plan.
(g) There is no contract, agreement, plan or arrangement to which
the Company or any Subsidiary of the Company is a party, including but not
limited to the provisions of this Agreement, that, individually or collectively,
could give rise to the payment of any material amount that would not be
deductible pursuant to Section 162(m) of the Code.
(h) No amount that could be received (whether in cash or property or
the vesting of property), as a result of the execution and delivery of this
Agreement or any other
24
related agreement, the consummation of the transactions contemplated hereby or
thereby, or the stockholder approval of the Merger (either alone or in
conjunction with any other event, such as termination of employment), by any
employee, officer or director of the Company or any Subsidiary of the Company
who is a "disqualified individual" (as such term is defined in Treasury
Regulation Section 1.280G-1) under any Company Benefit Plan or otherwise could
be characterized as a "parachute payment" (as defined in Section 280G(b)(2) of
the Code). The Company has made available to Parent all necessary information to
determine, as of the date hereof, the estimated maximum amount that could be
paid to each disqualified individual in connection with the transactions
contemplated by this Agreement under all employment, severance and termination
agreements, other compensation arrangements and Company Benefit Plans currently
in effect, assuming that the individual's employment with the Company is
terminated immediately after the Effective Time. The Company has also provided
to Parent (i) the grant dates, exercise prices and vesting schedules applicable
to each Company Option granted to the individual; (ii) the grant dates and
vesting schedules applicable to each grant of Company Restricted Stock, (iii)
the "base amount" (as defined in Section 280G(b)(e) of the Code) for each such
individual as of the date of this Agreement and (iv) the maximum additional
amount that the Company has an obligation to pay to each disqualified individual
to reimburse the disqualified individual for any excise tax imposed under
Section 4999 of the Code with respect to the disqualified individual's excess
parachute payments (including any taxes, interest or penalties imposed with
respect to the excise tax).
Section 3.14. Labor and Other Employment Matters(a) .
(a) Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (i) no work
stoppage, slowdown, lockout, labor strike, material arbitration or other
material labor dispute against the Company or any of its Subsidiaries by
employees is pending or threatened, (ii) neither the Company nor any of its
Subsidiaries is delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it or amounts required to be reimbursed to such employees, (iii)
the Company and each of its Subsidiaries are in compliance with all applicable
Laws respecting labor, employment, fair employment practices, terms and
conditions of employment, workers' compensation, occupational safety, plant
closings, and wage and hours, (iv) the Company and each of its Subsidiaries has
withheld all amounts required by Law or by agreement to be withheld from the
wages, salaries, and other payments to employees and is not liable for any
arrears of wages or any Taxes or any penalty for failure to comply with any of
the foregoing, (v) neither the Company nor any of its Subsidiaries is liable for
any payment to any trust or other fund or to any Governmental Entity, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for employees (other than routine payments to be made in the
ordinary course of business consistent with past practice), (vi) there are no
material pending claims against the Company or any of its Subsidiaries under any
workers' compensation plan or policy or for long term disability and (vii) there
are no material controversies pending or, to the knowledge of the Company,
threatened, between the Company or any of its Subsidiaries and any of their
respective current or former employees, which controversies have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity. To the Company's
knowledge, as of the date hereof, no employees of the Company or any of its
Subsidiaries are in any material respect in violation of any term of any
employment Contract,
25
non-disclosure agreement, noncompetition agreement, or any restrictive covenant
to a former employer relating to the right of any such employee to be employed
by the Company or any of its Subsidiaries because of the nature of the business
conducted or presently proposed to be conducted by the Company or such
Subsidiary or to the use of trade secrets or proprietary information of others.
As of the date hereof, no employee of the Company or any of its Subsidiaries, at
the officer level or above, has given notice to the Company or any of its
Subsidiaries that any such employee intends to terminate his or her employment
with the Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries is a party to or
otherwise bound by any collective bargaining Contract with a labor union or
labor organization, nor is any such Contract presently being negotiated. From
January 1, 2001 to the date hereof, there has not been a representation question
respecting any of the employees of the Company or any of its Subsidiaries and,
to the knowledge of the Company, there are no campaigns being conducted to
solicit cards from employees of the Company or any of its Subsidiaries to
authorize representation by any labor organization.
(c) The Company has identified in Section 3.14(c) of the Company
Disclosure Letter and has made available to Parent true and complete copies of
(i) all severance and employment agreements with directors, officers or
employees of or consultants to the Company or any of its Subsidiaries, (ii) all
severance programs and policies of each of the Company and each of its
Subsidiaries with or relating to its employees, and (iii) all plans, programs,
agreements and other arrangements of each of the Company and each of its
Subsidiaries with or relating to its directors, officers, employees or
consultants which contain change in control provisions. In no event will the
execution and delivery of this Agreement or any other related agreement, the
consummation of the transactions contemplated hereby or thereby, or the
stockholder approval of the Merger (either alone or in conjunction with any
other event, such as termination of employment) (x) result in any payment
(including, without limitation, severance, unemployment compensation, parachute
or otherwise) becoming due to any director or any employee of the Company or any
of its Subsidiaries or Affiliates from the Company or any of its Subsidiaries or
Affiliates under any Company Benefit Plan or otherwise, (y) significantly
increase any benefits otherwise payable under any Company Benefit Plan or
otherwise, or (z) result in any acceleration of the time of payment or vesting
of any benefits.
(d) Each current and, to the best of Company's knowledge, former
employee of the Company or any of its Subsidiaries who is or was engaged in the
invention of products or development of technology or authoring of computer
software or other copyrighted materials for the Company or any of its
Subsidiaries has executed a written contract obligating such Person to assign to
the Company or such Subsidiary all of his or her right, title and interest in
any such invention, technology or work of authorship, except where the failure
to have executed such a written contract would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or a
material adverse effect on a Company Key Product.
Section 3.15. Environmental Matters. Except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect: (a) the Company is now and always has been in material
compliance with all Environmental Laws; (b) the Company has all the
Environmental Permits necessary for the conduct and operation of the
26
business as now being conducted, and all such permits are in good standing; (c)
there is not now and has not been any Hazardous Substance used, generated,
treated, stored, transported, disposed of, released, handled or otherwise
existing on, under, about, or emanating from or to, any Company owned, leased or
operated property associated with the business except in full compliance with
all applicable Environmental Laws; (d) the Company has not received any notice
of alleged, actual or potential responsibility for, or any inquiry or
investigation regarding, any release or threatened release of Hazardous
Substances or alleged violation of, or non-compliance with, any Environmental
Law, nor is the Company aware of any information which might form the basis of
any such notice or any claim; and (e) there is no site to which the Company has
transported or arranged for the transport of Hazardous Substances which to the
knowledge of the Company is or may become the subject of any environmental
action. True, complete and correct copies of the written reports, and all parts
thereof, of all environmental audits or assessments which have been conducted at
any Company owned, leased or operated property, have been provided.
Section 3.16. Intellectual Property.
(a) Section 3.16(a) of the Company Disclosure Letter sets forth a
true and complete list as of the date hereof of all (i) statutory invention
certificates, U.S. and foreign patents, utility models, and patent applications
and for each, its number, issue date, title, owner and priority information for
each country in which such patent has been issued, or the application number,
date of filing, title, owner and priority information for each country in which
an application is pending; (ii) Company Registered Brand Names, the registration
number thereof, and, if applicable, the class(es) of goods or the description(s)
of goods or services covered thereby, the countries in which each such Company
Registered Brand Name is registered, and the owner of each such Company
Registered Brand Name; (iii) Company Unregistered Brand Names, and, if
applicable, the application serial number thereof, the date of filing, the
countries in which such application was filed and the class of goods or the
description of goods or services sought to be covered thereby; (iv) copyright
registrations and the number, title of the work, and date of registration
thereof for each country in which such copyright has been registered; (v)
applications for registration of copyrights, the title of the work, and the date
and countries in which each such application was filed; and (vi) domain name
registrations, in each case set forth in subsections (i) through (vi) above,
included in the Company Owned Intellectual Property as of the date hereof.
(b) Section 3.16(b) of the Company Disclosure Letter sets forth a
complete and accurate list or description, as appropriate, of all Contracts as
of the date hereof by which the Company or any of its Subsidiaries has been
granted or has granted to others any license to Intellectual Property that is
used in or necessary for the conduct of the business of the Company or any of
its Subsidiaries, as conducted as of the date hereof, and where (i) such
Intellectual Property is embodied in any Company Key Products; (ii) the
termination or expiration of such agreement would reasonably be expected to have
a Company Material Adverse Effect, (iii) the agreement requires or reasonably
could be expected to require the Company or any of its Subsidiaries to pay or be
paid royalties or amounts to/from another Person in an aggregate amount of
$100,000 or more; (iv) the agreement purports to be an inbound or outbound
license of rights on an exclusive basis; or (v) the agreement relates to
Intellectual Property which, to the Company's knowledge, is co-owned by another
Person or as to which, to the Company's
27
knowledge, another Person has a right to acquire, right of first refusal or
right of first negotiation (collectively, "COMPANY MATERIAL LICENSES");
provided, however, Section 3.16(b) of the Company Disclosure Letter need not
list licenses of computer software which computer software has not been
significantly modified or customized and that is widely available on
commercially reasonable terms. A true and complete copy of each Company Material
License has been made available to Parent.
(c) (i) The use of the Company Owned Intellectual Property and
Company Licensed Intellectual Property in connection with the operation of the
business of the Company or any of its Subsidiaries as conducted as of the date
hereof, and (ii) the manufacture, use, offer for sale, and sale of Company Key
Products (as such products exist as of the date hereof), do not, to the
Company's knowledge, infringe or misappropriate or otherwise violate the
Intellectual Property rights of any other Person, and no claim is pending or, to
the Company's knowledge, threatened against the Company or any of its
Subsidiaries alleging any of the foregoing.
(d) Except for the Company Material Licenses which Parent has been
provided copies, and applicable governmental and/or regulatory approvals, and as
listed in Section 3.16(d) of the Company Disclosure Letter, no right, license,
lease, consent, or other agreement is required with respect to any Intellectual
Property for the conduct of the business of the Company or any of its
Subsidiaries as conducted as of the date hereof that will require any material
payment or the undertaking of any material obligation by the Company or any of
its Subsidiaries.
(e) None of the patents or patent applications required to be listed
in Section 3.16(a) of the Company Disclosure Letter is involved in any
interference, reexamination, opposition or similar active proceeding which would
reasonably be expected to have a material adverse effect thereon, and to the
Company's knowledge, there has been no threat that any such proceeding will
hereafter be commenced. None of the Company Registered Brand Names or Company
Unregistered Brand Names required to be listed in Section 3.16(a) of the Company
Disclosure Letter is involved in any opposition, cancellation, nullification,
interference, or similar active proceeding which would reasonably be expected to
have a material adverse effect thereon, and to the Company's knowledge, there
has been no threat that any such proceeding will hereafter be commenced.
(f) The Company or a Subsidiary of the Company is the exclusive
owner of the entire and unencumbered right, title and interest in and to each
item of the Company Owned Intellectual Property. The Company or a Subsidiary of
the Company is entitled to use the Company Owned Intellectual Property and
Company Licensed Intellectual Property in the ordinary course of its business as
presently conducted, subject only to the terms of the Company Material Licenses
of which Parent has been provided copies.
(g) Other than the Company Owned Intellectual Property and Company
Licensed Intellectual Property, there are no items of Intellectual Property that
are necessary to the conduct of the business of the Company or any of its
Subsidiaries as conducted as of the date hereof. To the knowledge of the
Company, the Company Owned Intellectual Property is valid and enforceable, and
the Company has the right to enforce such Company Owned Intellectual Property
that has not been licensed to another Person on an exclusive basis, and such
Intellectual
28
Property has not been adjudged by a court of competent jurisdiction to be
invalid or unenforceable (except for challenges and adjudications that may be
received in the ordinary course of the prosecution of Intellectual Property
applications in Intellectual Property offices) in whole or part.
(h) No legal proceedings are pending or, to the Company's knowledge,
are threatened against the Company or any of its Subsidiaries or licensors of
Company Licensed Intellectual Property (i) based upon, challenging or seeking to
deny or restrict the use by the Company of any of the Company Owned Intellectual
Property or Company Licensed Intellectual Property, (ii) alleging that any
services provided by, processes used by, or products manufactured or sold or to
be manufactured or sold by the Company or any of its Subsidiaries or any other
operation of the business of the Company or any of its Subsidiaries infringes,
misappropriates or violates any Intellectual Property right of any other Person,
or (iii) alleging that the Company Material Licenses conflict with the terms of
any other Person's license or other agreement.
(i) To the Company's knowledge, no other Person is engaging in any
activity that infringes or misappropriates the Company Owned Intellectual
Property or Company Licensed Intellectual Property as of the date hereof. The
Company and its Subsidiaries have not granted any material license or other
material right to any other Person with respect to the Company Owned
Intellectual Property or Company Licensed Intellectual Property as of the date
hereof other than pursuant to agreements listed in Section 3.11(a) or 3.16(b) of
the Company Disclosure Letter.
(j) To the Company's knowledge, all material software used in the
business of the Company or any of its Subsidiaries is free of all viruses, worms
and Trojan horses that would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(k) The Company and its Subsidiaries have a license to use all
software development tools, library functions, compilers and other third-party
software that are material to the business of the Company or any of its
Subsidiaries as presently conducted, or that are required to operate or modify
the software used in the Company's or any of its Subsidiaries' business as
presently conducted, except for such licenses the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(l) The Company and its Subsidiaries have taken commercially
reasonable measures (but at least commensurate with industry standards) to
maintain their material trade secrets in confidence, including contractually
requiring licensees, contractors and other Persons with access to such trade
secrets to keep such trade secrets confidential.
(m) To the knowledge of the Company, as of the date hereof (i) there
has been no misappropriation of any material trade secrets or other material
confidential Intellectual Property of the Company or any of its Subsidiaries by
any Person, (ii) no employee, independent Contractor or agent of the Company or
any of its Subsidiaries has misappropriated any material trade secrets of any
other Person in the course of such performance as an employee, independent
29
contractor or agent, and (iii) no employee, independent contractor or agent of
the Company or any of its Subsidiaries is in material default or breach of any
term of any employment agreement, nondisclosure agreement, assignment of
invention agreement or similar agreement or Contract which has or is likely to
have a Company Material Adverse Effect.
(n) The Company and each of its Subsidiaries has secured valid
written assignments from all current employees and, to the best of the Company's
knowledge, all former employees, who contributed to the creation or development
of Company Owned Intellectual Property or the rights to such contributions that
the Company or such Subsidiary does not already own by operation of law, and all
of its employees have assigned to the Company or such Subsidiary the rights to
such contributions that the Company or such Subsidiary does not already own by
operation of law, except where the failure to have secured such written
assignments would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect or a material adverse effect on any
Company Key Product. All employees of the Company or any of its Subsidiaries
with access to material confidential information of the Company or any of its
Subsidiaries, which information relates to a Company Key Product, are parties to
written agreements under which, among other things, each such employee is
obligated to maintain the confidentiality of confidential information of the
Company or any of its Subsidiaries, except where the absence of such written
agreements would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect or a material adverse effect on any
Company Key Product. To the knowledge of the Company, as of the date hereof, no
employees of the Company or any of its Subsidiaries are in violation thereof.
(o) The execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, will not result in or
give rise to (i) any right of termination or other right to impair or limit any
of the Company's rights to own or license any of the Company Owned Intellectual
Property or Company Licensed Intellectual Property, or (ii) the inability (for
any period of time) of the Surviving Corporation to succeed to the rights and
perform the obligations of the Company with respect to the Company Owned
Intellectual Property and Company Licensed Intellectual Property, pursuant to
the terms of this Agreement.
(p) To the Company's knowledge, there are no facts or circumstances
that materially adversely affect or are reasonably likely to materially
adversely affect the continued supply (either for clinical purposes or in bulk)
of the active ingredients of the pharmaceutical products currently used in
clinical trials by or for the Company or any of its Subsidiaries.
Section 3.17. Real Property.
(a) Section 3.17(a) of the Company Disclosure Letter sets forth a
complete list, as of the date hereof, of all material real property owned by the
Company or any of its Subsidiaries as of the date hereof ("COMPANY OWNED REAL
PROPERTY"). The Company and each of its Subsidiaries has good and valid title in
fee simple to all Company Owned Real Property, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i)
liens for current taxes, payments of which are not yet delinquent or are being
disputed in good faith, (ii) such imperfections in title and easements and
encumbrances, if any, as are not substantial in character, amount or extent and
do not materially detract from the
30
value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company), or (iii) for
such matters which would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(b) Section 3.17(b) of the Company Disclosure Letter sets forth a
complete list, as of the date hereof, of all material real property leased by
the Company or any of its Subsidiaries as of the date hereof ("COMPANY MATERIAL
LEASED REAL PROPERTY"). A copy of the lease for each Company Material Leased
Real Property (the "COMPANY LEASES") has been filed as an exhibit to the Company
SEC Documents prior to the date hereof or has been delivered or made available
to Parent and Merger Sub. With respect to each of the Company Leases: (i) such
Company Lease is legal, valid, and binding on the Company or its Subsidiary
party thereto, and, to the Company's knowledge, each other Person thereto, and
is enforceable and in full force and effect, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws
relating to or affecting the rights and remedies of creditors generally and the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law); (ii) the
transactions contemplated by this Agreement do not require the consent of any
other party to such Company Lease, will not result in a breach of or default
under such Company Lease, or otherwise cause such Company Lease to cease to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the Closing; (iii) neither the Company nor any of its
Subsidiaries, as the case may be, nor, to the knowledge of the Company or any of
its Subsidiaries, as the case may be, any other party to the Company Lease is in
material breach or default under such Company Lease, and no event has occurred
or failed to occur or circumstance exists which, with the delivery of notice,
the passage of time or both, would constitute such a breach or default, or
permit the termination, modification or acceleration of rent under such Company
Lease; (iv) the other party to such Company Lease is not an Affiliate of, and
otherwise does not have any economic interest in, the Company or any of its
Subsidiaries; (v) neither the Company nor any of its Subsidiaries, as the case
may be, has subleased, licensed or otherwise granted any Person the right to use
or occupy such Company Material Leased Real Property or any portion thereof; and
(vi) neither the Company nor any of its Subsidiaries, as the case may be, has
collaterally assigned or granted any other security interest in such Company
Lease or any interest therein, except in the case of (i) through (vi) above, for
any such case that would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(c) The present use of the land, buildings, structures and
improvements on the Company Material Leased Real Property are, in all material
respects, in conformity with all Laws, including all applicable zoning Laws,
ordinances and regulations and with all registered deeds or other restrictions
of record, and neither the Company nor any of its Subsidiaries, as the case may
be, has received any written notice of violation thereof, except for such
nonconformities or violations that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries, as the case may be, has received any
written notice of any material conflict or dispute with any regulatory authority
or other Person relating to any Company Material Leased Real Property or the
activities thereon, other than where there is no current or reasonably likely
material interference with the operations at the Company Material Leased Real
Property as presently conducted (or as would be conducted at full capacity).
31
(d) Neither the Company nor any of its Subsidiaries, as the case may
be, has received any notice from any insurance company of any material defects
or inadequacies in the Company Material Leased Real Property or any part
thereof, which would materially and adversely affect the insurability of the
same or of any termination or threatened (in writing) termination of any policy
of insurance relating to any such Company Material Leased Real Property.
Section 3.18. Regulatory Compliance.
(a) Neither the Company nor any of its Subsidiaries has knowledge of
any actual or threatened enforcement action by the FDA or any other Governmental
Entity which has jurisdiction over the operations of the Company and its
Subsidiaries, and none has received notice of any pending or threatened claim
against either the Company, its Subsidiaries or any Company Partner, and the
Company and its Subsidiaries have no knowledge or reason to believe that any
Governmental Entity is considering such action, except where such action would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(b) All material reports, documents, claims and notices required to
be filed, maintained, or furnished to the FDA or any Governmental Entity by the
Company, its Subsidiaries, or, to the knowledge of the Company, Company Partners
have been so filed, maintained or furnished. All such reports, documents,
claims, and notices were complete and correct in all material respects on the
date filed (or were corrected in or supplemented by a subsequent filing) such
that no liability exists with respect to such filing.
(c) Except as described in the Company SEC Documents prior to the
date hereof, the Company, its Subsidiaries and, to the knowledge of the Company,
Company Partners have not received any FDA Form 483, notice of adverse finding,
Warning Letters, untitled letters or other correspondence or notice from the
FDA, or other Governmental Entity alleging or asserting noncompliance with any
applicable Laws or any licenses, approvals, clearances, authorizations,
registrations, certificates, permits, filings, notifications and supplements or
amendments thereto required by any applicable Laws, and the Company and its
Subsidiaries have no knowledge or reason to believe that the FDA or any
Governmental Entity is considering such action, except where such action would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(d) All material licenses, approvals, clearances, authorizations,
registrations, certificates, permits, filings, notifications and supplements or
amendments thereto that the Company, its Subsidiaries, or, to the knowledge of
the Company, Company Partners has received or made to the FDA or any other
Governmental Entity has not been limited, suspended, modified or revoked and the
Company and its Subsidiaries have no knowledge or reason to believe that the FDA
or any other Governmental Entity is considering such action.
(e) All studies, tests and preclinical and clinical trials being
conducted by the Company or its Subsidiaries are, and any such studies or trials
being conducted by a Company Partner are to the knowledge of the Company being
conducted in material compliance with experimental protocols, procedures and
controls pursuant to accepted professional scientific
32
standards and applicable local, state and federal Laws, rules, regulations and
guidances, including, but not limited to the applicable requirements of Good
Laboratory Practices or Good Clinical Practices, as applicable, and the FDCA and
its implementing regulations including, but not limited to, 21 C.F.R. Parts 50,
54, and 56, 58 and 312. The descriptions of the studies, tests and preclinical
and clinical trials, including the related results and regulatory status are
accurate and complete in all material respects. The Company and its Subsidiaries
are not aware of any studies, tests or trials the results of which call into
question the clinical results described or referred to in the Company Disclosure
Letter and Company SEC reports when viewed in the context in which such results
are described and the clinical state of development. The Company and its
Subsidiaries have not received any notices, correspondence or other
communication from the FDA or any other Governmental Entity requiring the
termination, suspension or material modification of any clinical trials
conducted by, or on behalf of, the Company or its Subsidiaries, or in which the
Company or its Subsidiaries have participated, and the Company and its
Subsidiaries have no knowledge or reason to believe that the FDA or any other
Governmental Entity is considering such action, except where such action would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(f) The manufacture of products by the Company and its Subsidiaries
is, and the manufacture of products by Company Partners is to the knowledge of
the Company, being conducted in material compliance with all applicable Laws
including the FDA's current Good Manufacturing Practices. In addition, the
Company and its Subsidiaries and, to the knowledge of the Company, the Company
Partners, are in material compliance with all other applicable FDA requirements,
including, but not limited to, registration and listing requirements set forth
in 21 U.S.C. Section 360 and 21 C.F.R. Part 207 and all other applicable Law.
(g) The Company and its Subsidiaries have not either voluntarily or
involuntarily, initiated, conducted, or issued, or caused to be initiated,
conducted or issued, any recall, market withdrawal or replacement, safety alert,
warning, "dear doctor" letter, investigator notice or other notice or action
relating to an alleged lack of safety or efficacy of any product or product
candidate. The Company and its Subsidiaries are not aware of any facts which are
reasonably likely to cause (1) the recall, market withdrawal or replacement of
any product sold or intended to be sold by the Company or its Subsidiaries; (2)
a change in the marketing classification or a material change in labeling of any
such products, or (3) a termination or suspension of marketing of any such
products.
(h) The Company and its Subsidiaries are and at all times have been
in material compliance with federal or state criminal or civil laws (including
without limitation the federal Anti-Kickback Statute (42 U.S.C. Section
1320a-7b(b)), Xxxxx Law (42 U.S.C. Section 1395nn), False Claims Act (31 U.S.C.
Section 3729 et seq.), Health Insurance Portability and Accountability Act of
1996 (Pub. L. No. 104-191), and any comparable state laws), or the regulations
promulgated pursuant to such Laws, or which are cause for civil penalties or
mandatory or permissive exclusion from Medicare, Medicaid or any other state or
federal health care program ("PROGRAM"). There is no civil, criminal,
administrative or other action, suit, demand, claim, hearing, investigation,
proceeding, notice or demand pending, received or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries which could
reasonably result in its exclusion from participation in any Program or other
third party payment programs in which the Company or any of its Subsidiaries
participates.
33
(i) To the Company's knowledge, the Company and each Subsidiary are
and have been in substantial compliance with all applicable Laws and regulations
related to 21 C.F.R. Part 11 compliance. The Company and each Subsidiary have
policies and procedures or a formal compliance program to ensure compliance with
all requirements of 21 C.F.R. Part 11, including those necessary: (i) to ensure
that its records are validated and audit trails are generated, such that
procedure is compliant with the legal requirements imposed by the appropriate
jurisdictions and the jurisdictions in which the Company conducts business; (ii)
to analyze and evaluate the potential risks and failures associated with the use
of electronic records and electronic signatures; and (iii) to train and educate
its new and current employees as required by Law. All such policies, procedures
or formal compliance programs are in full compliance with applicable Laws and
regulations. A true, accurate and complete copy of the written policies and
procedures or formal compliance program described immediately above has been
provided to Parent.
Section 3.19. Insurance.
(a) The Company has provided or made available to Parent true,
correct and complete copies of its director and officer and employee and officer
insurance policies and all policies of insurance material to the Company and its
Subsidiaries, taken as a whole, to which the Company or its Subsidiaries is a
party or is a beneficiary or named insured. The Company and its Subsidiaries
maintain insurance coverage with reputable insurers in such amounts and covering
such risks as are appropriate and reasonable, considering the Company's and its
Subsidiaries' properties, business and operations.
(b) Excluding insurance policies that have expired and been replaced
in the ordinary course of business, as of the date of this Agreement, to the
Company's knowledge, no threat in writing has been made to cancel (excluding
cancellation upon expiration or failure to renew) any such insurance policy of
the Company or any Subsidiary of the Company during the period of one year prior
to the date hereof. As of the date hereof, to the Company's knowledge, no event
has occurred, including the failure by the Company or any Subsidiary of the
Company to give any notice or information or by giving any inaccurate or
erroneous notice or information, which materially limits or impairs the rights
of the Company or any Subsidiary of the Company under any such excess Liability
or protection and indemnity insurance policies.
Section 3.20. Opinion of Financial Advisor. The Company's financial
advisor, XX Xxxxxx Securities Inc. (the "COMPANY FINANCIAL ADVISOR"), has
delivered to the Company's Board of Directors an oral opinion, to be confirmed
in writing, to the effect that, as of the date of this Agreement, the Merger
Consideration is fair, from a financial point of view, to the holders of Company
Common Stock.
Section 3.21. Brokers and Finders. The Company and its Subsidiaries
have not entered into any contract, arrangement or understanding with any Person
or firm which may result in the obligation of the Company or any of its
Subsidiaries to pay any investment banking fees, finder's fees, or brokerage
commissions in connection with the transactions contemplated hereby, other than
fees payable to the Company Financial Advisor. The Company has delivered to
Parent a true and complete copy of the engagement letter between the Company and
the Company Financial Advisor.
34
Section 3.22. Foreign Corrupt Practices and International Trade
Sanctions. To the Company's knowledge, neither the Company, nor any of its
Subsidiaries, nor any of their respective directors, officers, agents, employees
or any other Persons acting on their behalf has, in connection with the
operation of their respective businesses, (i) used any corporate or other funds
for unlawful contributions, payments, gifts or entertainment, or made any
unlawful expenditures relating to political activity to government officials,
candidates or members of political parties or organizations, or established or
maintained any unlawful or unrecorded funds in violation of Section 104 of the
Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), or any other
similar applicable foreign, Federal or state Law, (ii) paid, accepted or
received any unlawful contributions, payments, expenditures or gifts, or (iii)
violated or operated in noncompliance with any export restrictions, anti-boycott
regulations, embargo regulations or other applicable domestic or foreign Laws
and regulations, in each case, except as is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that except as set forth
in the disclosure letter dated as of the date hereof delivered by Parent to the
Company (the "PARENT DISCLOSURE LETTER"):
Section 4.01. Organization and Qualification. Parent is a corporation
duly organized and validly existing under the laws of the State of Delaware and
has the requisite corporate power and authority to own, lease, license and
operate its assets and properties and to carry on its business as it is now
being conducted. Parent is qualified to transact business and, where applicable,
is in good standing in each jurisdiction in which the properties owned, leased,
licensed or operated by it or the nature of the business conducted by it makes
such qualification necessary, except as would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
True, accurate and complete copies of the certificate of incorporation and
bylaws of Parent, in each case, as amended and in effect on the date hereof,
including all amendments thereto, have heretofore been filed with the SEC or
delivered to the Company.
Section 4.02. Capitalization.
(a) The authorized capital stock of Parent consists of 150,000,000
shares of Parent Common Stock, 1,000,000 shares of Class B common stock, par
value $0.014 per share ("PARENT CLASS B STOCK"), and 5,000,000 shares of
preferred stock, par value $0.01 per share ("PARENT PREFERRED STOCK"). As of
March 18, 2005, (i) 54,252,846 shares of Parent Common Stock, including in each
case the associated Parent Rights, were issued and outstanding, (ii) no shares
of Parent Class B Stock or Parent Preferred Stock were issued or outstanding,
(iii) 12,712,554 shares of Parent Common Stock were held in the treasury of
Parent, (iv) 13,839,278 shares of Parent Common Stock were reserved for issuance
upon exercise of Parent Stock Options issued and outstanding, (v) a variable
number of shares of Parent Common Stock were subject to outstanding convertible
debt (the "CONVERTIBLE NOTES"), (vi) 2,217,648 shares of Parent Common Stock
were authorized and reserved for future issuance pursuant to the Parent
35
Stock Plans (other than shares of Parent Common Stock Authorized and reserved
for future issuance upon exercise of Parent Stock Options issued and
outstanding), and (vii) 623,669 shares of Parent Preferred Stock were designated
as Series A Junior Participating Preference Stock, par value $0.01 per share,
and were reserved for issuance upon exercise of Parent Rights issued pursuant to
the Parent Rights Agreement. Parent has delivered or made available to the
Company a complete and correct copy of the Parent Rights Agreement as in effect
on the date hereof. Each issued and outstanding share of capital stock of Parent
is, and each share of Parent Common Stock reserved for issuance as specified
above will be, upon issuance on the terms and conditions specified in the
instruments pursuant to which it is issuable, duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Since March 18, 2005
through the date hereof, except as permitted by this Agreement, (i) no shares of
Parent Common Stock have been issued, except in connection with the exercise of
Parent Stock Options issued and outstanding and (ii) no options, warrants,
securities convertible into, or commitments with respect to the issuance of,
shares of capital stock of Parent have been issued, granted or made, except
Parent Rights in accordance with the terms of the Parent Rights Agreement.
(b) Except for Parent Rights and Parent Stock Options issued and
outstanding and the Convertible Notes, as of the date hereof, there are no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other anti-takeover
agreement, obligating Parent or any Subsidiary of Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of Parent
Common Stock or obligating Parent or any Subsidiary of Parent to grant, extend
or enter into any such agreement or commitment. As of the date hereof, there are
no obligations, contingent or otherwise, of Parent to (i) repurchase, redeem or
otherwise acquire any shares of Parent Common Stock or the capital stock or
other equity interests of any Subsidiary of Parent or (ii) 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, any Person other than a Subsidiary. There are no outstanding
stock appreciation rights or similar derivative securities or rights of Parent
or any of its Subsidiaries. There are no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Parent may vote. There are no voting trusts, irrevocable proxies
or other agreements or understandings to which Parent or any Subsidiary of
Parent is a party or is bound with respect to the voting of any shares of Parent
Common Stock. None of the Company and its Subsidiaries shall become an
"Acquiring Person" and no "Shares Acquisition Date" shall occur as a result of
the execution, delivery and performance of this Agreement and the consummation
of the Merger, and no "Distribution Date" shall occur as a result of the
announcement of or the execution of this Agreement or any of the transactions
contemplated hereby. As used in this Section 4.02(b), the terms "Acquiring
Person," "Distribution Date" and "Shares Acquisition Date" shall have the
meanings ascribed to such terms in the Parent Rights Agreement. Parent has not
agreed to register any securities under the Securities Act or under any state
securities law or granted registration rights to any Person (except rights which
have terminated or expired). Neither Parent nor any of its Subsidiaries has any
outstanding obligations in respect of prior acquisitions of businesses to pay,
in the form of securities, cash or other property, any portion of the
consideration payable to the seller or sellers in such transaction.
36
(c) Parent has previously made available to the Company complete and
correct copies of each Parent Stock Plan. Section 4.02(c) of the Parent
Disclosure Letter sets forth a complete and correct list as of March 18, 2005,
of all holders of outstanding Parent Stock Options, whether or not granted under
the Parent Stock Plans, including the date of grant, the number of shares of
Parent Common Stock originally granted subject to each such option, the exercise
price per share, the exercise and vesting schedule, the number of shares of
Parent Common Stock remaining subject to each such option, and the maximum term
of each such option. Complete and correct copies of the relevant forms of
written agreements, including forms of amendments thereto, evidencing the grant
of Parent Stock Options have been provided to the Company by Parent.
Section 4.03. Subsidiaries. Each Subsidiary of Parent is duly organized,
validly existing and, where applicable, in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own,
lease, license and operate its assets and properties and to carry on its
business as it is now being conducted, and each Subsidiary of Parent is
qualified to transact business, and is in good standing, in each jurisdiction in
which the properties owned, leased, licensed or operated by it or the nature of
the business conducted by it makes such qualification necessary, except in all
cases as would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect. All of the outstanding shares of capital
stock or other equity interests of each Subsidiary of Parent are validly issued,
fully paid, nonassessable and free of preemptive rights and are owned directly
or indirectly by Parent. There are no subscriptions, options, warrants, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting or transfer of any shares of
capital stock or other equity interests of any Subsidiary of Parent, including
any right of conversion or exchange under any outstanding security, instrument
or agreement. Parent has no material investment in any entity other than its
Subsidiaries.
Section 4.04. Authority; Non-Contravention; Approvals.
(a) Parent has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and, subject to obtaining
necessary stockholder approval in connection with this Agreement and the Merger,
to consummate the Merger and the other transactions contemplated by this
Agreement. The execution, delivery and performance by Parent of this Agreement,
and the consummation by Parent of the Merger and the other transactions
contemplated by this Agreement, have been duly authorized by all necessary
corporate action on the part of Parent, and no other corporate proceedings on
the part of Parent are necessary to authorize this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement (other than
the approval of the Share Issuance by Parent's stockholders and the filing and
recordation of appropriate merger documents as required by the DGCL and approval
of this Agreement by Parent as the sole stockholder of Merger Sub (which
approval of Parent shall be obtained promptly after the date hereof)). This
Agreement has been duly executed and delivered by Parent and Merger Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes a valid and binding obligation of Parent enforceable against Parent
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to
or affecting the rights and remedies of creditors generally and the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at
37
law). The affirmative vote of the holders of Parent Common Stock representing a
majority of the votes cast on the proposal relating to the Share Issuance,
provided that the total vote cast on the proposal represents over 50% in
interest of all shares of Parent Common Stock entitled to vote on the proposal,
is the only vote of the holders of capital stock of Parent necessary to approve
the Share Issuance (the "PARENT STOCKHOLDER APPROVAL").
(b) At a meeting duly called and held on March 20, 2005, the Board of
Directors of Parent (i) determined that this Agreement and the other
transactions contemplated hereby, including the Share Issuance, are advisable
and in the best interests of Parent and Parent's stockholders, (ii) approved and
adopted this Agreement and the transactions contemplated hereby, including the
Share Issuance, and (iii) resolved to recommend approval of the Share Issuance
by Parent's stockholders. No takeover statute or similar statute or regulation
relating to Parent is applicable to the Merger or to the transactions
contemplated by this Agreement. Without giving effect to the execution of this
Agreement, neither Parent nor any affiliate or associate of Parent is, or has
been during the last three years, an "interested stockholder" (as defined in
Section 203 of the DGCL) of the Company.
(c) The execution, delivery and performance of this Agreement by Parent
and the consummation of the Merger and the other transactions contemplated
hereby (including the transactions contemplated by the Financing Commitment
Letter) do not and will not violate, conflict with, give rise to the right to
modify or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or require any
offer to purchase or any prepayment of any debt, or result in the creation of
any Lien, security interest or encumbrance upon any of the properties or assets
of Parent or any of its Subsidiaries under any of the terms, conditions or
provisions of (i) the respective certificate of incorporation or bylaws or
similar governing documents of Parent or any of its Subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Entity applicable to Parent or any
of its Subsidiaries or any of their respective properties or assets, subject in
the case of consummation, to obtaining the Parent Required Statutory Approvals
and the Parent Stockholder Approval, or (iii) any Parent Permit or Contract to
which Parent or any of its Subsidiaries is a party or by which Parent or any of
its Subsidiaries or any of their respective properties or assets may be bound or
affected, other than, in the case of (ii) and (iii) above, such violations,
conflicts, rights to modify, breaches, defaults, terminations, accelerations or
creations of Liens, security interests or encumbrances that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(d) Except for (i) the filings by Parent required by the HSR Act, (ii)
the filings by Parent required by Antitrust Laws of foreign jurisdictions, (iii)
the applicable requirements of the Exchange Act, (iv) the filing of the
Certificate of Merger and (v) any required filings under the rules and
regulations of NYSE (the filings and approvals referred to in clauses (i)
through (v) collectively, the "PARENT REQUIRED STATUTORY APPROVALS"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental Entity is necessary for the execution
and delivery of this Agreement by Parent or the consummation by Parent of the
Merger and the other transactions contemplated hereby, other than such
declarations, filings,
38
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
Section 4.05. Reports and Financial Statements.
(a) Since January 1, 2001, Parent has filed with the SEC all material
forms, registration statements, prospectuses, reports, schedules and documents
(including all exhibits, post-effective amendments and supplements thereto) (the
"PARENT SEC DOCUMENTS") required to be filed by it under each of the Securities
Act and the Exchange Act, all of which, as amended if applicable, complied in
all material respects as to form with all applicable requirements of the
appropriate Act, SOX and the rules and regulations thereunder. As of their
respective dates (taking into account any amendments or supplements filed prior
to the date hereof), the Parent SEC Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the principal executive officer of Parent and the principal
financial officer of Parent (or each former principal executive officer of
Parent and each former principal financial officer of Parent, as applicable) has
made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act
or Sections 302 and 906 of SOX and the rules and regulations of the SEC
promulgated thereunder with respect to the Parent SEC Documents, and to the
knowledge of Parent, the statements contained in such certifications are true
and correct. For purposes of this Section 4.05(b), "principal executive officer"
and "principal financial officer" shall have the meanings given to such terms in
SOX. Neither Parent nor any of its Subsidiaries has outstanding, or has arranged
any outstanding, "extensions of credit" to directors or executive officers
within the meaning of Section 402 of SOX.
(c) The consolidated financial statements of Parent included in the
Parent SEC Documents comply as to form, as of their respective dates of filing
with the SEC, in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q or 8-K or the applicable rules of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments which are not material). The books and records of Parent and its
Subsidiaries are maintained in all material respects in accordance with GAAP and
any other applicable legal and accounting requirements.
(d) Neither Parent nor any of its Subsidiaries is a party to, or has any
commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar contract or arrangement (including any contract or
arrangement relating to any transaction or relationship between or among Parent
and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited purpose entity or
Person, on the other hand or any "off-balance sheet arrangements" (as defined in
Item
39
303(a) of Regulation S-K of the SEC)), where the result, purpose or intended
effect of such contract or arrangement is to avoid disclosure of any material
transaction involving, or material Liabilities of, Parent or any of its
Subsidiaries in Parent's or such Subsidiary's published financial statements or
other the Parent SEC Documents.
(e) Parent maintains a system of internal accounting controls sufficient
to provide reasonable assurance that: (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(f) Parent has in place the "disclosure controls and procedures" (as
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) required in order
for the Chief Executive Officer and Chief Financial Officer of Parent to engage
in the review and evaluation process mandated by the Exchange Act and the rules
promulgated thereunder. Parent's "disclosure controls and procedures" are
reasonably designed to ensure that all information (both financial and
non-financial) required to be disclosed by Parent in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC,
and that all such information is accumulated and communicated to Parent's
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive Officer and
Chief Financial Officer of Parent required under the Exchange Act with respect
to such reports.
(g) Since December 31, 2000, Parent has not received from its
independent auditors any oral or written notification of a (x) "reportable
condition" or (y) "material weakness" in Parent's internal controls. For
purposes of this Agreement, the terms "reportable condition" and "material
weakness" shall have the meanings assigned to them in the Statements of Auditing
Standards 60, as in effect on the date hereof.
Section 4.06. Absence of Undisclosed Liabilities. Except as disclosed in
the audited financial statements included in Parent's Form 10-K for the year
ended June 30, 2004 (the "PARENT 10-K") or the unaudited financial statements
included in Parent's Form 10-Q for the period ended December 31, 2004 (the
"PARENT 10-Q"), neither Parent nor any of its Subsidiaries has as of the date
hereof any Liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except Liabilities, obligations or contingencies (a)
which are accrued or reserved against in the financial statements in the Parent
10-K or Parent 10-Q or reflected in the notes thereto, (b) which were incurred
in the ordinary course of business and consistent with past practices, (c) which
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect or (d) which are of a nature not required to be
reflected in the consolidated financial statements of Parent and its
Subsidiaries prepared in accordance with GAAP consistently applied.
Section 4.07. Litigation. Except as disclosed in the Parent SEC
Documents prior to the date hereof, as of the date hereof, there are no Actions
pending, or, to the knowledge of
40
Parent, threatened in writing against, which relate to or affect Parent or any
of its Subsidiaries, before any court or other Governmental Entity or any
arbitrator that would, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect. As of the date hereof, neither Parent
nor any of its Subsidiaries is subject to any judgment, decree, injunction, rule
or order of any Governmental Entity or any arbitrator which would, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect. There has not, within the last four years, been nor, as of the date
hereof, are there any internal investigations or inquiries being conducted by
Parent, the Board of Directors of Parent (or any committee thereof) or any other
Person at the request of any of the foregoing concerning any financial,
accounting, Tax, conflict of interest, self-dealing, fraudulent or deceptive
conduct or other misfeasance or malfeasance issues.
Section 4.08. Absence of Certain Changes or Events.
(a) Except as disclosed in the Parent SEC Documents prior to the date
hereof, since June 30, 2004 through the date hereof:
(i) Parent and its Subsidiaries have conducted their business only
in the ordinary course consistent with past practice;
(ii) there has not been any split, combination or reclassification
of any of Parent's capital stock or any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, in lieu of, or in substitution for, shares of
Parent's capital stock;
(iii) except as required by a change in GAAP, there has not been any
change in accounting methods, principles or practices by Parent materially
affecting the consolidated financial position or results of operations of
Parent;
(iv) Parent and its Subsidiaries have not made any material Tax
election or settled or compromised any material Tax liability or refund,
other than Tax elections required by Law, or changed any annual Tax
accounting period or method of Tax accounting, filed any material amendment
to a Tax Return, entered into any closing agreement relating to any material
Tax, surrendered any right to claim a material Tax refund, or consented to
any extension or waiver of the statute of limitations period applicable to
any material Tax claim or assessment; and
(v) no action has been taken by Parent or its Subsidiaries to amend
or waive any performance or vesting criteria or accelerate vesting,
exercisability or funding under any Parent Benefit Plan or Parent Stock
Option.
(b) Since June 30, 2004, there has not occurred any circumstance or
event, or series of circumstances or events, that, individually or in the
aggregate, has had or would reasonably be expected to have a Parent Material
Adverse Effect.
Section 4.09. Registration Statement, Etc. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (a) the Registration Statement, (b) the Joint Proxy Statement and (c) any
other documents to be filed with the SEC in
41
connection with the transactions contemplated hereby will, at the respective
times such documents are filed and at the time such documents become effective
or at the time any amendment or supplement thereto becomes effective, contain
any untrue statement of a material fact, or omit to state any material fact
required or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; and, in the case of the
Registration Statement, when it becomes effective or at the time any amendment
or supplement thereto becomes effective, will cause the Registration Statement
or such supplement or amendment to contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or which
is necessary in order to make the statements therein not misleading, or, in the
case of the Joint Proxy Statement, when first mailed to the stockholders of
Parent and the stockholders of the Company, or in the case of the Joint Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Parent Stockholders' Meeting or the time of the Company Stockholders' Meeting,
will cause the Joint Proxy Statement or any amendment thereof or supplement
thereto to contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, no representation is made by
Parent with respect to statements made in any such documents based on
information supplied by the Company or with respect to information concerning
the Company which is incorporated by reference in such documents.
Section 4.10. Compliance with Applicable Law; Permits.
(a) Parent, its Subsidiaries and their employees hold all
authorizations, permits, licenses, certificates, easements, concessions,
franchises, variances, exemptions, orders, consents, registrations, approvals
and clearances of all Governmental Entities (including, without limitation, all
those that may be required by the FDA or any other Governmental Entity engaged
in the regulation of Parent's products) which are required for Parent and its
Subsidiaries to own, lease, license and operate its properties and other assets
and to carry on their respective business in the manner described in the Parent
SEC Documents filed prior to the date hereof and as they are being conducted as
of the date hereof (the "PARENT PERMITS"), and all Parent Permits are valid, and
in full force and effect, except where the failure to have, or the suspension or
cancellation of, or the failure to be valid or in full force and effect of, any
such Parent Permits would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
(b) Parent and its Subsidiaries are, and have been at all times since
January 1, 2001, in compliance with the terms of the Parent Permits and all
applicable Laws relating to Parent and its Subsidiaries or their respective
businesses, assets or properties, except where the failure to be in compliance
with the terms of the Parent Permits or such applicable Law would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. Since January 1, 2001, neither Parent nor any of its
Subsidiaries has received any notification from any Governmental Entity (i)
asserting that Parent or any of its Subsidiaries is not in material compliance
with, or at any time since such date has failed to materially comply with,
applicable Law or (ii) threatening to revoke any material Parent Permit. As of
the date hereof, no material investigation or review by any Governmental Entity
is pending or, to the knowledge of Parent, has been threatened against Parent or
any of its Subsidiaries.
42
Section 4.11. Parent Material Contracts; Defaults.
(a) As of the date hereof and except as filed as exhibits to Parent's
SEC Documents, neither Parent nor any of its Subsidiaries is a party to, and
none of their respective assets, businesses or operations is bound by, any
Contract (whether written or oral) that (i) is a "material contract" (as such
term is defined in Item 601(a)(10) of Regulation S-K promulgated under the
Securities Act), (ii) relates to any indebtedness in excess of $500,000, (iii)
provides for aggregate payments from it or any of its Subsidiaries in excess of
$500,000, has an unexpired term exceeding six months, cannot be terminated
without penalty upon not more than sixty (60) days' prior written notice, and
which has yet-to-be performed executory obligations, (iv) materially limits its
freedom or the freedom of any of its Subsidiaries to compete in any line of
business or with any Person or in any geographical area or which would so
materially limit its freedom or the freedom of any of its Subsidiaries so to
compete after the Effective Time, (v) relates to the research, development,
distribution, supply, license, co-promotion or manufacturing by other Persons of
Parent Key Products which Contract, if terminated or non-renewed, would
reasonably be expected to have a material adverse effect on any Parent Key
Product; (vi) that relates to a Parent Key Product and purports to prohibit
Parent or any Subsidiary from contesting the validity or ownership of any other
Person's patent or from challenging the inventorship of any other Person's
invention; (vii) which relates to a Parent Key Product and where, in settlement
of an actual or threatened action for patent infringement, trade secrets
misappropriation or similar intellectual property action, Parent or any
Subsidiary purports to acknowledge or agree that certain acts infringe or
misappropriate the rights of another Person; (viii) where, in settlement of an
actual or threatened action for patent infringement, trade secret
misappropriation or similar intellectual property action, another Person agrees
in writing not to contest the validity or ownership of Parent Owned Intellectual
Property which relates to a Parent Key Product; or (ix) to the extent not
included within the foregoing, each Parent Material License (collectively, the
"PARENT MATERIAL CONTRACTS"). Except for Parent Material Contracts which have
expired pursuant to their terms after the date hereof, each of the Parent
Material Contracts is valid and binding on Parent or its Subsidiary party
thereto and, to Parent's knowledge, each other Person thereto, and is in full
force and effect and enforceable against Parent or such Subsidiary, as the case
may be, in accordance with its terms (except as enforcement may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles and (ii) to the extent
applicable, securities laws limitations on the enforceability of provisions
regarding indemnification in connection with the sale or issuance of
securities).
(b) Neither Parent nor any of its Subsidiaries is in violation, breach
or default under any of the Parent Material Contracts, and there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a violation, breach or default, except for such breaches
or defaults that would not, individually or in the aggregate, reasonably be
expected to result in a Parent Material Adverse Effect. No other Person has
alleged or claimed that Parent or any of its Subsidiaries or, to Parent's
knowledge, any sublicensee of Parent or any of its Subsidiaries, is in
violation, breach or default under any Parent Material Contract, except for such
breaches or defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Parent Material Adverse Effect.
43
Section 4.12. Taxes.
(a) Each of Parent and its Subsidiaries has (i) duly and timely filed
with the appropriate Tax authority all Tax Returns required to be filed by it
through the date hereof, and all such Tax Returns are true, correct and complete
in all respects and (ii) paid all Taxes due and owing (whether or not shown due
on any Tax Returns), except in each case where the failure to pay such Taxes or
the failure of such Tax Returns to be true, correct or complete in all respects
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. Neither Parent nor any of its Subsidiaries
currently is the beneficiary of any extension of time within which to file any
material Tax Return. No written claim has ever been made by a Tax authority in a
jurisdiction where Parent and its Subsidiaries do not file Tax Returns that
Parent or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction.
(b) The unpaid Taxes of Parent and its Subsidiaries did not, as of the
date of the financial statements contained in the most recent Parent SEC
Filings, exceed the reserve for Tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the balance sheets (rather than in any notes
thereto) contained in such financial statements. Since the date of the financial
statements in the most recent Parent SEC Filings, neither Parent nor any of its
Subsidiaries has incurred any liability for Taxes outside the ordinary course of
business or otherwise inconsistent with past custom and practice, except for any
liability for Taxes which would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
(c) There are no Liens for Taxes upon any property or asset of Parent or
any Subsidiary thereof, except for Liens (i) for Taxes contested in good faith
and reserved against in accordance with GAAP and reflected in the Parent SEC
Reports filed prior to the date hereof or (ii) that would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect.
(d) No deficiencies for Taxes with respect to any of Parent and its
Subsidiaries have been set forth or claimed in writing, or proposed or assessed
by a Tax authority. There are no pending or, to the knowledge of Parent,
proposed or threatened audits, investigations, disputes or claims or other
actions for or relating to any Liability for Taxes with respect to any of Parent
and its Subsidiaries, and there are no matters under discussion with any Tax
authority, or known to Parent, with respect to Taxes that are likely to result
in a material additional Liability for Taxes with respect to any of Parent and
its Subsidiaries. No issues relating to Taxes of Parent or its Subsidiaries were
raised by the relevant Tax authority in any completed audit or examination that
would reasonably be expected to recur with a Parent Material Adverse Effect on
Taxes in a later taxable period. Parent has delivered or made available to the
Company true and complete copies of federal, state and local income Tax Returns
of each of Parent and its Subsidiaries and their predecessors for the years
ended June 30, 2001, 2002, 2003 and promptly upon their availability, 2004, and
true and complete copies of all examination reports and statements of
deficiencies assessed against or agreed to by any of Parent and its Subsidiaries
or any predecessor, with respect to Taxes. None of Parent, any of its
Subsidiaries or any predecessor has waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, or has made any request in writing for any such extension or waiver.
44
(e) Each of Parent and its Subsidiaries has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and all Tax Returns (including without
limitation all IRS Forms W-2 and 1099) required with respect thereto have been
properly completed and timely filed in all material respects. Neither Parent nor
any of its Subsidiaries has classified any individual as an "independent
contractor" or similar non-employee status who, according to any Parent Benefit
Plan or applicable Law, should have been classified as an employee.
(f) There are no Tax sharing agreements or similar arrangements
(including indemnity arrangements) with respect to or involving any of Parent
and its Subsidiaries, and, after the Closing Date, none of Parent and its
Subsidiaries shall be bound by any such Tax sharing agreements or similar
arrangements or have any Liability thereunder for amounts due in respect of
periods prior to the Closing Date.
(g) Except for the affiliated group of which Parent is the common
parent, each of Parent and its Subsidiaries is not and has never been a member
of an affiliated group of corporations within the meaning of Section 1504 of the
Code or any group that has filed a combined, consolidated or unitary Tax Return.
Neither Parent nor any of its Subsidiaries has Liability for the Taxes of any
Person (including an individual, corporation, general or limited partnership,
limited liability company, joint venture, estate, trust, association,
organization, labor union or other entity or Governmental Entity) other than
Parent and its Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or
any similar provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise.
(h) Parent has not constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two (2) years prior to the
date of this Agreement, or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) that includes the Merger.
(i) Neither Parent nor any of its Subsidiaries has taken any action or
knows of any fact that is reasonably likely to prevent the Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
(j) None of Parent and its Subsidiaries (i) has consented at any time
under former Section 341(f)(1) of the Code to have the provisions of former
Section 341(f)(2) of the Code apply to any disposition of the assets of Parent
(or under any similar provision of state, local or foreign law); (ii) has
agreed, or is or was required, to make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise (or by reason
of any similar provision of state, local or foreign law); (iii) has ever been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code; (iv) has been a stockholder of a "controlled foreign
corporation" as defined in Section 957 of the Code (or any similar provision of
state, local or foreign law), (v) has ever made an election under Section 338 of
the Code (or under any similar provisions of state, local or foreign Law), (vi)
has been a "personal holding company" as defined in Section 542 of the Code (or
any similar provision of state, local or foreign law); (vii) has had a material
Liability with respect to Taxes as
45
a result of being a stockholder of a "passive foreign investment company" within
the meaning of Section 1297 of the Code; or (viii) has engaged in a trade or
business, had a permanent establishment (within the meaning of an applicable Tax
treaty) or has otherwise become subject to Tax jurisdiction in a country other
than the country of its formation.
(k) Neither Parent nor any of its Subsidiaries has been a party to a
"reportable transaction," as such term is defined in Treasury Regulations
Section 1.6011-4(b)(1) or to a transaction that is or is substantially similar
to a "listed transaction," as such term is defined in Treasury Regulations
Section 1.6011-4(b)(2), or any other transaction requiring disclosure under
analogous provisions of state, local or foreign Tax law. Parent has disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of Code
Section 6662.
Section 4.13. Employee Benefit Plans; ERISA.
(a) Section 4.13(a) of the Parent Disclosure Letter includes a complete
list, as of the date hereof, of each material employee benefit plan, program or
policy providing benefits to any current or former employee, officer or director
of Parent or any of its Subsidiaries or any beneficiary or dependent thereof
that is sponsored or maintained by Parent or any of its Subsidiaries or to which
Parent or any of its Subsidiaries contributes or is obligated to contribute, or
with respect to which Parent or any of its Subsidiaries has or may have any
Liability or obligations, including any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA or any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA)
and any material bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe
benefit or similar arrangement, agreement, plan, program or policy
(collectively, the "PARENT BENEFIT PLANS"). Parent has made available to the
Company a copy of each of the Parent Benefit Plans, including any amendments
thereto, and where applicable, any related trust agreement, annuity or insurance
contract, the most recent actuarial valuation, the most recent summary plan
description, the most recent prospectus, the most recent IRS determination
letter, and the most recent annual report (Form 5500) and audited financial
statements.
(b) Except as would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect: (i) Parent and its
Subsidiaries have complied, and are now in compliance, with all provisions of
all laws and regulations applicable to Parent Benefit Plans and each Parent
Benefit Plan has been administered in accordance with its terms, including the
making of all required contributions and the reflection by Parent of all
required accruals on its financial statements; (ii) no event or condition exists
which would reasonably be expected to subject Parent or any of its Subsidiaries
to Liability in connection with the Parent Benefit Plans or any plan, program,
or policy sponsored or contributed to by any of their respective ERISA
Affiliates other than the provision of benefits thereunder in the ordinary
course; and (iii) there are no pending or, to Parent's knowledge, threatened
Actions (other than claims for benefits in the ordinary course) relating to
Parent Benefit Plans which have been asserted or instituted and which would
reasonably be expected to result in any Liability of Parent or any of its
Subsidiaries.
46
(c) In no event will the execution and delivery of this Agreement or any
other related agreement, the consummation of the transactions contemplated
hereby or thereby, or the stockholder approval of the Merger (either alone or in
conjunction with any other event, such as termination of employment) result in,
cause the accelerated vesting, exercisability, funding or delivery of, or
increase the amount or value of, any material payment or benefit to any current
or former employee, officer or director of Parent or any of its Subsidiaries or
any beneficiary or dependent thereof or result in a limitation on the right of
Parent or any of its Subsidiaries to amend, merge, terminate or receive a
reversion of assets from any Parent Benefit Plan or related trust.
(d) Section 4.13(d) of the Parent Disclosure Letter identifies each
Parent Benefit Plan that is intended to be a "qualified plan" within the meaning
of Section 401(a) of the Code or is intended to be similarly qualified or
registered under applicable foreign law (collectively, the "PARENT QUALIFIED
PLANS"). Except as would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect, the IRS (or other relevant
foreign regulatory agency) has issued a favorable determination letter (or
similar approval under foreign law) with respect to each Parent Qualified Plan
and the related trust that has not been revoked, and Parent knows of no existing
circumstances or events that have occurred that would reasonably be expected to
adversely affect the qualified status of any Parent Qualified Plan or the
related trust, which cannot be cured without a Parent Material Adverse Effect.
(e) No Parent Benefit Plan or Parent ERISA Affiliate Plan is, or has
ever been, subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of
the Code.
(f) No Parent Benefit Plan or Parent ERISA Affiliate Plan is, or has
ever been, a Multiemployer Plan.
(g) There is no contract, agreement, plan or arrangement to which Parent
or any Subsidiary of Parent is a party, including but not limited to the
provisions of this Agreement, that, individually or collectively, could give
rise to the payment of any material amount that would not be deductible pursuant
to Section 162(m) of the Code.
Section 4.14. Labor and Other Employment Matters(a) .
(a) Except as would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect, (i) no work stoppage,
slowdown, lockout, labor strike, material arbitration or other material labor
dispute against Parent or any of its Subsidiaries by employees is pending or
threatened, (ii) neither Parent nor any of its Subsidiaries is delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed for it or amounts
required to be reimbursed to such employees, (iii) Parent and each of its
Subsidiaries are in compliance with all applicable Laws respecting labor,
employment, fair employment practices, terms and conditions of employment,
workers' compensation, occupational safety, plant closings, and wage and hours,
(iv) Parent and each of its Subsidiaries has withheld all amounts required by
Law or by agreement to be withheld from the wages, salaries, and other payments
to employees and is not liable for any arrears of wages or any Taxes or any
penalty for failure to comply with any of the
47
foregoing, (v) neither Parent nor any of its Subsidiaries is liable for any
payment to any trust or other fund or to any Governmental Entity, with respect
to unemployment compensation benefits, social security or other benefits or
obligations for employees (other than routine payments to be made in the
ordinary course of business consistent with past practice), (vi) there are no
material pending claims against Parent or any of its Subsidiaries under any
workers' compensation plan or policy or for long term disability and (vii) there
are no material controversies pending or, to the knowledge of Parent,
threatened, between Parent or any of its Subsidiaries and any of their
respective current or former employees, which controversies have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity. To Parent's
knowledge, as of the date hereof, no employees of Parent or any of its
Subsidiaries are in any material respect in violation of any term of any
employment Contract, non-disclosure agreement, noncompetition agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by Parent or any of its Subsidiaries because of the
nature of the business conducted or presently proposed to be conducted by Parent
or such Subsidiary or to the use of trade secrets or proprietary information of
others. As of the date hereof, no employee of Parent or any of its Subsidiaries,
at the officer level or above, has given notice to Parent or any of its
Subsidiaries that any such employee intends to terminate his or her employment
with Parent or any of its Subsidiaries.
(b) Neither Parent nor any of its Subsidiaries is a party to or
otherwise bound by any collective bargaining Contract with a labor union or
labor organization, nor is any such Contract presently being negotiated. From
January 1, 2001 to the date hereof, there has not been a representation question
respecting any of the employees of Parent or any of its Subsidiaries and, to the
knowledge of Parent, there are no campaigns being conducted to solicit cards
from employees of Parent or any of its Subsidiaries to authorize representation
by any labor organization.
(c) Parent has identified in Section 4.14(c) of the Parent Disclosure
Letter and has made available to the Company true and complete copies of (i) all
severance and employment agreements with directors, officers or employees of or
consultants to Parent or any of its Subsidiaries, (ii) all severance programs
and policies of each of Parent and each of its Subsidiaries with or relating to
its employees, and (iii) all plans, programs, agreements and other arrangements
of each of Parent and each of its Subsidiaries with or relating to its
directors, officers, employees or consultants which contain change in control
provisions. In no event will the execution and delivery of this Agreement or any
other related agreement, the consummation of the transactions contemplated
hereby or thereby, or the stockholder approval of the Merger (either alone or in
conjunction with any other event, such as termination of employment) (x) result
in any payment (including, without limitation, severance, unemployment
compensation, parachute or otherwise) becoming due to any director or any
employee of Parent or any of its Subsidiaries or Affiliates from Parent or any
of its Subsidiaries or Affiliates under any Parent Benefit Plan or otherwise,
(y) significantly increase any benefits otherwise payable under any Parent
Benefit Plan or otherwise, or (z) result in any acceleration of the time of
payment or vesting of any benefits.
(d) Each current and, to the best of Parent's knowledge, former employee
of Parent or any of its Subsidiaries who is or was engaged in the invention of
products or development of technology or authoring of computer software or other
copyrighted materials for
48
Parent or any of its Subsidiaries has executed a written contract obligating
such Person to assign to Parent or such Subsidiary all of his or her right,
title and interest in any such invention, technology or work of authorship,
except where the failure to have executed such a written contract would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect or a material adverse effect on a Parent Key Product.
Section 4.15. Environmental Matters. Except as would not, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect: (a) Parent is now and always has been in material compliance with all
Environmental Laws; (b) Parent has all the Environmental Permits necessary for
the conduct and operation of the business as now being conducted, and all such
permits are in good standing; (c) there is not now and has not been any
Hazardous Substance used, generated, treated, stored, transported, disposed of,
released, handled or otherwise existing on, under, about, or emanating from or
to, any Company owned, leased or operated property associated with the business
except in full compliance with all applicable Environmental Laws; (d) Parent has
not received any notice of alleged, actual or potential responsibility for, or
any inquiry or investigation regarding, any release or threatened release of
Hazardous Substances or alleged violation of, or non-compliance with, any
Environmental Law, nor is Parent aware of any information which might form the
basis of any such notice or any claim; and (e) there is no site to which Parent
has transported or arranged for the transport of Hazardous Substances which to
the knowledge of Parent is or may become the subject of any environmental
action. True, complete and correct copies of the written reports, and all parts
thereof, of all environmental audits or assessments which have been conducted at
any Parent owned, leased or operated property, have been provided.
Section 4.16. Intellectual Property.
(a) Section 4.16(a) of the Parent Disclosure Letter sets forth a true
and complete list as of the date hereof of all (i) statutory invention
certificates, U.S. and foreign patents, utility models, and patent applications
and for each, its number, issue date, title, owner and priority information for
each country in which such patent has been issued, or the application number,
date of filing, title, owner and priority information for each country in which
an application is pending; (ii) Parent Registered Brand Names, the registration
number thereof, and, if applicable, the class(es) of goods or the description(s)
of goods or services covered thereby, the countries in which each such Parent
Registered Brand Name is registered, and the owner of each such Parent
Registered Brand Name; (iii) Parent Unregistered Brand Names, and, if
applicable, the application serial number thereof, the date of filing, the
countries in which such application was filed and the class of goods or the
description of goods or services sought to be covered thereby; (iv) copyright
registrations and the number, title of the work, and date of registration
thereof for each country in which such copyright has been registered; (v)
applications for registration of copyrights, the title of the work, and the date
and countries in which each such application was filed; and (vi) domain name
registrations, in each case set forth in subsections (i) through (vi) above,
included in the Parent Owned Intellectual Property as of the date hereof.
(b) Section 4.16(b) of the Parent Disclosure Letter sets forth a
complete and accurate list or description, as appropriate, of all Contracts as
of the date hereof by which Parent or any of its Subsidiaries has been granted
or has granted to others any license to Intellectual
49
Property that is used in or necessary for the conduct of the business of Parent
or any of its Subsidiaries, as conducted as of the date hereof and where (i)
such Intellectual Property is embodied in any Parent Key Products; (ii) the
termination or expiration of such agreement would reasonably be expected to have
a Parent Material Adverse Effect; (iii) the agreement requires or reasonably
could be expected to require Parent or any of its Subsidiaries to pay or be paid
royalties or amounts to/from another Person in an aggregate amount of $100,000
or more; (iv) the agreement purports to be an inbound or outbound license of
rights on an exclusive basis; or (v) the agreement relates to Intellectual
Property which, to Parent's knowledge, is co-owned by another Person or as to
which, to Parent's knowledge, another Person has a right to acquire, right of
first refusal or right of first negotiation (collectively, "PARENT MATERIAL
Licenses"); provided, however, Section 4.16(b) of the Parent Disclosure Letter
need not list licenses of computer software which computer software has not been
significantly modified or customized and that is widely available on
commercially reasonable terms. A true and complete copy of each Parent Material
License has been made available to the Company.
(c) (i) The use of the Parent Owned Intellectual Property and the Parent
Licensed Intellectual Property in connection with the operation of the business
of Parent or any of its Subsidiaries as conducted as of the date hereof, and
(ii) the manufacture, use, offer for sale, and sale of Parent Key Products (as
such products exist as of the date hereof), do not, to Parent's knowledge,
infringe or misappropriate or otherwise violate the Intellectual Property rights
of any other Person, and no claim is pending or, to Parent's knowledge,
threatened against Parent or any of its Subsidiaries alleging any of the
foregoing.
(d) Except for the Parent Material Licenses of which the Company has
been provided copies, and applicable governmental and/or regulatory approvals,
as listed in Section 4.16(d) of the Parent Disclosure Letter, no right, license,
lease, consent, or other agreement is required with respect to any Intellectual
Property for the conduct of the business of Parent or any of its Subsidiaries as
conducted as of the date hereof that will require any material payment or the
undertaking of any material obligation by Parent or any of its Subsidiaries.
(e) None of the patents or patent applications required to be listed in
Section 4.16(a) of the Parent Disclosure Letter is involved in any interference,
reexamination, opposition or similar active proceeding which would reasonably be
expected to have a material adverse effect thereon, and, to Parent's knowledge,
there has been no threat that any such proceeding will hereafter be commenced.
None of the Parent Registered Brand Names or the Parent Unregistered Brand Names
required to be listed in Section 4.16(a) of the Parent Disclosure Letter is
involved in any opposition, cancellation, nullification, interference or similar
active proceeding which would reasonably be expected to have a material adverse
effect thereon, and to Parent's knowledge, there has been no threat that any
such proceeding will hereafter be commenced.
(f) Parent or a Subsidiary of Parent is the exclusive owner of the
entire and unencumbered right, title and interest in and to each item of the
Parent Owned Intellectual Property. Parent or a Subsidiary of Parent is entitled
to use the Parent Owned Intellectual Property and the Parent Licensed
Intellectual Property in the ordinary course of its business as presently
conducted, subject only to the terms of the Parent Material Licenses of which
the Company has been provided copies.
50
(g) Other than Parent Owned Intellectual Property and Parent Licensed
Intellectual Property, there are no items of Intellectual Property that are
necessary to the conduct of the business of Parent or any of its Subsidiaries as
conducted as of the date hereof. To the knowledge of Parent, the Parent Owned
Intellectual Property is valid and enforceable, and Parent has the right to
enforce such Parent Owned Intellectual Property that has not been licensed to
another Person on an exclusive basis, and such Intellectual Property has not
been adjudged by a court of competent jurisdiction to be invalid or
unenforceable (except for challenges and adjudications that may be received in
the ordinary course of the prosecution of Intellectual Property applications in
Intellectual Property offices) in whole or part.
(h) No legal proceedings are pending or, to Parent's knowledge, are
threatened against Parent or any of its Subsidiaries or licensors of Parent
Licensed Intellectual Property (i) based upon, challenging or seeking to deny or
restrict the use by Parent of any of the Parent Owned Intellectual Property or
the Parent Licensed Intellectual Property, (ii) alleging that any services
provided by, processes used by, or products manufactured or sold or to be
manufactured or sold by Parent or any of its Subsidiaries or any other operation
of the business of Parent or any of its Subsidiaries infringes, misappropriates
or violates any Intellectual Property right of any other Person, or (iii)
alleging that the Parent Material Licenses conflict with the terms of any other
Person's license or other agreement.
(i) To Parent's knowledge, no other Person is engaging in any activity
that infringes or misappropriates the Parent Owned Intellectual Property or the
Parent Licensed Intellectual Property as of the date hereof. Parent and its
Subsidiaries have not granted any material license or other material right to
any other Person with respect to the Parent Owned Intellectual Property or the
Parent Licensed Intellectual Property as of the date hereof other than pursuant
to agreements listed in Section 4.11(a) or 4.16(b) of the Parent Disclosure
Letter.
(j) To Parent's knowledge, all material software used in the business of
Parent or any of its Subsidiaries is free of all viruses, worms and Trojan
horses that would, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
(k) Parent and its Subsidiaries have a license to use all software
development tools, library functions, compilers and other third-party software
that are material to the business of Parent or any of its Subsidiaries as
presently conducted, or that are required to operate or modify the software used
in Parent's or any of its Subsidiaries' business as presently conducted, except
for such licenses the failure of which to obtain would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
(l) Parent and its Subsidiaries have taken commercially reasonable
measures (but at least commensurate with industry standards) to maintain their
material trade secrets in confidence, including contractually requiring
licensees, contractors and other Persons with access to such trade secrets to
keep such trade secrets confidential.
(m) To the knowledge of Parent, as of the date hereof, (i) there has
been no misappropriation of any material trade secrets or other material
confidential Intellectual Property of Parent or any of its Subsidiaries by any
Person, (ii) no employee, independent Contractor or
51
agent of Parent or any of its Subsidiaries has misappropriated any material
trade secrets of any other Person in the course of such performance as an
employee, independent contractor or agent, and (iii) no employee, independent
contractor or agent of Parent or any of its Subsidiaries is in material default
or breach of any term of any employment agreement, nondisclosure agreement,
assignment of invention agreement or similar agreement or Contract which has or
is likely to have a Parent Material Adverse Effect.
(n) Parent and each of its Subsidiaries has secured valid written
assignments from all current employees and, to the best of Parent's knowledge,
all former employees, who contributed to the creation or development of Parent
Owned Intellectual Property or the rights to such contributions that Parent or
such Subsidiary does not already own by operation of law, and all of its
employees have assigned to Parent or such Subsidiary the rights to such
contributions that Parent or such Subsidiary does not already own by operation
of law, except where the failure to have secured such written assignments would
not, individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect or a material adverse effect on a Parent Key Product.
All employees of Parent or any of its Subsidiaries with access to material
confidential information of Parent or any of its Subsidiaries, which information
relates to a Parent Key Product, are parties to written agreements under which,
among other things, each such employee is obligated to maintain the
confidentiality of confidential information of Parent or any of its
Subsidiaries, except where the absence of such written agreements would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect or a material adverse effect on any Parent Key Product.
To the knowledge of Parent as of the date hereof, no employees of Parent or any
of its Subsidiaries are in violation thereof.
(o) The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, will not result in or give
rise to (i) any right of termination or other right to impair or limit any of
Parent's rights to own or license any of the Parent Owned Intellectual Property
or the Parent Licensed Intellectual Property, or (ii) the inability (for any
period of time) of the Surviving Corporation to succeed to the rights and
perform the obligations of Parent with respect to the Parent Owned Intellectual
Property and the Parent Licensed Intellectual Property, pursuant to the terms of
this Agreement.
(p) To Parent's knowledge, there are no facts or circumstances that
materially adversely affect or are reasonably likely to materially adversely
affect the continued supply (either for clinical purposes or in bulk) of the
active ingredients of the pharmaceutical products currently used in clinical
trials by or for Parent or any of its Subsidiaries.
Section 4.17. Real Property.
(a) Neither Parent nor any of its Subsidiaries owns any real property.
(b) Section 4.17(b) of the Parent Disclosure Letters sets forth a
complete list, as of the date hereof, of all material real property leased by
Parent or any of its Subsidiaries as of the date hereof ("PARENT MATERIAL LEASED
REAL PROPERTY"). A copy of the lease for each Parent Material Leased Real
Property (the "PARENT LEASES") has been filed as an exhibit to the Parent SEC
Documents prior to the date hereof or has been delivered or made available to
the Company. With respect to each of the Parent Leases: (i) such Parent Lease is
legal, valid,
52
binding on Parent or its Subsidiary party thereto and, to Parent's knowledge,
each other Person thereto, and is enforceable and in full force and effect,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar Laws relating to or affecting the rights
and remedies of creditors generally and the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law); (ii) the transactions contemplated by this Agreement do
not require the consent of any other party to such Parent Lease, will not result
in a breach of or default under such Parent Lease, or otherwise cause such
Parent Lease to cease to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the Closing; (iii) neither Parent nor
any of its Subsidiaries, as the case may be, nor, to the knowledge of Parent or
any of its Subsidiaries, as the case may be, any other party to the Parent Lease
is in material breach or default under such Parent Lease, and no event has
occurred or failed to occur or circumstance exists which, with the delivery of
notice, the passage of time or both, would constitute such a breach or default,
or permit the termination, modification or acceleration of rent under such
Parent Lease; (iv) the other party to such Parent Lease is not an Affiliate of,
and otherwise does not have any economic interest in, Parent or any of its
Subsidiaries; (v) neither Parent nor any of its Subsidiaries, as the case may
be, has subleased, licensed or otherwise granted any Person the right to use or
occupy such Parent Material Leased Real Property or any portion thereof; and
(vi) neither Parent nor any of its Subsidiaries, as the case may be, has
collaterally assigned or granted any other security interest in such Parent
Lease or any interest therein, except in the case of (i) through (vi) above, for
any such case that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
(c) The present use of the land, buildings, structures and improvements
on the Parent Material Leased Real Property are, in all material respects, in
conformity with all Laws, including all applicable zoning Laws, ordinances and
regulations and with all registered deeds or other restrictions of record, and
neither Parent nor any of its Subsidiaries, as the case may be, has received any
written notice of violation thereof, except for such nonconformities or
violations that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Neither Parent nor any of its
Subsidiaries, as the case may be, has received any written notice of any
material conflict or dispute with any regulatory authority or other Person
relating to any Parent Material Leased Real Property or the activities thereon,
other than where there is no current or reasonably likely material interference
with the operations at the Parent Material Leased Real Property as presently
conducted (or as would be conducted at full capacity).
(d) Neither Parent nor any of its Subsidiaries, as the case may be, has
received any notice from any insurance company of any material defects or
inadequacies in the Parent Material Leased Real Property or any part thereof,
which would materially and adversely affect the insurability of the same or of
any termination or threatened (in writing) termination of any policy of
insurance relating to any such Parent Material Leased Real Property.
Section 4.18. Regulatory Compliance.
(a) Neither Parent nor any of its Subsidiaries has knowledge of any
actual or threatened enforcement action by the FDA or any other Governmental
Entity which has jurisdiction over the operations of Parent and its
Subsidiaries, and none has received notice of
53
any pending or threatened claim against either Parent, its Subsidiaries or any
Parent Partner, and Parent and its Subsidiaries have no knowledge or reason to
believe that any Governmental Entity is considering such action, except where
such action would not, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect.
(b) All material reports, documents, claims and notices required to be
filed, maintained, or furnished to the FDA or any Governmental Entity by Parent,
its Subsidiaries, or, to the knowledge of Parent, Parent Partners have been so
filed, maintained or furnished. All such reports, documents, claims, and notices
were complete and correct in all material respects on the date filed (or were
corrected in or supplemented by a subsequent filing) such that no liability
exists with respect to such filing.
(c) Except as described in the Parent SEC Documents prior to the date
hereof, Parent, its Subsidiaries and, to the knowledge of Parent, Parent
Partners have not received any FDA Form 483, notice of adverse finding, Warning
Letters, untitled letters or other correspondence or notice from the FDA, or
other Governmental Entity alleging or asserting noncompliance with any
applicable Laws or any licenses, approvals, clearances, authorizations,
registrations, certificates, permits, filings, notifications and supplements or
amendments thereto required by any applicable Laws, and Parent and its
Subsidiaries have no knowledge or reason to believe that the FDA or any
Governmental Entity is considering such action, except where such action would
not, individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(d) All material licenses, approvals, clearances, authorizations,
registrations, certificates, permits, filings, notifications and supplements or
amendments thereto that Parent, its Subsidiaries, or, to the knowledge of
Parent, Parent Partners has received or made to the FDA or any other
Governmental Entity has not been limited, suspended, modified or revoked and
Parent and its Subsidiaries have no knowledge or reason to believe that the FDA
or any other Governmental Entity is considering such action.
(e) All studies, tests and preclinical and clinical trials being
conducted by Parent or its Subsidiaries are, and any such studies or trials
being conducted by a Parent Partner are to the knowledge of Parent being
conducted in material compliance with experimental protocols, procedures and
controls pursuant to accepted professional scientific standards and applicable
local, state and federal Laws, rules, regulations and guidances, including, but
not limited to the applicable requirements of Good Laboratory Practices or Good
Clinical Practices, as applicable, and the FDCA and its implementing regulations
including, but not limited to, 21 C.F.R. Parts 50, 54, and 56, 58 and 312. The
descriptions of the studies, tests and preclinical and clinical trials,
including the related results and regulatory status are accurate and complete in
all material respects. Parent and its Subsidiaries are not aware of any studies,
tests or trials the results of which call into question the clinical results
described or referred to in the Parent Disclosure Letter and Parent SEC reports
when viewed in the context in which such results are described and the clinical
state of development. Parent and its Subsidiaries have not received any notices,
correspondence or other communication from the FDA or any other Governmental
Entity requiring the termination, suspension or material modification of any
clinical trials conducted by, or on behalf of, Parent or its Subsidiaries, or in
which Parent or its Subsidiaries have participated, and Parent and its
Subsidiaries have no knowledge or reason to believe that the
54
FDA or any other Governmental Entity is considering such action, except where
such action would not, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect.
(f) The manufacture of products by Parent and its Subsidiaries is, and
the manufacture of products by Parent Partners is to the knowledge of Parent,
being conducted in material compliance with all applicable Laws including the
FDA's current Good Manufacturing Practices. In addition, Parent and its
Subsidiaries and, to the knowledge of Parent, the Parent Partners, are in
material compliance with all other applicable FDA requirements, including, but
not limited to, registration and listing requirements set forth in 21 U.S.C.
Section 460 and 21 C.F.R. Part 207 and all other applicable Law.
(g) Parent and its Subsidiaries have not either voluntarily or
involuntarily, initiated, conducted, or issued, or caused to be initiated,
conducted or issued, any recall, market withdrawal or replacement, safety alert,
warning, "dear doctor" letter, investigator notice or other notice or action
relating to an alleged lack of safety or efficacy of any product or product
candidate. Parent and its Subsidiaries are not aware of any facts which are
reasonably likely to cause (1) the recall, market withdrawal or replacement of
any product sold or intended to be sold by Parent or its Subsidiaries; (2) a
change in the marketing classification or a material change in labeling of any
such products, or (3) a termination or suspension of marketing of any such
products.
(h) Parent and its Subsidiaries are and at all times have been in
material compliance with federal or state criminal or civil laws (including
without limitation the federal Anti-Kickback Statute (42 U.S.C. Section
1320a-7b(b)), Xxxxx Law (42 U.S.C. Section 1395nn), False Claims Act (31 U.S.C.
Section 3729 et seq.), Health Insurance Portability and Accountability Act of
1996 (Pub. L. No. 104-191), and any comparable state laws), or the regulations
promulgated pursuant to such Laws, or which are cause for civil penalties or
mandatory or permissive exclusion from any Program. There is no civil, criminal,
administrative or other action, suit, demand, claim, hearing, investigation,
proceeding, notice or demand pending, received or, to the knowledge of Parent,
threatened against Parent or any of its Subsidiaries which could reasonably
result in its exclusion from participation in any Program or other third party
payment programs in which Parent or any of its Subsidiaries participates.
(i) To Parent's knowledge, Parent and each Subsidiary are and have been
in substantial compliance with all applicable Laws and regulations related to 21
C.F.R. Part 11 compliance. Parent and each Subsidiary have policies and
procedures or a formal compliance program to ensure compliance with all
requirements of 21 C.F.R. Part 11, including those necessary: (i) to ensure that
its records are validated and audit trails are generated, such that procedure is
compliant with the legal requirements imposed by the appropriate jurisdictions
and the jurisdictions in which Parent conducts business; (ii) to analyze and
evaluate the potential risks and failures associated with the use of electronic
records and electronic signatures; and (iii) to train and educate its new and
current employees as required by Law. All such policies, procedures or formal
compliance programs are in full compliance with applicable Laws and regulations.
A true, accurate and complete copy of the written policies and procedures or
formal compliance program described immediately above has been provided to the
Company.
55
Section 4.19. Insurance.
(a) Parent has provided or made available to the Company true, correct
and complete copies of its director and officer and employee and officer
insurance policies and all policies of insurance material to Parent and its
Subsidiaries, taken as a whole, to which Parent or its Subsidiaries is a party
or is a beneficiary or named insured. Parent and its Subsidiaries maintain
insurance coverage with reputable insurers in such amounts and covering such
risks as are appropriate and reasonable, considering Parent's and its
Subsidiaries' properties, business and operations.
(b) Excluding insurance policies that have expired and been replaced in
the ordinary course of business, as of the date of this Agreement, to Parent's
knowledge, no threat in writing has been made to cancel (excluding cancellation
upon expiration or failure to renew) any such insurance policy of Parent or any
Subsidiary of Parent during the period of one year prior to the date hereof. As
of the date hereof, to Parent's knowledge, no event has occurred, including the
failure by Parent or any Subsidiary of Parent to give any notice or information
or by giving any inaccurate or erroneous notice or information, which materially
limits or impairs the rights of Parent or any Subsidiary of Parent under any
such excess Liability or protection and indemnity insurance policies.
Section 4.20. Opinion of Financial Advisor. Parent's financial advisor,
Deutsche Bank Securities, Inc. and Xxxxxx Xxxxxx Partners LLC (the "PARENT
FINANCIAL ADVISORS"), has delivered to Parent's Board of Directors an oral
opinion, to be confirmed in writing, to the effect that, as of the date of this
Agreement, the Merger Consideration is fair, from a financial point of view, to
Parent.
Section 4.21. Brokers and Finders. Parent and its Subsidiaries have not
entered into any contract, arrangement or understanding with any Person or firm
which may result in the obligation of Parent or any of its Subsidiaries to pay
any investment banking fees, finder's fees, or brokerage commissions in
connection with the transactions contemplated hereby, other than fees payable to
the Parent Financial Advisors. Parent has delivered to the Company a true and
complete copy of the engagement letter between Parent and the Parent Financial
Advisors.
Section 4.22. Foreign Corrupt Practices and International Trade
Sanctions. To Parent's knowledge, neither Parent, nor any of its Subsidiaries,
nor any of their respective directors, officers, agents, employees or any other
Persons acting on their behalf has, in connection with the operation of their
respective businesses, (i) used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, or established or maintained
any unlawful or unrecorded funds in violation of Section 104 of the FCPA, or any
other similar applicable foreign, Federal or state Law, (ii) paid, accepted or
received any unlawful contributions, payments, expenditures or gifts, or (iii)
violated or operated in noncompliance with any export restrictions, anti-boycott
regulations, embargo regulations or other applicable domestic or foreign Laws
and regulations, in each case, except as is not, individually or in the
aggregate, reasonably likely to have a Parent Material Adverse Effect.
56
Section 4.23. Financing. A true and correct copy of the financing
commitment letter, dated March 20, 2005, from Deutsche Bank Securities, Inc. and
Deutsche Bank Trust Company Americas to Parent, as in effect on the date hereof
(the "FINANCING COMMITMENT LETTER"), has been delivered to the Company. At
Closing, Parent will have sufficient funds and sufficient authorized but
unissued shares of Parent Common Stock to consummate the transactions
contemplated by this Agreement.
Section 4.24. Interim Operations of Merger Sub. Merger Sub is a direct,
wholly-owned subsidiary of Parent formed solely for the purpose of effecting the
Merger, and has conducted no activity and has incurred no liability or
obligation other than as contemplated by this Agreement.
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business by the Company Pending the Closing.
Except for matters set forth in Section 5.01 of the Company Disclosure Letter or
otherwise expressly permitted by this Agreement (or as required by applicable
Law or the regulations or requirements of any stock exchange or regulatory
organization applicable to the Company), from the date of this Agreement to the
Effective Time, the Company shall, and shall cause each of its Subsidiaries to,
(i) conduct its business in the ordinary course of business consistent with past
practice, and (ii) use commercially reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers, key employees and key independent
contractors, and preserve the goodwill and business relationships with
customers, suppliers, licensors, licensees and others having business
relationships with them. In addition, and without limiting the generality of the
foregoing, except for matters set forth in Section 5.01 of the Company
Disclosure Letter or otherwise expressly permitted by this Agreement, from the
date of this Agreement to the Effective Time, the Company shall not (unless
required by applicable Law or the regulations or requirements of any stock
exchange or regulatory organization applicable to the Company), and shall not
permit any of its Subsidiaries to, do any of the following without the prior
written consent of Parent, which consent shall not be unreasonably withheld or
delayed:
(a) (i) amend or propose to amend the Company's certificate of
incorporation or bylaws or similar governing documents, or materially amend or
propose to materially amend any of the Company's Subsidiaries' certificate of
incorporation or bylaws or similar governing documents, (ii) split, combine or
reclassify their outstanding capital stock or issue or authorize the issuance of
any other security in respect or, in lieu of, or in substitution for, share of
its capital stock, (iii) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, except for the payment of
dividends or distributions to the Company or any of its Subsidiaries by a
Subsidiary of the Company, (iv) merge or consolidate with any Person (other than
a merger among wholly-owned Subsidiaries of the Company or a merger between the
Company and its wholly-owned Subsidiaries), or (v) enter into any agreement with
respect to the voting of its capital stock or other securities held by the
Company or any of its Subsidiaries;
57
(b) issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any shares of, or any options, warrants or rights of any kind to
acquire any shares of, their capital stock of any class or any debt or equity
securities convertible into or exchangeable for such capital stock, except that
(i) the Company may issue shares of Company Common Stock (A) upon the exercise
of Company Purchase Rights outstanding on the date hereof or hereafter granted
in accordance with the provisions of subclause (iv) of this clause (b), (B) upon
exercise of Company Stock Options outstanding on the date hereof or hereafter
granted in accordance with the provisions of subclause (ii) or (iii) of this
clause (b) or (C) in accordance with the terms of the Company Rights Agreement
as in effect on the date hereof, (ii) the Company may grant Company Stock
Options to purchase up to an aggregate of 100,000 shares of Company Common Stock
to new employees of the Company or its Subsidiaries in accordance with the terms
of the Company Stock Plans consistent with past practice and with an exercise
price per share of Company Common Stock no less than the fair market value of a
share of Company Common Stock on the date of grant, provided that the vesting of
such options does not accelerate as a result of the Merger or the transactions
contemplated by this Agreement and provided, further, that no such grant to
purchase more than 25,000 shares of Company Common Stock shall be made to any
individual, (iii) the Company may grant Company Stock Options pursuant to
existing contractual relationships as set forth in Section 5.01(b) of the
Company Disclosure Letter, (iv) the Company may grant Company Purchase Rights in
accordance with the terms of the Company ESPP (as in effect on the date hereof),
subject to Section 2.07, (v) the Company may grant up to an aggregate of 10,000
shares of Company Restricted Stock to new employees of the Company or its
Subsidiaries in accordance with the terms of the Company Restricted Stock Plan
consistent with past practice, provided that the vesting of such shares does not
accelerate as a result of the Merger or the transactions contemplated by this
Agreement and provided, further, that no such grant to purchase more than 1,000
shares of Company Common Stock shall be made to any individual, and (vi)
transactions exclusively among the Company and its Subsidiaries shall be
permitted;
(c) except for transactions exclusively among the Company and its
Subsidiaries, (i) issue any debt securities, incur, guarantee or otherwise
become contingently liable with respect to any indebtedness for borrowed money,
or enter into any arrangement having the economic effect of any of the foregoing
(other than in connection with accounts payable in the ordinary course of
business or borrowings under the existing credit facilities of the Company or
any of its Subsidiaries), (ii) make any loans, advances or capital contributions
to, or investments in, any Person, (iii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or any options, warrants or
rights to acquire any of its capital stock or any security convertible into or
exchangeable for its capital stock other than in connection with the exercise of
outstanding Company Stock Options pursuant to the terms of the Company Stock
Plans and the relevant written agreements evidencing the grant of Company Stock
Options and repurchases of outstanding shares of Company Restricted Stock
pursuant to the terms of the Company Restricted Stock Plan, (iv) make any
material acquisition of any assets or businesses (including by merger,
consolidation, acquisition of stock or assets, in-bound license transactions or
otherwise) other than acquisitions the fair market value of the total
consideration (including license, royalty or other fees) for which does not
exceed, individually, $2,000,000 or, in the aggregate, $5,000,000 (provided that
any such acquisition does not adversely affect the ability of Parent and the
Company to obtain applicable approvals under the Antitrust Laws), or (v) sell,
pledge, assign, dispose of, transfer, lease, securitize or materially encumber
any businesses or
58
assets that are material to the Company and its Subsidiaries, taken as a whole
(excluding Intellectual Property, which is addressed in Section 5.01(d)) other
than (A) sales of inventory and other assets in the ordinary course of business,
(B) sales or dispositions of assets in one or a series of transactions having an
aggregate value of $3,000,000 or less, and (C) divestitures pursuant to Section
5.11;
(d) (i) sell, pledge, assign, dispose of, transfer, securitize, lease or
materially encumber any material Company Owned Intellectual Property or material
Company Licensed Intellectual Property, or (ii) except in the ordinary course of
business, as reasonably prudent to the conduct of the business or as provided
for in Company Material Contracts in effect as of the date hereof, (A)
exclusively license, abandon or fail to maintain any material Company Owned
Intellectual Property or material Company Licensed Intellectual Property, (B)
grant, extend, amend (except as required in the diligent prosecution of the
material Company Owned Intellectual Property), waive or modify any rights in or
to any material Company Owned Intellectual Property or material Company Licensed
Intellectual Property, (C) fail to diligently prosecute the Company's and its
Subsidiaries' material patent applications, or (D) fail to exercise a right of
renewal or extension under any Company Material License;
(e) (i) enter into any Contract or arrangement that materially limits or
otherwise materially restricts the Company or any of its Subsidiaries or any of
their respective affiliates or any successor thereto from engaging or competing
in any line of business or in any geographic area, (ii) vary its inventory
practices in any material respect from its past practices, except as required by
GAAP or by Law, or (iii) make any capital expenditure or expenditures (including
leases and in-bound licenses) in the aggregate in excess of the aggregate amount
set forth in the Company's budget provided to Parent prior to the date hereof
(other than capital expenditures for unbudgeted repairs and maintenance in the
ordinary course of business consistent with past practice);
(f) grant, enter into or amend any employment, severance, change in
control, special pay arrangement with respect to termination of employment or
other similar arrangements or Contract with any directors, officers or employees
of the Company or its Subsidiaries, except (i) pursuant to previously existing
Contractual arrangements or policies between such current directors, officers or
employees and the Company, (ii) pursuant to employment agreements entered into
with a Person who is not already an officer of the Company in the ordinary
course of business and is hired or promoted by the Company or one of its
Subsidiaries after the date hereof in the ordinary course of business or (iii)
to the minimum extent necessary to comply with Section 409A of the Code without
increasing the benefits provided to any Person;
(g) (i) increase the salary, benefits or monetary compensation of any
directors, executive officers or employees, except (A) for increases in the
ordinary course of business, (B) pursuant to previously existing Contractual
arrangements, (C) in connection with the assumption by such employee of new or
additional responsibilities or (D) to respond to offers of employment made by
other Persons, or (ii) establish, adopt, enter into, or materially amend any,
collective bargaining agreement or bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination or severance plan, arrangement, trust, fund, policy or
agreement, except to the minimum extent necessary to comply
59
with Section 409A of the Code without increasing the benefits provided to any
Person or as otherwise required by any other applicable Law;
(h) (i) accelerate, amend or change the period of exercisability or
vesting of options, restricted stock or similar awards under any Company Stock
Plan, except to the minimum extent necessary in order to comply with Section
409A of the Code without accelerating the exercisability or vesting of any such
award, or (ii) authorize cash payments in exchange for any options granted under
any of such plans except as required by the terms of such plans or any related
agreements in effect as of the date hereof;
(i) waive, release, assign, settle or compromise any material claims, or
any material litigation or arbitration;
(j) take, or agree to take, any action that would prevent the Merger
from qualifying as a reorganization with the meaning of Section 368(a) of the
Code;
(k) adopt, enter into, or amend any Company Benefit Plan to materially
increase the benefits, Liability, or obligations of any Company Benefit Plan or
to accelerate the payment of benefits under any Company Benefit Plan, except (i)
as involves any such then existing plans, agreements, trusts, funds or
arrangements of any company acquired after the date hereof as permitted by this
Agreement; or (ii) as required pursuant to existing Contractual arrangements or
this Agreement;
(l) change any method or principle of financial accounting in a manner
that is inconsistent with past practice, except to the extent required by GAAP
as advised by the Company's regular independent accountants;
(m) make any material Tax election or settle or compromise any material
Tax liability or refund, or change any annual Tax accounting period or material
method of Tax accounting, file any material amendment to a Tax Return, enter
into any closing agreement relating to any material Tax, surrender any right to
claim a material Tax refund, or consent to any extension or waiver of the
statute of limitations period applicable to any material Tax claim or
assessment, in each case, other than as required by Law;
(n) modify, amend or terminate, or waive, release or assign any material
rights or claims with respect to any confidentiality or standstill agreement to
which the Company is a party and which relates to a business combination or
other similar extraordinary transaction;
(o) take any action to render inapplicable, or to exempt any third
Person from, (i) the provisions of Section 203 of the DGCL, or (ii) any other
state takeover or similar Law or state Law that purports to limit or restrict
business combinations or the ability to acquire or vote shares;
(p) take any action that is intended or would reasonably be expected to
result in any of the conditions to the Merger in Article VI not being satisfied;
or
(q) agree, authorize or otherwise to take any of the foregoing actions.
60
Section 5.02. Conduct of Business by Parent Pending the Closing. Except
for matters set forth in Section 5.02 of the Parent Disclosure Letter or
otherwise expressly permitted by this Agreement (or as required by applicable
Law or the regulations or requirements of any stock exchange or regulatory
organization applicable to Parent), from the date of this Agreement to the
Effective Time, Parent shall, and shall cause each of its Subsidiaries to, (i)
conduct its business in the ordinary course of business consistent with past
practice and (ii) use commercially reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers, key employees and key independent
contractors, and preserve the goodwill and business relationships with
customers, suppliers, licensors, licensees and others having business
relationships with them. In addition, and without limiting the generality of the
foregoing, except for matters set forth in Section 5.02 of the Parent Disclosure
Letter or otherwise expressly permitted by this Agreement, from the date of this
Agreement to the Effective Time, Parent shall not (unless required by applicable
Law or the regulations or requirements of any stock exchange or regulatory
organization applicable to Parent), and shall not permit any of its Subsidiaries
to, do any of the following without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed:
(a) (i) amend or propose to amend Parent's certificate of incorporation
or bylaws or similar governing documents, or materially amend or propose to
materially amend any of Parent's Subsidiaries' certificate of incorporation or
bylaws or similar governing documents, (ii) split, combine or reclassify their
outstanding capital stock or issue or authorize the issuance of any other
security in respect or, in lieu of, or in substitution for, shares of its
capital stock, (iii) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, except for the payment of
dividends or distributions to Parent or any of its Subsidiaries by a Subsidiary
of Parent, (iv) merge or consolidate with any Person (other than a merger among
wholly-owned Subsidiaries of Parent or a merger between Parent and its
wholly-owned Subsidiaries), or (v) enter into any agreement with respect to the
voting of its capital stock or other securities held by Parent or any of its
Subsidiaries;
(b) issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any shares of, or any options, warrants or rights of any kind to
acquire any shares of, their capital stock of any class or any debt or equity
securities convertible into or exchangeable for such capital stock, except that
(i) Parent may issue shares of Parent Common Stock upon exercise of Parent Stock
Options outstanding on the date hereof or hereafter granted in accordance with
the provisions of subclause (ii) or (iii) of this clause (b) or (B) in
accordance with the terms of the Parent Rights Agreement as in effect on the
date hereof, (ii) Parent may grant Parent Stock Options to purchase up to an
aggregate of 75,000 shares of Parent Common Stock and 75,000 shares of
restricted stock in accordance with the terms of the Parent Stock Plans
consistent with past practice and with an exercise price per share of Parent
Common Stock no less than the fair market value of a share of Parent Common
Stock on the date of grant, (iii) in connection with Parent's annual year-end
equity awards consistent with past practice, Parent may grant Parent Stock
Options and restricted stock in accordance with the terms of the Parent Stock
Plans consistent with past practice and, in respect of Parent Stock Options,
with an exercise price per share of Parent Common Stock no less than the fair
market value of a share of Parent Common Stock on the date of grant, (iv) Parent
may grant Parent Stock Options pursuant to existing contractual relationships as
set forth in Section 5.02(b) of the Parent Disclosure Letter, (v) Parent may
issue one or more series of securities of Parent in connection with a
61
Financing consistent with the terms and conditions of this Agreement, the
primary use of proceeds of which is to pay the Cash Merger Consideration, and
(vi) transactions exclusively among Parent and its Subsidiaries shall be
permitted;
(c) except for transactions exclusively among Parent and its
Subsidiaries, (i) issue any debt securities, incur, guarantee or otherwise
become contingently liable with respect to any indebtedness for borrowed money,
or enter into any arrangement having the economic effect of any of the foregoing
(other than (A) in connection with accounts payable in the ordinary course of
business, (B) borrowings under the existing credit facilities of Parent or any
of its Subsidiaries, and (C) the issuance of one or more series of securities of
Parent or the incurrence of indebtedness by Parent in connection with a
Financing consistent with the terms and conditions of this Agreement, the
primary use of proceeds of which is to pay the Cash Merger Consideration), (ii)
make any loans, advances or capital contributions to, or investments in, any
Person, other than loans, advances, capital contributions or investments that
are not, in the aggregate, in excess of $25,000,000, (iii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or any
options, warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock other than in connection
with the exercise of outstanding Parent Stock Options pursuant to the terms of
the Parent Stock Plans and the relevant written agreements evidencing the grant
of Parent Stock Options, (iv) make any material acquisition of any assets or
businesses (including by merger, consolidation, acquisition of stock or assets,
in-bound license transactions or otherwise) other than acquisitions the fair
market value of the total consideration (including license, royalty or other
fees) for which does not exceed, in the aggregate, $25,000,000 (provided that
any such acquisition does not materially and adversely affect the ability of
Parent and the Company to obtain applicable approvals under the Antitrust Laws);
or (v) sell, pledge, assign, dispose of, transfer, lease, securitize or
materially encumber any businesses or assets (other than Parent Owned
Intellectual Property or Parent Licensed Intellectual Property) that are
material to Parent and its Subsidiaries, taken as a whole, other than (A) sales
of inventory and other assets in the ordinary course of business, (B) sales or
dispositions of assets in one or a series of transactions having an aggregate
value of $25,000,000 or less, and (C) divestitures pursuant to Section 5.11;
(d) (i) sell, pledge, assign, dispose of, transfer, securitize, lease or
materially encumber any material Parent Owned Intellectual Property or material
Parent Licensed Intellectual Property (except in connection with any Contract or
arrangement related to obtaining Financing that is consistent with the terms and
conditions of this Agreement, the primary use of proceeds of which is to pay the
Cash Merger Consideration), or (ii) except in the ordinary course of business,
as reasonably prudent to the conduct of the business or as provided for in
Parent Material Contracts in effect as of the date hereof, (A) exclusively
license, abandon or fail to maintain any material Parent Owned Intellectual
Property or material Parent Licensed Intellectual Property, (B) grant, extend,
amend (except as required in the diligent prosecution of the material Parent
Owned Intellectual Property), waive or modify any rights in or to any material
Parent Owned Intellectual Property or material Parent Licensed Intellectual
Property, (C) fail to diligently prosecute Parent's and its Subsidiaries'
material patent applications, or (D) fail to exercise a right of renewal or
extension under any Parent Material License;
(e) (i) enter into any Contract or arrangement that materially limits or
otherwise materially restricts Parent or any of its Subsidiaries or any of their
respective affiliates
62
or any successor thereto from engaging or competing in any line of business or
in any geographic area, or (ii) make any capital expenditure or expenditures,
including leases and in-bound licenses (other than capital expenditures that are
not, in the aggregate, in excess of $10,000,000 and (B) capital expenditures for
unbudgeted repairs and maintenance in the ordinary course of business consistent
with past practice);
(f) except in the ordinary course of business, make any material Tax
election or settle or compromise any material Tax liability or refund, or change
any annual Tax accounting period or material method of Tax accounting, file any
material amendment to a Tax Return, enter into any closing agreement relating to
any material Tax, surrender any right to claim a material Tax refund, or consent
to any extension or waiver of the statute of limitations period applicable to
any material Tax claim or assessment, in each case, other than as required by
Law;
(g) take, or agree to take, any action that would prevent the Merger
from qualifying as a reorganization with the meaning of Section 368(a) of the
Code;
(h) waive, release, assign, settle or compromise any material claims, or
any material litigation or arbitration, except in the ordinary course of
business;
(i) modify, amend or terminate, or waive, release or assign any material
rights or claims with respect to any confidentiality or standstill agreement to
which Parent is a party and which relates to a business combination or other
similar extraordinary transaction;
(j) take any action to render inapplicable, or to exempt any third
Person from, (i) the provisions of Section 203 of the DGCL, or (ii) any other
state takeover or similar Law or state Law that purports to limit or restrict
business combinations or the ability to acquire or vote shares;
(k) take any action that is intended or would reasonably be expected to
result in any of the conditions to the Merger in Article VI not being satisfied;
or
(l) agree, authorize or otherwise to take any of the foregoing actions.
Section 5.03. No Solicitation by the Company.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, neither the Company nor any of its Subsidiaries
nor any of the officers, directors or employees of the Company or its
Subsidiaries shall, and the Company shall use reasonable best efforts to cause
its and its Subsidiaries' attorneys, accountants, investment bankers, financial
advisors, agents and other representatives ("Representatives") not to, directly
or indirectly: (i) solicit, initiate, encourage or induce any inquiry with
respect to, or the making, submission or announcement of, a Company Acquisition
Proposal, (ii) participate in any discussions or negotiations regarding, or
furnish to any Person any nonpublic information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, a Company Acquisition
Proposal (except to disclose the existence of the provisions of this Section
5.03), or (iii) enter into any letter of intent or similar document or any
Contract (whether binding or not) contemplating or otherwise
63
relating to a Company Acquisition Proposal. The Company and its Subsidiaries and
their officers, directors and employees will immediately cease, and the Company
shall use reasonable best efforts to cause its Representatives to cease, any and
all existing discussions or negotiations with a Person with respect to a Company
Acquisition Proposal. The Company shall as soon as practicable demand that each
Person which has within the 12 months prior to the date of this Agreement
executed a confidentiality agreement with the Company or any of its Affiliates
or Subsidiaries or any of its or their Representatives with respect to such
Person's consideration of a possible Company Acquisition Transaction to
immediately return or destroy (which destruction shall be certified in writing
by such Person to the Company) all confidential information heretofore furnished
by the Company or any of its Affiliates or Subsidiaries or any of its or their
Representatives to such Person or any of its Affiliates or Subsidiaries or any
of its or their Representatives.
(b) Notwithstanding the provisions of Section 5.03(a), the Company may,
in response to an unsolicited, bona fide written Company Acquisition Proposal
from a Person (a "COMPANY POTENTIAL ACQUIROR") which the Company's Board of
Directors determines in good faith, after consultation with a nationally
recognized, independent financial advisor and its outside legal counsel,
constitutes, or is reasonably likely to result in, a Company Superior Proposal,
take the following actions; provided that (x) the Company has first given Parent
a written notice that states that the Company has received such Company
Acquisition Proposal and otherwise includes the information set forth in Section
5.03(c) (a "COMPANY SUPERIOR PROPOSAL NOTICE"), and (y) such Company Acquisition
Proposal was not solicited after the date hereof, was made after the date hereof
and did not otherwise result from a breach of this Section 5.03:
(i) furnish information to the Company Potential Acquiror; provided
that (A) prior to furnishing any such information, the Company receives from
the Company Potential Acquiror an executed confidentiality agreement
containing terms at least as restrictive as the terms contained in the
Confidentiality Agreement (a "COMPETING CONFIDENTIALITY AGREEMENT");
provided, however, that such Competing Confidentiality Agreement shall not
be required to contain standstill provisions; provided, further, that, if
any Competing Confidentiality Agreement does not contain a standstill
provision or contains a standstill provision that is more favorable to the
other party thereto than the terms of the Confidentiality Agreement, the
Confidentiality Agreement shall automatically, and without any further
action of the parties, be amended to delete (in the case where the Competing
Confidentiality Agreement does not contain a standstill provision) or
amended to restate (in the case where the Competing Confidentiality
Agreement contains a standstill agreement with terms more favorable to the
other party thereto than the standstill provisions set forth in the
Confidentiality Agreement) the standstill provision in the Confidentiality
Agreement to make the terms of the Confidentiality Agreement relating to the
standstill consistent with the more favorable terms of the Competing
Confidentiality Agreement, and (B) contemporaneously with furnishing any
such nonpublic information to the Company Potential Acquiror, the Company
furnishes such nonpublic information to Parent (or, with respect to any such
nonpublic information that has previously been furnished to Parent or its
Representatives, a list identifying such nonpublic information delivered to
Parent and its Representatives); and
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(ii) participate or engage in discussions or negotiations with the
Company Potential Acquiror with respect to such Company Acquisition
Proposal.
(c) As promptly as practicable (and, in any event, within 48 hours)
after receipt of a Company Acquisition Proposal or any request for nonpublic
information or inquiry which could reasonably be expected to lead to a Company
Acquisition Proposal, the Company shall provide Parent with written notice of
the material terms and conditions of such Company Acquisition Proposal, request
or inquiry, and the identity of the Person or group making such Company
Acquisition Proposal, request or inquiry, and a copy of all written materials
provided in connection with such Company Acquisition Proposal, request or
inquiry. After receipt of such Company Acquisition Proposal, request or inquiry,
the Company shall promptly keep Parent informed in all material respects of the
status and details (including material amendments or proposed material
amendments) of such Company Acquisition Proposal, request or inquiry and shall
promptly provide to Parent a copy of all written materials subsequently provided
in connection with such Company Acquisition Proposal, request or inquiry.
(d) For a period of not less than five (5) Business Days after Parent's
receipt of each Company Superior Proposal Notice, the Company shall, if
requested by Parent, negotiate in good faith with Parent to revise this
Agreement so that the Company Acquisition Proposal that constituted a Company
Superior Proposal no longer constitutes a Company Superior Proposal (a "FORMER
COMPANY SUPERIOR PROPOSAL"). The terms and conditions of this Section 5.03 shall
again apply to any inquiry or proposal made by any Person who withdraws or
materially amends a Company Superior Proposal or who made a Former Company
Superior Proposal (after withdrawal or after such time as their proposal is a
Former Company Superior Proposal).
(e) Neither the Company's Board of Directors nor any committee thereof
shall (i) withdraw or modify in a manner adverse to Parent or Merger Sub, or
publicly propose to withdraw or modify in a manner adverse to Parent or Merger
Sub, the approval or recommendation by the Company's Board of Directors of this
Agreement or the Merger, (ii) approve any letter of intent, agreement in
principle, acquisition agreement or similar Contract relating to a Company
Acquisition Proposal or (iii) approve or recommend, or publicly propose to
approve or recommend, a Company Acquisition Proposal. Notwithstanding anything
to the contrary contained in this Agreement, the Company's Board of Directors or
any committee thereof may take any or all of the actions described in (i) and
(iii) above (in each case, a "COMPANY CHANGE OF RECOMMENDATION") if, prior to
receipt of the Company Stockholder Approval:
(w) The Company's Board of Directors shall have determined in good
faith, after consultation with outside legal counsel, that failure to take such
action would reasonably be likely to constitute a violation of its fiduciary
duties under applicable Law;
(x) The Company's Board of Directors has notified Parent in writing
of the determination described in clause (w) above; and
(y) in the case of any such actions taken in connection with a
Company Acquisition Proposal, at least five (5) Business Days following receipt
by Parent of the notice required pursuant to clause (x) above, and taking into
account any revised proposal made
65
by Parent since receipt of such notice, the Company's Board of Directors
maintains its determination described in clause (w) above.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the obligation of the Company to call, give notice of, convene and
hold the Company Stockholders' Meeting shall not be limited or otherwise
affected by the commencement, disclosure, announcement or submission to it of a
Company Acquisition Proposal (whether or not the Company Superior Proposal) or
by a Company Change of Recommendation. The Company shall not submit to the vote
of its stockholders a Company Acquisition Proposal, or propose to do so, prior
to termination of this Agreement.
(g) Nothing contained in this Agreement shall prohibit the Company or
its Board of Directors from taking and disclosing to the Company's stockholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act. Without limiting the foregoing, the Company shall not effect a
Company Change of Recommendation unless specifically permitted pursuant to the
terms of Section 5.03(e).
Section 5.04. No Solicitation by Parent.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, neither Parent nor any of its Subsidiaries nor
any of the officers, directors or employees of Parent or its Subsidiaries shall,
and Parent shall use reasonable best efforts to cause its and its Subsidiaries'
Representatives not to, directly or indirectly: (i) solicit, initiate, encourage
or induce any inquiry with respect to, or the making, submission or announcement
of, any Parent Acquisition Proposal, (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any nonpublic information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected to lead to, any
Parent Acquisition Proposal (except to disclose the existence of the provisions
of this Section 5.04), or (iii) enter into any letter of intent or similar
document or any Contract (whether binding or not) contemplating or otherwise
relating to a Parent Acquisition Proposal. Parent and its Subsidiaries and their
officers, directors and employees will immediately cease, and Parent shall use
reasonable best efforts to cause its Representatives to cease, any and all
existing discussions or negotiations with a Person with respect to a Parent
Acquisition Proposal. Parent shall as soon as practicable demand that each
Person which has within the 12 months prior to the date of this Agreement
executed a confidentiality agreement with Parent or any of its Affiliates or
Subsidiaries or any of its or their Representatives with respect to such
Person's consideration of a possible Parent Acquisition Transaction to
immediately return or destroy (which destruction shall be certified in writing
by such Person to Parent) all confidential information heretofore furnished by
Parent or any of its Affiliates or Subsidiaries or any of its or their
Representatives to such Person or any of its Affiliates or Subsidiaries or any
of its or their Representatives.
(b) Notwithstanding the provisions of Section 5.04(a), Parent may, in
response to an unsolicited, bona fide written Parent Acquisition Proposal from a
Person (a "PARENT POTENTIAL ACQUIROR") which Parent's Board of Directors
determines in good faith, after consultation with a nationally recognized,
independent financial advisor and its outside legal counsel, constitutes, or is
reasonably likely to result in, a Parent Superior Proposal, take the
66
following actions; provided, that (x) Parent has first given the Company written
notice that states that Parent has received such Parent Acquisition Proposal and
otherwise includes the information required by Section 5.04(c) (a "PARENT
SUPERIOR PROPOSAL NOTICE"), and (y) such Parent Acquisition Proposal was not
solicited after the date hereof, was made after the date hereof and did not
otherwise result from a breach of this Section 5.04:
(i) furnish information to the Parent Potential Acquiror; provided
that (A) prior to furnishing any such information, Parent receives from the
Parent Potential Acquiror a Competing Confidentiality Agreement; provided,
however, that such Competing Confidentiality Agreement shall not be required
to contain standstill provisions; provided, further, that if any Competing
Confidentiality Agreement does not contain a standstill provision or
contains a standstill provision that is more favorable to the other party
thereto than the terms of the Confidentiality Agreement, the Confidentiality
Agreement shall automatically, and without any further action of the
parties, be amended to delete (in the case where the Competing
Confidentiality Agreement does not contain a standstill provision) or
amended to restate (in the case where the Competing Confidentiality
Agreement contains a standstill agreement with terms more favorable to the
other party thereto than the standstill provisions set forth in the
Confidentiality Agreement) the standstill provision in the Confidentiality
Agreement to make the terms of the Confidentiality Agreement relating to the
standstill consistent with the more favorable terms of the Competing
Confidentiality Agreement, and (B) contemporaneously with furnishing any
such nonpublic information to the Parent Potential Acquiror, Parent
furnishes such nonpublic information to the Company (or, with respect to any
such nonpublic information that has previously been furnished to the Company
or its Representatives, a list identifying such nonpublic information
delivered to the Company and its Representatives); and
(ii) participate or engage in discussions or negotiations with the
Parent Potential Acquiror with respect to the Parent Acquisition Proposal.
(c) As promptly as practicable (and, in any event, within 48 hours)
after receipt of a Parent Acquisition Proposal or any request for nonpublic
information or inquiry which could reasonably be expected to lead to an Parent
Acquisition Proposal, Parent shall provide the Company with written notice of
the material terms and conditions of such Parent Acquisition Proposal, request
or inquiry, and the identity of the Person or group making such Parent
Acquisition Proposal, request or inquiry, and a copy of all written materials
provided in connection with such Parent Acquisition Proposal, request or
inquiry. After receipt of such Parent Acquisition Proposal, request or inquiry,
Parent shall promptly keep the Company informed in all material respects of the
status and details (including material amendments or proposed material
amendments) of such Parent Acquisition Proposal, request or inquiry and shall
promptly provide to the Company a copy of all written materials subsequently
provided in connection with such Parent Acquisition Proposal, request or
inquiry.
(d) For a period of not less than five (5) Business Days after the
Company's receipt of each Parent Superior Proposal Notice, Parent shall, if
requested by the Company, negotiate in good faith with the Company to revise
this Agreement so that the Parent Acquisition Proposal that constituted a Parent
Superior Proposal no longer constitutes a Parent Superior
67
Proposal (a "FORMER PARENT SUPERIOR PROPOSAL"). The terms and conditions of this
Section 5.04 shall again apply to any inquiry or proposal made by any Person who
withdraws or materially amends a Parent Superior Proposal or who made a Former
Parent Superior Proposal (after withdrawal or after such time as their proposal
is a Former Parent Superior Proposal).
(e) Neither Parent's Board of Directors nor any committee thereof shall
(i) withdraw or modify in a manner adverse to the Company or Merger Sub, or
publicly propose to withdraw or modify in a manner adverse to the Company or
Merger Sub, the approval or recommendation by Parent's Board of Directors of the
Share Issuance, (ii) approve any letter of intent, agreement in principle,
acquisition agreement or similar Contract relating to a Parent Acquisition
Proposal or (iii) approve or recommend, or publicly propose to approve or
recommend, a Parent Acquisition Proposal. Notwithstanding anything to the
contrary contained in this Agreement, Parent's Board of Directors or any
committee thereof may take any or all of the actions described in (i) and (iii)
above (in each case, a "PARENT CHANGE OF RECOMMENDATION") if, prior to receipt
of the Parent Stockholder Approval:
(w) Parent's Board of Directors shall have determined in good faith,
after consultation with outside legal counsel, that failure to take such action
would reasonably be likely to constitute a violation of its fiduciary duties
under applicable Law;
(x) Parent's Board of Directors has notified the Company in writing
of the determination described in clause (w) above; and
(y) in the case of any such actions taken in connection with a
Parent Acquisition Proposal, at least five (5) Business Days following receipt
by Company of the notice required pursuant to clause (x) above, and taking into
account any revised proposal made by the Company since receipt of such notice,
Parent's Board of Directors maintains its determination described in clause (w)
above.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the obligation of Parent to call, give notice of, convene and hold
the Parent Stockholders' Meeting shall not be limited or otherwise affected by
the commencement, disclosure, announcement or submission to it of a Parent
Acquisition Proposal (whether or not a Parent Superior Proposal) or by a Parent
Change of Recommendation. Parent shall not submit to the vote of its
stockholders a Parent Acquisition Proposal, or propose to do so, prior to
termination of this Agreement.
(g) Nothing contained in this Agreement shall prohibit Parent or its
Board of Directors from taking and disclosing to Parent's stockholders a
position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act. Without limiting the foregoing, Parent shall not effect a Parent Change of
Recommendation unless specifically permitted pursuant to the terms of Section
5.04(e).
Section 5.05. Access to Information; Confidentiality.
(a) Parent and its Subsidiaries, on the one hand, and the Company and
its Subsidiaries, on the other hand, shall each afford to the other and its
Representatives reasonable access during normal business hours upon reasonable
notice throughout the period prior to the Effective Time to their respective
officers, employees, Representatives, properties, books,
68
contracts, commitments, files and records and, during such period, shall furnish
promptly such information concerning its businesses, properties and personnel as
the other party shall reasonably request. Notwithstanding the foregoing, neither
Parent nor the Company shall be required to provide any information which it
reasonably believes it may not provide to the other party by reason of
Contractual or legal restrictions, including applicable Laws, or which it
believes is competitively sensitive information, but shall use its best efforts
to obtain a consent to disclosure of such information. In addition, each party
may designate any competitively sensitive information provided to the other
under this Agreement as "outside counsel only." Such information shall be given
only to outside counsel of the recipient. Each party will use reasonable best
efforts to minimize any disruption to the businesses of the other party and its
Subsidiaries which may result from the requests for access, data and information
hereunder.
(b) Each of Parent and the Company also will consult with the other
party regarding its business in a prompt manner and on a regular basis. The
Company and its officers and employees shall notify Parent of, and keep Parent
informed of all material information regarding, any meeting or discussion with
the FDA regarding product approvals of the Company. Parent and its officers and
employees shall notify the Company of, and keep the Company informed of all
material information regarding, any meeting or discussion with the FDA regarding
product approvals of Parent.
(c) All nonpublic information provided to, or obtained by, a party in
connection with the transactions contemplated hereby shall be "Proprietary
Information" for purposes of the Confidentiality Agreement dated November 17,
2004 between Parent and the Company (the "CONFIDENTIALITY AGREEMENT"), the terms
of which shall continue in force until the Effective Time; provided that Parent
and the Company may disclose such information as may be necessary in connection
with seeking the Parent Required Statutory Approvals, the Company Required
Statutory Approvals, the Company Stockholder Approval and the Parent Stockholder
Approval.
(d) In addition, without limiting the foregoing, the Company shall (i)
to the extent reasonably practicable, provide Parent with sufficient advance
notice of intended written or electronic communications with the SEC regarding
the investigation referred to in "Other Matters--Government Inquiry" under Item
3 of the Company 10-K (the "INVESTIGATION") to allow Parent to review and
comment upon such communications, (ii) promptly notify Parent of the receipt of
any communications (written or oral) from the SEC or its staff and of any
request by the SEC or its staff for additional information related to the
Investigation, and, with respect to the Investigation, shall supply Parent with
(A) full, complete and accurate copies of all correspondence between the Company
or any of its Representatives and the SEC or its staff, and all information
provided by the Company to the SEC or its staff, and (B) a full, accurate and
complete description of all oral communications between the Company or any of
its Representatives and the SEC or its staff, (iii) furnish Parent with all
non-privileged information, files and records concerning and related to the
Investigation as Parent may reasonably request, (iv) afford Parent and its
Representatives reasonable access to the Company's officers, employees and
Representatives concerning the Investigation, and (v) keep Parent fully informed
of all material information and developments regarding the Investigation. The
Company shall consider in good faith the views and comments of Parent and its
Representatives with respect to all communications and disclosure made to the
SEC or its staff and other actions taken relating to
69
the Investigation. The Company may designate any competitively sensitive
information provided to Parent under this Agreement as "outside counsel only."
Section 5.06. Employee Benefits.
(a) From and after the Effective Time, Company Benefit Plans in effect
as of the date of this Agreement shall remain in effect with respect to
employees of the Company (or their Subsidiaries), covered by such plans at the
Effective Time until such time as Parent shall, subject to applicable Law, the
terms of this Agreement and the terms of such plans, adopt new benefit plans
with respect to employees of the Company and its Subsidiaries (the "NEW BENEFIT
PLANS"). Prior to the Effective Time, Parent and the Company shall cooperate in
reviewing, evaluating and analyzing Company Benefit Plans with a view towards
developing appropriate New Benefit Plans for the employees covered thereby. At
such time as any New Benefit Plans are implemented, Parent will, and will cause
its Subsidiaries to, with respect to all New Benefit Plans, (i) provide each
employee of the Company or its Subsidiaries with service or other credit for all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to employees of
the Company or its Subsidiaries under any New Benefit Plan that is a welfare
plan that such employees may be eligible to participate in after the Effective
Time, to the extent that such employee would receive credit for such conditions
under the corresponding welfare plan in which any such employee participated
immediately prior to the Effective Time, (ii) provide each employee of the
Company or its Subsidiaries with credit for any co-payments and deductibles paid
in satisfying any applicable deductible or out-of-pocket requirements under any
New Benefit Plan that is a welfare plan that such employees are eligible to
participate in after the Effective Time, (iii) provide each employee with credit
for all service for purposes of eligibility, vesting and benefit accruals (but
not for benefit accruals under any defined benefit pension plan) with the
Company and its Subsidiaries, under each employee benefit plan, program, or
arrangement of Parent or its Subsidiaries in which such employees are eligible
to participate after the Effective Time, and (iv) provide benefits under
medical, dental, vision and similar health and welfare plans that are in the
aggregate no less favorable than those provided to similarly situated employees
of Parent and its Subsidiaries; provided, however, that in no event shall the
employees be entitled to any credit to the extent that it would result in a
duplication of benefits with respect to the same period of service.
Notwithstanding anything to the contrary in this Section 5.06, Parent shall have
no obligation to provide any credit for service, co-payments, deductibles paid,
or for any purpose, unless and until Parent has received such supporting
documentation as Parent may reasonably deem to be necessary in order to verify
the appropriate credit to be provided.
(b) If requested by Parent at least seven (7) days prior to the
Effective Time, the Company shall terminate any and all Company Benefit Plans
intended to qualify under Section 401(k) of the Code, effective not later than
the last business day immediately preceding the Effective Time. In the event
that Parent requests that such 401(k) plan(s) be terminated, the Company shall
provide Parent with evidence that such 401(k) plan(s) have been terminated
pursuant to resolution of the Company's Board of Directors (the form and
substance of which shall be subject to review and approval by Parent) not later
than the day immediately preceding the Effective Time.
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(c) The foregoing notwithstanding, Parent shall, and shall cause its
Subsidiaries to, honor in accordance with their terms all benefits accrued
through the Effective Time under Company Benefit Plans or under other contracts,
arrangements, commitments, or understandings described in the Company Disclosure
Letter.
(d) Unless mutually agreed upon by the parties hereto, the Company shall
terminate the Company ESPP in accordance with Section 2.07.
(e) Nothing in this Section 5.06 shall be interpreted as preventing
Parent from amending, modifying or terminating any of the Company Benefit Plans,
or other contracts, arrangements, commitments or understandings, in accordance
with their terms and applicable Law.
Section 5.07. Registration Statement; Joint Proxy Statement; Stockholder
Meetings; Listing of Shares.
(a) As soon as is reasonably practicable after the execution of this
Agreement, Parent and the Company shall prepare and file with the SEC proxy
materials which shall constitute the Joint Proxy Statement and Parent shall
prepare and file with the SEC the Registration Statement (in which the Joint
Proxy Statement will be included as a prospectus). Each of Parent and the
Company shall use its commercially reasonable best efforts to have the
Registration Statement declared effective under the Securities Act by the SEC as
promptly as practicable after such filing and to keep the Registration Statement
effective as long as is necessary to consummate the Merger and the other
transactions contemplated hereby, and Parent shall take all commercially
reasonable actions required to be taken under any applicable state blue sky or
securities Laws in connection with the Share Issuance. Each party hereto shall
furnish all information concerning it and the holders of its capital stock as
the other party hereto may reasonably request in connection with such actions.
The parties shall notify each other promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Joint Proxy Statement or the Registration Statement or for
additional information, and shall supply each other with copies of all
correspondence between such or any of its representatives, on the one hand, and
the SEC or its staff, on the other hand, with respect to the Joint Proxy
Statement, the Registration Statement or the Merger.
(b) If, at any time prior to the receipt of the Parent Stockholder
Approval or the Company Stockholder Approval, any event occurs with respect to
the Company or any of its Subsidiaries, or any change occurs with respect to
other information supplied by the Company for inclusion in the Joint Proxy
Statement or the Registration Statement, which is required to be described in an
amendment of, or a supplement to, the Joint Proxy Statement or the Registration
Statement, the Company shall promptly notify Parent of such event, and Parent
and the Company shall cooperate in the prompt filing with the SEC of any
necessary amendment or supplement to the Joint Proxy Statement and the
Registration Statement and, as required by Law, in disseminating the information
contained in such amendment or supplement to Parent's or the Company's
stockholders.
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(c) If, at any time prior to the receipt of the Parent Stockholder
Approval or the Company Stockholder Approval, any event occurs with respect to
Parent or any of its Subsidiaries, or any change occurs with respect to other
information supplied by Parent for inclusion in the Joint Proxy Statement or the
Registration Statement, which is required to be described in an amendment of, or
a supplement to, the Joint Proxy Statement or the Registration Statement, Parent
shall promptly notify the Company of such event, and Parent and the Company
shall cooperate in the prompt filing with the SEC of any necessary amendment or
supplement to the Joint Proxy Statement and the Registration Statement and, as
required by Law, in disseminating the information contained in such amendment or
supplement to Parent's or the Company's stockholders.
(d) The Company will, as promptly as reasonably practicable following
the execution of this Agreement, duly take all lawful action to call, give
notice of, convene and hold the Company Stockholders' Meeting for the purpose of
obtaining the Company Stockholder Approval, which meeting shall be a special
meeting of the Company's stockholders. In connection with the Company
Stockholders' Meeting and the transactions contemplated hereby, the Company will
(i) subject to the fiduciary duties of its Board of Directors, use its
commercially reasonable best efforts (including postponing or adjourning the
Company Stockholders' Meeting to solicit additional proxies) to obtain the
necessary approvals by its stockholders of this Agreement, the Merger and the
other transactions contemplated hereby and (ii) otherwise comply with all legal
requirements applicable to the Company Stockholders' Meeting. Subject to Section
5.03(e), the Joint Proxy Statement shall contain the unqualified recommendation
of the Company's Board of Directors that its stockholders vote in favor of the
approval and adoption of this Agreement and the Merger.
(e) Parent will, as promptly as reasonably practicable following the
execution of this Agreement, duly take all lawful action to call, give notice
of, convene and hold the Parent Stockholders' Meeting for the purpose of
obtaining the Parent Stockholder Approval. In connection with the Parent
Stockholders' Meeting and the transactions contemplated hereby, Parent will (i)
subject to the fiduciary duties of its Board of Directors, use its commercially
reasonable best efforts (including postponing or adjourning the Parent
Stockholders' Meeting to solicit additional proxies) to obtain the necessary
approvals by its stockholders of the Share Issuance and (ii) otherwise comply
with all legal requirements applicable to the Parent Stockholders' Meeting.
Subject to Section 5.04(e), the Joint Proxy Statement shall contain the
unqualified recommendation of Parent's Board of Directors that its stockholders
vote in favor of the Share Issuance.
(f) Parent shall use its commercially reasonable best efforts to cause
the shares of Parent Common Stock to be issued in the Merger and the shares of
Parent Common Stock to be reserved for issuance upon exercise of converted
Company Stock Options to be approved for listing on the NYSE, subject to
official notice of issuance.
Section 5.08. Section 16 Matters. Prior to the Effective Time: (i)
Parent's Board of Directors, or an appropriate committee of non-employee
directors thereof, shall adopt a resolution consistent with the interpretive
guidance of the SEC so that the acquisition by any officer or director of the
Company, who may become a covered person of Parent for purposes of Section 16
(together with the rules and regulations thereunder, "SECTION 16") of the
Exchange
72
Act, of shares of Parent Common Stock or options to purchase shares of Parent
Common Stock pursuant to this Agreement and the Merger shall be an exempt
transaction for purposes of Section 16; and (ii) the Company's Board of
Directors, or an appropriate committee of non-employee directors thereof, shall
adopt a resolution consistent with the interpretive guidance of the SEC so that
the disposition by any officer or director of the Company, who is a covered
person of the Company for purposes of Section 16, of shares of Company Common
Stock or Company Stock Options pursuant to this Agreement and the Merger shall
be an exempt transaction for purposes of Section 16.
Section 5.09. Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to review
and make reasonable comment upon, any press release or making any public
statement with respect to its business operations or this Agreement and the
transactions contemplated hereby and, except as may be required by applicable
Law or any listing agreement with, or regulation of, any securities exchange on
which the Company Common Stock or the Parent Common Stock, as applicable, are
listed, will not issue any such press release or make any such public statement
prior to receiving the other party's consent (which shall not be unreasonably
withheld or delayed); provided, however, that each of Parent and the Company may
make any public statement in response to specific questions by the press,
analysts, investors or those attending industry conferences or financial analyst
conference calls, so long as any such statements are not inconsistent with
previous press releases, public disclosures or public statements made by Parent
and the Company in compliance with this Section 5.09.
Section 5.10. Expenses and Fees.
(a) Subject to Section 5.10(b) and Section 5.10(c), all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
that those expenses incurred in connection with preparing, printing and filing
the Registration Statement (including the Joint Proxy Statement), the listing of
the Parent Common Stock on the NYSE and in connection with any required filings
under the HSR Act shall be borne equally by Parent and the Company.
(b) The Company agrees to pay to Parent the fees set forth below under
the following circumstances:
(i) If this Agreement is terminated pursuant to Section 7.01(c),
then the Company shall pay Parent $10,000,000 within two (2) Business Days
following termination by wire transfer of same-day funds to an account
specified in writing by Parent.
(ii) If (i) after the date of this Agreement and prior to the
Company Stockholders' Meeting, any Person publicly announces a Company
Acquisition Proposal which has not been expressly and bona fide publicly
withdrawn, (ii) this Agreement is terminated by either the Company or Parent
pursuant to Section 7.01(b)(iii) or by Parent pursuant to Section 7.01(c) as
a result of a breach of a covenant or other affirmative obligation, and
(iii) within 12 months after the date of termination of this Agreement, the
Company enters into a definitive agreement with respect to a Company
Acquisition
73
Transaction or consummates a Company Acquisition Transaction, then the
Company shall pay to Parent by wire transfer of same-day funds $90,000,000
(the "COMPANY TERMINATION FEE"), less any amount paid by the Company to
Parent pursuant to Section 5.10(b)(i) at the earlier of the date the Company
enters into a definitive agreement providing for a Company Acquisition
Transaction and the date of consummation of such the Company Acquisition
Transaction. Solely for the purposes of this Section 5.10(b)(ii), the term
"Company Acquisition Transaction" shall have the meaning assigned to such
term in Section 8.03(a), except that all references to "15%" or "85%" shall
be changed to "50%".
(iii) If Parent terminates this Agreement pursuant to Section
7.01(e), the Company shall pay Parent the Company Termination Fee within two
(2) Business Days following termination by wire transfer of same-day funds
to an account specified in writing by Parent.
(c) Parent agrees to pay to the Company the fees set forth below under
the following circumstances:
(i) If this Agreement is terminated pursuant to Section 7.01(d),
then Parent shall pay the Company $10,000,000 within two (2) Business Days
following termination by wire transfer of same-day funds to an account
specified in writing by the Company. If this Agreement is terminated
pursuant to Section 7.01(b)(iv), then Parent shall pay the Company
$16,500,000 within two (2) Business Days following termination by wire
transfer of same-day funds to an account specified in writing by the
Company.
(ii) If (i) after the date of this Agreement and prior to the Parent
Stockholders' Meeting, any Person publicly announces a Parent Acquisition
Proposal which has not been expressly and bona fide publicly withdrawn, (ii)
this Agreement is terminated by either the Company or Parent pursuant to
Section 7.01(b)(iv) or by the Company pursuant to Section 7.01(d) as a
result of a breach of a covenant or other affirmative obligation, and (iii)
within 12 months after the date of termination of this Agreement, Parent
enters into a definitive agreement with respect to a Parent Acquisition
Transaction or consummates a Parent Acquisition Transaction, then Parent
shall pay to the Company by wire transfer of same-day funds $70,000,000 (the
"PARENT TERMINATION FEE"), less any amount paid by Parent to the Company
pursuant to Section 5.10(c)(i) or 5.10(c)(iv), at the earlier of the date
Parent enters into a definitive agreement providing for a Parent Acquisition
Transaction and the date of consummation of such Parent Acquisition
Transaction. Solely for the purposes of this Section 5.10(c)(ii), the term
"Parent Acquisition Transaction" shall have the meaning assigned to such
term in Section 8.03(a), except that all references to "15%" or "85%" shall
be changed to "50%".
(iii) If the Company terminates this Agreement pursuant to Section
7.01(f), Parent shall pay the Company the Parent Termination Fee within two
(2) Business Days following termination by wire transfer of same-day funds
to an account specified in writing by the Company.
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(iv) If either party terminates this Agreement pursuant to Section
7.01(b)(i) or 7.01(b)(ii) and all other conditions to consummation of the
Merger are satisfied or capable of then being satisfied and the sole reason
that the Merger has not been consummated on or prior to the date of such
termination is that one or more conditions set forth in Section 6.01(b) or
Section 6.01(c) has not been satisfied due to the failure to obtain the
necessary consents and approvals under Antitrust Laws or a judgment,
injunction, order or decree of a Governmental Entity of competent
jurisdiction shall be in effect (including the effects of any such failure
or acts) and such judgment, injunction, order or decree was issued under
Antitrust Laws, then Parent shall pay the Company $10,000,000 within two (2)
Business Days following termination by wire transfer of same-day funds to an
account specified in writing by the Company; provided, however, that the
Company shall not be entitled to such fee if, prior to or at the time of
termination, (A) Parent is entitled to terminate this Agreement pursuant to
Section 7.01(c) (excluding the notice provisions contained therein) or (B)
the Company is in breach of its obligations set forth in Section 5.11 with
respect to Antitrust Laws.
(v) Notwithstanding the foregoing, Parent shall not be obligated to
pay the Company a fee under both Section 5.10(c)(i) and Section 5.10(c)(iv).
(d) Each of Parent and the Company acknowledges that the agreements
contained in Sections 5.10(b) and 5.10(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
the other party would not enter into this Agreement. Accordingly, if either
party (the "DEFAULTING PARTY") fails promptly to pay the termination fee, and,
in order to obtain such payment, the other party commences a suit that results
in a judgment against the Defaulting Party for the termination fee, the
Defaulting Party shall pay to the other party interest on the termination fee
from and including the date payment of the termination fee was originally due to
but excluding the date of actual payment at the prime rate of Bank of America,
National Association in effect on the date such payment was originally required
to be made. If applicable, the termination fee shall not be payable by a party
more than once pursuant to this Section 5.10.
Section 5.11. Agreement to Cooperate.
(a) The Company and Parent shall each use their reasonable best efforts
to (i) take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary and proper under applicable Law to consummate and
make effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third Person any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by the Company or Parent or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby including, without
limitation, the Merger, and (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities Laws, (B) the
HSR Act and any related governmental request thereunder, and (C) any other
applicable Law. The Company and Parent shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its
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advisors prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. Subject to Section 5.05,
Parent and the Company shall use their reasonable best efforts to furnish to
each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable Law in connection
with the transactions contemplated by this Agreement.
(b) The Company and Parent agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use their reasonable best efforts
to obtain any government clearances or approvals required for the Closing under
the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended, the
Federal Trade Commission Act, as amended, and any other federal, state or
foreign Law or decree designed to prohibit, restrict or regulate actions for the
purpose or effect of monopolization or restraint of trade (collectively
"ANTITRUST LAWS"), to obtain the expiration of any applicable waiting period
under any Antitrust Law, to respond to any government requests for information
under any Antitrust Law, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. Parent shall have the right to determine and
direct the strategy and process by which the parties will seek required
approvals under Antitrust Laws; provided that Parent will consult with and
consider in good faith the views of the Company in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to any Antitrust Law. Notwithstanding anything to
the contrary in this Section 5.11, neither Parent nor any of its Subsidiaries
shall be required to (i) license, divest, dispose of or hold separate any
material assets or businesses of Parent or the Company or any of their
respective Subsidiaries or otherwise take or commit to take any action that
limits in any material respect its freedom of action with respect to, or its
ability to retain, any of the assets or businesses of Parent or the Company or
any of their respective Subsidiaries, or (ii) agree to or effect any license,
divestiture, disposition or hold separate any business or take any other action
or agree to any limitation that is not conditioned on the consummation of the
Merger. The Company (x) shall not take or agree to take any action identified in
clause (i) or (ii) of the immediately preceding sentence without the prior
written consent of Parent and (y) if so requested by Parent, shall use
reasonable best efforts to effect any license, divestiture, disposition or hold
separate of any of the Company's assets or businesses necessary to obtain
clearances or approvals required for the Closing under the Antitrust Laws,
provided that such action is conditioned on the consummation of the Merger.
(c) Each of Parent and the Company shall give (or shall cause their
respective Subsidiaries to give) any notices to third Persons, and use, and
cause their respective Subsidiaries to use, their reasonable efforts to obtain
any third Person consents related to or required in connection with the Merger
that are (i) necessary to consummate the transactions contemplated hereby, (ii)
disclosed or required to be disclosed in the Parent Disclosure Letter or the
Company Disclosure Letter, as the case may be, or (iii) required to prevent a
Parent Material Adverse Effect or a Company Material Adverse Effect from
occurring prior to or after the Effective Time. If any party shall fail to
obtain any consent from a third Person described in this subsection (c), such
party will use its reasonable efforts, and will take any such actions reasonably
requested by the other party hereto, to limit the adverse affect upon the
Company and Parent, their respective
76
Subsidiaries, and their respective businesses resulting, or that could
reasonably be expected to result after the Effective Time, from the failure to
obtain such consent.
(d) Parent and the Company shall promptly (and, in any event, within 24
hours) advise the other orally and in writing of any state of facts, event,
change, effect, development, condition or occurrence that, individually or in
the aggregate, has had or would reasonably be expected to have a Parent Material
Adverse Effect or a Company Material Adverse Effect, respectively. The Company
shall give prompt notice to Parent, and Parent or Merger Sub shall give prompt
notice to the Company, of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
Section 5.12. Directors' and Officers' Indemnification.
(a) Parent shall, to the fullest extent permitted by Law, and shall
cause the Surviving Corporation to, honor all of the Company's and its
Subsidiaries' obligations to indemnify the current or former directors or
officers of the Company or any of its Subsidiaries, and any person who becomes
an officer or director of the Company or any of its Subsidiaries, for acts or
omissions by such directors and officers occurring prior to the Effective Time,
whether pursuant to the Company's or any Subsidiary's Certification of
Incorporation, bylaws, individual indemnity agreements or otherwise, and such
obligations shall survive the Merger. For a period of six years following the
Effective Time, the certificates of incorporation and bylaws of the Surviving
Corporation and each of its Subsidiaries shall contain, and Parent shall cause
the certificates of incorporation and bylaws of the Surviving Corporation and
each of its Subsidiaries to contain, provisions no less favorable with respect
to indemnification and exculpation of such directors and officers than are
presently set forth in the Company's and its Subsidiary's Certification of
Incorporation and bylaws.
(b) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company; provided that Parent
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amounts containing terms and conditions which
are no less advantageous with respect to claims arising from or related to facts
or events which occurred at or before the Effective Time; provided, however,
that Parent shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 200% of the annual premiums paid as
of the date hereof by the Company for such insurance (such 200% amount, the
"MAXIMUM PREMIUM"); provided, further, if such insurance coverage cannot be
obtained at all, or can only be obtained at an annual premium in excess of the
Maximum Premium, Parent shall maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to the
Maximum Premium; provided, further, if Parent in its sole discretion elects, by
giving written notice to the Company at least thirty days prior to the Effective
Time, then, in lieu of the foregoing insurance,
77
effective as of the Effective Time, the Company shall purchase a directors' and
officers' liability insurance "tail" or "runoff" insurance program for a period
of six years after the Effective Time with respect to wrongful acts and/or
omissions committed or allegedly committed at or prior to the Effective Time
(such coverage shall have an aggregate coverage limit over the term of such
policy in an amount at least equal to the annual aggregate coverage limit under
the Company's existing directors and officers liability policy, and in all other
respects shall be with reputable and financially sound carriers and no less
advantageous on the whole to such existing coverage). Parent and the Surviving
Corporation shall maintain such "tail" policy in full force and effect and
continue to honor their respective obligations thereunder, in lieu of all other
obligations of Parent and the Surviving Corporation under the first sentence of
this Section 5.12(b) for so long as such "tail" policy shall be maintained in
full force and effect. Company represents to Parent that the Maximum Premium is
as set forth in Section 5.12(b) of the Company Disclosure Letter.
(c) In the event that Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all its properties and assets to any Person, then, and in each such case, Parent
shall cause proper provisions to be made so that the successors and assigns of
Parent or the Surviving Corporation, as the case may be, assume the obligations
set forth in this Section 5.12. The obligations of Parent and the Surviving
Corporation under this Section 5.12 shall not be terminated or modified in such
a manner as to adversely affect any indemnitee to whom this Section 5.12 applies
without the express written consent of such affected indemnitee (it being
expressly agreed that the indemnitees to whom this Section 5.12 applies shall be
third party beneficiaries of this Section 5.12).
Section 5.13. Rule 145. The Company shall, promptly after the date
hereof and prior to the mailing of the Joint Proxy Statement, deliver to Parent
a list setting forth the names of all Persons the Company expects to be, at the
time of the Company's Stockholders' Meeting, "affiliates" of the Company for
purposes of Rule 145 under the Securities Act. The Company shall furnish such
information and documents as Parent may reasonably request for the purpose of
reviewing the list and shall supplement such list to reflect any Person that
later becomes an "affiliate" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use reasonable best efforts to cause each
Person who is identified as an affiliate in the list furnished or supplemented
pursuant to this Section 5.13 to execute a written agreement, promptly following
the date hereof, in substantially the form of Exhibit A hereto.
Section 5.14. Tax Free Merger.
(a) Each of Parent, Merger Sub and the Company shall use its
commercially reasonable efforts to cause the Merger to qualify, and shall use
its commercially reasonable efforts not to, and not to permit or cause any of
its Subsidiaries to, take any action (including any action otherwise permitted
by Section 5.01 in the case of the Company or Section 5.02 in the case of
Parent) that could reasonably be expected to prevent or impede the Merger from
qualifying, as a "reorganization" within the meaning of Section 368(a) of the
Code.
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(b) Unless otherwise required pursuant to a "determination" within the
meaning of Section 1313(a) of the Code, each of Parent, Merger Sub and the
Company shall report the Merger as a "reorganization" within the meaning of
Section 368(a) of the Code.
(c) The parties hereto shall cooperate and use their commercially
reasonable efforts in order for Parent to obtain the opinion of Xxxxxx & Xxxxxxx
LLP described in Section 6.01(f) and for the Company to obtain the opinion of
Xxxxxxxx & Xxxxxxxx LLP described in Section 6.01(g). In connection therewith,
both Parent (together with Merger Sub) and the Company shall deliver to Xxxxxx &
Xxxxxxx LLP and Xxxxxxxx & Xxxxxxxx LLP representation letters, dated and
executed as of the dates of such opinions, in substantially the form attached to
this Agreement as Exhibits B and C, respectively.
Section 5.15. Stockholder Litigation.
(a) In the event a stockholder litigation related to this Agreement
or the transactions contemplated hereby is brought, or threatened, against the
Company and/or the members of the Company's Board of Directors, the Company
shall have the right to control the defense of such litigation; provided,
however, that the Company shall engage Xxxxxxxx & Xxxxxxxx LLP or such other
counsel that is reasonably acceptable to Parent. The Company shall promptly
notify Parent of any such stockholder litigation brought, or threatened, against
the Company and/or the members of the Company's Board of Directors and shall
provide Parent with updates and such information as Parent shall reasonably
request with respect to the status of the litigation and discussions between the
parties thereto (unless the provision of such updates and information could
reasonably be expected to result in a loss of attorney-client privilege). The
Company shall give Parent the opportunity to participate in the defense of and
settlement discussions with respect to such litigation and shall not make any
payment or settlement offer prior to the Effective Time with respect to any such
litigation unless Parent shall have consented in writing to such payment or
settlement, which consent shall not be unreasonably withheld.
(b) In the event a stockholder litigation related to this Agreement
or the transactions contemplated hereby is brought, or threatened, against
Parent and/or the members of Parent's Board of Directors, Parent shall have the
right to control the defense of such litigation; provided, however, that Parent
shall engage Xxxxxx & Xxxxxxx LLP or such other counsel that is reasonably
acceptable to the Company. Parent shall promptly notify the Company of any such
stockholder litigation brought, or threatened, against Parent and/or the members
of Parent' Board of Directors and shall provide the Company with updates and
such information as the Company shall reasonably request with respect to the
status of the litigation and discussions between the parties thereto (unless the
provision of such updates and information could reasonably be expected to result
in a loss of attorney-client privilege). Parent shall give the Company the
opportunity to participate in the defense of and settlement discussions with
respect to such litigation and shall not make any payment or settlement offer
prior to the Effective Time with respect to any such litigation unless the
Company shall have consented in writing in such payment or settlement, which
consent shall not be unreasonably withheld.
Section 5.16. Control of Other Party's Business. Nothing contained in
this Agreement shall give any party, directly or indirectly, the right to
control or direct the operations of any other party prior to the consummation of
the
79
Merger. Prior to the consummation of the Merger, each party shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its operations.
Section 5.17. Rights Agreements.
(a) The Company covenants and agrees that it will not (i) redeem the
Company Rights, or (ii) amend the Company Rights Agreement prior to the
termination of this Agreement unless, and only to the extent that, it is
required to do so by order of a court of competent jurisdiction. The Company's
Board of Directors shall not make a determination that Parent, Merger Sub or any
of their respective "Affiliates" or "Associates" (as such terms are defined in
the Company Rights Agreement) is, by virtue of this Agreement or any action
contemplated by this Agreement, an "Acquiring Person" (as such term is defined
in the Company Rights Agreement) for purposes of the Company Rights Agreement.
The Company shall not adopt a new stockholder rights plan or "poison pill."
(b) Parent covenants and agrees that it will not (i) redeem the Parent
Rights, or (ii) amend the Parent Rights Agreement prior to the termination of
this Agreement unless, and only to the extent that, it is required to do so by
order of a court of competent jurisdiction. Parent's Board of Directors shall
not make a determination that the Company, Merger Sub or any of their respective
"Affiliates" or "Associates" (as such terms are defined in the Parent Rights
Agreement) is, by virtue of this Agreement or any action contemplated by this
Agreement, an "Acquiring Person" (as such term is defined in the Parent Rights
Agreement) for purposes of the Parent Rights Agreement. Parent shall not adopt a
new stockholder rights plan or "poison pill."
Section 5.18. Board of Directors. At or prior to the Effective Time, the
Board of Directors of Parent shall take all action necessary so that, effective
immediately following the Effective Time, (i) Xxxxxxxx X. Xxxxxxxxx, M.D.,
Xxxxxxxx X. Xxxx, Xxx X. Xxxxxxxx (or, in the event that Xx. Xxxxxxxx is unable
to serve as a director, such other current director of the Company selected by
the nominating committee of Parent's Board of Directors) and Xxxxx X.
Xxxxxxxxxxx shall be appointed to Board of Directors of Parent, with Xx.
Xxxxxxxxx being placed in a class with a term expiring in 2005, Xx. Xxxxxxxx (or
such other current director of the Company determined by the nominating
committee of Parent's Board of Directors) and Xx. Xxxxxxxxxxx being placed in a
class with a term expiring in 2006 and Xx. Xxxx being placed in a class with a
term expiring in 2007, and (ii) the audit committee of Parent's Board of
Directors shall consist of four members, including two current members of
Parent's Board of Directors and Xx. Xxxxxxxxxxx and Xx. Xxxxxxxx (or, in the
event that Xx. Xxxxxxxx is unable to serve as a director, such other current
director of the Company selected by the nominating committee of Parent's Board
of Directors). Certain management designations anticipated by the parties to be
effected at the Effective Time are set forth on Schedule 5.18 of the Company
Disclosure Letter.
Section 5.19. Financing.
(a) Without limiting Sections 5.05 or 5.11, the Company agrees to use
its reasonable best efforts to provide, and to use its reasonable best efforts
to cause the Subsidiaries of the Company and the respective officers, employees
and independent auditors of the Company and the subsidiaries of the Company to
provide, cooperation in connection with the arrangement of any financing to be
consummated in order to fund the Cash Merger Consideration to be paid
80
pursuant to this Agreement (each, a "FINANCING"), including without limitation,
reasonable participation in meetings and road shows; the provision of
information relating to the Financing reasonably requested by Parent; and
reasonable assistance in the preparation of offering memoranda, private
placement memoranda, prospectuses and similar documents of Parent.
Notwithstanding this Section 5.19(a), the Company shall not be required to
provide any information which it reasonably believes it may not provide to
another party by reason of Contractual or legal restrictions, including
applicable Laws, or which it believes is competitively sensitive information,
but shall use its best efforts to obtain a consent to disclosure of such
information. In addition, the Company may designate any competitively sensitive
information provided to the other under this Section 5.19(a) as "outside counsel
only." Such information shall be given only to outside counsel of the recipient.
Parent will use reasonable best efforts to minimize any disruption to the
businesses of the Company and its Subsidiaries which may result from the
requests for access, data and information hereunder.
(b) Prior to the Closing, Parent shall obtain all financing required for
the transactions contemplated by this Agreement. Any Financing shall, in the
reasonable judgment of Parent, be on reasonable terms. Parent acknowledges that,
notwithstanding any conditions stated in the Financing Commitment Letter,
Parent's and Merger Sub's obligations to have sufficient funds and sufficient
authorized but unissued shares of Parent Common Stock to consummate the Merger
and the other transactions contemplated by this Agreement are not conditioned
upon the consummation of any Financing.
(c) Without limiting Section 5.05, Parent shall keep the Company
reasonably informed of the status of any contemplated or proposed Financing.
Without limiting the generality of the foregoing, Parent shall (i) notify the
Company promptly of any proposed or executed amendments to the Financing
Commitment Letter, (ii) provide to the Company copies of any other commitment
letters and any definitive agreements entered into by Parent or any of its
Affiliates in connection with the Financing Commitment Letter or any alternative
Financing, and all notices and all proposed or executed amendments or
modifications regarding any such documents or arrangements, (iii) notify the
Company of any assertion by any lender under the Financing Commitment Letter or
any other commitment letter or definitive agreements entered into in relation to
a Financing that any condition contained in the Financing Commitment Letter or
any other commitment letter or definitive agreements entered into in relation to
a Financing has not been satisfied or cannot be satisfied at the time such
condition is required to be satisfied, and (iv) discuss with the Company at the
Company's reasonable request the status of any contemplated or proposed
Financing.
Section 5.20. Further Assurances. Each party hereby agrees to perform
any further acts and to execute and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
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ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to the Obligations of Each Party. The
respective obligations of each party to consummate the Merger are subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) (i) The Company shall have obtained the Company Stockholder Approval
and (ii) Parent shall have obtained the Parent Stockholder Approval;
(b) No judgment, injunction, order or decree of a Governmental Entity of
competent jurisdiction shall be in effect which has the effect of making the
Merger illegal or otherwise restraining or prohibiting the consummation of the
Merger; provided, however, that prior to asserting this condition, subject to
Section 5.11, each of the parties shall have used its reasonable efforts to
prevent the entry of any such judgment, injunction, order or decree;
(c) (i) All consents, approvals, orders or authorizations from, and all
material declarations, filings and registrations with, any Governmental Entity,
including all necessary approvals under any applicable Antitrust Laws, required
to consummate the Merger and the other transactions contemplated by this
Agreement shall have been obtained or made, except for such consents, approvals,
orders, authorizations, material declarations, filings and registrations, the
failure of which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect (for
purposes of this clause, after giving effect to the Merger), and (ii) the
waiting period (and any extension thereof) applicable to consummation of the
Merger under the HSR Act shall have expired or been terminated;
(d) The Registration Statement shall have been declared effective under
the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before the SEC;
(e) The shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance;
(f) Parent shall have received a written opinion of Xxxxxx & Xxxxxxx
LLP, in form and substance reasonably acceptable to it, dated as of the Closing
Date to the effect that, on the basis of the facts, representations and
assumptions set forth or referred to in such opinion, for U.S. federal income
tax purposes the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code. In rendering such opinion, counsel to Parent shall
be entitled to rely upon customary assumptions and representations reasonably
satisfactory to such counsel, including representations set forth in
certificates of officers of Parent, Merger Sub and the Company, in substantially
the forms attached hereto as Exhibits B and C. The condition set forth in this
Section 6.01(f) shall not be waivable after receipt of the Company Stockholder
Approval or the Parent Stockholder Approval, unless further stockholder approval
is obtained with appropriate disclosure;
(g) The Company shall have received a written opinion of Xxxxxxxx &
Xxxxxxxx LLP, in form and substance reasonably acceptable to it, dated as of the
Closing Date to
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the effect that, on the basis of the facts, representations and assumptions set
forth or referred to in such opinion, for U.S. federal income tax purposes the
Company Merger will constitute a "reorganization" within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel to the Company shall be
entitled to rely upon customary assumptions and representations reasonably
satisfactory to such counsel, including representations set forth in
certificates of officers of Parent, Merger Sub and the Company, in substantially
the forms attached hereto as Exhibits B and C. The condition set forth in this
Section 6.01(g) shall not be waivable after receipt of the Company Stockholder
Approval or the Parent Stockholder Approval, unless further stockholder approval
is obtained with appropriate disclosure; and
(h) There shall not be pending any suit, action or proceeding by any
Governmental Entity in any court of competent jurisdiction seeking to prohibit
the consummation of the Merger or any other transaction contemplated by this
Agreement or that would otherwise cause a Company Material Adverse Effect or a
Parent Material Adverse Effect; provided that, if the court of competent
jurisdiction dismisses or renders a final decision denying a Governmental
Entity's request for an injunction in such suit, action or proceeding, then four
(4) Business Days following such dismissal or decision, this condition to
closing shall, with respect to such suit, action or proceeding, thereafter be
deemed satisfied whether or not such Governmental Entity appeals the decision of
such court or files an administrative complaint before the Federal Trade
Commission.
Section 6.02. Conditions to the Obligations of Parent. The obligation of
Parent to consummate the Merger is subject to the satisfaction of the following
further conditions:
(a) The Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) The representations and warranties of the Company contained in this
Agreement shall be true and correct (without giving effect to any limitation as
to "materiality" or "Company Material Adverse Effect" set forth therein) at and
as of the Effective Time as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to be true and
correct (without giving effect to any limitation as to "materiality" or "Company
Material Adverse Effect" set forth therein) would not, individually or in the
aggregate, result in a Company Material Adverse Effect;
(c) Since the date of this Agreement, there shall not have been any
state of facts, events, changes, effects, developments, conditions or
occurrences that, individually or in the aggregate, has had or would reasonably
be expected to have a Company Material Adverse Effect;
(d) Parent shall have received a certificate signed by an executive
officer of the Company indicating that the conditions set forth in clauses (a)
and (b) of this Section 6.02 have been satisfied;
(e) Effective demands under Section 262 of the DGCL shall not have been
received by the Company with respect to more than 10.0% of the outstanding
shares of Company
83
Common Stock; and
(f) The Investigation (including the facts and circumstances related
thereto) shall not have prevented Parent from obtaining Financing consistent
with the terms and conditions set forth in the Financing Commitment Letter;
provided, however, that Parent shall have used commercially reasonable efforts
to obtain such Financing.
Section 6.03. Conditions to the Obligations of the Company. The
obligation of the Company to consummate the Merger is subject to the
satisfaction of the following:
(a) Parent shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) The representations and warranties of Parent contained in this
Agreement shall be true and correct (without giving effect to any limitation as
to "materiality" or "Parent Material Adverse Effect" set forth therein) at and
as of the Effective Time as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to be true and
correct (without giving effect to any limitation as to "materiality" or "Parent
Material Adverse Effect" set forth therein) would not, individually or in the
aggregate, result in a Parent Material Adverse Effect;
(c) Since the date of this Agreement, there shall not have been any
state of facts, events, changes, effects, developments, conditions or
occurrences that, individually or in the aggregate, has had or would reasonably
be expected to have a Parent Material Adverse Effect;
(d) The Company shall have received a certificate signed by an executive
officer of Parent indicating that the conditions set forth in clauses (a) and
(b) of this Section 6.03 have been satisfied; and
(e) Parent shall have the funds necessary to pay the Cash Merger
Consideration.
ARTICLE VII
TERMINATION
Section 7.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company and/or
Parent):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger has not been consummated on or before December 19,
2005 (such date, as it may be extended under clause (A) of this paragraph, the
84
"TERMINATION DATE"); provided, however, that (A) the Termination Date may be
extended by either party (by written notice thereof to the other party), from
time to time, for an additional period of time not to exceed forty-three days if
(y) if Parent has been unable to obtain funds on terms satisfactory to Parent
sufficient to pay the full amount of the Cash Merger Consideration or (z) all
other conditions to consummation of the Merger are satisfied or capable of then
being satisfied and the sole reason that the Merger has not been consummated by
such date is that one or more conditions set forth in Section 6.01(b), Section
6.01(c) or Section 6.01(d) has not been satisfied due to the failure to obtain
the necessary consents and approvals under Antitrust Laws or a judgment,
injunction, order or decree of a Governmental Entity of competent jurisdiction
shall be in effect, and Parent or the Company are still attempting to obtain
such necessary consents and approvals under Antitrust Laws or are contesting the
refusal of the relevant Governmental Entity to give such consents or approvals
or the entry of any such judgment, injunction, order or decree by a Governmental
Entity or through other applicable proceedings, and (B) the right to terminate
this Agreement pursuant to this Section 7.01(b)(i) shall not be available to any
party whose breach of any provision of this Agreement has been the cause of or
resulted in the failure of the Merger to be consummated by the Termination Date;
(ii) if any Governmental Entity shall have issued a final order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
is or shall have become final and nonappealable;
(iii) if, upon a vote at a duly held meeting (or at any adjournment
or postponement thereof) to obtain the Company Stockholder Approval, the Company
Stockholder Approval is not obtained; or
(iv) if, upon a vote at a duly held meeting (or at any adjournment
or postponement thereof) to obtain the Parent Stockholder Approval, the Parent
Stockholder Approval is not obtained;
(c) by Parent, if there has been a breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement
which (x) would result in a failure of a condition set forth in Section 6.02(a)
or Section 6.02 (b) and (y) cannot be cured prior to the Termination Date;
provided that Parent shall have given the Company written notice, delivered at
least ten (10) Business Days prior to such termination, stating Parent's
intention to terminate this Agreement pursuant to this Section 7.01(c) and the
basis for such termination;
(d) by the Company, if there has been a breach by Parent of any
representation, warranty, covenant or agreement contained in this Agreement
which (x) would result in a failure of a condition set forth in Section 6.03(a)
or Section 6.03(b) and (y) cannot be cured prior to the Termination Date;
provided that the Company shall have given Parent written notice, delivered at
least ten (10) Business Days prior to such termination, stating the Company's
intention to terminate this Agreement pursuant to this Section 7.01(d) and the
basis for such termination;
85
(e) by Parent, if (i) the Company's Board of Directors shall have
effected a Company Change of Recommendation or resolved to do so; (ii) the
Company's Board of Directors shall have approved or recommended to the Company's
stockholders a Company Acquisition Proposal or resolved to do so; (iii) a tender
offer or exchange offer for shares of Company Common Stock is commenced (other
than by Parent or any of its Affiliates) and the Company's Board of Directors
recommends that the Company's stockholders tender their shares in such tender or
exchange offer or such Board of Directors fails to recommend that the Company's
stockholders reject such tender or exchange offer within ten (10) Business Days
after receipt of Parent's request to do so; or (iv) for any reason the Company
fails to call, hold or convene the Company Stockholders' Meeting on or before
the fifth Business Day prior to the Termination Date; provided that (A) Parent's
right to terminate this Agreement under clause (iv) shall not be available if at
such time (y) the Company would be entitled to terminate this Agreement under
Sections 7.01(b)(ii), (d) or (f) or (z) the conditions set forth in Sections
6.01(a)(ii), (b), (c), (d) or (h) shall not have been satisfied, and (B) with
respect to clauses (i) and (ii), it being understood that neither disclosure of
any competing proposal that is not being recommended by the Company's Board of
Directors nor disclosure of any facts or circumstances, together with a
statement that the Company's Board of Directors continues to recommend approval
of this Agreement and the Merger, shall be considered to be a Company Change of
Recommendation; or
(f) by the Company, if (i) Parent's Board of Directors shall have
effected a Parent Change of Recommendation or resolved to do so; (ii) Parent's
Board of Directors shall have approved or recommended to Parent's stockholders a
Parent Acquisition Proposal or resolved to do so; (iii) a tender offer or
exchange offer for outstanding shares of Parent Common Stock is commenced (other
than by the Company or any of its affiliates) and Parent's Board of Directors
recommends that Parent's stockholders tender their shares in such tender or
exchange offer or such Board of Directors fails to recommend that Parent's
stockholders reject such tender or exchange offer within ten (10) Business Days
after receipt of the Company's request to do so; or (iv) for any reason Parent
fails to call, hold or convene the Parent Stockholders' Meeting on or before the
fifth Business Day prior the Termination Date; provided that (A) the Company's
right to terminate this Agreement under clause (iv) shall not be available if at
such time (y) Parent would be entitled to terminate this Agreement under
Sections 7.01(b)(ii), (c) or (e) or (z) the conditions set forth in Sections
6.01(a)(i), (b), (c), (d) or (h) shall not have been satisfied, and (B) with
respect to clauses (i) and (ii), it being understood that neither disclosure of
any competing proposal that is not being recommended by Parent's Board of
Directors nor disclosure of any facts or circumstances, together with a
statement that Parent's Board of Directors continues to recommend approval of
the Share Issuance, shall be considered to be a Parent Change of Recommendation.
The party desiring to terminate this Agreement pursuant to Section 7.01 (other
than pursuant to Section 7.01(a)) shall give written notice of such termination
to the other parties.
Section 7.02. Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company prior to the Effective Time pursuant
to the provisions of Section 7.01, this Agreement shall forthwith become void,
and there shall be no Liability or further obligation on the part of Parent, the
Company or Merger Sub or their respective officers or directors (except as set
forth in Sections 5.05(c), 5.10 and Article VIII, all
86
of which shall survive the termination). Nothing in this Section 7.02 shall
relieve any party from Liability for any willful and material breach of this
Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Non-Survival of Representations and Warranties. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 8.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given (i) upon personal delivery, (ii) one (1) Business Day after being sent via
a nationally recognized overnight courier service if overnight courier service
is requested or (iii) upon receipt of electronic or other confirmation of
transmission if sent via facsimile, in each case at the addresses or fax numbers
(or at such other address or fax number for a party as shall be specified by
like notice) set forth below:
If to Parent, to:
Medicis Pharmaceutical Corporation
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with copies to:
Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
R. Xxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company, to:
Inamed Corporation
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel
Facsimile: (000) 000-0000
87
with copies to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Section 8.03. Defined Terms.
(a) For purposes of this Agreement:
"ACTION" means any claim, suit, action, proceeding or investigation.
An "AFFILIATE" of any Person shall mean another Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such first Person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise.
"BUSINESS DAY" means any day, other than (i) a Saturday or a Sunday or
(ii) a day on which banking and savings and loan institutions are authorized or
required by Law to be closed in Los Angeles, California.
"COMPANY ACQUISITION PROPOSAL" means any offer or proposal with respect
to a potential or proposed the Company Acquisition Transaction.
"COMPANY ACQUISITION TRANSACTION" means any (a) merger, consolidation,
business combination or similar transaction involving the Company or any of its
Significant Subsidiaries pursuant to which the stockholders of the Company
immediately prior to such transaction would own less than 85% of the aggregate
voting power of the entity surviving or resulting from such transaction (or the
ultimate parent entity thereof), (b) sale, lease, exclusive license or other
disposition, directly or indirectly, by merger, consolidation, business
combination, share exchange, joint venture or otherwise of assets of the Company
or its Subsidiaries representing 15% or more of the consolidated assets of the
Company and its Subsidiaries, (c) issuance, sale or other disposition (including
by way of merger, consolidation, business combination, share exchange, joint
venture or any similar transaction) of securities (or options, rights or
warrants to purchase, or securities convertible into or exchangeable for, such
securities) representing 15% or more of the voting power of the Company, (d)
transaction in which any Person shall acquire beneficial ownership, or the right
to acquire beneficial ownership or any group shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding voting capital stock of the Company or (e) any
combination of the foregoing (other than the Merger).
"COMPANY ERISA AFFILIATE PLAN" shall mean each material employee benefit
plan, program or policy providing benefits to any current or former employee,
officer or director of any ERISA Affiliate of the Company or any of its
Subsidiaries or any beneficiary or dependent thereof that is sponsored or
contributed to by any ERISA Affiliate of the Company or
88
any of its Subsidiaries or to which any ERISA Affiliate of the Company or any of
its Subsidiaries contributes or is obligated to contribute or with respect to
which any ERISA Affiliate of the Company or any of its Subsidiaries has or may
have any Liability or obligations, including any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA or any employee pension benefit plan
within the meaning of Section 3(2) of ERISA (whether or not such plan is subject
to ERISA) and any material bonus, incentive, deferred compensation, vacation,
stock purchase, stock option, severance, employment, change of control or fringe
benefit or similar arrangement, agreement, plan, program or policy.
"COMPANY KEY PRODUCT" shall mean any product or line of products which,
in any of the preceding three calendar years, generated more than 5% of the
Company's or any of its Subsidiary's net revenue for that year and any product
which the Company reasonably expects to generate more than 5% of the Company's
or any Subsidiary's net revenue in any of the next five years, but in any event
including the products sold or to be sold under the following trademarks and
trade names: Lap-Band System, BIB (BioEntrerics Intragastric Balloon System),
BioDimensional, 410 Signature Series, Biospan, McGhan, McGhan, Reloxin, Dysport,
Cosmoderm, Cosmoplast, Hylaform, Captique, Zyderm, Zyplast Hydrafill, Hydrafill,
JuveDerm or Juvinox.
"COMPANY LICENSED INTELLECTUAL PROPERTY" means all material Intellectual
Property licensed to the Company or any of its Subsidiaries.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change, event,
development or effect that (i) is materially adverse to the business or
financial condition of the Company and its Subsidiaries, taken as a whole,
except for any such change, event, development or effect resulting from or
arising out of (A) changes or developments in the medical device and specialty
pharmaceutical industries generally (which changes or developments, in each
case, do not disproportionately affect the Company in any material respect), (B)
changes or developments in financial or securities markets or the economy in
general (which changes or developments, in each case, do not disproportionately
affect the Company in any material respect), (C) any change in the Company's
stock price or trading volume, in and of itself, (D) any failure by the Company
to meet published revenue or earnings projections, in and of itself, (E) any
changes resulting from or arising out of the announcement of this Agreement or
actions pursuant to (and required by) this Agreement, or (F) the determination
by, or the delay of a determination by, the FDA, or any panel or advisory body
empowered or appointed thereby, with respect to the approval, non-approval or
disapproval of any of the Company's products, or (ii) that prevents the Company
from fulfilling its obligation to consummate the Merger.
"COMPANY OWNED INTELLECTUAL PROPERTY" means all material Intellectual
Property owned by the Company or any of its Subsidiaries.
"COMPANY PARTNER" means any Person which manufactures, develops,
packages, processes, labels, tests or distributes products pursuant to a
development, commercialization, manufacturing, supply, testing or other
collaboration arrangement with the Company or any of its Subsidiaries.
89
"COMPANY REGISTERED BRAND NAME" means all trademarks, trade names, brand
names, and service marks registered by the Company or any of its Subsidiaries in
any country throughout the world.
"COMPANY RESTRICTED STOCK" shall mean the Company Common Stock subject
to the rights to acquire unvested shares outstanding under the Company
Restricted Stock Plan.
"COMPANY RESTRICTED STOCK PLAN" shall mean the Company's 2003 Restricted
Stock Plan.
"COMPANY STOCK PLANS" shall mean the Company's Non-Employee Director's
Stock Option Plan, the Company's 1998 Stock Option Plan, the Company's 1999
Director's Stock Election Plan, the Company's 1999 Stock Option Plan, the
Company's 2000 Stock Option Plan, the Company's 2003 Outside Director
Compensation Plan, the Company's 2004 Performance Stock Option Plan, the Company
Restricted Stock Plan, the Standalone Option Agreements and any other plan or
arrangement under which the Company or its subsidiaries grants equity-based
awards.
"COMPANY SUPERIOR PROPOSAL" means an unsolicited, bona fide written
offer made by a Company Potential Acquiror to acquire, directly or indirectly,
pursuant to a tender offer, exchange offer, merger, consolidation or other
business combination, all or substantially all of the assets of the Company or a
majority of the total outstanding voting securities of the Company and as a
result of which the stockholders of the Company immediately preceding such
transaction would hold less than 50% of the equity interests in the surviving or
resulting entity of such transaction or any direct or indirect parent or
subsidiary thereof, on terms that are more favorable to the Company's
stockholders than the terms of the Merger, taking into account, among other
matters, all legal, financial, regulatory and other aspects of such offer and
the Company Potential Acquiror, including (i) the likelihood and timing of
consummation, (ii) any amendments to or modifications of this Agreement that
Parent has offered at the time of determination and (iii) such other factors
deemed relevant by the Company's Board of Directors.
"COMPANY UNREGISTERED BRAND NAME" means all (i) trademarks, trade names,
brand names, and service marks for which the Company or any of its Subsidiaries
has filed an application with the U.S. Patent and Trademark Office or any
foreign equivalent office and (ii) material trademarks, trade names, brand
names, and service marks used by the Company or any of its Subsidiaries but not
registered in any country anywhere in the world.
"CONTRACT" means any agreements, contracts, leases, powers of attorney,
notes, loans, evidence of indebtedness, purchase orders, letters of credit,
settlement agreements, franchise agreements, undertakings, covenants not to
compete, employment agreements, licenses, covenants not to xxx, instruments,
obligations, commitments, understandings, policies, purchase and sales orders,
quotations and other executory commitments to which any company is a party or to
which any of the assets of the companies are subject, whether oral or written,
express or implied (each, including all amendments thereto).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
90
"ERISA AFFILIATE" means, with respect to any entity, trade or business,
any other entity, trade or business that is, or was at the relevant time, a
member of a group described in Section 52 or 414(b), (c), (m) or (o) of the Code
or Section 4001(b)(1) of ERISA that includes or included the first entity, trade
or business, or that is, or was at the relevant time, a member of the same
"controlled group" as the first entity, trade or business pursuant to Section
4001(a)(14) of ERISA.
"ENVIRONMENTAL LAW(S)" means any and all applicable international,
federal, state, or local Laws or rule of common Law, permits, restrictions and
licenses, which (i) regulate or relate to the protection or clean up of the
environment; the use, treatment, storage, transportation, handling, disposal or
release of Hazardous Substances, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural resources;
or the health and safety of Persons or property, including without limitation
protection of the health and safety of employees; or (ii) impose liability or
responsibility with respect to any of the foregoing, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.), or any other law of similar effect.
"ENVIRONMENTAL PERMITS" means any material permit, license,
authorization or approval required under applicable Environmental Laws.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder).
"FDA" means the U.S. Food and Drug Administration.
"FDCA" means the Federal Food, Drug and Cosmetic Act of 1938, as
amended, and the regulations of the FDA promulgated thereunder.
"GAAP" means United States generally accepted accounting principles.
"GOOD CLINICAL PRACTICES" means the FDA's standards for the design,
conduct, performance, monitoring, auditing, recording, analysis, and reporting
of clinical trials contained in Title 21 parts 50, 54, 56, 312, 314, 320, 812,
and 814 of the Code of Federal Regulations.
"GOOD LABORATORY PRACTICES" means the FDA's standards for conducting non
clinical laboratory studies contained in Title 21 part 58 of the Code of Federal
Regulations.
"GOOD MANUFACTURING PRACTICES" means the requirements set forth in the
quality systems regulations for medical devices contained in Title 21 part 820
of the Code of Federal Regulations, and the good manufacturing practice
regulations for finished pharmaceutical or drug products contained in Title 21
parts 210 and 211 of the Code of Federal Regulations.
"GOVERNMENTAL ENTITY" means any foreign, federal, state, local or
multi-national court, arbitral tribunal, administrative agency or commission or
other governmental or regulatory body, agency, instrumentality or authority.
"HAZARDOUS SUBSTANCES" means any pollutant, chemical, substance and any
toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable
chemical, or chemical
91
compound, or hazardous substance, material or waste, whether solid, liquid or
gas, that is subject to regulation, control or remediation under any
Environmental Laws, including without limitation, any quantity of asbestos in
any form, urea formaldehyde, PCBs, radon gas, crude oil or any fraction thereof,
all forms of natural gas, petroleum products or by-products or derivatives.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INTELLECTUAL PROPERTY" means all intellectual property or other
proprietary rights of every kind, foreign and domestic, including (i) patents,
patent applications (including any provisionals, continuations, divisions,
continuations-in-part, extensions, renewals, reissues, revivals and
reexaminations, any national phase PCT applications, PCT international
applications, and all foreign counterparts), statutory invention certificates,
copyrights, mask works, industrial designs, URLs, domain names, trademarks,
service marks, logotypes, brand names, trade dress and trade names, (ii) all
rights in, applications for, registrations of any of the foregoing, (iii) moral
rights, rights to use a natural person's name and likeness, publicity rights,
(iv) trade secrets, confidential information, inventions, discoveries,
improvements, modifications, know-how, techniques, methods, data, embodied or
disclosed in any computer programs; product specifications; manufacturing,
assembly, testing, clinical trials, patient surveys, physician surveys, surgical
methods, educational programs, and (v) all good will related to any of the
foregoing.
"IRS" means Internal Revenue Service.
"KNOWLEDGE" shall mean the actual knowledge of the executive officers of
the Company or Parent, as the case may be.
"LAW" means any foreign or domestic law, statute, code, ordinance, rule,
regulation, order, judgment, writ, stipulation, award, injunction, decree,
treaty, convention, compact, protocol or arbitration award or finding.
"LIABILITY OR LIABILITIES" mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured, liquidated, unliquidated, known or unknown.
"LIENS" means any mortgage, deed of trust, deed to secure debt, title
retention agreement, pledge, lien, encumbrance, security interest, conditional
or installment sale agreement, charge or other claims of third parties of any
kind.
"MULTIEMPLOYER PLAN" means any "multiemployer plan" within the meaning
of Section 3(37) or 4001(a)(3) of ERISA.
"NYSE" means the New York Stock Exchange, Inc.
"PARENT ACQUISITION PROPOSAL" means any offer or proposal with respect
to a potential or proposed Parent Acquisition Transaction.
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"PARENT ACQUISITION TRANSACTION" means any (a) merger, consolidation,
business combination or similar transaction involving Parent or any of its
Significant Subsidiaries pursuant to which the stockholders of Parent
immediately prior to such transaction would own less than 85% of the aggregate
voting power of the entity surviving or resulting from such transaction (or the
ultimate parent entity thereof), (b) sale, lease, exclusive license or other
disposition, directly or indirectly, by merger, consolidation, business
combination, share exchange, joint venture or otherwise of assets of Parent or
its Subsidiaries representing 15% or more of the consolidated assets of Parent
and its Subsidiaries, (c) issuance, sale or other disposition (including by way
of merger, consolidation, business combination, share exchange, joint venture or
any similar transaction) of securities (or options, rights or warrants to
purchase, or securities convertible into or exchangeable for, such securities)
representing 15% or more of the voting power of Parent, (d) transaction in which
any Person shall acquire beneficial ownership, or the right to acquire
beneficial ownership or any group shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 15% or more of the
outstanding voting capital stock of Parent or (e) any combination of the
foregoing (other than the Merger).
"PARENT ERISA AFFILIATE PLAN" shall mean each material employee benefit
plan, program or policy providing benefits to any current or former employee,
officer or director of any ERISA Affiliate of the Company or any of its
Subsidiaries or any beneficiary or dependent thereof that is sponsored or
contributed to by any ERISA Affiliate of the Company or any of its Subsidiaries
or to which any ERISA Affiliate of the Company or any of its Subsidiaries
contributes or is obligated to contribute or with respect to which any ERISA
Affiliate of the Company or any of its Subsidiaries has or may have any
Liability or obligations, including any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA or any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA)
and any material bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe
benefit or similar arrangement, agreement, plan, program or policy.
"PARENT KEY PRODUCT" shall mean any product or line of products which,
in any of the preceding three calendar years, generated more than 5% of Parent's
or any of its Subsidiary's net revenue for that year and any product which
Parent reasonably expects to generate more than 5% of the Company's or any
Subsidiary's net revenue in any of the next five years, but in any event
including the products sold or to be sold under the following trademarks and
trade names: Restylane, Loprox, Dynacin, Plexion and Triaz.
"PARENT LICENSED INTELLECTUAL PROPERTY" means all material Intellectual
Property licensed to Parent or any of its Subsidiaries.
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change, event,
development or effect that (i) is materially adverse to the business or
financial condition of Parent and its Subsidiaries, taken as a whole, except for
any such change, event, development or effect resulting from or arising out of
(A) changes or developments in the medical device and specialty pharmaceutical
industries generally (which changes or developments, in each case, do not
disproportionately affect Parent in any material respect), (B) changes or
developments in financial or securities markets or the economy in general (which
changes or developments, in
93
each case, do not disproportionately affect Parent in any material respect), (C)
any change in Parent's stock price or trading volume, in and of itself, (D) any
failure by Parent to meet published revenue or earnings projections, in and of
itself, (E) any changes resulting from or arising out of the announcement of
this Agreement or actions pursuant to (and required by) this Agreement, or (F)
the determination by, or the delay of a determination by, the FDA, or any panel
or advisory body empowered or appointed thereby, with respect to the approval,
non-approval or disapproval of any of Parent's products, or (ii) that prevents
Parent from fulfilling its obligation to consummate the Merger.
"PARENT OWNED INTELLECTUAL PROPERTY" means all material Intellectual
Property owned by Parent or any of its Subsidiaries.
"PARENT PARTNER" means any Person which manufactures, develops,
packages, processes, labels or tests or distributes products pursuant to a
development, commercialization, manufacturing, supply, testing or other
collaboration arrangement with Parent or any of its Subsidiaries.
"PARENT REGISTERED BRAND NAME" means all trademarks, trade names, brand
names, and service marks registered by Parent or any of its Subsidiaries in any
country throughout the world.
"PARENT RESTRICTED STOCK" shall mean the Parent Common Stock subject to
the rights to acquire unvested shares outstanding under the Parent Restricted
Stock Plan.
"PARENT RESTRICTED STOCK PLAN" shall mean Parent's 2001 Senior Executive
Restricted Stock Plan.
"PARENT STOCK OPTION" means any option to purchase Parent Common Stock
granted under the Parent Stock Plans or otherwise.
"PARENT STOCK PLANS" means Parent's 1992 Stock Option Plan, Parent's
1995 Stock Option Plan, Parent's 1998 Stock Option Plan, Parent's 2001 Senior
Executive Restricted Stock Plan, Parent's 2002 Stock Option Plan, Parent's 2004
Stock Incentive Plan and any other plan or arrangement under which Parent grants
equity-based awards.
"PARENT SUPERIOR PROPOSAL" means an unsolicited, bona fide written offer
made by a Parent Potential Acquiror to acquire, directly or indirectly, pursuant
to a tender offer, exchange offer, merger, consolidation or other business
combination, all or substantially all of the assets of Parent or a majority of
the total outstanding voting securities of Parent and as a result of which the
stockholders of Parent immediately preceding such transaction would hold less
than 50% of the equity interests in the surviving or resulting entity of such
transaction or any direct or indirect parent or subsidiary thereof, on terms
that are more favorable to Parent's stockholders than the terms of the Merger,
taking into account, among other matters, all legal, financial, regulatory and
other aspects of such offer and the Parent Potential Acquiror, including (i) the
likelihood and timing of consummation, (ii) any amendments to or modifications
of this Agreement that the Company has offered at the time of determination and
(iii) such other factors deemed relevant by Parent's Board of Directors.
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"PARENT UNREGISTERED BRAND NAME" means all (i) trademarks, trade names,
brand names, and service marks for which Parent or any of its Subsidiaries has
filed an application with the U.S. Patent and Trademark Office or any foreign
equivalent office and (ii) material trademarks, trade names, brand names, and
service marks used by Parent or any of its Subsidiaries but not registered in
any country anywhere in the world.
"PERSON" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended (together
with the rules and regulations promulgated thereunder).
"SHARE ISSUANCE" means the issuance of Parent Common Stock pursuant to
Section 2.01(a)(i).
"SIGNIFICANT SUBSIDIARY" shall mean as such term is defined in Rule 1-02
of Regulation S-X of the Exchange Act.
"SOX" means the Xxxxxxxx-Xxxxx Act of 2002.
"STANDALONE OPTION AGREEMENTS" shall mean the Option Agreement between
the Company and Xxxxxxxx X. Xxxx, dated July 23, 2001 and the Option Agreement
between the Company and Xxxx Xxxxx, dated September 28, 2001.
"SUBSIDIARY" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
"TAX" or "TAXES" means all taxes of whatever kind or nature, including
those on or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, estimated, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or other similar fees, assessments or
charges of any kind whatsoever (together with any interest and any penalties,
additions to tax or additional amounts), whether disputed or not, imposed by any
Governmental Entity or Tax authority (domestic or foreign).
"TAX RETURNS" means any report, return (including information return),
claim for refund, or statement relating to Taxes or required to be filed with
any Tax authority (domestic or foreign), including any schedule or attachment
thereto, and including any amendments thereof.
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"WARNING LETTER" is a letter issued by the FDA for an alleged violation
of regulatory significance which provides individuals and firms an opportunity
to take voluntary corrective action.
(b) The following terms are defined elsewhere in this Agreement, as
indicated below:
TERM REFERENCE
---- ---------
1999 Option Plan......................................... Section 2.06(a)
2000 Option Plan......................................... Section 2.06(a)
Aggregate Cash Amount.................................... Section 2.02(c)(ii)
Aggregate Company Share Number........................... Section 2.02(c)(iii)
Aggregate Dissenter's Value.............................. Section 2.02(c)(i)
Aggregate Parent Share Number............................ Section 2.02(c)(iv)
Aggregate Parent Stock Value............................. Section 2.02(c)(v)
Agreement................................................ Preamble
Antitrust Laws........................................... Section 5.11(b)
Assigned Repurchase Rights............................... Section 2.08
Cash Merger Consideration................................ Section 2.01(a)(i)(B)
Certificate.............................................. Section 2.04(b)
Certificate of Merger.................................... Section 1.02
Closing.................................................. Section 1.02
Closing Date............................................. Section 1.02
Closing Parent Stock Price............................... Section 2.02(c)(vi)
Closing Transaction Value................................ Section 2.02(c)(vii)
Code..................................................... Preamble
Company.................................................. Preamble
Company 10-K............................................. Section 3.06
Company Benefit Plans.................................... Section 3.13(a)
Company Change of Recommendation......................... Section 5.03(e)
Company Common Stock..................................... Section 2.01(a)
Company Disclosure Letter................................ Article III Preamble
Company ESPP............................................. Section 2.07
Company Financial Advisor................................ Section 3.20
Company Leases........................................... Section 3.17(b)
Company Material Contracts............................... Section 3.11(a)
Company Material Leased Real Property.................... Section 3.17(b)
Company Material Licenses................................ Section 3.16(b)
Company Owned Real Property.............................. Section 3.17(a)
Company Permits.......................................... Section 3.10(a)
Company Potential Acquiror............................... Section 5.03(b)
Company Preferred Stock.................................. Section 3.02(a)
Company Purchase Rights.................................. Section 3.02(a)
Company Qualified Plans.................................. Section 3.13(d)
Company Required Statutory Approvals..................... Section 3.04(d)
Company Rights........................................... Section 2.01(c)
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TERM REFERENCE
---- ---------
Company Rights Agreement................................. Section 2.01(c)
Company SEC Documents.................................... Section 3.05(a)
Company Stock Options.................................... Section 2.06(b)
Company Stockholder Approval............................. Section 3.04(a)
Company Stockholders' Meeting............................ Section 3.09
Company Superior Proposal Notice......................... Section 5.03(b)
Company Termination Fee.................................. Section 5.10(b)(ii)
Competing Confidentiality Agreement...................... Section 5.03(b)(i)
Confidentiality Agreement................................ Section 5.05(c)
Conversion Options....................................... Section 2.06(b)
Convertible Notes........................................ Section 4.02(a)
Defaulting Party......................................... Section 5.10(d)
DGCL..................................................... Preamble
Dissenting Shares........................................ Section 2.03
Effective Time........................................... Section 1.02
Exchange Agent........................................... Section 2.04(a)
Exchange Fund............................................ Section 2.04(a)
Exchange Options......................................... Section 2.06(a)
Exchange Ratio........................................... Section 2.01(a)(i)(A)
FCPA..................................................... Section 3.22
Financing................................................ Section 5.19(a)
Financing Commitment Letter.............................. Section 4.23
Former Company Superior Proposal......................... Section 5.03(d)
Former Parent Superior Proposal.......................... Section 5.04(d)
Investigation............................................ Section 5.05(d)
Joint Proxy Statement.................................... Section 3.09
Maximum Premium.......................................... Section 5.12(b)
Merger................................................... Preamble
Merger Consideration..................................... Section 2.01(a)(i)(B)
Merger Sub............................................... Preamble
New Benefit Plans........................................ Section 5.06(a)
Option Exchange Ratio.................................... Section 2.06(a)
Parent................................................... Preamble
Parent 10-K.............................................. Section 4.06
Parent 10-Q.............................................. Section 4.06
Parent Benefit Plans..................................... Section 4.13(a)
Parent Change of Recommendation.......................... Section 5.04(e)
Parent Class B Stock..................................... Section 4.02(a)
Parent Common Stock...................................... Section 2.01(a)(i)(A)
Parent Disclosure Letter................................. Article IV Preamble
Parent Financial Advisors................................ Section 4.20
Parent Leases............................................ Section 4.17(b)
Parent Material Contracts................................ Section 4.11(a)
Parent Material Leased Real Property..................... Section 4.17(b)
Parent Material Licenses................................. Section 4.16(b)
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TERM REFERENCE
---- ---------
Parent Permits........................................... Section 4.10(a)
Parent Potential Acquiror................................ Section 5.04(b)
Parent Preferred Stock................................... Section 4.02(a)
Parent Qualified Plans................................... Section 4.13(d)
Parent Required Statutory Approvals...................... Section 4.04(d)
Parent Rights............................................ Section 2.01(c)
Parent Rights Agreement.................................. Section 2.01(c)
Parent SEC Documents..................................... Section 4.05(a)
Parent Stockholder Approval.............................. Section 4.04(a)
Parent Stockholders' Meeting............................. Section 3.09
Parent Superior Proposal Notice.......................... Section 5.04(b)
Parent Termination Fee................................... Section 5.10(c)(ii)
Patent Litigations....................................... Section 5.18
Program.................................................. Section 3.18(h)
Registration Statement................................... Section 3.09
Representatives.......................................... Section 5.03(a)
Repurchase Rights........................................ Section 2.08
Section 16............................................... Section 5.08
Stock Merger Consideration............................... Section 2.01(a)(i)(A)
Surviving Corporation.................................... Section 1.01
Termination Date......................................... Section 7.01(b)(i)
Unit..................................................... Section 2.06(b)
Section 8.04. Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 8.05. Miscellaneous. This Agreement (including the documents and
instruments referred to herein) shall not be assigned by operation of law or
otherwise. The parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Court of Chancery of the State of Delaware,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) irrevocably and
unconditionally consents to submit itself to the jurisdiction of the Court of
Chancery of the State of Delaware in the event any dispute arises out of this
Agreement or the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (c) agrees that it
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will not bring any action relating to this Agreement or the transactions
contemplated by this Agreement in any court other than the Court of Chancery of
the State of Delaware, and each of the parties irrevocably waives the right to
trial by jury, (d) waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action on the Court of
Chancery of the State of Delaware, and (e) each of the parties irrevocably
consents to service of process by first class certified mail, return receipt
requested, postage prepaid, to the address at which such party is to receive
notice. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
Section 8.06. Counterparts. This Agreement may be executed in two or
more counterparts, and by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
Section 8.07. Amendments; Extensions.
(a) This Agreement may be amended by the parties hereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after the Company Stockholder Approval or the Parent Stockholder Approval has
been obtained; provided that, after the Company Stockholder Approval has been
obtained, there shall be made no amendment that by law requires further approval
by stockholders of the Company without the further approval of such stockholders
and, after the Parent Stockholder Approval has been obtained, there shall be
made no amendment that by law requires further approval by stockholders of
Parent without the further approval of such stockholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
(b) At any time prior to the Effective Time, the parties hereto, by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein (except as specifically provided in
Sections 6.01(f) and 6.01(g)); provided that after the Company Stockholder
Approval has been obtained, there shall be made no waiver that by law requires
further approval by stockholders of the Company without the further approval of
such stockholders and after the Parent Stockholder Approval has been obtained,
there shall be made no waiver that by law requires further approval by
stockholders of Parent without the further approval of such stockholders. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure or delay of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those rights.
Section 8.08. Entire Agreement. This Agreement (including the Company
Disclosure Letter and the Parent Disclosure Letter), the letter agreement (with
respect to paragraphs 8 and 9 only) dated as of March 18, 2005 by and among
Q-Med AB, Parent and the Company, and the Confidentiality Agreement constitute
the entire agreement between the parties
99
with respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder except for the provisions of Section 5.12, which
are intended for the benefit of the Company's former and present officers and
directors and Article I hereof.
Section 8.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
Section 8.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.
Section 8.11. Disclosure. Any matter disclosed in any section of a
party's Disclosure Letter shall be considered disclosed for other sections of
such Disclosure Letter, but only to the extent such matter on its face would
reasonably be expected to be pertinent to a particular section of a party's
Disclosure Letter in light of the disclosure made in such section. The provision
of monetary or other quantitative thresholds for disclosure does not and shall
not be deemed to create or imply a standard of materiality hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MEDICIS PHARMACEUTICAL CORPORATION
By: /s/ Xxxxx Xxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxx
Chairman of the Board and Chief
Executive Officer
Masterpiece Acquisition Corp.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxx
President
INAMED CORPORATION
By: /s/ Xxxxxxxx X. Xxxx
---------------------------------------
Xxxxxxxx X. Xxxx
Chairman, President and Chief Executive
Officer
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