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Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of December 24, 1996
(the "Agreement") by and among Xxxxxx Pharmaceuticals, Inc., a Nevada
corporation ("Xxxxxx"), Dolphins Acquisition Corp., a Florida corporation and
the wholly-owned subsidiary of Xxxxxx ("Xxxxxx Sub"), and Royce Laboratories,
Inc., a Florida corporation (the "Company").
WHEREAS, the Board of Directors of each of Xxxxxx and the Company have
determined that a business combination between Xxxxxx and the Company merging
their respective pharmaceutical businesses is in the best interests of their
respective companies and stockholders and accordingly have agreed to effect the
merger provided for herein upon the terms and subject to the conditions set
forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that (a)
for federal income tax purposes, the merger provided for herein shall qualify
as a "reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"); and (b) for accounting purposes, the
merger provided for herein shall qualify as a "pooling of interests"; and
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.3 of this
Agreement), Xxxxxx Sub shall be merged with and into the Company in accordance
with the laws of the State of Florida and the terms of this Agreement (the
"Merger"), whereupon the separate corporate existence of Xxxxxx Sub shall
cease, and the Company shall be the surviving corporation of the Merger (the
Company, as the surviving corporation after the Merger is sometimes referred to
herein as the "Surviving Corporation").
1.2. Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices
of X'Xxxxxx & Xxxxxx, 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 at 10:00
a.m. three business days after all the conditions set forth in Article VI of
this Agreement (other than those that are waived by the party or parties for
whose benefit such conditions exist) are satisfied; or (b) at such other place,
time, and/or date as the parties hereto may otherwise agree. The date upon
which the Closing shall occur is referred to herein as the "Closing Date."
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1.3. Effective Time. If all the conditions to the Merger set
forth in Article VI of this Agreement have been fulfilled or waived and this
Agreement shall not have been terminated as provided in Article VII hereof, the
parties hereto shall cause a certificate of merger (the "Certificate of Merger")
to be properly executed and filed in accordance with the laws of the State of
Florida and the terms of this Agreement on or before the Closing Date. The
parties hereto shall also take such further actions as may be required under the
laws of the State of Florida in connection with the consummation of the Merger.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Secretary of State of Florida or at such later time as is
specified in the Certificate of Merger (the "Effective Time"). From and after
the Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises and be subject to all of the restrictions,
disabilities and duties of the Company and Xxxxxx Sub, all as provided under
applicable law.
1.4. Conversion of Shares.
(a) At the Effective Time:
(i) each share of Common Stock, par value $0.01 per share,
of Xxxxxx Sub outstanding at the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof,
shall be converted into and exchanged for one share of Common
Stock, par value $0.01 per share, of the Surviving Corporation;
and
(ii) each share of Common Stock, $0.005 par value per
share, of the Company (the "Company Common Stock") outstanding at
the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof, except as otherwise provided
in Sections 1.4(c) and 1.4(e) hereof, shall be converted into the
right to receive the number of shares of Xxxxxx Common Stock equal
to the following: $7.25 divided by the Average Closing Price (as
defined herein) (the "Exchange Ratio").
(b) As a result of the Merger and without any action on the
part of the holder thereof, at the Effective Time, all shares of Company Common
Stock shall cease to be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of shares of Company Common Stock shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except for the right to receive, without interest, the
consideration set forth in this Section 1.4 and cash for fractional shares of
Xxxxxx Common Stock in accordance with Section 1.6 of this Agreement upon the
surrender of a certificate (each, a "Certificate") representing such shares of
Company Common Stock in accordance with the provisions of this Article I.
(c) Each share of Company Common Stock and each share of Series
A, B, C, D or E Preferred Stock of the Company (collectively, the "Preferred
Stock") held by the Company as treasury stock or owned by Xxxxxx or any
Subsidiary (as defined in Section 1.4(d) of this Agreement) of Xxxxxx at the
Effective Time shall be canceled, and no payment shall be made with respect
thereto.
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(d) For purposes of this Agreement, (i) the term "Average Closing
Price" shall mean the average of the per share last daily closing price of
Xxxxxx Common Stock as quoted on the Nasdaq National Market ("Nasdaq") (and as
reported by The Wall Street Journal or, if not reported thereby, by another
authoritative source) during the ten (10) consecutive trading days ending on the
trading day immediately preceding the Closing Date; provided, however, that (A)
if the Average Closing Price is greater than $47, for purposes of this
Agreement, the Average Closing Price shall be deemed to be equal to $47; and (B)
if the Average Closing Price is less than $38, for purposes of this Agreement,
the Average Closing Price shall be deemed to be equal to $38; (ii) the word
"Subsidiary" when used with respect to any Person means any corporation or other
organization, whether incorporated or unincorporated, of which (A) at least
fifty percent (50%) of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries; or (B) such Person or any other Subsidiary
of such Person is a general partner, it being understood that representations
and warranties of a Person concerning any former Subsidiary of such Person shall
be deemed to relate only to the periods during which such former Subsidiary was
a Subsidiary of such Person; and (iii) the word "Person" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof, or any affiliate (as that
term is defined in the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Exchange Act")) of any of the
foregoing.
(e) As soon as practicable after the date hereof, the parties
hereto will negotiate in good faith to enter into an agreement to allow Xxxxxx
to pay cash to certain holders of small numbers of shares of Company Common
Stock in lieu of the consideration to be received by such holders of Company
Common Stock pursuant to Section 1.4(a) hereof; provided, however, that the
aggregate cash consideration to be paid to such holders may not exceed 9.9% of
the aggregate consideration to be paid to all holders of Company Common Stock
upon consummation of the transactions contemplated hereby.
1.5. Stock Options. All options and warrants to acquire Company
Common Stock (individually, a "Company Option" and collectively, the "Company
Options") outstanding at the Effective Time under the Company's 1992 Stock
Option Plan, the Company's 1995 Stock Option Plan or otherwise (the "Company
Stock Option Plans") shall remain outstanding following the Effective Time. At
the Effective Time, such Company Options, by virtue of the Merger and without
any further action on the part of the Company or the holder of such Company
Options, shall be assumed by Xxxxxx in such manner that Xxxxxx (a) is a
corporation (or a parent or a subsidiary corporation of such corporation)
"assuming a stock option in a transaction to which Section 424(a) applied"
within the meaning of Section 424 of the Code; or (b) to the extent that Section
424 of the Code does not apply to any such Company Options, would be such a
corporation (or a parent or a subsidiary corporation of such corporation) were
Section 424 applicable to such option. Each Company Option assumed by Xxxxxx
shall be exercisable upon
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the same terms and conditions as under the applicable Company Stock Option Plan
and the applicable option agreement issued thereunder, except that (x) the
unexercised portion of each such Company Option shall be exercisable for that
whole number of shares of Xxxxxx Common Stock (rounded to the nearest whole
share, with 0.5 rounded upward) equal to the number of shares of Company Common
Stock subject to the unexercised portion of such Company Option multiplied by
the Exchange Ratio; and (y) the option exercise price per share of Xxxxxx
Common Stock shall be an amount equal to the option exercise price per share of
Company Common Stock subject to such Company Option in effect at the Effective
Time divided by the Exchange Ratio (the option price per share, as so
determined, being rounded to the nearest full cent, with $0.005 rounded
upward). No payment shall be made for fractional interests. The term,
exercisability, vesting schedule, status as an "incentive stock option" under
Section 422 of the Code, if applicable, and all of the other terms of the
Company Options shall otherwise remain unchanged unless modified by or as a
result of the transaction contemplated by this Agreement. As soon as
practicable after the Effective Time, Xxxxxx shall deliver to the holders of
Company Options appropriate notices setting forth such holders' rights pursuant
to such Company Options, as amended by this Section 1.5 as well as notice of
Xxxxxx'x assumption of the Company's obligations with respect thereto (which
occurs by virtue of this Agreement). Xxxxxx shall take all corporate actions
necessary to reserve for issuance such number of shares of Xxxxxx Common Stock
as will be necessary to satisfy exercises in full of all Company Options after
the Effective Time.
1.6. Exchange of Certificates Representing Company Common Stock.
(a) American Stock Transfer & Trust Company shall act as exchange
agent (the "Exchange Agent") in the Merger.
(b) As of the Effective Time and in any event, no later than five
(5) business days after the Effective Time, Xxxxxx shall deposit or cause to be
deposited with the Exchange Agent for exchange in accordance with this Article
I, the shares of Xxxxxx Common Stock issuable pursuant to Section 1.4 in
exchange for shares of Company Common Stock outstanding at the Effective Time
and a sufficient amount of cash to satisfy the cash payments to be made by
Xxxxxx to certain holders of Company Common Stock pursuant to Sections 1.4(e)
and 1.6(f) hereof.
(c) On or promptly after the Effective Time, Xxxxxx shall cause
the Exchange Agent to mail to each holder of record of shares of Company
Common Stock (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to such shares of Company Common
Stock shall pass, only upon delivery of the Certificates representing such
shares to Xxxxxx; and (ii) instructions for use in effecting the surrender of
such Certificates in exchange for the consideration to be received by such
holder pursuant to Sections 1.4 and 1.6 hereof. Upon surrender of a
Certificate representing shares of Company Common Stock for cancellation to
Xxxxxx, together with such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, the holder of the shares
represented by such Certificate
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shall be entitled to receive in exchange therefor either (i) cash in accordance
with Section 1.4(e) hereof; or (ii)(A) a certificate representing that number
of whole shares of Xxxxxx Common Stock; and (B) a check representing the amount
of cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of this Section 1.6, in
each case, after giving effect to any required withholding tax, and the shares
represented by the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on the cash payable pursuant to Section 1.4(e)
hereof, the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of shares of Company Common Stock who
receive shares of Xxxxxx Common Stock pursuant to Section 1.4 hereof. In the
event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, the consideration to be paid
to such holder of Company Common Stock pursuant to Sections 1.4 and 1.6 hereof
may be issued to such a transferee if the Certificate representing such Company
Common Stock is presented to Xxxxxx, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid or, alternatively, payments of such transfer tax
to the Exchange Agent. Until so surrendered, each Certificate that, at the
Effective Time, represented shares of Company Common Stock will be deemed from
and after the Effective Time, for all corporate purposes other than the payment
of dividends (except to the extent provided in Section 1.6(d) below), to
evidence the consideration to be received by the holders of Company Common
Stock pursuant to Sections 1.4 and 1.6 hereof.
(d) Notwithstanding anything to the contrary contained herein, no
dividends or other distributions declared after the Effective Time on Xxxxxx
Common Stock shall be paid with respect to any shares of Company Common Stock
entitled to be converted into shares of Xxxxxx Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Xxxxxx Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Xxxxxx Common Stock and not paid,
less the amount of any withholding taxes which may be required thereon; and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Xxxxxx Common Stock, less the amount of any withholding
taxes which may be required thereon.
(e) At or after the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of Company Common Stock
which were outstanding at the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the consideration set forth in this Article I deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures
set forth in this Section 1.6. Certificates surrendered for exchange by any
person constituting an
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"affiliate" of the Company for purposes of Rule 145(c) under the Securities Act
of 1933, as amended (the "Securities Act") shall not be exchanged until Xxxxxx
has received an Affiliate Letter (as defined herein) from such person as
provided in Section 5.9.
(f) No fractional shares of Xxxxxx Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Xxxxxx
Common Stock pursuant to Section 1.4, cash adjustments will be paid to holders
in respect of any fractional share of Xxxxxx Common Stock that would otherwise
be issuable, and the amount of such cash adjustment shall be equal to such
fractional proportion of the Average Closing Price of a share of Xxxxxx Common
Stock.
(g) All former stockholders of the Company (each, a "Stockholder"
and collectively the "Stockholders") shall look only to Xxxxxx for payment of
cash (if a Stockholder is to receive cash pursuant to Section 1.4(e) hereof),
shares of Xxxxxx Common Stock, cash in lieu of fractional shares and unpaid
dividends and distributions on the Xxxxxx Common Stock, as the case may be,
deliverable in respect of each share of Company Common Stock such stockholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon.
(h) None of Xxxxxx, Xxxxxx Sub, the Company, the Surviving
Corporation or any other person shall be liable to any former holder of shares
of Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(i) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, Xxxxxx will issue
in exchange for such lost, stolen or destroyed Certificate, the consideration
to be received by the holder of such Certificate pursuant to Sections 1.4 and
1.6 hereof.
(j) Any portion of the property delivered to the Exchange Agent in
accordance with this Section 1.6 that remains unclaimed by the Stockholders one
year after the Effective Time shall be delivered to Xxxxxx. Any Stockholders
who have not theretofore complied with this Section 1.6 shall thereafter look
only to Xxxxxx for payment of their consideration to be received by such
Stockholder pursuant to Sections 1.4 and 1.6 hereof deliverable in respect of
each share of the Company Common Stock such Stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
1.7. Adjustment of Exchange Ratio. In the event that, subsequent to
the date of this Agreement but prior to the Effective Time, the outstanding
shares of Xxxxxx Common Stock or Company Common Stock shall have been changed
into a different number of shares or a different class as a result of a stock
split, reverse stock split, stock dividend, subdivision,
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reclassification, split, combination, exchange, recapitalization or other
similar transaction, the Exchange Ratio and the Average Closing Price shall be
appropriately adjusted.
1.8. Tax Consequences and Accounting Treatment. It is intended by
the parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Code and that the transaction be accounted for as
a pooling of interests.
1.9. Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Xxxxxx Sub, the officers and directors
of the Company and Xxxxxx Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful
and necessary action, so long as such action is consistent with this Agreement.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
2.1. Certificate of Incorporation of the Surviving Corporation. The
certificate of incorporation of Xxxxxx Sub in effect at the Effective Time
shall be the certificate of incorporation of the Surviving Corporation until
amended in accordance with its terms and pursuant to applicable law; provided
however, that Article I of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation
is Royce Laboratories, Inc.".
2.2. By-Laws of the Surviving Corporation. The By-Laws of Xxxxxx Sub
in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation until amended in accordance with the terms of such By-Laws and
pursuant to applicable law and the Certificate of Incorporation of the
Surviving Corporation.
2.3. Directors of the Surviving Corporation. The directors of the
Surviving Corporation immediately after the Effective Time shall consist of the
persons listed on Exhibit A attached hereto, to hold office until their
successors are duly appointed or elected in accordance with applicable law.
2.4. Officers of the Surviving Corporation. The officers of the
Surviving Corporation immediately after the Effective Time shall consist of the
persons listed on Exhibit B attached hereto who shall hold the offices listed
opposite their respective names until their successors are duly appointed or
elected in accordance with applicable law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF XXXXXX AND XXXXXX SUB
Xxxxxx and Xxxxxx Sub represent and warrant to the Company that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure statement delivered by Xxxxxx and Xxxxxx Sub to the
Company concurrently herewith and identified as the "Xxxxxx Disclosure
Statement." All exceptions noted in the Xxxxxx Disclosure Statement shall be
numbered to correspond to the applicable sections to which such exception
refers; provided, however that any disclosure set forth on any particular
schedule shall be deemed disclosed in reference to all applicable schedules.
3.1 Existence, Good Standing, Corporate Authority. Each of Xxxxxx and
Xxxxxx Sub (i) is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation; (ii)
has all requisite power and authority to own or lease, and operate its
properties and assets, and to carry on its business as now conducted and as
currently proposed to be conducted, except where the failure to have such power
and authority would not have a Xxxxxx Material Adverse Effect (as defined
herein) and to consummate the transactions contemplated hereby; (iii) is duly
qualified or licensed to do business and is in good standing in all
jurisdictions in which it owns or leases property or in which the conduct of
its business requires it to so qualify or be licensed, except where the failure
to so qualify, individually or in the aggregate, would not have a Xxxxxx
Material Adverse Effect; and (iv) has obtained all licenses, permits,
franchises and other governmental authorizations necessary to the ownership or
operation of its properties or the conduct of its business, except where the
failure to have obtained such licenses, permits, franchises or authorizations
would not have a Xxxxxx Material Adverse Effect. The copies of Xxxxxx'x and
Xxxxxx Sub's Articles or Certificate of Incorporation and By-Laws as in effect
on the date hereof have been previously delivered to the Company or have been
made available for the Company's review and are true and correct. For purposes
of this Agreement, a "Material Adverse Effect" when used with respect to any
entity means (a) a material adverse effect on the business, results of
operations, financial condition or prospects of such entity and its
subsidiaries, taken as a whole, or (b) a material impairment in the ability of
such entity or its subsidiaries to perform any of their obligations under this
Agreement or to consummate the Merger.
3.2 Authorization of Agreement and Other Documents. The execution and
delivery of this Agreement and the other documents executed or to be executed
in connection herewith to which Xxxxxx or Xxxxxx Sub is a party (collectively,
the "Xxxxxx Ancillary Documents"), have been duly authorized by the Board of
Directors of Xxxxxx and Xxxxxx Sub and no other proceedings on the part of
Xxxxxx or Xxxxxx Sub or their stockholders are necessary to authorize the
execution, delivery or performance of this Agreement or any Xxxxxx Ancillary
Document. This Agreement is, and, as of the Closing Date, each of the Xxxxxx
Ancillary Documents will be, a valid and binding obligation of Xxxxxx and/or
Xxxxxx Sub, as the case may be, enforceable against Xxxxxx and/or Xxxxxx Sub,
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as the case may be, in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency; reorganization,
moratorium, fraudulent conveyance or other similar laws affecting enforcement
of creditors' rights generally, and by general principles of equity (regardless
of whether enforcement is considered in a proceeding at law or in equity).
3.3 No Violation. Neither the execution and delivery by Xxxxxx and
Xxxxxx Sub of this Agreement or the Xxxxxx Ancillary Agreements, nor the
consummation by Xxxxxx and Xxxxxx Sub of the transactions contemplated hereby
and thereby in accordance with their respective terms, will (a) conflict with
or result in a breach of any provisions of the Articles or Certificate of
Incorporation or By-Laws of Xxxxxx or Xxxxxx Sub; (b) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of the
Xxxxxx stock option plans, or any grant or award made under any of the
foregoing; (c) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Xxxxxx or Xxxxxx Sub under, or result in
being declared void, voidable, or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any material license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which Xxxxxx or Xxxxxx Sub is a
party, or by which Xxxxxx or Xxxxxx Sub or any of their respective properties
is bound or affected, except for any of the foregoing matters which would not
have a Xxxxxx Material Adverse Effect; (d) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgement,
injunction, order or decree binding upon or applicable to Xxxxxx or Xxxxxx Sub,
except for any of the foregoing matters which would not have a Xxxxxx Material
Adverse Effect; or (e) other than the filings provided for in Sections 1.3 and
5.7, filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 0000 (xxx "XXX Xxx"), the Exchange Act, the Securities Act, or applicable
state securities and "Blue Sky" laws or filings in connection with the
maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any material consent,
approval or authorization of, or declaration of, or filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make which would have a Xxxxxx Material Adverse Effect.
3.4 SEC Documents. Xxxxxx has delivered or made available to the
Company each registration statement, report, proxy statement or information
statement (as defined in Regulation 14C under the Exchange Act) prepared by it
since January 1, 1994, which reports constitute all of the documents required
to be filed by Xxxxxx with the Securities and Exchange Commission ("SEC") since
such date, each in the form (including exhibits and any amendments thereto)
filed with the SEC (collectively, the "Xxxxxx Reports"). As of their
respective dates, the Xxxxxx Reports and any Xxxxxx Reports filed after the
date hereof and prior to the Effective Time (a) complied as to form in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations thereunder; and
(b) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein
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or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Xxxxxx has timely
filed with the SEC all reports required to be filed under Sections 13, 14 and
15(d) of the Exchange Act since January 1, 1994. Each of the consolidated
balance sheets of Xxxxxx included in or incorporated by reference into the
Xxxxxx Reports (including the related notes and schedules) fairly present in
all material respects the consolidated financial position of Xxxxxx and the
Xxxxxx Subsidiaries as of its date (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be material in
amount or effect), and each of the consolidated statements of income, retained
earnings and cash flows of Xxxxxx included in or incorporated by reference into
the Xxxxxx Reports (including any related notes and schedules) fairly present
in all material respects the results of operations, retained earnings or cash
flows, as the case may be, of Xxxxxx and the Xxxxxx Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect). The financial statements of Xxxxxx, including the notes thereto,
included in or incorporated by reference into the Xxxxxx Reports comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, and have
been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") (except as may be indicated in the notes
thereto). Since January 1, 1994, there has been no material change in Xxxxxx'x
accounting methods or principles except as described in the notes to such
Xxxxxx financial statements. All transactions entered into by Xxxxxx or its
Subsidiaries with Related Parties (as defined herein) that are required to be
disclosed in the Xxxxxx Reports have been properly disclosed, in all material
respects.
3.5 No Brokers. Xxxxxx has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
the Company or Xxxxxx, Xxxxxx Sub or their respective Subsidiaries to pay any
finder's fee, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that Xxxxxx has retained Bear
Xxxxxxx & Co. Inc. as its financial advisor, the arrangements with which have
been disclosed in writing to the Company prior to the date hereof.
3.6 Opinion of Financial Advisor. Xxxxxx has received the opinion of
Bear Xxxxxxx & Co. Inc., to the effect that, as of the date of such opinion,
the consideration to be paid by Xxxxxx pursuant to the Merger is fair to Xxxxxx
from a financial point of view.
3.7 Xxxxxx Common Stock. The issuance and delivery by Xxxxxx of
shares of Xxxxxx Common Stock in connection with the Merger and this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of Xxxxxx. The shares of Xxxxxx Common Stock to be issued in connection
with the Merger and this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable and free
of preemptive rights.
3.8 Capitalization
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(a) The total authorized capital stock of Xxxxxx consists
of (i) 500,000,000 shares of Xxxxxx Common Stock, 36,818,957 shares of which
are issued and outstanding as of December 1, 1996 and (ii) 2,500,000 shares of
Preferred Stock, none of which are issued and outstanding as of the date of
this Agreement. The authorized capital stock of Xxxxxx Sub consists of 1,000
shares of Common Stock, $0.01 par value per share, 100 shares of which, as of
the date hereof, are issued and outstanding and are held by Xxxxxx. There are
no shares of capital stock of Xxxxxx or Xxxxxx Sub of any other class
authorized, issued or outstanding. Except as set forth in the Xxxxxx
Disclosure Statement, Xxxxxx has not issued any shares of Xxxxxx Common Stock
or Preferred Stock since December 1, 1996. All of such outstanding shares of
Xxxxxx Common Stock have been validly issued, are fully paid and nonassessable
and were issued in compliance with all preemptive rights.
(b) Except as set forth in the Xxxxxx Disclosure Statement,
there are currently no outstanding, and as of the Closing; there will be no
outstanding (i) securities convertible into or exchangeable for any capital
stock of Xxxxxx or any of the Xxxxxx Significant Subsidiaries (as defined
below), (ii) options, warrants or other rights to purchase or subscribe to
capital stock of Xxxxxx or any of the Xxxxxx Significant Subsidiaries or
securities convertible into or exchangeable for capital stock of Xxxxxx or any
of the Xxxxxx Significant Subsidiaries, or (iii) contracts, commitments,
agreements, understandings, arrangements, calls or claims of any kind relating
to the issuance of any capital stock of Xxxxxx or any of the Xxxxxx Significant
Subsidiaries. For purposes of this Agreement, a "Xxxxxx Significant Subsidiary"
shall mean each Subsidiary of Xxxxxx which has total assets or total revenues
for the previous fiscal year in excess of $10,000,000.
3.9 Material Adverse Change. Since September 30, 1996 to the date
of this Agreement, Xxxxxx, Xxxxxx Sub and their Subsidiaries, taken as a whole,
have not suffered any change in their businesses, operations, assets,
liabilities, financial condition or prospects which would reasonably have a
Xxxxxx Material Adverse Effect; provided, that a Xxxxxx Material Adverse Effect
will not be deemed to have occurred solely as a result of fluctuations in the
value of Xxxxxx Common Stock due to or arising from any public disclosures by
Xxxxxx (including its 50% Subsidiary, Somerset Pharmaceuticals, Inc.),
including, without limitation, disclosures relating to Xxxxxx'x entering into
any other transactions (including, without limitation, transactions relating to
the acquisition of assets, stock or merger transactions). Since September 30,
1996 to the date of this Agreement, (a) Xxxxxx, Xxxxxx Sub and their
Subsidiaries have not entered into any transaction outside the ordinary course
of business which will be required to be disclosed in Xxxxxx'x Form 10-K for
the year ended December 31, 1996; (b) Xxxxxx has not (i) declared, set aside or
paid any dividend or made any other distribution or payment with respect to any
shares of its capital stock or other ownership interests; or (ii) directly or
indirectly, redeemed, purchased or otherwise acquired any shares of its capital
stock, or made any commitment for any such action; or (c) neither Xxxxxx nor
any Xxxxxx Significant Subsidiary has voluntarily elected to alter the manner
of keeping its books, accounts or records, or changed in any manner the
accounting practices therein reflected, except for (i) changes that would not
have a Xxxxxx Material Adverse Effect; or (ii) changes in accounting laws which
effect all pharmaceutical companies generally.
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3.10 Litigation. There is no litigation or proceeding, in law or
in equity, and there are no proceedings or governmental investigations before
any commission or other administrative authority, pending or, to Xxxxxx'x
knowledge, threatened against Xxxxxx, any of the Xxxxxx Significant
Subsidiaries or any of Xxxxxx'x or the Xxxxxx Significant Subsidiaries'
respective officers, directors or affiliates, with respect to or affecting
Xxxxxx'x or any of the Xxxxxx Significant Subsidiaries' operations, business,
products, sales practices or financial condition, or related to the
consummation of the transactions contemplated hereby, or by the Xxxxxx
Ancillary Documents or the Ancillary Documents which, in each case, if
conducted with results unfavorable to Xxxxxx or any of the Xxxxxx Significant
Subsidiaries, would have a Xxxxxx Material Adverse Effect. There are no facts
known to Xxxxxx which, if known by a potential claimant or governmental
authority, would reasonably give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to Xxxxxx or any of the Xxxxxx
Significant Subsidiaries, would have a Xxxxxx Material Adverse Effect.
3.11 Disclosure Documents. The Proxy Statement/Prospectus to be
delivered to the Stockholders in connection with the approval of the
transactions contemplated by this Agreement, or any amendment or supplement
thereto (the "Proxy Statement") at the time of mailing thereof and at the time
of the meeting of Stockholders, or, in the case of the Form S-4 (as defined in
Section 5.7 of this Agreement) and each amendment or supplement thereto, at the
time it is filed or becomes effective under the Securities Act, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the foregoing shall not apply to the extent that any
such untrue statement of a material fact or omission to state a material fact
was made by Xxxxxx in reliance upon and in conformity with written information
concerning the Company furnished to Xxxxxx by the Company specifically for use
in the Proxy Statement.
3.12 Tax Reorganization; Accounting Matters. Neither Xxxxxx nor
any of its Subsidiaries has taken or failed to take any action which would
prevent the Merger from (a) constituting a reorganization within the meaning of
section 368(a) of the Code; or (b) being treated as a "pooling or interests" in
accordance with Accounting Principles Board Opinion No. 16, the interpretative
releases issued pursuant thereto, and the pronouncements of the SEC.
3.13 Compliance with Laws--General. Xxxxxx and each of the Xxxxxx
Significant Subsidiaries are in substantial compliance with all foreign,
federal, state or local laws, ordinances or regulations of any court, arbitral,
tribunal, administrative agency or commissioner or other governmental or other
regulatory authority or agency ("Governmental Entities") (including, but not
limited to, those related to occupational health and safety, controlled
substances, Environmental Laws (as defined herein), Tax (as defined herein)
laws, labor, ERISA (as defined herein), the Foreign Corrupt Practices Act,
employment and employment practices or EEOC matters) that are applicable to
Xxxxxx and each Xxxxxx Significant Subsidiary or affect or relate to this
Agreement or the transactions contemplated hereby, except for any such
noncompliance that would not, individually or in the aggregate, have a Xxxxxx
Material Adverse Effect. To Xxxxxx'x knowledge, there has been
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no storage, treatment, generation, transportation or Release (as defined
herein) of any Materials of Environmental Concern (as defined herein) by
Xxxxxx, any Xxxxxx Significant Subsidiary or by any other person or entity for
which Xxxxxx or any Xxxxxx Significant Subsidiary is or may be held
responsible, at any Facility (as herein defined) or any Offsite Facility (as
herein defined) in violation of, or which could give rise to any material
obligation under, Environmental Laws, where such liability or obligation would
be reasonably likely to have a Xxxxxx Material Averse Effect.
3.14 Compliance with Laws--FDA.
(a) Xxxxxx and each Xxxxxx Significant Subsidiary are in
substantial compliance with all Federal and state laws applicable to the
manufacture, processing, packing, testing and sale of pharmaceutical products
to the extent such laws are applicable to them, all rules and regulations of
the Food and Drug Administration ("FDA") and the U.S. Drug Enforcement Agency
(the "DEA"), to the extent such rules and regulations are applicable to them,
each new drug application ("NDA") and abbreviated new drug application ("ANDA")
and each of its establishment license applications ("ELA") and/or product
license applications ("PLA") in which Xxxxxx or any of the Xxxxxx Significant
Subsidiaries have sold any product on or after July 17, 1995, except where the
failure to be in such compliance would not have a Xxxxxx Material Adverse
Effect.
(b) At any time after July 17, 1995, neither Xxxxxx, the Xxxxxx
Significant Subsidiaries nor, to the knowledge of Xxxxxx, their respective
officers, employees, or agents have made an untrue statement of material fact
or fraudulent statement to the FDA or the DEA, failed to disclose a material
fact required to be disclosed to the FDA or the DEA, or committed an act, made
a statement, or failed to make a statement that could reasonably be expected to
provide a basis for the FDA to invoke its policy respecting "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities," set forth in 56
Fed. Reg 46191 (September 10, 1991).
(c) At any time after July 17, 1995, neither Xxxxxx nor any of the
Xxxxxx Significant Subsidiaries have received any written notice that the FDA
or the DEA has commenced, or threatened to initiate, any judicial action
against or to withdraw its approval or request the recall of any product of
Xxxxxx or any of the Xxxxxx Significant Subsidiaries, where such product
withdrawal or recall would have a Xxxxxx Material Adverse Effect, or commenced
or threatened to initiate, any action to enjoin production at any facility
owned or used by Xxxxxx or any of the Xxxxxx Significant Subsidiaries or any
other facility at which any of Xxxxxx'x or any of the Xxxxxx Significant
Subsidiaries' products are manufactured, processed, packaged, labeled, stored,
distributed, tested or otherwise handled (the "Manufacturing Locations"), where
such action would have a Xxxxxx Material Adverse Effect.
(d) Xxxxxx has made available to the Company copies of any and all
material reports of inspection observations, establishment inspection reports,
warning letters and any other material documents received from or issued by the
FDA or the DEA since January 1, 1995 that indicate or suggest a lack of
material compliance with the FDA or the DEA regulatory requirements by Xxxxxx
or by any Xxxxxx Significant Subsidiary.
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3.15 Books and Records. Xxxxxx'x and each Xxxxxx Significant
Subsidiary's books, accounts and records are, in all material respects,
maintained in Xxxxxx'x and such Xxxxxx Significant Subsidiary's usual, regular
and ordinary manner, in accordance with GAAP and with respect to Xxxxxx and the
Xxxxxx Significant Subsidiaries other than Circa Pharmaceuticals, Inc.
("Circa"), since January 1, 1995, and, with respect to Circa, since July 18,
1995, all material transactions to which Xxxxxx or any Xxxxxx Significant
Subsidiary is or has been a party, taken as a whole, are properly reflected
therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Xxxxxx and Xxxxxx Sub that the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure statement delivered by the Company to Xxxxxx and Xxxxxx
Sub concurrently herewith and identified as the "Disclosure Statement." All
exceptions noted in the Disclosure Statement shall be numbered to correspond to
the applicable sections to which such exception refers; provided, however that
any disclosure set forth on any particular schedule shall be deemed disclosed
in reference to all applicable schedules.
4.1. Organization, Standing and Qualification. The Company and
each of its Subsidiaries (i) is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation; (ii) has all requisite power and authority to own or lease, and
operate their respective properties and assets, and to carry on their
respective businesses as now conducted and as currently proposed to be
conducted except where the failure to have such power and authority would not
have a Company Material Adverse Effect and to consummate the transactions
contemplated hereby; (iii) is duly qualified or licensed to do business and is
in good standing in all jurisdictions in which they own or lease property or in
which the conduct of their respective businesses requires them to so qualify or
be licensed except where the failure to so qualify, individually or in the
aggregate, would not have a Company Material Adverse Effect; and (iv) has
obtained all licenses, permits, franchises and other governmental
authorizations necessary to the ownership or operation of their respective
properties or the conduct of their respective businesses except where the
failure to have obtained such licenses, permits, franchises or authorizations
would not have a Company Material Adverse Effect.
4.2. Capitalization.
---------------
(a) The total authorized capital stock of the Company consists of (i)
35,000,000 shares of common stock, par value $0.005 per share, 13,519,213
shares of which are issued and outstanding as of the date of this Agreement;
(ii) 38,500 shares of Series A Preferred Stock, par value $0.005 per share,
none of which are issued and outstanding as of the date of this Agreement;
(iii) 10,000 shares of Series B Preferred Stock, par value $0.005 per share,
none of which are issued and outstanding as of the date of this Agreement; (iv)
35,000 shares of Series C Preferred Stock, par value $0.005 per share, none of
which are issued and outstanding
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as of the date of this Agreement; (v) 10,000 shares of Series D Preferred
Stock, par value $0.005 per share, none of which are issued and outstanding as
of the date of this Agreement; (vi) 27,000 shares of Series E Preferred Stock,
par value $10 per share, none of which are issued and outstanding as of the
date of this Agreement; and (iii) 128,000 shares of preferred stock, none of
which are issued and outstanding as of the date of this Agreement. There are
no shares of capital stock of the Company of any other class authorized, issued
or outstanding.
(b) Except as set forth in the Disclosure Statement, each share of the
outstanding Company Common Stock is (i) duly authorized and validly issued;
(ii) fully paid and nonassessable and free of preemptive and similar rights;
and (iii) to the knowledge of the Company, with respect to the shares of
Company Common Stock owned by the directors and officers of the Company, free
and clear of all liens, pledges, security interests, claims or other
encumbrances and restrictions on voting and transfer other than restrictions
on transfer imposed by Federal and state securities laws.
(c) Except as set forth in the Disclosure Statement, there are
currently no outstanding, and, except as permitted pursuant to Section 5.2 or
the exercise or cancellation of outstanding options in accordance with their
terms, as of the Closing, there will be no outstanding (i) securities
convertible into or exchangeable for any capital stock of the Company or any of
its Subsidiaries, (ii) options, warrants or other rights to purchase or
subscribe to capital stock of the Company or any of its Subsidiaries or
securities convertible into or exchangeable for capital stock of the Company or
any of its Subsidiaries, or (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind to which the Company
or any of its Subsidiaries is a party or is bound relating to the issuance of
any capital stock of the Company or any of its Subsidiaries. The Disclosure
Statement identifies, as of the date hereof, the option holder, the number of
shares subject to each option, the exercise price, the vesting schedule and the
expiration date of each outstanding option or warrant to purchase capital stock
of the Company or any of its Subsidiaries.
4.3. Subsidiaries. The Company owns directly or indirectly each of
the outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of each of the
Company's Subsidiaries indicated in the Disclosure Schedule as being owned by
the Company. Each of the outstanding shares of capital stock owned by the
Company of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
the Company free and clear of all liens, pledges, security interests, claims or
other encumbrances other than liens imposed by local law which are not
material. The following information for each Subsidiary of the Company is
listed in the Disclosure Schedule, if applicable: (a) its name and jurisdiction
of incorporation or organization; (b) the location of its chief executive
office; (c) a summary of its lines of business and products; (d) its authorized
capital stock or share capital; and (e) the number of issued and outstanding
shares of capital stock or share capital.
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4.4. Ownership Interests. Except for the interests in the
Company's Subsidiaries and the interests disclosed in the Disclosure Schedule,
neither the Company nor any of its Subsidiaries owns any direct or indirect
interest in any corporation, joint venture, limited liability company,
partnership, association or other entity. Since January 1, 1992, the Company
has not (i) disposed of the capital stock (other than Company Common Stock) or
all or substantially all of the assets of any ongoing business, or (ii)
purchased the business and/or all or substantially all of the assets of another
person, firm or corporation (whether by purchase of stock, assets, merger or
otherwise).
4.5. Constituent Documents. True and complete copies of the
Certificate of Incorporation and all amendments thereto, the By-Laws as amended
and currently in force, all stock records, and all corporate minute books and
records of the Company and each of its Subsidiaries have been furnished or made
available by the Company to Xxxxxx for inspection to the extent requested by
Xxxxxx. Said stock records accurately reflect all stock transactions and the
current stock ownership of the Company and its Subsidiaries. Since April 1,
1990, the corporate minute books and records of the Company and its
Subsidiaries contain true and complete copies of all resolutions adopted by the
stockholders or the board of directors of the Company and its Subsidiaries and
any other action formally taken by them respectively as such.
4.6. Authorization of Agreement and Other Documents. The execution
and delivery of this Agreement and the other documents executed or to be
executed in connection herewith to which the Company is a party (collectively,
the "Ancillary Documents"), have been duly authorized by the Board of Directors
of the Company and no other proceedings on the part of the Company are
necessary to authorize the execution, delivery or performance of this Agreement
or any Ancillary Document, except the approval of the Merger by the
Stockholders. This Agreement is, and, as of the Closing Date, each of the
Ancillary Documents will be, a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting enforcement of creditors' rights generally, and by general principles
of equity (regardless of whether enforcement is considered in a proceeding at
law or in equity) and subject to the receipt of Stockholder approval of the
Merger.
4.7. No Violation. Neither the execution and delivery of this
Agreement nor the Ancillary Documents by the Company nor the consummation by
the Company of the transactions contemplated hereby and thereby in accordance
with their respective terms, will (a) conflict with or result in a breach of
any provisions of the Certificate of Incorporation or By-Laws of the Company or
any of its Subsidiaries; (b) result in a breach or violation of, a default
under, or the triggering of any payment or other material obligations pursuant
to, or accelerate vesting under, any of the Company Stock Option Plans, or any
grant or award made under any of the foregoing; (c) violate, conflict with,
result in a breach of any provision of, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
result in the termination, or in a right of termination or cancellation of,
accelerate the performance required by, result in the triggering of any payment
or other material obligations pursuant to, result in the creation of any lien,
security interest, charge or encumbrance upon any of the material properties of
the Company or any of its
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Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound or affected; (d) contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company or any of its
Subsidiaries, except for any of the foregoing matters which would not have a
Company Material Adverse Effect; or (e) other than the Regulatory Filings,
require any material consent, approval or authorization of, or declaration of,
or filing or registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have a Company Material
Adverse Effect.
4.8. Compliance with Laws--General.
(a) The Company and each of its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of any Governmental
Entities necessary for the lawful conduct of its business (the "Permits"),
except where the failure to hold such permits would not have a Company Material
Adverse Effect.
(b) The Company and its Subsidiaries are in substantial compliance
with the terms of its Permits.
(c) The Company and its Subsidiaries are in substantial compliance
with all laws, ordinances or regulations of all Governmental Entities
(including, but not limited to, those related to occupational health and
safety, controlled substances or employment and employment practices) that are
applicable to the Company or any of its Subsidiaries or affect or relate to
this Agreement or the transactions contemplated hereby, except for any
noncompliance that would not have a Company Material Adverse Effect.
(d) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Entity with
respect to the Company or any of its Subsidiaries is to the knowledge of the
Company, pending or threatened.
(e) Neither the Company nor any of its Subsidiaries are subject to
any agreement, contract or decree with any Governmental Entities arising out of
any current or previously existing violations of any laws, ordinances or
regulations applicable to the Company or any of its Subsidiaries.
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4.9. Compliance with Laws--FDA.
(a) As to each drug of the Company for which a new drug
application or abbreviated new drug application has been approved by the FDA,
which drug is described in the Disclosure Statement, the applicant and all
persons performing operations covered by the application are in substantial
compliance with 21 U.S.C. Sections 355 or 357, 21 C.F.R. Parts 314 or 430 et.
seq., respectively, and all terms and conditions of the application.
(b) As to each biologic product of the Company or its Subsidiaries
for which an ELA and/or PLA has been filed, which products are described in the
Disclosure Statement, the applicant and all persons performing operations
covered by the application are in substantial compliance with 42 U.S.C. Section
262, 21 C.F.R. Part 601 et. seq., and all terms and conditions of the ELA
and/or PLA.
(c) The Company and each of its Subsidiaries are in substantial
compliance with all applicable registration and listing requirements set forth
in 21 U.S.C. Section 360 and 21 C.F.R. Part 207. To the extent required, the
Company and each of its Subsidiaries have obtained licenses from the DEA and
are in substantial compliance with all such licenses and all applicable
regulations promulgated by the DEA.
(d) All manufacturing operations conducted by or, to the knowledge
of the Company, for the benefit of the Company and its Subsidiaries have been
and are being conducted in substantial compliance with the good manufacturing
practice regulations set forth in 21 C.F.R. Parts 210 and 211.
(e) Neither the Company, its Subsidiaries nor, to the knowledge of
the Company, their respective officers, employees, or agents have made an
untrue statement of material fact or fraudulent statement to the FDA or the
DEA, failed to disclose a material fact required to be disclosed to the FDA or
the DEA, or committed an act, made a statement, or failed to make a statement
that could reasonably be expected to provide a basis for the FDA to invoke its
policy respecting "Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities," set forth in 56 Fed. Reg 46191 (September 10, 1991).
(f) The Company has made available to Xxxxxx copies of any and all
reports of inspection observations, establishment inspection reports, warning
letters and any other documents received from or issued by the FDA or the DEA
within the last three years that indicate or suggest lack of compliance with
the FDA or the DEA regulatory requirements by the Company, its Subsidiaries or
persons covered by product applications or otherwise performing services for
the benefit of the Company or its Subsidiaries.
(g) Neither the Company nor its Subsidiaries have received any
written notice that the FDA or the DEA has commenced, or threatened to
initiate, any action to withdraw its approval or request the recall of any
product of the Company or its Subsidiaries or commenced or threatened to
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initiate, any action to enjoin production at any facility owned or used by the
Company or its Subsidiaries or any of the Company's or its Subsidiaries'
Manufacturing Locations.
(h) As to each article of drug or consumer product currently
manufactured and/or distributed by the Company or its Subsidiaries, which
products are described in the Disclosure Statement, such article is not
adulterated or misbranded within the meaning of the FDCA, 21 U.S.C. Sections
301c et. seq.
(i) As to each drug referred to in (a), the Company, and its
officers, employees, agents and affiliates have included or caused to be
included in the application for such drug, where required, the certification
described in 21 U.S.C. Section 335a(k)(l) and the list described in 21 U.S.C.
Section 335a(k)(2), and such certification and such list was in each case true
and accurate when made and remained true and accurate thereafter.
(j) Neither the Company, its Subsidiaries, nor, to the knowledge
of the Company, their respective officers, employees, agents or affiliates, has
been convicted of any crime or engaged in any conduct for which debarment is
mandated by 21 U.S.C. Section 335a(a) or authorized by 21 U.S.C. Section
335a(b).
(k) As to each application or abbreviated application submitted
to, but not approved by, the FDA, and not withdrawn by the Company or its
Subsidiaries, or applicants acting on its behalf as of the date of this
Agreement, the Company and its Subsidiaries have complied in all material
respects with the requirements of 21 U.S.C. Sections 355 and 357 and 21 C.F.R.
Parts 312, 314 and 430 et. seq. and has provided, or will provide, all
additional information and taken, or will take, all additional action requested
by the FDA in connection with the application.
4.10. Books and Records. The Company's and its Subsidiaries' books,
accounts and records are, and have been, in all material respects, maintained
in the Company's and its Subsidiaries usual, regular and ordinary manner, in
accordance with GAAP, and since July 1, 1990, all material transactions to
which the Company or any of its Subsidiaries is or has been a party are
properly reflected therein.
4.11. SEC Documents. The Company has delivered or made available
to Xxxxxx each registration statement, report, proxy statement or information
statement (as defined in Regulation 14C under the Exchange Act) prepared by it
since January 1, 1993, which reports constitute all of the documents required
to be filed by the Company with the SEC since such date, each in the form
(including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of their respective dates, the
Company Reports and any Company Reports filed after the date hereof and prior
to the Effective Time (a) complied as to form in all material respects with the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations thereunder; and (b) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
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Company has timely filed with the SEC all reports required to be filed under
Section 13, 14 and 15(d) of the Exchange Act since January 1, 1993. Each of
the consolidated balance sheets of the Company included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of its date (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect, and each of the consolidated statements of
income, retained earnings and cash flows of the Company included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly present in all material respects the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). The financial statements of the Company,
including the notes thereto, included in or incorporated by reference into the
Company Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and have been prepared in accordance with GAAP (except as
may be indicated in the notes thereto). Since January 1, 1993, there has been
no material change in the Company's accounting methods or principles except as
described in the notes to such Company financial statements.
4.12. Accounts Receivables. To the knowledge of the Company, none of
the trade receivables and notes receivable which are reflected in the financial
statements contained in the Company Reports or which arose subsequent to
September 30, 1996, is or was subject to any counterclaim or set off. All of
such trade receivables arose out of bona fide, arms-length transactions for the
sale of goods or performance of services, and to the Company's knowledge, all
such trade receivables and notes receivable are good and collectible (or have
been collected) in the ordinary course of business using normal collection
practices at the aggregate recorded amounts thereof, less the amount of
applicable reserves for doubtful accounts and for allowances and discounts.
All such reserves, allowances and discounts, were and are adequate and
materially consistent in extent with reserves, allowances and discounts
previously maintained by the Company in the ordinary course of its business,
subject to industry changes due to shelf restocking or customer rebates. Since
September 30, 1996, there has not been a material write-down or write-off of
the Company's aggregate trade receivables or a material adverse change in the
aging thereof. The Company does not have, to a material extent, any
outstanding sales on consignment, sales on approval, sales on return or
guaranteed sales.
4.13. Inventory. All inventory of the Company or any of its
Subsidiaries which is held for sale or resale, including raw materials, work in
process and finished goods (collectively, "Inventory"), consists of items of a
quantity and quality historically usable and/or saleable in the normal course
of business, except for items of obsolete and slow-moving material and
materials which are below standard quality, all of which have been written down
to estimated net realizable value on an item by item basis. None of such
write-downs have had a Company Material Adverse Effect since September 30,
1996. With the exception of items of below standard quality which have been
written down to their estimated net realizable value, no material portion of
the materials and/or
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workmanship comprising the Inventory is defective. All Inventory reflected in
the Company Reports is valued at the lower of cost or market with cost
determined by the first in first out accounting method. Since September 30,
1996, there has not been a material change in the level of the Inventory. All
Inventory is, and, to the knowledge of the Company, all tools, dies, jigs,
patterns, molds, equipment, supplies and other materials used in the production
of Inventory are, located at the Real Estate (as defined herein), the Leased
Premises (as defined herein) or the Company's or its Subsidiaries'
Manufacturing Locations.
4.14. Bank Accounts. The Disclosure Statement contains a list
showing: (a) the name of each bank, safe deposit company or other financial
institution in which the Company or any of its Subsidiaries has an account,
lock box or safe deposit box; (b) the names of all persons authorized to draw
thereon or to have access thereto and the names of all persons and entities, if
any, holding powers of attorney from the Company or any of its Subsidiaries;
and (c) all instruments or agreements to which the Company or any of its
Subsidiaries is a party as an endorser, surety or guarantor, other than checks
or other instruments endorsed for collection or deposit.
4.15. Intellectual Property.
(a) The Disclosure Statement identifies all of the following which
are used in the Company's or any of its Subsidiaries' businesses and in which
the Company or any of its Subsidiaries claims any ownership rights: (i) all
registered trademarks, service marks, slogans, trade names, trade dress and the
like (collectively with the associated goodwill of each, "Trademarks"),
together with information regarding all registrations and pending applications
to register any such rights; (ii) all common law Trademarks; (iii) all patents
on and pending applications to patent any technology or design; (iv) all
registrations of and applications to register copyrights; and (v) all licenses
or rights in computer software, Trademarks, patents, copyrights, unpatented
formulations, manufacturing methods and other know-how, whether to or by the
Company or any of its Subsidiaries, other than licenses to commercially
available computer software and other know-how acquired or entered into by the
Company or any of its Subsidiaries in the ordinary course of business. The
rights required to be so identified, together with all proprietary formulation,
manufacturing methods, know-how and trade secrets that are material to the
Company's or any of its Subsidiaries' businesses, are referred to herein
collectively as the "Intellectual Property".
(b)(i) The Company or its Subsidiaries is the owner of or duly
licensed to use each Trademark and its associated goodwill; (ii) each of the
Trademark registrations exists and has been maintained in good standing; (iii)
each patent and application included in the Intellectual Property exists, is
owned by or licensed to the Company or its Subsidiaries and, to the Company's
knowledge, has been maintained in good standing; (iv) each copyright
registration exists and is owned by the Company or its Subsidiaries; (v) to the
Company's knowledge, no other firm, corporation, association or person claims
the right to use in connection with similar or closely related goods and in the
same geographic area, any xxxx which is identical or confusingly similar to any
of the Trademarks; (vi) the Company has no knowledge of any claim that any
third party asserts ownership rights in any of the Intellectual Property; (vii)
the Company has no knowledge of any claim or
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knowledge of any facts that would give the Company any reason to reasonably
believe that the Company's or its Subsidiaries' use of any Intellectual
Property infringes any right of any third party; (viii) the Company has no
knowledge and there are no facts known to the Company that would give the
Company any reasonable basis to believe that any third party is infringing on
any of the Company's or its Subsidiaries' rights in any of the Intellectual
Property; (ix) the Company has no knowledge and there are no facts known to the
Company that would give the Company any reasonable basis to believe that any of
its actions or the actions of its Subsidiaries has infringed or is infringing
on any third party's Intellectual Property rights; (x) to the Company's
knowledge, there are no undisclosed government restrictions, domestic or
foreign, which specifically limit the manner in which any of the Intellectual
Property may be used or licensed; and (xi) to the Company's knowledge, neither
the Company, its Subsidiaries nor any of their respective officers or directors
has disclosed any confidential information of the Company or any of its
Subsidiaries which would constitute trade secrets under Florida law, except in
the ordinary course of business of the Company and its Subsidiaries or with the
authority of the Company or its Subsidiaries.
(c) Xxxxxx understands and acknowledges that the Surviving
Corporation must continue to assert control over the quality of the goods or
services offered in connection with the Company's Trademarks or its
Subsidiaries in order to maintain its claim of ownership in the Trademarks
after the Closing.
4.16. Title to Properties. Attached to the Disclosure Statement is a
list and description of each item of real or tangible personal property owned
by the Company or any of its Subsidiaries which has a net book value in excess
of $50,000. The Company or its Subsidiaries (i) has good, marketable, legal
and valid title to such property free and clear of all liens, claims,
encumbrances or security interests (collectively, "Liens"), except for (A)
Liens set forth on the Disclosure Statement and (B) (x) mechanic's,
materialmen's, and similar liens, (y) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation and (z) liens on goods in transit incurred pursuant to documentary
letters of credit; and (ii) enjoys peaceful and undisturbed possession under
all leases to which it is a party as lessee. All of the leases to which the
Company or any of its Subsidiaries is a party (other than leases for Leased
Premises) are legal, valid and binding obligations of the Company or its
Subsidiaries and in full force and effect, and no default by the Company or its
Subsidiaries, or, to the knowledge of the Company, any other party thereto has
occurred or is continuing thereunder. The Disclosure Schedule lists all
properties and assets used by the Company or any of its Subsidiaries in
connection with the operation of their respective businesses which are held
under any lease or under any conditional sale or other title retention
agreement to the extent the Company or its Subsidiaries remaining obligations
under any such lease or agreement exceeds $50,000. Except for such assets and
facilities as are immaterial to the business of the Company or its
Subsidiaries, all tangible assets and facilities of the Company and its
Subsidiaries are in good operating condition and repair (ordinary wear and tear
excepted) and, in the aggregate with the intangible assets of the Company, are
sufficient to conduct the business of the Company and its Subsidiaries as
previously conducted prior to the date hereof.
4.17. Real Estate.
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(a) Neither the Company nor any of its Subsidiaries owns any real
estate, or has the option to acquire any real estate, other than the premises
identified in the Disclosure Statement (the "Real Estate"). The Disclosure
Statement accurately sets forth the street addresses of the Real Estate. The
Real Estate is not subject to any leases or tenancies. None of the
improvements comprising the Real Estate or the businesses conducted or proposed
to be conducted by the Company or its Subsidiaries thereon, are, to the
Company's knowledge, in violation of any material use or occupancy restriction,
limitation, condition or covenant of record or any zoning or building law,
code, ordinance or public utility easement or any other applicable law. No
material expenditures are required to be made for the repair or maintenance of
any improvements on the Real Estate or for the Real Estate to be used for its
intended purpose.
(b) Neither the Company nor any of its Subsidiaries leases any
real estate other than the premises identified in the Disclosure Statement as
being so leased (the "Leased Premises"). The Leased Premises are leased to the
Company or its Subsidiaries, pursuant to written leases, true, correct and
complete copies of which have been provided to Xxxxxx or its counsel. None of
the improvements comprising the Leased Premises, or the businesses conducted or
proposed to be conducted by the Company or its Subsidiaries thereon, are, to
the Company's knowledge, in violation of any building line or use or occupancy
restriction, limitation, condition or covenant of record or any zoning or
building law, code or ordinance, public utility or other easements or other
applicable law, except for violations which do not have a Company Material
Adverse Effect or materially interfere with the conduct of the business of the
Company or its Subsidiaries. No material expenditures are required to be made
for the repair or maintenance of any improvements on the Leased Premises or for
the Leased Premises to be used for its intended purpose. Neither the Company
nor its Subsidiaries are in default under any agreement relating to the Leased
Premises nor, to the knowledge of the Company, is any other party thereto in
default thereunder. All options in favor of the Company or its Subsidiaries to
purchase any of the Leased Premises, if any, are in full force and effect.
(c) The Real Estate, the Leased Premises, each facility located on
the Real Estate and the Leased Premises and, to the Company's knowledge, each
of the Company's or its Subsidiaries' Manufacturing Locations are currently
served by gas, electricity, water, sewage and waste disposal and other
utilities adequate to operate such Real Estate, Leased Premises, Manufacturing
Locations and/or facility at its current rate of production, and none of the
utility companies serving any such Real Estate, Leased Premises, any facility
and, to the Company's knowledge, each of such Manufacturing Locations has
threatened the Company or its Subsidiaries with any reduction in service.
(d) There are no challenges or appeals pending regarding the
amount of the taxes on, or the assessed valuation of, the Real Estate or the
Leased Premises, and no special arrangements or agreements exist with any
governmental authority with respect thereto (the representations and warranties
contained in this Section 4.17(d) shall not be deemed to be breached by any
prospective general increase in real estate tax rates).
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(e) There are no condemnation proceedings pending against the
Company or, to the Company's knowledge, threatened with respect to any portion
of the Real Estate or the Leased Premises.
(f) There is no tax assessment (in addition to the normal, annual
general real estate tax assessment) pending against the Company or, to the
Company's knowledge, threatened with respect to any portion of the Real Estate
or, to the extent the Company or its Subsidiaries is liable for payment
therefor, the Leased Premises.
(g) The buildings and other facilities located on the Real Estate
and the Leased Premises are free of any material latent structural or
engineering defects known to the Company or any material patent structural or
engineering defects.
4.18. Contracts.
(a) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, or the issuer or beneficiary of, any undischarged written or oral:
(i) agreement or arrangement obligating the Company or its Subsidiaries to pay
or receive, or pursuant to which the Company or its Subsidiaries has previously
paid or received, an amount in excess of $50,000 (excluding purchase and sale
orders entered into by the Company or its Subsidiaries in the ordinary course
of business consistent with past practices); (ii) employment or consulting
agreement or arrangement; (iii) collective bargaining agreement; (iv) plan or
contract or arrangement providing for bonuses, severance, options, deferred
compensation, retirement payments, profit sharing, medical and dental benefits
or the like covering employees of the Company, other than Plans, Welfare Plans
and Employee Benefit Plans (in each case as defined herein) described in the
Disclosure Statement; (v) agreement restricting in any manner the Company's
right to compete with any other person or entity, the Company's right to sell
to or purchase from any other person or entity, the right of any other party to
compete with the Company, or the ability of such person or entity to employ any
of the Company's employees; (vi) secrecy or confidentiality agreements; (vii)
any distributorship, non-employee commission or marketing agent, representative
or franchise agreement providing for the marketing and/or sale of the products
or services of the Company or any of its Subsidiaries; (viii) agreement between
the Company and any of its affiliates or other Related Parties (as herein
defined); (ix) guaranty, performance, bid or completion bond, or surety or
indemnification agreement; (x) requirements contract; (xi) loan or credit
agreement, pledge agreement, note, security agreement, mortgage, debenture,
indenture, factoring agreement or letter of credit; (xii) agreement for the
treatment or disposal of Materials of Environmental Concern (as defined
herein); (xiii) power of attorney; (xiv) any agreement relating to the
ownership or control of any interest in a partnership, corporation, limited
liability company, joint venture or other entity or similar arrangement; (xvi)
any contract, agreement or arrangement containing change of control provisions;
or (xvii) any other agreement not entered into in the ordinary course of
business. Neither the Company nor any of its Subsidiaries are currently
negotiating (and have not entered into preliminary discussions with respect to)
any transaction involving an aggregate payment by the Company or its
Subsidiaries and/or receipts to the Company or its Subsidiaries in excess of
$150,000 excluding purchase and sale orders entered
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into by the Company or its Subsidiaries in the ordinary course of business
consistent with past practices.
(b) All agreements, leases, subleases and other instruments referred
to in this Section 4.18, are, pursuant to their terms, in full force and
binding upon the Company or its Subsidiaries, and, to the knowledge of the
Company, the other parties thereto. Neither the Company nor any of its
Subsidiaries is and, to the Company's knowledge, none of the other parties
thereto are in default of a material provision under any such agreement, lease,
sublease or other instrument. No event, occurrence or condition exists which,
with the lapse of time, the giving of notice, or both, or the happening of any
further event or condition, would become a default of a material provision
under any such agreement, lease, sublease or other instrument by the Company or
its Subsidiaries, or, to the knowledge of the Company, the other contracting
party. Neither the Company nor any of its Subsidiaries has released or waived
any material right under any such agreement, lease, sublease or other
instrument other than in the ordinary course of business consistent with past
practices.
(c) Immediately after the Closing, except as contemplated by this
Agreement, neither the Company nor any of its Subsidiaries will be bound by the
terms of any stock option agreement, registration rights agreement,
stockholders agreement, management agreement, consulting agreement or any other
agreement relating to the equity or management of the Company or its
Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any unexpired, undischarged or unsatisfied written or oral contract,
agreement, indenture, mortgage, debenture, note or other instrument under the
terms of which performance by the Company or its Subsidiaries according to the
terms of this Agreement will be a default of a material provision under or an
event of acceleration, or grounds for termination, or whereby timely
performance by the Company of this Agreement may be prohibited, prevented or
delayed.
4.19. Insurance. The Disclosure Statement contains a true and
correct list of all insurance policies which are owned by the Company or its
Subsidiaries or which name the Company or any of its Subsidiaries as an insured
(or loss payee), including without limitation those which pertain to the
Company's or its Subsidiaries' assets, employees or operations. All such
insurance policies are in full force and effect and neither the Company nor any
of its Subsidiaries have received notice of cancellation of any such insurance
policies. In the two (2) year period ending on the date hereof, neither the
Company nor any of its Subsidiaries have received any written notice from, or
on behalf of, any insurance carrier relating to or involving an annual increase
by over 10% in insurance rates (except to the extent that insurance risks may
be increased for all similarly situated risks) or non-renewal of a policy, or
requiring or suggesting material alteration of any of the Company's or its
Subsidiaries' assets, purchase of additional equipment, or material
modification of any of the Company's or its Subsidiaries' methods of doing
business. Neither the Company nor any of its Subsidiaries made any claim for
reimbursement from its insurance carriers since June 30, 1993.
4.20. Litigation. Except as set forth in the Disclosure Schedule or
matters which are immaterial to the Company or its Subsidiaries, there is no
litigation or proceeding, in law or in
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equity, and there are no proceedings or governmental investigations before any
commission or other administrative authority, pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries, or any of
the Company's or its Subsidiaries' respective officers, directors or
affiliates, with respect to or affecting the Company's or its Subsidiaries'
respective operations, businesses, products, sales practices or financial
condition, or related to the consummation of the transactions contemplated
hereby or by the Xxxxxx Ancillary Documents or the Ancillary Documents. There
are no facts known to the Company which, if known by a potential claimant or
governmental authority, would reasonably give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to the Company or its
Subsidiaries, would have a Company Material Adverse Effect.
4.21. Warranties. To the Company's knowledge, neither the Company nor
any of its Subsidiaries has made any oral or written warranties with respect to
the quality or absence of defects of its products or services which they have
sold or performed which are in force as of the date hereof except as are
described in the Disclosure Statement. There are no material claims pending
or, to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries with respect to the quality of or absence of defects in such
products or services nor are there any facts known to the Company relating to
the quality of or absence of defects in such products or services which, if
known by a potential claimant or governmental authority, would reasonably give
rise to a material claim or proceeding. The Disclosure Statement sets forth a
summary, which is accurate in all material respects, of all returns of products
during the period beginning January 1, 1995 and ending on the date hereof, and
all credits and allowances for returned products given to customers during said
period to the extent that such returns, credits and allowances with respect to
any one product exceeds $50,000 in the aggregate, and said summary contains a
description of any reoccurring product defects (other than returns due to date
expirations). The Company has no knowledge of or reason to believe that the
percentage of warranty claims or product returns for products sold by the
Company and its Subsidiaries prior to the Closing Date will exceed historical
levels.
4.22. Products Liability. Neither the Company nor any of its
Subsidiaries have received any written notice relating to, nor does the Company
have knowledge of any facts or circumstances which could reasonably give rise
to, any claim involving any product manufactured, produced, distributed or sold
by or on behalf of the Company or its Subsidiaries resulting from an alleged
defect in design, manufacture, materials or workmanship, or any alleged failure
to warn, or from any breach of implied warranties or representations, other
than notices or claims that have been settled or resolved by the Company or its
Subsidiaries prior to the date of this Agreement.
4.23. Arbitration. Neither the Company nor any of its Subsidiaries
is a party to, or bound by, any decree, order or arbitration award (or
agreement entered into in any administrative, judicial or arbitration
proceeding with any governmental authority) with respect to or affecting the
properties, assets, personnel or business activities of the Company or its
Subsidiaries.
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4.24. Taxes.
------
(a) As used in this Agreement, (i) the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatever of a nature similar to taxes,
together with any interest and any penalties, additions to tax or additional
amounts with respect thereto, and the term "Tax" means any one of the foregoing
Taxes; and (ii) the term "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes, and the
term "Return" means any one of the foregoing Returns.
(b) There have been properly completed and filed on a timely basis and
in correct form all material Returns required to be filed by the Company or any
of its Subsidiaries. As of the time of filing, the foregoing Returns were
correct and complete in all material respects. An extension of time within
which to file any Return which has not been filed has not been requested or
granted.
(c) With respect to all amounts in respect of Taxes imposed upon the
Company or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries is or could be liable, whether to taxing authorities (as, for
example, under law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before September 30, 1996, (i) all applicable tax laws and
agreements have been complied with in all material respects, and (ii) all
amounts required to be paid by the Company or its Subsidiaries, to taxing
authorities or others, on or before the date hereof have been paid or
adequately reserved for on the financial statements contained in the Company
Reports, and any Taxes accrued but not due and payable as of September 30, 1996
have been accrued or otherwise reserved for in financial statements contained
in the most recent Company Report. No Taxes have been (or will prior to the
Closing Date be) recorded by the Company or any of its Subsidiaries other than
in the ordinary course of business. There are no Liens filed against any asset
of the Company or any of its Subsidiaries resulting from the failure to pay any
Tax when due.
(d) To the Company's knowledge, no issues have been raised (and are
currently pending) by any taxing authority in connection with any of the
Returns. No waivers of statutes of limitation with respect to the Returns have
been given by the Company or any of its Subsidiaries (or with respect to any
Return which a taxing authority has asserted should have been filed by the
Company or any of its Subsidiaries) which waivers are still in effect. The
Disclosure Statement sets forth those years for which examinations have been
completed, those years for which examinations are presently being conducted,
and those years for which Returns will be required but are not yet due to be
filed and have not yet been filed. All deficiencies asserted or assessments
made as a result of any examinations have been fully paid, or are fully
reflected as a liability in the financial statements contained in the Company
Report, or are being contested and an adequate reserve therefor has been
established and is fully reflected as a liability in the financial statements
contained in the most recent Company Report.
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(e) The unpaid Taxes of the Company or any of its Subsidiaries do not
materially exceed the reserve for tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and tax
income) set forth or included in the financial statements included in the most
recent Company Report, as adjusted for the passage of time through the Closing.
(f) Neither the Company nor any of its Subsidiaries is or at any time
has been a party to or bound by (nor will the Company or any of its
Subsidiaries become a party to or bound by) any tax indemnity, tax sharing or
tax allocation agreement.
(g) Neither the Company nor any of its Subsidiaries has ever been a
member of an affiliated group of corporations, within the meaning of section
1504 of the Code.
(h) All material elections with respect to Taxes affecting the Company
or any of its Subsidiaries that are currently effective as of the date hereof
that are not reflected in the Company's Returns are set forth in the Disclosure
Statement.
4.25. ERISA. The Disclosure Schedule contains a list and brief
description of all "employee pension benefit plans" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA and referred to herein as a
"Welfare Plan") and all other Benefit Plans (defined herein as any Pension
Plan, Welfare Plan and any other plan, fund, program, arrangement or agreement
to provide employees, directors, independent contractors, officers or agents of
any Commonly Controlled Entity with medical, health, life, bonus, stock
(option, ownership or purchase), deferred compensation, severance, salary
continuation, vacation, sick leave, fringe, incentive insurance or other
benefits) maintained, or contributed to, or required to be contributed to, by
the Company or any of its subsidiaries or any other Person that, together with
the Company at any time during the last six years, is or was treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (the Company
and each such other Person, a "Commonly Controlled Entity") for the benefit of
any current or former employees, officers or directors of any Commonly
Controlled Entity. The Company has delivered or made available to Xxxxxx true,
complete and correct copies of (i) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual
report on Forms 5500 and 990, if any, filed with the Internal Revenue Service
with respect to each Benefit Plan (if any such report was required), (iii) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required, (iv) each trust agreement and group
annuity contract relating to any Benefit Plan; and (v) a list of all assets and
liabilities of, allocated to or accounted for separately with respect to every
Benefit Plan (including insurance contracts associated with every Benefit Plan
regardless of whether any current cash value exists). Each Benefit Plan has
been established, funded, maintained and administered in all material respects
in accordance with its terms and is in compliance with the applicable
provisions of ERISA, the Code, all other applicable laws and all applicable
collective bargaining agreements except where the failure to comply would not
be reasonably expected to result in a Company Material Adverse Effect.
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(b) All Pension Plans have been the subject of favorable
and up-to-date (through any applicable remedial amendment period) determination
letters from the Internal Revenue Service, or have filed a timely application
therefor, to the effect that such Pension Plans are qualified and exempt from
federal income taxes under Section 401(a) and 501(a), respectively, of the
Code, and no such determination letter has been revoked nor has any such
Pension Plan been amended since the date of its most recent determination
letter or application therefor in any respect that would adversely affect its
qualification or materially increase its costs.
(c) No Commonly Controlled Entity has adopted or been
obligated to contribute to any "defined benefit pension plan" as defined in
Section 3(35) of ERISA subject to Title IV of ERISA in the five years preceding
the date hereof.
(d) No Commonly Controlled Entity has been required at
any time within the five calendar years preceding the date hereof or is
required currently to contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA ) or has withdrawn from any multiemployer plan
where such withdrawal has either: (i) resulted or would result in any
"withdrawal liability" (within the meaning of Section 4201 of ERISA) that has
not been fully paid; or (ii) engaged in a transaction that might have resulted
in withdrawal liability but for the application of Section 4204 of ERISA.
(e) With respect to any Welfare Plan, (i) no such Welfare
Plan is funded through a "welfare benefits fund", as such term is defined in
Section 419(e) of the Code, (ii) no such Welfare Plan is self-insured, and
(iii) each such Welfare Plan that is a "group health plan", as such term is
defined in Section 5000(b)(1) of the Code, complies with the applicable
requirements of Section 4980B(f) of the Code.
(f) Except as set forth in the Disclosure Schedule,
neither the Company or any Commonly Controlled Entity nor any Person acting on
behalf of the Company or any Commonly Controlled Entity has, in contemplation
of any corporate transaction involving Xxxxxx, issued any written communication
to, or otherwise made or entered into any legally binding commitment with, any
employees of the Company or of any Commonly Controlled Entity to the effect
that, following the date hereof, (i) any benefits or compensation provided to
such employees under existing Benefit Plans or under any other plan or
arrangement will be enhanced, (ii) any new plans or arrangements providing
benefits or compensation will be adopted, (iii) any Benefit Plans will be
continued for any period of time or cannot be amended or terminated at any time
or for any reason, or (iv) any plans or arrangements provided by Xxxxxx will be
made available to such employees.
(g) No Commonly Controlled Entity has ever promised or
been obligated to provide former employees with coverage or benefits under
Benefit Plans, other than as required by Section 4980B of the Code.
(h) All contributions or premiums owed by Commonly
Controlled Entities with respect to Benefit Plans under law, contract or
otherwise have been made in full and on a timely basis and Commonly Controlled
Entities are not obligated to contribute with respect to any Benefit
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Plan that involves a retroactive contribution, assessment or funding waiver
arrangement. All administrative costs attributable to Benefit Plans have been
paid when due.
(i) To the Company's knowledge, no Pension Plan or
Welfare Plan or any "fiduciary" or "party-in-interest" (as such terms are
respectively defined by Sections 3(21) and 3(14) of ERISA) thereto has engaged
in a transaction prohibited by Section 406 of ERISA or 4975 of the Code for
which a valid exception is not available.
(j) There are no pending or, to the Company's knowledge,
threatened likely claims, lawsuits, arbitrations or audits asserted or
instituted against any Benefit Plan, any fiduciary (as defined by Section 3(21)
of ERISA thereto, any Commonly Controlled Entity or any employee or
administrator thereof in connection with the existence, operation or
administration of a Benefit Plan, other than routine claims for benefits.
(k) Nothing in this Agreement or the transaction
contemplated hereunder will: (i) cause the termination or repricing of any
insurance contract to which a Commonly Controlled Entity or Benefit Plan is a
party to the purposes of providing employee benefits; (ii) trigger a right of
any employee of any Commonly Controlled Entity to severance, deferred
compensation or retirement benefits; or (iii) cause any early withdrawal or
premature termination penalty with respect to any asset held in connection with
any Benefit Plan.
(l) No Commonly Controlled Entity maintains any unfunded
plan of deferred compensation.
4.26. Labor Matters. Except as set forth in the Disclosure Statement
or for events that occur after the date hereof which are disclosed in writing
by the Company to Xxxxxx, (a) there is no labor strike, dispute, slowdown, work
stoppage or lockout pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries and during the past
three years, there has not been any such action; (b) there are no union claims
to represent the employees of the Company or any of its Subsidiaries, (c)
neither the Company nor any of its Subsidiaries is a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company or any of its Subsidiaries;
(d) none of the employees of the Company or any of its Subsidiaries are
represented by any labor organization and the Company does not have any
knowledge of any current union organizing activities among the employees of the
Company or any of its Subsidiaries, nor to the knowledge of the Company does
any question concerning representation exist with respect to such employees;
(e) to the knowledge of the Company, the Company and its Subsidiaries are, and
has at all times been, in material compliance with all applicable employment
laws and practices, including, without limitation, any such laws relating to
employment discrimination, occupational safety and health and unfair labor
practices; (f) there is no unfair labor practice charge or complaint against
the Company or any of its Subsidiaries pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board or, to the
knowledge of the Company, any charges or complaints, or facts which could
reasonably give rise
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to a charge or complaint, pending or threatened with any Governmental Entity
who has jurisdiction over unlawful employment practices; (g) there is no
grievance or arbitration proceeding arising out of any collective bargaining
agreement or other grievance procedure pending relating to the Company or any
of its Subsidiaries; (h) 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 by
them to the date of this Agreement or amounts required to be reimbursed to such
employees; (i) upon termination of the employment of any of the employees of
the Company or any of its Subsidiaries after the Closing, neither the Company
nor any of its Subsidiaries will be liable to any of its employees for
severance pay, except as otherwise required by federal law; (j) the employment
of each of the Company's or its Subsidiaries' employees is terminable at will
without cost to the Company or any of its Subsidiaries except for payments
disclosed on the Disclosure Statement or required under the Plans, Welfare
Plans and Employee Benefit Plans and payment of accrued salaries or wages and
vacation pay; (k) no employee or former employee of the Company or any of its
Subsidiaries has any right to be rehired by the Company or its Subsidiaries
prior to the Company's or its Subsidiaries' hiring a person not previously
employed by the Company or its Subsidiaries; and (l) the Disclosure Statement
contains a true and complete list of all employees who are employed by the
Company or any of its Subsidiaries as of December 1, 1996, and said list
correctly reflects their salaries, wages, other compensation (other than
benefits under the Plans, Welfare Plans and Employee Benefit Plans), dates of
employment and positions. Neither the Company nor any of its Subsidiaries owes
any past or present employee any sum in excess of $25,000 individually or
$50,000 in the aggregate other than for accrued wages or salaries for the
current payroll period, and amounts payable under Plans, Welfare Plans or
Employee Benefit Plans. No employee owes any sum to the Company or any of its
Subsidiaries in excess of $25,000, and all employees together do not owe the
Company or any of its Subsidiaries in excess of $50,000.
4.27. Environmental Matters.
(a) The Company, its Subsidiaries and their respective assets and
businesses are in substantial compliance with all Environmental Laws and
Environmental Permits (as herein defined) applicable to them. A copy of any
notice, citation, inquiry or complaint which the Company or any of its
Subsidiaries has received in the past three years of any alleged violation of
any Environmental Law or Environmental Permit is contained in the Disclosure
Schedule, and all violations alleged in said notices have been or are being
corrected. A description of all such violations currently being corrected is
contained in the Disclosure Statement. The Company and its Subsidiaries
possess all Environmental Permits which are required for the operation of their
respective businesses, and are in substantial compliance with the provisions of
all such Environmental Permits. Copies of all Environmental Permits issued to
the Company or any of its Subsidiaries have been provided or made available to
Xxxxxx or its counsel. The Company has delivered to Xxxxxx copies of all
environmental reports with respect to the Real Estate and the Leased Premises
in its possession (other than reports prepared by or on behalf of Xxxxxx) which
were conducted during the last five years.
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(b) The Disclosure Statement sets forth a complete list of all
Materials of Environmental Concern stored, treated, generated, used,
transported or Released (as herein defined) in connection with the operation of
the Company's business. There has been no storage, treatment, generation,
transportation or Release of any Materials of Environmental Concern by the
Company or any of its Subsidiaries, or, to the knowledge of the Company, by any
other person or entity for which the Company or any of its Subsidiaries is or
may be held responsible, at any Facility (as herein defined) or any Offsite
Facility (as herein defined) in violation of, or which could give rise to any
material obligation under, Environmental Laws.
(c) The Disclosure Statement sets forth a complete list of all
Containers (as herein defined) that are now present at, or have heretofore been
removed during the last two years from, the Real Estate or the Leased Premises.
All Containers which have been heretofore removed from the Real Estate or the
Leased Premises have been removed substantially in accordance with all
applicable Environmental Laws.
(d) For the purposes of this Agreement: (i) "Environmental Laws"
means all federal, state and local statutes, regulations, ordinances, rules,
regulations and policies, all court orders and decrees and arbitration awards,
and the common law, which pertain to environmental matters or contamination of
any type whatsoever. Environmental Laws include, without limitation, those
relating to: manufacture, processing, use, distribution, treatment, storage,
disposal, generation or transportation of Materials of Environmental Concern;
air, surface or ground water or noise pollution; Releases; protection of
wildlife, endangered species, wetlands or natural resources; Containers; health
and safety of employees and other persons; and notification requirements
relating to the foregoing; (ii) "Environmental Permits" means licenses,
permits, registrations, governmental approvals, agreements and consents which
are required under or are issued pursuant to Environmental Laws; (iii)
"Materials of Environmental Concern" means (A) pollutants, contaminants,
pesticides, radioactive substances, solid wastes or hazardous or extremely
hazardous, special, dangerous or toxic wastes, substances, chemicals or
materials within the meaning of any Environmental Law, including without
limitation any (i) "hazardous substance" as defined in CERCLA, and (ii) any
"hazardous waste" as defined in the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C., Sec. 6902 et. seq., and all amendments thereto and
reauthorizations thereof; and (B) even if not prohibited, limited or regulated
by Environmental Laws, all pollutants, contaminants, hazardous, dangerous or
toxic chemical materials, wastes or any other substances, including without
limitation, any industrial process or pollution control waste (whether or not
hazardous within the meaning of RCRA) which could pose a hazard to the
environment or the health and safety of any person, or impair the use or value
of any portion of the Real Estate or the Leased Premises; (iv) "Release" means
any spill, discharge, leak, emission, escape, injection, dumping, or other
release or threatened release of any Materials of Environmental Concern into
the environment, whether or not notification or reporting to any governmental
agency was or is, required, including without limitation any Release which is
subject to CERCLA; (v) "Facility" means any facility as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et. seq., as amended and reauthorized ("CERCLA"); (vi) "Offsite Facility"
means any Facility which is not presently, and has not heretofore been, owned,
leased or occupied by the Company; and
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(vii) "Containers" means above-ground and under-ground storage tanks, vessels
and related equipment and containers.
4.28. Interim Conduct of Business. Except as otherwise contemplated
by this Agreement, since September 30, 1996, neither the Company nor any of
its Subsidiaries has:
(a) sold, assigned, leased, exchanged, transferred or otherwise
disposed of any material portion of its assets or property, except for sales of
Inventory and cash applied in the payment of the Company's or its Subsidiaries'
liabilities in the usual and ordinary course of business in accordance with the
Company's or its Subsidiaries' past practices;
(b) written off any asset which has a net book value which exceeds
$25,000 individually or $50,000 in the aggregate in value, or suffered any
casualty, damage, destruction or loss, or interruption in use, of any material
asset, property or portion of Inventory (whether or not covered by insurance),
on account of fire, flood, riot, strike or other hazard or Act of God;
(c) waived any material right arising out of the conduct of, or with
respect to, its business;
(d) made (or committed to make) capital expenditures in an amount
which exceeds $25,000 for any item or $100,000 in the aggregate;
(e) made any change in accounting methods or principles;
(f) borrowed any money or issued any bonds, debentures, notes or
other corporate securities (other than equity securities), including without
limitation, those evidencing borrowed money;
(g) entered into any transaction with, or made any payment to, or
incurred any liability to, any Related Party (as defined herein) in an amount
which exceeds $15,000 or $50,000 in the aggregate (except for payment of salary
and other customary expense reimbursements made in the ordinary course of
business to Related Parties who are employees of the Company or its
Subsidiaries);
(h) increased the compensation payable to any employee, except for
normal pay increases in the ordinary course of business consistent with past
practices;
(i) made any payments or distributions to its employees, officers or
directors except such amounts as constitute currently effective compensation
for services rendered, or reimbursement for reasonable ordinary and necessary
out-of-pocket business expenses;
(j) paid or incurred any management or consulting fees, or engaged
any consultants, except in the ordinary course of business;
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(k) hired any employee who has an annual salary in excess of $35,000,
or employees with aggregate annual salaries or wages in excess of $70,000;
(l) terminated any employee having an annual salary or wages in
excess of $35,000 or employees with aggregate annual salaries or wages in
excess of $70,000;
(m) adopted any new Plan, Welfare Plan or Employee Benefit Plan;
(n) issued or sold any securities of any class, except for the grant
or exercise of options to purchase Company Common Stock under the Company
Option Plans;
(o) paid, declared or set aside any dividend or other distribution
on its securities of any class, or purchased, exchanged or redeemed any of its
securities of any class; or
(p) without limitation by the enumeration of any of the foregoing,
entered into any transaction other than in the usual and ordinary course of
business in accordance with past practices.
Notwithstanding the foregoing, the Company shall not be deemed to have breached
the terms of this Section 4.28 by entering into this Agreement or by
consummating the transactions contemplated hereby.
4.29. Affiliated Transactions. Since January 1, 1995, neither the
Company nor any of its Subsidiaries has been a party to any transactions (other
than employee compensation and other ordinary incidents of employment) in
excess of $15,000 individually or $50,000 in the aggregate with a "Related
Party" other than loans to Company employees made in connection with the
exercise of Company stock options, all of which have been paid in full as of
the date hereof. For purposes of this Agreement, the term "Related Party"
shall mean: any present or former officer or director, 10% stockholder or
present affiliate of the Company or any of its Subsidiaries, any present or
former known spouse, ancestor or descendant of any of the aforementioned
persons or any trust or other similar entity for the benefit of any of the
foregoing persons. No property or interest in any property (including, without
limitation, designs and drawings concerning machinery) which relates to and is
or will be necessary or useful in the present or currently contemplated future
operation of the Company's or its Subsidiaries' respective businesses, is
presently owned by or leased or licensed by or to any Related Party. Prior to
the Closing, all amounts due and owing to or from the Company or its
Subsidiaries by or to any of the Related Parties (excluding employee
compensation and other incidents of employment) shall be paid in full. Except
for the ownership of securities representing less than a 2% equity interest in
various publicly traded companies, neither the Company, its Subsidiaries, nor
to the Company's knowledge, any Related Party has an interest, directly or
indirectly, in any business, corporate or otherwise, which is in competition
with the Company's or its Subsidiaries' respective businesses.
4.30. Significant Customers, Suppliers and Employees. The Disclosure
Statement sets forth an accurate list of the Company's and its Subsidiaries'
Significant Customers (as defined herein),
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Significant Suppliers (as defined herein) and Significant Employees (as defined
herein). The Company has no knowledge of any intention or indication of
intention by a (a) Significant Customer to terminate its business relationship
with the Company or its Subsidiaries or to limit or alter its business
relationship with the Company or its Subsidiaries in any material respect; (b)
Significant Supplier to terminate its business relationship with the Company or
its Subsidiaries or to limit or alter its business relationship with the
Company or its Subsidiaries in any material respect; or (c) Significant
Employee intends to terminate his employment with the Company or its
Subsidiaries. Notwithstanding the foregoing, nothing contained herein shall be
deemed to be a covenant or guaranty by the Company that any particular
Significant Customer, Significant Supplier or Significant Employee will
continue to conduct business with the Company and its Subsidiaries after the
date hereof. As used herein, (w) "Significant Customer" means the 10 largest
customers of the Company and its Subsidiaries, taken as a whole, including
distributors of the Company's products, measured in terms of sales volume in
dollars for the year ended December 31, 1995 and for the eleven month period
ending November 30, 1996, (x) "Significant Supplier" means any supplier of the
Company and its Subsidiaries from whom the Company or its Subsidiaries has
purchased $250,000 or more of goods during the year ended December 31, 1995 or
$229,000 or more goods during the eleven month period ending November 30, 1996,
for use in the Company's or its Subsidiaries' respective businesses; and (y)
"Significant Employee" means the Chief Executive Officer, the President, the
Senior Director of Research and Development, any Vice President, the Director
of Field Sales or any regional sales manager of the Company or its
Subsidiaries.
4.31. Material Adverse Change. Since September 30, 1996 to the date
of this Agreement, neither the Company nor its Subsidiaries has suffered any
material adverse change in the business, operations, assets, liabilities,
financial condition or prospects of the Company or its Subsidiaries, taken as a
whole.
4.32. Bribes. Since April 1, 1990, neither the Company, its
Subsidiaries nor, to the Company's knowledge, any of their respective officers,
directors, employees, agents or representatives has made, directly or
indirectly, with respect to the Company, its Subsidiaries or their respective
business activities, any bribes or kickbacks, illegal political contributions,
payments from corporate funds not recorded on the books and records of the
Company or its Subsidiaries, payments from corporate funds to governmental
officials, in their individual capacities, for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business.
4.33. Absence of Indemnifiable Claims, etc. There are no pending
claims and, to the knowledge of the Company, no facts that would reasonably
entitle any director, officer or employee of the Company or its Subsidiaries to
indemnification by the Company or its Subsidiaries under applicable law, the
Certificate of Incorporation or By-laws of the Company or its Subsidiaries or
any insurance policy maintained by the Company or its Subsidiaries.
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4.34. No Undisclosed Liabilities. There are no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
of the Company or its Subsidiaries other than (i) liabilities disclosed or
provided for in the most recent financial statements contained in the Company
Reports; (ii) liabilities which, individually or in the aggregate, are not
material to the Company or its Subsidiaries; (iii) liabilities under this
Agreement (or contemplated hereby) or disclosed in the Disclosure Statement and
(iv) liabilities incurred since September 30, 1996 in the ordinary course of
business and consistent with past practices.
4.35. No Brokers. Neither the Company nor any of its Subsidiaries has
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of the Company or Xxxxxx, Xxxxxx Sub or
their respective Subsidiaries to pay any finder's fee, brokerage or agent's
commissions or other like payments in connection with negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby,
except that the Company has retained Gruntal & Co., Incorporated as its
financial advisor, the arrangements with which have been disclosed in writing
to Xxxxxx prior to the date hereof.
4.36. Tax Reorganization. Neither the Company nor any of its
Subsidiaries has taken or failed to take any action which would prevent the
Merger from (a) constituting a reorganization within the meaning of section
368(a) of the Code or (b) being treated as a "pooling or interests" in
accordance with Accounting Principles Board Opinion No. 16, the interpretative
releases issued pursuant thereto, and the pronouncements of the SEC.
4.37. Opinion of Financial Advisor. The Company has received the
opinion of Gruntal & Co., Incorporated to the effect that, as of the date
hereof, the consideration to be received by the Stockholders pursuant to the
Merger is fair to such Stockholders from a financial point of view.
4.38. Information Supplied. The information supplied or to be
supplied in writing by the Company, its Subsidiaries, or any of their
respective officers, directors, representatives, agents or employees, for
inclusion or incorporation by reference in (a) the Proxy Statement will not, at
the time the Proxy Statement is first mailed to the Stockholders, at the time
such Stockholders vote on adoption of this Agreement, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading and (b) the Form S-4, together with all
amendments and supplements thereto, will not, at the time the Form S-4 is filed
or becomes effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No representation is
made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Xxxxxx or any of Xxxxxx'x
Subsidiaries specifically for inclusion or incorporation by reference in the
Proxy Statement or the Form S-4.
4.39. Takeover Statutes. No "fair price", "moratorium", "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the Xxxxxx Xxxxxx,
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applicable to the Company or any of its Subsidiaries is applicable to the
Merger or the other transactions contemplated hereby.
ARTICLE V
COVENANTS
5.1 Alternative Proposals. Prior to the Effective Time, the
Company agrees (a) that neither it nor any of its Subsidiaries shall, and it
shall direct and cause its officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, initiate or
solicit, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its Stockholders) with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company or its
Subsidiaries (any such proposal or offer being hereinafter referred to as an
"Alternative Proposal") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Alternative Proposal, or otherwise facilitate any effort
or attempt to make or implement an Alternative Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 5.1; and (c) that it will notify the other immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, it; provided, however, that nothing contained in this Section 5.1 shall
prohibit the Board of Directors of the Company from (A) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal to acquire the Company pursuant to a
merger, consolidation, share exchange, purchase of a substantial portion of
assets, business combination or other similar transaction, if, and only to the
extent that, (i) the Board of Directors of the Company determines in good faith
that such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law; (ii) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to Xxxxxx to the effect that it
is furnishing information to, or entering into discussions or negotiations
with, such person or entity; and (iii) subject to any confidentiality agreement
with such person or entity (which the Company determined in good faith was
required to be executed in order for its Board of Directors to comply with its
fiduciary duties to stockholders imposed by law), the Company keeps Xxxxxx
informed of the status of any such discussions or negotiations; and (B) to the
extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Alternative Proposal. Nothing in this Section 5.1 shall (x)
permit the Company to terminate this Agreement (except as specifically provided
in Article 7 hereof); (y) permit the Company to enter into any agreement with
respect to an Alternative Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, the Company shall
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not enter into any agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal (other than a confidentiality agreement in
customary form)); or (z) affect any other obligation of the Company under this
Agreement.
5.2 Interim Operations.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as set forth in the Disclosure Statement, unless Xxxxxx
has consented in writing thereto (which consent shall not be unreasonably
withheld), the Company shall, and shall cause each of its Subsidiaries to,:
(i) conduct their respective operations according to their
usual, regular and ordinary course in substantially the same manner as
heretofore conducted;
(ii) to the extent consistent with their respective
businesses, use commercially reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(iii) not amend their respective Certificates of Incorporation
or By-Laws or comparable governing instruments;
(iv) promptly notify Xxxxxx of any material emergency or
other Company Material Adverse Effect, any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the material breach of any
representation or warranty contained herein;
(v) promptly deliver to Xxxxxx true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(vi) not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement, issue any shares of its
capital stock, effect any stock split or otherwise change its capitalization as
it existed on the date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire any
shares of its capital stock; (C) increase any compensation or enter into or
amend any employment agreement with any of its present or future officers,
directors or employees, except for normal increases consistent with past
practice; (D) grant any severance or termination package to any employee or
consultant, except to the extent consistent with past practices; (E) hire any
new employee who shall have, or terminate the employment of any employee who
has, an annual salary in excess of $80,000; or (F) adopt any new employee
benefit plan (including any stock option, stock benefit or stock purchase plan)
or amend any existing employee benefit plan in any material respect, except for
changes which are less favorable to participants in such plans;
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(vii) not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests; or (B) directly or indirectly, redeem,
purchase or otherwise acquire any shares of its capital stock, or make any
commitment for any such action;
(viii) not enter into any agreement or transaction, or agree
to enter into any agreement or transaction, outside the ordinary course of
business, including, without limitation, any transaction involving a merger,
consolidation, joint venture, license agreement partial or complete liquidation
or dissolution, reorganization, recapitalization, restructuring or a purchase,
sale, lease or other disposition of a material portion of assets or capital
stock;
(ix) not enter into any additional research and development
contracts which call for the payment or receipt of funds in excess of $10,000
individually or $50,000 in the aggregate, other than the contracts contemplated
by the Company's research and development plan which has been disclosed by the
Company to Xxxxxx prior to the date hereof;
(x) not incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of others other than in the ordinary
course of its business, but in no event in an amount exceeding $2,500,000 in the
aggregate (other than normal expenditures for the purchase of raw materials or
other supplies);
(xi) not make any loans, advances or capital contributions
to, or investments in, any other Person;
(xii) Except as described in the Disclosure Statement, not
make or commit to made any capital expenditures in excess of $25,000
individually or $50,000 in the aggregate;
(xiii) not apply any of its assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate or Related Party of the
Company or any of its Subsidiaries or enter into any transaction with any
affiliate or Related Party of the Company or its Subsidiaries (except for
payment of salary and other customary expense reimbursements made in the
ordinary course of business to Related Parties who are employees of the Company
or its Subsidiaries);
(xiv) not voluntarily elect to alter the manner of keeping its
books, accounts or records, or change in any manner the accounting practices
therein reflected, except for changes in accounting laws which effect all
pharmaceutical companies generally;
(xv) not grant or make any mortgage or pledge or subject
itself or any of its material properties or assets to any lien, charge or
encumbrance of any kind, except Liens for taxes not currently due and liens
granted to incur the indebtedness contemplated by Section 5.2(a)(x) hereof; and
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(xvi) maintain insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are currently
in effect.
(b) During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
except as set forth in the Disclosure Statement, unless the Company has
consented in writing thereto (which consent shall not be unreasonably
withheld), Xxxxxx shall, and shall cause each of its Subsidiaries to,:
(i) conduct their respective operations according to their
usual, regular and ordinary course in substantially the same manner as
heretofore conducted (except for entering into transactions described in
5.2(b)(v) below);
(ii) promptly deliver to the Company true and correct copies
of any report, statement or schedule filed with the SEC subsequent to the date
of this Agreement;
(iii) promptly notify the Company of any material emergency
or other Xxxxxx Material Adverse Effect, any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the material breach of any
representation or warranty contained herein;
(iv) not amend their respective Certificates of Incorporation
or By-laws or comparable governing instruments;
(v) promptly notify the Company of its entering into any
agreement with respect to any material transaction involving a merger,
consolidation, joint venture, partial or complete liquidation or dissolution,
reorganization or recapitalization, restructuring or a purchase, sale, lease or
other disposition of a material portion of assets or capital stock;
(vi) not take any action that would result in a failure to
maintain the trading of Xxxxxx Common Stock on the Nasdaq National Market;
(vii) with respect to Xxxxxx only (and not its Subsidiaries),
not (A) declare, set aside or pay any dividend or make any other distribution
or payment with respect to any shares of its capital stock or other ownership
interests; or (B) directly or indirectly, redeem, purchase or otherwise acquire
any shares of its capital stock, or make any commitment for any such action;
and
(viii) not voluntarily elect to alter the manner of keeping
its books, accounts or records, or change in any manner the accounting
practices therein reflected, except for (A) changes that would not have a
Xxxxxx Material Adverse Effect; or (B) changes in accounting laws which effect
all pharmaceutical companies generally.
5.3 Meetings of Stockholders. The Company will take all action
necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of the
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Stockholders as promptly as practicable to consider and vote upon the approval
of the Merger, this Agreement and the transactions contemplated hereby. The
Board of Directors of the Company shall recommend such approval and the Company
shall take all lawful action to solicit such approval, including, without
limitation, timely mailing the Proxy Statement to the Stockholders; provided,
however, that such recommendation or solicitation is subject to any action
(including any withdrawal or change of its recommendation) taken by, or upon
authority of, the Board of Directors of the Company in the exercise of its good
faith judgment as to its fiduciary duties to the Stockholders imposed by law.
5.4 Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Xxxxxx shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with
one another in (i) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; and
(ii) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; (c) use commercially reasonable efforts
to obtain all consents under or with respect to, any contract, lease,
agreement, purchase order, sales order or other instrument, Permit or
Environmental Permit, where the consummation of the transactions contemplated
hereby would be prohibited or constitute an event of default, or grounds for
acceleration or termination, in the absence of such consent; and (d) take, or
cause to be taken, all other commercially reasonable actions as are reasonably
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further commercially reasonable action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors of Xxxxxx and the Surviving Corporation shall take all such necessary
action.
5.5 Inspection of Records. From the date hereof to the Effective
Time, the Company shall (a) allow all designated officers, attorneys,
accountants and other representatives of Xxxxxx reasonable access at all
reasonable times to the offices, records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs of the Company and its Subsidiaries; (b) furnish to Xxxxxx, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request; and (c) instruct the employees, counsel and financial
advisors of the Company and its Subsidiaries to cooperate with Xxxxxx and its
investigation of the business of the Company and its Subsidiaries. From the
date hereof to the Effective Time, Xxxxxx shall (a) furnish to the Company, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request, and (b) instruct the officers, counsel and financial
advisors of Xxxxxx to cooperate with the Company in its investigation of the
business of Xxxxxx or its Subsidiaries. All information disclosed by the
Company to Xxxxxx and its representatives or by Xxxxxx to the Company and its
representatives shall be subject to the terms of
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that certain Non-Disclosure Agreement (the "Confidentiality Agreement") dated
as of December 13, 1995 between Xxxxxx and the Company.
5.6 Publicity. Neither party hereto shall make any press release or
public announcement with respect to this Agreement, the Merger or the
transactions contemplated hereby without the prior written consent of the other
party hereto (which consent shall not be unreasonably withheld); provided,
however, that each party hereto may make any disclosure or announcement which
such party, in the opinion of its legal counsel, is obligated to make pursuant
to applicable law or regulation of any national securities exchange, in which
case, the party desiring to make the disclosure shall consult with the other
party hereto prior to making such disclosure or announcement.
5.7 Registration Statement. Xxxxxx and the Company shall cooperate
and promptly prepare and Xxxxxx shall file with the SEC as soon as practicable
a Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Xxxxxx Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the Proxy Statement. The
respective parties will cause the Proxy Statement and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. Xxxxxx shall use all reasonable efforts, and the Company will
cooperate with Xxxxxx, to have the Form S-4 declared effective by the SEC as
promptly as practicable. Xxxxxx shall use its best efforts to obtain, prior to
the effective date of the Form S-4, all necessary state securities law or "Blue
Sky" permits or approvals required to carry out the transactions contemplated
by this Agreement and will pay all expenses incident thereto. No amendment or
supplement to the Proxy Statement will be made by Xxxxxx or the Company without
the approval of the other party, which approval shall not be unreasonably
withheld. Xxxxxx will advise the Company, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement
or amendment has been filed, the issuance of any stop order, the suspension of
the qualification of the Xxxxxx Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information and Xxxxxx
shall use its best efforts to promptly resolve any such stop order, suspension
or qualification.
5.8 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
5.9 Affiliate Letters. At least 30 days prior to the Closing Date,
the Company shall deliver to Xxxxxx a list of names and addresses of those
persons who were or will be, in the Company's reasonable judgment, at the
record date for its Stockholders' meeting to approve the Merger, "affiliates"
(each such person, an "Affiliate") of the Company within the meaning of Rule
145 of the rules and regulations promulgated under the Securities Act. The
Company shall provide Watson such information and documents as Xxxxxx shall
reasonably request for purposes of reviewing such
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list. The Company shall deliver or cause to be delivered to Xxxxxx, prior to
the Closing Date, from each of the Affiliates of the Company identified in the
foregoing list, an Affiliate Letter in substantially the form attached hereto
as Exhibit X. Xxxxxx shall be entitled to place legends as specified in such
Affiliate Letters on the certificates evidencing any Xxxxxx Common Stock to be
received by such Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the
Xxxxxx Common Stock, consistent with the terms of such Affiliate Letters.
5.10 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
(a) as otherwise expressly provided for herein; and (b) the expenses incurred
in connection with printing and mailing the Form S-4 and the Proxy Statement
shall be shared equally by the Company and Xxxxxx.
5.11 Tax Treatment of Merger. From and after the date hereof and
until the Effective Time, neither Xxxxxx nor the Company nor any of their
respective Subsidiaries or other affiliates shall (a) knowingly take any
action, or knowingly fail to take any action, that would jeopardize
qualification of the Merger as (i) a reorganization within the meaning of
Section 368(a) of the Code; or (ii) a "pooling of interests" for accounting
purposes; or (b) enter into any contract, agreement, commitment or arrangement
with respect to the foregoing. After the Effective Time, Xxxxxx shall not take
or fail to take (and shall cause the Surviving Corporation not to take or fail
to take) any action that is reasonably likely to jeopardize qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
5.12 Employee Benefit Plans. Xxxxxx covenants and agrees that it will
continue the Company's existing benefit plans and arrangements for a period of
at least six months following the Effective Date. Thereafter, to the extent
the existing benefit plans and arrangements provided by the Company to its
employees are terminated, such employees who remain employees of the Surviving
Corporation shall be entitled to participate in all benefit plans and
arrangements that are available and subsequently become available to Xxxxxx'x
employees on the same basis as Watson's employees in similar positions are
eligible to participate. For purposes of satisfying the terms and conditions
of such plans, Xxxxxx shall give full credit for eligibility, vesting or
benefit accrual for each participant's period of service with the Company prior
to the Effective Time. To the extent Xxxxxx'x benefit plans provide medical
or dental welfare benefits after the Closing Date, Xxxxxx shall cause all
pre-existing condition exclusions and actively at work requirements to be
waived and Xxxxxx shall provide that any expenses incurred on or before the
Closing Date shall be taken into account under Xxxxxx'x benefit plans for
purposes of satisfying the applicable deductible, coinsurance and maximum
out-of-pocket provisions for such employees and their covered dependents.
5.13 Company Options. Immediately after the Effective Time, but in
any event, no later than three business days after the Closing Date, Xxxxxx
shall register the shares of Xxxxxx Common Stock issuable upon exercise of such
Company Options with the SEC on Form S-8, to the extent that such Company
Options may be registered on such form. To the extent that all or any portion
of the
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Company Options may not be registered on Form S-8 (the "Non-Employee Options"),
Xxxxxx and the Company shall cooperate and promptly prepare and Xxxxxx shall
file with the SEC as soon as practicable a Registration Statement on Form S-3
(the "Form S-3") under the Securities Act, with respect to the Xxxxxx Common
Stock issuable upon exercise of the Non-Employee Options. Xxxxxx shall use all
reasonable efforts, and the Company will cooperate with Xxxxxx, to have the
Form S-3 declared effective by the SEC on or prior to the Effective Date.
Xxxxxx will advise holders of such Non-Employee Options, promptly after it
receives notice thereof, of the time when the Form S-3 has become effective,
the issuance of any stop order or the suspension of the qualification of the
Xxxxxx Common Stock issuable in connection with the exercise of the
Non-Employee Options for offering or sale in any jurisdiction and Xxxxxx shall
use its best efforts to promptly resolve any such stop order, suspension or
qualification.
5.14 Indemnification of Directors and Officers of the Company
--------------------------------------------------------
(a) From and after the Effective Time of the Merger, Xxxxxx agrees
to indemnify and hold harmless, and to cause the Surviving Corporation to honor
its separate indemnification to, each person who is an officer or director of
the Company or its Subsidiaries on the date of this Agreement (an "Indemnified
Person") from and against all damages, liabilities, judgments and claims (and
related expenses including, but not limited to, attorney's fees and amounts
paid in settlement) based upon or arising from his or her capacity as an
officer or director of the Company or its Subsidiaries, to the same extent he
or she would have been indemnified under the Articles of Incorporation or
By-laws of Xxxxxx as such documents were in effect on the date of this
Agreement and to the extent permitted under applicable law. Subject to an
Indemnified Person's obligation to refund any advances in accordance with the
Florida Business Corporation Act, Xxxxxx shall advance all litigation costs
reasonably incurred by such Indemnified Person in accordance with applicable
law.
(b) The rights granted to the Indemnified Persons hereby shall be
contractual rights inuring to the benefit of all Indemnified Persons and shall
survive this Agreement and any merger consolidation or reorganization of
Xxxxxx.
(c) The rights to indemnification granted by this Section 5.14 are
subject to the following limitations: (i) amounts otherwise required to be paid
by Xxxxxx to an Indemnified Person pursuant to this Section 5.14 shall be
reduced by any amounts that such Indemnified Person has recovered by virtue of
the claim for which indemnification is sought and Xxxxxx shall be reimbursed
for any amounts paid by Xxxxxx that such Indemnified Person subsequently
recovers by virtue of such claim; (ii) any claim for indemnification pursuant
to this Section 5.14 must be submitted in writing to the Chief Executive
Officer or Chairman of Xxxxxx promptly upon such Indemnified Person becoming
aware of such claim, provided that any such failure to advise promptly will not
cause a loss of indemnity unless it has a prejudicial effect on Xxxxxx; and
(iii) an Indemnified Person shall not settle any claim for which
indemnification is provided herein without the prior written consent of Xxxxxx,
which consent shall not be unreasonably withheld.
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5.15 Publication of Post-Merger Results. Xxxxxx shall use its
reasonable best efforts to cause financial results covering at least thirty
days of post-Merger combined operations to be published in its first report of
quarterly financial statements as soon as practicable after such information is
required to be filed with the SEC.
5.16 Agreement with respect to Products under Development. As soon
as practicable after the date hereof, but in any event within ten (10) business
days after the date hereof, Xxxxxx and the Company shall negotiate in good
faith and shall use their best efforts to enter into an agreement with respect
to the development and sale of all of the Company's products under development.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions (unless waived by each of the parties hereto in accordance with the
provisions of Section 7.6 hereof):
(a) This Agreement and the Merger and other transactions
contemplated hereby shall have been approved and adopted by the requisite vote
of the Stockholders.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger or materially changes the terms or conditions of this Agreement shall
have been issued and remain in effect. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(d) The Form S-4 and Form S-3 shall have been declared effective by
the SEC and shall be effective at the Effective Time, and no stop order
suspending the effectiveness of the Form S-4 or the Form S-3 shall have been
issued, no action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and all
necessary approvals under state securities laws relating to the issuance or
trading of the Xxxxxx Common Stock to be issued to the Stockholders in
connection with the Merger shall have been received.
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(e) All material consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time.
(f) The Xxxxxx Common Stock to be issued to the Stockholders in
connection with the Merger shall have been authorized for trading on the Nasdaq
National Market subject only to official notice of issuance.
(g) Xxxxxx shall have received the opinion of X'Xxxxxx & Xxxxxx,
counsel to Xxxxxx, dated the Closing Date, to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that the Company and Xxxxxx will
each be a party to that reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, counsel shall be entitled to rely upon,
among other things, reasonable assumptions as well as representations and
covenants of Xxxxxx, Xxxxxx Sub and the Company.
(h) The Company shall have received the opinion of Akerman,
Senterfitt & Xxxxxx P.A., counsel to the Company, dated the Closing Date, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that the
Company and Xxxxxx will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In rendering such opinion, counsel
shall be entitled to rely upon, among other things, reasonable assumptions as
well as representations and covenants of Xxxxxx, Xxxxxx Sub and the Company.
(i) Xxxxxx shall have received the opinion of Price Waterhouse
LLP, dated the Closing Date, to the effect that the Merger will be treated as a
"pooling of interests" for accounting purposes.
(j) The Company shall have received from Price Waterhouse LLP a
letter, dated the Closing Date, indicating that the Company has not taken any
action that would preclude it from entering into a transaction that would be
treated as a "pooling of interests" for accounting purposes.
(k) Xxxxxxx X. XxXxxxx shall have entered into an Employment
Agreement in substantially the form attached hereto as Exhibit D.
6.2 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions (unless
waived by the Company in accordance with the provisions of Section 7.6 hereof):
(a) Xxxxxx shall have performed, in all material respects, all of
its agreements contained herein that are required to be performed by Xxxxxx on
or prior to the Closing Date, and the Company
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shall have received a certificate of the Chairman or President of Xxxxxx, dated
the Closing Date, certifying to such effect.
(b) The representations and warranties of Xxxxxx and Xxxxxx Sub
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing in all material respects,
and the Company shall have received a certificate of the Chairman or President
of Xxxxxx, dated the Closing Date, certifying to such effect.
(c) The Company shall have received from Xxxxxx certified copies
of the resolutions of Xxxxxx'x and Xxxxxx Sub's Boards of Directors approving
and adopting this Agreement, the Xxxxxx Ancillary Documents and the
transactions contemplated hereby and thereby.
(d) The Company shall have received the opinion of X'Xxxxxx &
Xxxxxx to such matters as the Company or the Company's counsel shall reasonably
request.
(e) From the date of this Agreement through the Effective Time,
there shall not have occurred any event that has had, would have or would be
reasonably likely to have a material adverse effect in the financial condition,
business, operations or prospects of Xxxxxx and its Subsidiaries, taken as a
whole; provided, that such an event will not be deemed to have occurred solely
as a result of fluctuations in the value of Xxxxxx Common Stock due to or
arising from any public disclosures by Xxxxxx (including its 50% subsidiary,
Somerset Pharmaceuticals, Inc.), including, without limitation, disclosures
relating to Xxxxxx'x entering into any other transactions (including, without
limitation, transactions relating to the acquisition of assets, stock or merger
transactions).
(f) The Company shall have received the updated opinion of Gruntal
& Co., Incorporated dated the Closing Date, to the effect that the Merger or the
Exchange Ratio, as the case may be, continues to be fair to the Stockholders
from a financial point of view.
(g) Xxxxxx and Xxxxxx Sub shall have executed and delivered such
other documents and taken such other actions as the Company shall reasonably
request.
6.3 Conditions to Obligation of Watson and Watson Sub to Effect the
Merger. The obligations of Watson and Watson Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions (unless waived by the Company in accordance with the provisions of
Section 7.6 hereof):
(a) The Company shall have performed, in all material respects,
all of its agreements contained herein that are required to be performed by the
Company on or prior to the Closing Date, and Watson shall have received a
certificate of the Chairman or President of the Company, dated the Closing
Date, certifying to such effect.
(b) The representations and warranties of the Company contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct as of the Closing in all
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material respects, and Watson shall have received a certificate of the Chairman
or President of the Company, dated the Closing Date, certifying to such effect.
(c) Watson shall have received from the Company certified copies
of the resolutions of the Company's Board of Directors and Stockholders
approving and adopting this Agreement, the Ancillary Documents and the
transactions contemplated hereby and thereby.
(d) Watson shall have received the opinion of Akerman, Senterfitt
& Xxxxxx P.A. to such matters as Xxxxxx or Xxxxxx'x counsel shall reasonably
request.
(e) From the date of this Agreement through the Effective Time,
there shall not have occurred any event that has had, would have or would be
reasonably likely to have a material adverse effect in the financial condition,
business, operations or prospects of the Company.
(f) The Company shall have received all necessary consents with
respect to any contract, lease, purchase order, sales order, license agreement,
Permit, Environmental Permit and license which are required as a result of a
change of control of the Company except in those instances where failure to
receive any such consent would not have a Company Material Adverse Effect.
(g) The Company shall have executed and delivered such other
documents and taken such other actions as Xxxxxx shall reasonably request.
ARTICLE VII
TERMINATION
7.4 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the Stockholders, by the mutual
consent of Watson and the Company.
7.5 Termination by Either Watson or the Company. This Agreement may
be terminated and the Merger may be abandoned by action of the Board of
Directors of either Watson or the Company if (a) the Merger shall not have been
consummated by March 31, 1997; provided, however, that the right to terminate
this Agreement under this Section 7.2(a) will not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Merger to occur on or before such date;
(b) the approval of the Stockholders required by Section 6.1(a) shall not have
been obtained at a meeting duly convened therefor or at any adjournment
thereof; provided, however, that the Company shall not have the right to
terminate this Agreement under this Section 7.2(b) if the Company caused
(directly or indirectly) or aided in the failure to obtain such approval; or
(c) a court of competent jurisdiction or a governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action either (i) permanently restraining, enjoining
or otherwise prohibiting the transactions
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contemplated by this Agreement; or (ii) compelling Watson, Watson Sub or the
Surviving Corporation to dispose of or hold separate all or a material portion
of the respective businesses or assets of Watson and the Company, or sell or
license any material product of Watson or the Company, and such order, decree,
ruling or other action shall have become final and non-appealable.
7.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the Stockholders, by action of the Board of
Directors of the Company, if (a) the Company receives an Alternative Proposal
and the Board of Directors of the Company determines in good faith and pursuant
to the exercise of its fiduciary duties to its Stockholders, to accept such
Alternative Proposal, and the Board of Directors of the Company recommends or
resolves to accept or recommend to the Stockholders such Alternative Proposal;
(b) the Board of Directors of the Company determines in good faith and pursuant
to the exercise of its fiduciary duties, to withdraw its recommendation of this
Agreement and/or the Merger; (c) the Board of Directors of Watson shall have
withdrawn or modified in a manner materially adverse to the Company, its
approval or recommendation of this Agreement and/or the Merger (other than upon
the happening of an event described in Sections 7.4(b) or 7.4(c)); (d) there
has been a breach by Watson or Watson Sub of any representation or warranty
contained in this Agreement which would have a Xxxxxx Material Adverse Effect;
(e) there has been a material breach of any of the material covenants or
agreements set forth in this Agreement on the part of Watson, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by the Company to Watson; or (f) Watson enters into any
transaction, or series of related transactions, or enters into any agreement
relating to any of the foregoing, where Watson would (i) require the approval
of its shareholders pursuant to Nevada General Corporate Law; or (ii) issue or
propose to issue in excess of twenty-percent (20%) of the outstanding Watson
Common Stock in connection with such transaction, or series of related
transactions, calculated on a fully diluted basis after giving effect to the
consummation of the contemplated transaction between Watson and Oclassen
Pharmaceuticals, Inc. and the consummation of such new transaction or series of
related new transactions.
7.4 Termination by Watson. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the Stockholders, by action of the Board of Directors of
Watson, if (a) the Board of Directors of the Company shall have (i) recommended
an Alternative Proposal to the Stockholders or (ii) withdrawn or modified in a
manner materially adverse to Watson, its approval or recommendation of this
Agreement or the Merger (other than upon the happening of an event described in
Sections 7.3(d) or 7.3(e)); (b) there has been a breach by the Company of any
representation or warranty contained in this Agreement which would have a
Company Material Adverse Effect; or (c) there has been a material breach of any
of the material covenants or agreements set forth in this Agreement on the part
of the Company, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by Watson to the Company.
7.5 Effect of Termination and Abandonment.
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(a) In the event that this Agreement is terminated by the Company
pursuant to Sections 7.3(a) or 7.3(b) or by Watson pursuant to Section 7.4(a)
and the Company enters into an agreement or an understanding with respect to an
Alternative Proposal within nine (9) months of the date of such termination and
thereafter, consummates such transaction, then the Company shall promptly pay
Watson a fee in an amount equal to $3,000,000. If (x) the Company terminates
this Agreement pursuant to Section 7.3(a) or Watson terminates this Agreement
pursuant to Section 7.4(a)(i); and (y) the Company does not enter into an
agreement or an understanding with respect to an Alternative Proposal within
nine (9) months after the termination of this Agreement or does not consummate
such transaction within eighteen (18) months after the termination of this
Agreement, the Company shall reimburse Watson for all actual out-of-pocket
costs and expenses incurred by Watson in connection with this Agreement and
the consummation and negotiation of the transactions contemplated hereby,
including, without limitation, legal, professional and service fees and
expenses, which amount shall be payable by wire transfer of same day funds
within twelve months from the date of termination of this Agreement. The
Company acknowledges that the agreements contained in this Section 7.5(a) are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Watson and Watson Sub would not enter into this
Agreement. Accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 7.5(a), and, in order to obtain such payment, Watson
or Watson Sub commences a suit which results in a final, non-appealable
judgment against the Company for the fee set forth in this Section 7.5(a), the
Company shall pay to Watson its costs and expenses (including attorneys' fees)
incurred by Watson in connection with such suit, together with interest on the
amount of the fee at the rate of 12% per annum.
(b) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
7.5 and the provisions of Sections 5.6 and 5.10, which obligations shall
survive the termination of this Agreement.
7.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and, shall not survive
the Merger, provided, however, that the agreements contained in Sections 1.4,
1.5, 1.6, 1.7, 1.9, 5.10, 5.11, 5.12, 5.13, 5.14 and 5.15 and Articles 2 and 8
and the agreements delivered pursuant to this Agreement shall survive the
Merger.
8.2 Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by
mail shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand by facsimile, or by nationally recognized private carrier
shall be deemed given on the day following receipt; provided, however, that a
notice delivered by facsimile shall only be effective if such notice is also
delivered by hand, or deposited in the United States mail, postage prepaid,
registered or certified mail, on or before two (2) business days after its
delivery by facsimile. All notices shall be addressed as follows:
If to Watson or Watson Sub: If to the Company:
Xxxxxx Pharmaceuticals, Inc. Royce Laboratories, Inc.
000 Xxxxxx Xxxxxx 0000 X.X. 000xx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000 Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000 Fax:
Attn: Xx. Xxxxx Xxxx, Attn: Xxxxxxx X. XxXxxxx,
Chairman, Chairman & CEO President and CEO
With copies to: With copies to:
X'Xxxxxx & Xxxxxx Akerman, Senterfitt & Xxxxxx P.A.
00 Xxxxx XxXxxxx, Xxxxx 0000 One S.E. 3rd Avenue
Chicago, Illinois 60602 Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx Attn: Xxxxxx X. Xxxxxxxx
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
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8.3 Assignment, Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.4, 1.5, 1.6, 1.7, 2.3, and 2.4, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors, administrators
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
8.4 Entire Agreement. This Agreement, the Exhibits, the Disclosure
Statement, the Watson Disclosure Statement, the Confidentiality Agreement, the
Ancillary Documents, the Watson Ancillary Agreements, and any other documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the parties hereto,
by action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
Stockholders, but after any such Stockholder approval, no amendment shall be
made which by law requires the further approval of Stockholders without
obtaining such further approval. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
8.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without regard to its rules
of conflict of laws.
8.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
8.8 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any
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representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
8.11 Incorporation of Exhibits. The Disclosure Statement, the Watson
Disclosure Statement and all Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
8.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
XXXXXX PHARMACEUTICALS, INC.
By:______________________________
Title:___________________________
DOLPHINS ACQUISITION CORP.
By:______________________________
Title:___________________________
ROYCE LABORATORIES, INC.
By:______________________________
Title:___________________________
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EXHIBIT A
---------
DIRECTORS
---------
Xx. Xxxxx Xxxx
Xxxxxxx XxXxxxx
Xxxx Xxxxxxxxx
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EXHIBIT B
---------
OFFICERS
--------
Xx. Xxxxx Xxxx Chairman
Xxxxxxx XxXxxxx President
Xxxxxx Xxxxxxx Secretary
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