AGREEMENT AND PLAN OF MERGER BY AND AMONG NEXMED, INC., BQ ACQUISITION CORP., BIO-QUANT, INC., ALI SAMER AL-ASSAAD, as SHAREHOLDER REPRESENTATIVE and as to Sections 4.1(c) and Article VIII hereof, BASSAM DAMAJ, EDWARD COX and HENRY ESBER Dated as of...
AGREEMENT
AND PLAN OF MERGER
BY AND
AMONG
NEXMED,
INC.,
BQ
ACQUISITION CORP.,
BIO-QUANT,
INC.,
ALI XXXXX
XX-XXXXXX, as
SHAREHOLDER
REPRESENTATIVE
and as to
Sections 4.1(c) and Article VIII hereof,
XXXXXX
XXXXX,
XXXXXX
XXX
and
XXXXX
XXXXX
Dated as
of November 20, 2009
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER, dated as of November 20, 2009 (the “Agreement”), is entered into
by and among NexMed, Inc., a Nevada corporation (“NexMed”), BQ Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of NexMed (“Merger Sub”), Bio-Quant, Inc.,
a Utah corporation (“Bio-Quant”), Ali Xxxxx
Xx-Xxxxxx, as Shareholder Representative, and as to Sections 4.1(c) and Article
VIII hereof, Xxxxxx Xxxxx, Xxxxxx Xxx and Xxxxx Xxxxx (collectively, the “Bio-Quant
Principals”).
RECITALS:
WHEREAS,
the Boards of Directors of NexMed, Merger Sub and Bio-Quant have determined that
it is in the best interests of their respective corporations and their
shareholders or stockholders, as the case may be, to consummate the business
combination transaction provided for herein in which Merger Sub will, in
accordance with the General Corporation Law of the State of Delaware (“Delaware Law”) and the Utah
Revised Business Corporation Act (“Utah Law”) and subject to the
terms and conditions set forth herein, merge (the “Merger”) with and into
Bio-Quant, with Bio-Quant surviving as a wholly-owned subsidiary of
NexMed;
WHEREAS,
pursuant to the Merger, NexMed will acquire all of the outstanding equity
securities of Bio-Quant in exchange for the Merger Consideration (as defined
below) to be provided to the shareholders of Bio-Quant pursuant to the terms of
this Agreement;
WHEREAS,
NexMed, Merger Sub and Bio-Quant intend, by approving resolutions authorizing
this Agreement, to adopt this Agreement as a plan of reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”), and the
regulations thereunder, and to cause the Merger to qualify, to the extent
eligible, as a reorganization under the provisions of Section 368(a) of the
Code; and
WHEREAS,
NexMed, Merger Sub and Bio-Quant desire to make certain representations and
warranties and other agreements in connection with the Merger and pursuant to
the terms of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, NexMed, Merger Sub and Bio-Quant hereby agree as
follows:
ARTICLE
I
THE
MERGER
1.1. THE
MERGER.
(a) The
Merger. On the Closing Date, and subject to and upon the terms
and conditions of this Agreement, Delaware Law and Utah Law, Merger Sub shall be
merged with and into Bio-Quant at the Effective Time, whereupon the separate
corporate existence of Merger Sub shall cease and Bio-Quant shall continue as
the surviving corporation (the “Surviving
Corporation”).
(b) Closing; Effective
Time. The Closing will take place on the Closing Date at the
offices of Xxxxxxx Procter LLP, 0000 Xxxxxxxxx Xxxxx, 0xx Xxxxx,
Xxx Xxxxx, Xxxxxxxxxx, 00000, or such other location as may be agreed to in
writing by the parties hereto (the “Closing”). At the
Closing, the parties hereto shall cause the Merger to be consummated by filing
Certificates and/or Plans of Merger in accordance with the relevant provisions
of Delaware Law and Utah Law, respectively (the “Certificates of Merger”),
together with any other required related certificates, with the Secretaries of
State of the State of Delaware and the State of Utah, in such forms as required
by, and executed in accordance with the relevant provisions of, Delaware Law and
Utah Law, as applicable (the time of such filing in the State of Delaware being
the “Effective Time” and
the date on which the Effective Time occurs shall be the “Effective Date”).
(c) Bio-Quant Closing
Deliverables. At or prior to the Closing, Bio-Quant shall
deliver to NexMed the following items:
(i)
An opinion of Durham Xxxxx & Xxxxxxx, P.C., special Utah
legal counsel to Bio-Quant, in form satisfactory to NexMed and addressing the
matters set forth on Annex I;
(ii)
The Certificates of Merger, duly executed by
Bio-Quant;
(iii)
a certificate of the Secretary of Bio-Quant, certifying to (i) the
Articles of Incorporation and By-Laws of Bio-Quant, (ii) the resolutions of the
Board of Directors of Bio-Quant approving and adopting this Agreement, all other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby, which shall not have been modified, revoked or rescinded as
of the Closing, and (iii) the resolutions of holders of a majority of the
outstanding voting stock of Bio-Quant approving and adopting this Agreement, all
other Transaction Documents to which it is a party and all transactions
contemplated hereby and thereby, which shall not have been modified, revoked or
rescinded as of the Closing;
(iv) a
Certificate of Good Standing with respect to Bio-Quant, dated not more than five
(5) days prior to the Closing Date, from the state of Utah and all states listed
on Section 2.1 of the Bio-Quant Disclosure Schedule;
(v)
The Bio-Quant Closing Balance Sheet, accompanied with a
certification of Bio-Quant’s Chief Executive Officer to the effect that it has
been prepared on a consistent basis with the Bio-Quant Financials under GAAP and
that it fairly and accurately presents the financial condition of Bio-Quant as
of the date of the Bio-Quant Closing Balance Sheet;
(vi)
an Employment Agreement, by and between Xxxxxx
Xxxxx, Ph.D. (“Damaj”)
and NexMed, pursuant to which Damaj shall serve as the Chief Executive Officer
of NexMed on the terms set forth on Exhibit B hereto (the “Damaj Employment Agreement”),
duly executed by Damaj;
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(vii) such
documentation as may be mutually agreed upon by Bio-Quant and NexMed to
establish that the offering of the Merger Consideration hereunder shall
constitute a valid private placement under Section 4(2) of the Securities Act of
1933, as amended (the “Securities Act”) or a valid
exempt offering under Regulation S promulgated under the Securities Act (“Regulation S”), as the case
may be;
(viii) duly
executed resignations of certain directors and officers of Bio-Quant as set
forth on Section 4.15 hereof; and
(ix)
duly executed agreements of all persons listed on Section 4.4
of the Bio-Quant Disclosure Schedule in the form attached hereto as Exhibit
D.
(d) NexMed Closing
Deliverables. At or prior to the Closing, NexMed shall deliver
to Bio-Quant the following items:
(i)
The opinions of Xxxxxx Xxxxxx Xxxxxxxx LLP, with respect to Merger
Sub, and Xxxxxxxxxx Hyatt Xxxxxx Xxxxxxx LLP, special Nevada Counsel to NexMed,
with respect to NexMed, each in form satisfactory to Bio-Quant and addressing
the matters set forth on Annex II;
(ii)
The Certificates of Merger, duly executed by Merger
Sub;
(iii) Resolutions
of the Board of Directors of NexMed (x) appointing the new members of the NexMed
Board of Directors pursuant to Section 4.11 hereof, (y) appointing Damaj as
Chief Executive Officer of NexMed and Xxxxxx X. Xxx as Chairman of the Board and
Executive Vice President of NexMed;
(iv)
The NexMed Closing Balance Sheet, accompanied with a certification
of NexMed’s Chief Financial Officer to the effect that it has been prepared on a
consistent basis with the NexMed Financials under GAAP and that it fairly and
accurately presents the financial condition of NexMed as of the date of the
NexMed Closing Balance Sheet;
(v)
The Damaj Employment Agreement, duly executed by
NexMed;
(vi)
a certificate of the Secretary of NexMed, certifying to (i) the
Articles of Incorporation and By-Laws of NexMed and (ii) the resolutions of the
Board of Directors of NexMed approving and adopting this Agreement, all other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby, which shall not have been modified, revoked or rescinded as
of the Closing;
(vii) a
certificate of the Secretary of Merger Sub, certifying to (i) the Certificate of
Incorporation and By-Laws of Merger Sub, (ii) the resolutions of the Board of
Directors of NexMed approving and adopting this Agreement, all other Transaction
Documents and the transactions contemplated hereby and thereby, which shall not
have been modified, revoked or rescinded as of the Closing, and (iii) the
resolutions of the sole shareholder of Merger Sub approving and adopting this
Agreement, all other Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby, which shall not have been
modified, revoked or rescinded as of the Closing;
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(viii) A
Certificate of Good Standing with respect to NexMed, dated not more than five
(5) days prior to the Closing Date, from the state of Nevada and all of the
states listed on Section 3.1 of the NexMed Disclosure Schedule; and
(ix)
Voting Agreements, duly executed by Xxxxxx X. Xxx and Xxxx Xxxxxxxx, in the form
attached hereto as Exhibit C (the “Voting
Agreements”).
1.2. EFFECT
OF THE MERGER. At the Effective Time, the effect of the Merger shall
be as provided in this Agreement, the Certificates of Merger and the applicable
provisions of Delaware Law and Utah Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations and duties of Merger Sub
shall become the debts, liabilities, obligations and duties of the Surviving
Corporation.
1.3. ARTICLES
OF INCORPORATION; BYLAWS.
(a) Articles of
Incorporation. The Articles of Incorporation of Bio-Quant, as
in effect immediately prior to the Effective Time, shall be and remain the
Articles of Incorporation of the Surviving Corporation at the Effective Time
until thereafter amended as provided by Utah Law and such Articles of
Incorporation.
(b) Bylaws. The
Bylaws of Bio-Quant, as in effect immediately prior to the Effective Time, shall
be and remain the Bylaws of the Surviving Corporation at the Effective Time
until thereafter amended as provided by Utah Law, the Articles of Incorporation
of the Surviving Corporation and such Bylaws.
1.4. DIRECTORS
AND OFFICERS. The directors of NexMed immediately after the Effective
Time, as set forth in Section 4.11 hereof, shall be the directors of the
Surviving Corporation immediately after the Effective Time, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation. The officers of NexMed immediately after the Effective
Time, as set forth in Section 4.11 hereof, shall be the officers of the
Surviving Corporation immediately after the Effective Time, each to hold office
until their respective successors are duly elected or appointed and
qualified.
1.5. CONVERSION
OF MERGER SUB COMMON STOCK. Each of the shares of the common stock,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall become shares of the Surviving Corporation at
the Effective Time of the Merger and shall thereafter constitute all of the
issued and outstanding shares of the Surviving Corporation.
1.6. EFFECT
ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger and
pursuant to the terms provided herein, and without any action on the part of
NexMed, Bio-Quant or the holders of any of the following securities except as
provided herein:
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(a) Merger
Consideration. Upon consummation of the Merger, holders
of capital stock of Bio-Quant shall be entitled to receive, in the aggregate,
4,000,000 shares of common stock, par value $0.001 per share, of NexMed (the
“NexMed Common Stock”),
valued at $0.168 per share (the “NexMed Shares”), plus
promissory notes issued by NexMed in the aggregate principal amount of
$12,129,010 in the form attached hereto as Exhibit A (collectively, the “Notes” and together with the
NexMed Shares, the “Merger
Consideration”). Except as set forth in Section 1.6(b) below,
each share of Bio-Quant common stock issued and outstanding immediately prior to
the Effective Time (other than the Dissenting Shares, as defined in Section
1.12) (the “Shares”)
shall be automatically converted into the right to receive the following (such conversion, the
“Exchange
Ratio”):
(i) NexMed Common
Stock. 913.96 validly issued, fully paid and non-assessable
shares of NexMed Common Stock; and
(ii) Promissory
Note. A Note in the principal amount of
$2,771.37.
At the
Effective Time, all shares of Bio-Quant common stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of certificates previously representing any such shares
of Bio-Quant common stock shall cease to have any rights with respect thereto,
except the right to receive the portion of the Merger Consideration set forth in
this Section 1.6 upon surrender of certificates representing shares of Bio-Quant
common stock pursuant to Section 1.7 hereof or those rights set forth in Section
1.12 hereof, as applicable.
(b) Cancellation. Each
Share held in the treasury of Bio-Quant and each Share owned by NexMed or by any
direct or indirect wholly-owned subsidiary of NexMed immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be outstanding, be cancelled and retired without
payment of any consideration therefor other than pursuant to the terms herein
and cease to exist.
(c) Fractional
Shares. No fraction of a share of NexMed Common Stock will be
issued pursuant to Section 1.6(a)(i) hereof, but in lieu thereof, the principal
amount under the Note issued to each holder of Bio-Quant Common Stock who would
otherwise be entitled to a fraction of a share of NexMed Common Stock (after
aggregating all fractional shares of NexMed Common Stock to be received by such
holder) shall be increased by an amount (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the average
closing price of a share of NexMed Common Stock on the NASDAQ Capital Market
(“NASDAQ”) or, in the
event that the NexMed Common Stock is not listed on NASDAQ as of such date, the
OTC Bulletin Board over the five (5) trading days ending on the trading day
prior to the Effective Time.
(d) Limitations. Notwithstanding
anything to the contrary contained in this Section 1.6, the aggregate number of
shares of NexMed Common Stock issuable to the shareholders of Bio-Quant pursuant
to this Agreement shall in no event exceed 19.99% of the shares of NexMed Common
Stock outstanding immediately prior to the Effective Time; provided, that if
NexMed receives stockholder approval for the issuance of additional shares to
repay the outstanding principal amounts, and interest thereon, under the Notes,
the limitation set forth in this Section 1.6(e) shall thereafter be equal to
forty-five percent (45%) of the total shares of NexMed Common Stock immediately
prior to the Effective Time.
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1.7. EXCHANGE
OF CERTIFICATES.
(a) Exchange
Agent. NexMed, acting directly or through any bank or trust
company designated by NexMed (the “Exchange Agent”), shall make
available or cause to be made available for the benefit of the holders of
Shares, for exchange in accordance with Section 1.6 and this Section 1.7 (i)
certificates evidencing shares of NexMed Common Stock issuable pursuant to this
Agreement as Merger Consideration and (ii) Notes issuable pursuant to this
Agreement as Merger Consideration.
(b) Exchange
Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
evidenced outstanding Shares (the “Certificates”) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as NexMed may reasonably specify after review by Bio-Quant) in form
satisfactory to NexMed and Bio-Quant (each, a “Letter of Transmittal”) and
(ii) instructions to effect the surrender of the Certificates in exchange for
the certificates evidencing shares of NexMed Common Stock and Notes and, in lieu
of any fractional shares thereof, cash. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such Letter of Transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefore: (A) certificates evidencing that number of whole shares
of NexMed Common Stock which such holder has the right to receive as Merger
Consideration, in respect of the Shares formerly evidenced by such Certificate,
(B) a Note issuable with respect of the Shares formerly evidenced by such
Certificate in the aggregate principal amount calculated pursuant to Section
1.6(a)(ii) and 1.6(d), and (C) any dividends or other distributions to which
such holder is entitled pursuant to Section 1.7(c), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Shares which are not registered in the transfer records of Bio-Quant as of
the Effective Time, Merger Consideration may be issued and paid in accordance
with this Article I to a transferee if the Certificates evidencing such Shares
are presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer pursuant to this Section 1.7(b) and by
evidence that any applicable stock transfer taxes have been paid. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented Shares will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, if any, to evidence the
right to receive the ratable portion of the Merger Consideration.
(c) Distributions with Respect
to Unexchanged Shares. No dividends or other distributions
declared or made after the Effective Time, with respect to NexMed Common Stock
with a record date after the Effective Time, shall be paid to the holder of any
unsurrendered Certificate until the holder of such Certificate shall surrender
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of NexMed Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of NexMed Common Stock.
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(d) Transfers of
Ownership. If any certificate for shares of NexMed Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to NexMed or any person designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
NexMed Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of NexMed or any
agent designated by it that such tax has been paid or is not
payable.
(e) No
Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither NexMed nor Bio-Quant shall be liable to any holder of
Bio-Quant Common Stock at the Effective Time or NexMed Common Stock for any
Merger Consideration (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Withholding
Rights. NexMed, the Surviving Corporation and the Exchange
Agent shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of Shares, such
amounts as NexMed, the Surviving Corporation or the Exchange Agent is required
to deduct and withhold with respect to the making of such payment under the Code
or any provision of state, local, provincial or foreign tax law. To the extent
that amounts are so withheld, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by NexMed, the
Surviving Corporation or the Exchange Agent.
(g) Return of Merger
Consideration to Surviving Corporation. Any portion of the
Merger Consideration that remains undistributed to the holders of Bio-Quant
Common Stock for more than six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any such holders of
Bio-Quant Common Stock who have not theretofore complied with the provisions of
this Article I shall thereafter look only to the Surviving Corporation for the
Merger Consideration to which they are entitled hereunder.
1.8. STOCK
TRANSFER BOOKS. At the Effective Time, the stock transfer books of
Merger Sub and Bio-Quant shall be closed, and there shall be no further
registration of transfers of Merger Sub common stock or Bio-Quant Common Stock
thereafter on the records of Merger Sub or Bio-Quant, respectively.
1.9. NO
FURTHER OWNERSHIP RIGHTS IN BIO-QUANT COMMON STOCK. The Merger
Consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Shares
which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
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1.10.
LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the ratable portion
of the Merger Consideration as contemplated in this Article I; provided, however, that NexMed
may, in its sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
indemnify against any claim that may be made against NexMed, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.11.
TAX CONSEQUENCES. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code. The parties hereto hereby adopt this Agreement as a “plan of
reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.12.
DISSENTER’S RIGHTS. Notwithstanding anything in this Agreement
to the contrary, Shares issued and outstanding immediately prior to the
Effective Time and held by a Bio-Quant shareholder who has not voted in favor of
the Merger, consented thereto in writing or otherwise waived its dissenter’s
rights and who has complied with all of the relevant provisions of Section
16-10a-1301 et. seq. of
the Utah Law with respect to being a dissenting shareholder (each, a “Dissenting Shareholder”) shall
not be converted into the right to receive the Merger Consideration provided in
Section 1.6 hereof unless and until such holder fails to perfect or effectively
withdraws or otherwise loses such holder’s right to such dissenter’s rights
under Utah Law. A Dissenting Shareholder may receive payment of the fair value
of the Shares issued and outstanding immediately prior to the Effective Time and
held by such Dissenting Shareholder (“Dissenting Shares”) in
accordance with the provisions of Utah Law, provided, that such
Dissenting Shareholder complies with all applicable provisions of Section
16-10a-1301 et seq. of
Utah Law. At the Effective Time, all Dissenting Shares shall be cancelled and
cease to exist and shall represent only the right to receive the fair value
thereof in accordance with Utah Law. If, after the Effective Time, any
Dissenting Shareholder fails to perfect or effectively withdraws or otherwise
loses such Dissenting Shareholder’s right to appraisal, such Dissenting
Shareholder’s Dissenting Shares shall thereupon be treated as if they had been
converted, as of the Effective Time, into the right to receive the Merger
Consideration in accordance with Section 1.6 hereof.
1.13.
TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of NexMed,
Merger Sub and Bio-Quant will in good faith take all such commercially
reasonable and lawful action as may be necessary or appropriate in order to
effectuate the Merger in accordance with this Agreement as promptly as possible.
If, at any time after the Effective Time, any such 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 Bio-Quant, the officers
and directors of Merger Sub and Bio-Quant are fully authorized in the name of
the corporation or otherwise to take, and will take, all such lawful and
necessary action.
1.14.
MATERIAL ADVERSE EFFECT. When used in this Agreement with
respect to NexMed or Bio-Quant as the case may be, the term “Material Adverse Effect” means
any change or effect that, individually or when taken together with all other
such changes or effects that have occurred prior to the date of determination of
the occurrence of the Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
condition (financial or otherwise), prospects or results of operations of NexMed
or Bio-Quant and/or its subsidiaries, as the case may be.
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1.15.
POST-CLOSING ADJUSTMENT. Section 1.15 of the
Bio-Quant Disclosure Schedule sets forth as of the date hereof all accounts
receivable of Bio-Quant which are aged at least 120 days (the “Past Due Receivables”), and
the respective aging thereof. If, on the date 90 days after the
Closing Date, any portion of the Past Due Receivables (such aggregate amount,
the “Uncollected
Amount”) remains uncollected, then NexMed, acting through its Chief
Financial Officer, shall, upon written notice to the Shareholder Representative,
have the right to offset against the unpaid principal amount of the Notes, on a
dollar-for-dollar basis, an amount equal to eighty percent (80%) of the
Uncollected Amount (the “Merger
Consideration Adjustment”), which Merger Consideration Adjustment shall
be applied pro rata in proportion to the original principal amount of the Note
held by each Note holder. For all purposes, the Merger Consideration
Adjustment shall be deemed an adjustment to the Merger Consideration provided to
Bio-Quant shareholders in respect of the Merger.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF BIO-QUANT
Bio-Quant
hereby represents and warrants to NexMed and Merger Sub as follows, except as
set forth in the written disclosure schedule delivered by Bio-Quant to NexMed
(the “Bio-Quant Disclosure
Schedule”). The Bio-Quant Disclosure Schedule shall be arranged in
sections and subsections corresponding to the numbered and lettered sections and
subsections contained in this Article II to which such disclosure relates
(which, in each case, shall constitute the only valid disclosure with respect to
such sections and subsections); provided, however, to the extent that the
disclosure of an item is relevant and reasonably apparent on its face to apply
to the disclosure required by any other section, such item shall be deemed to be
disclosed in such other section whether or not an explicit cross-reference
appears. The inclusion of any information in the Bio-Quant Disclosure
Schedule shall not be deemed to be an admission or acknowledgment, in and of
itself, that such information is required by the terms hereof to be disclosed,
is material, has resulted in or would result in a Material Adverse Effect, or is
outside the ordinary course of business. For purposes of this
Agreement, the phrase “to the knowledge of Bio-Quant” or “its subsidiaries” or
any phrase of similar import shall mean and be limited to the actual knowledge
of the Bio-Quant Principals after due inquiry.
2.1.
ORGANIZATION OF BIO-QUANT. Bio-Quant is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its property and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect on
Bio-Quant. Bio-Quant has delivered or made available a true and correct copy of
its Certificate of Incorporation and Bylaws, each as amended to date, to
NexMed. Section 2.1 of the Bio-Quant Disclosure Schedule lists each
foreign jurisdiction in which Bio-Quant is required to be qualified to do
business, as well as the names of each director and officer of
Bio-Quant. Bio-Quant has no direct or indirect
subsidiaries.
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2.2.
CAPITAL STRUCTURE. As of the date hereof, the authorized
capital stock of Bio-Quant consists of 100,000,000 shares of Common Stock, par
value $0.01 per share (the “Bio-Quant Common Stock”), of
which 4,376.542 shares are issued and outstanding, and 20,000,000 shares of
Preferred Stock, par value $0.01 per share. No shares of any series
or class of preferred stock have ever been issued and no shares of capital stock
are held in Bio-Quant’s treasury. All outstanding shares of Bio-Quant
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of Bio-Quant or any agreement or document to which
Bio-Quant is a party or by which it is bound, and were issued in compliance with
all applicable federal and state securities laws. Section 2.2 of the Bio-Quant
Disclosure Schedule lists each holder of record of Bio-Quant Common Stock, the
number of shares held, whether such holder is an “accredited” investor, as that
term is defined in Rule 501 promulgated under the Securities Act (based on the
responses to accredited investor questionnaires provided by such holders to
Bio-Quant) and whether such person is a “U.S. person,” as that term is defined
in Regulation S.
2.3.
OBLIGATIONS WITH RESPECT TO CAPITAL
STOCK. Except as set forth in Section 2.2 of the Bio-Quant Disclosure
Schedule, there are no equity securities of any class of Bio-Quant, or any
securities exchangeable or convertible into or exercisable for such equity
securities, authorized, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.2 of the Bio-Quant
Disclosure Schedule, there are no options, warrants, equity securities, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Bio-Quant is a party or by which it is bound obligating Bio-Quant to
issue, deliver or sell, or cause to be issued, delivered or sold, or to
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock of Bio-Quant or obligating Bio-Quant
to grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement. Except as set
forth in Section 2.2 of the Bio-Quant Disclosure Schedule, there are no
registration rights and, to the knowledge of Bio-Quant, there are no voting
trusts, proxies or other agreements or understandings with respect to any equity
security of any class of Bio-Quant.
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2.4.
AUTHORITY.
(a)
Bio-Quant has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Bio-Quant and its shareholders,
subject only to the filing and recordation of the Certificate of Merger pursuant
to Delaware Law and Utah Law. This Agreement has been duly executed and
delivered by Bio-Quant and, assuming the due authorization, execution and
delivery of this Agreement by the other parties hereto, this Agreement
constitutes the valid and binding obligation of Bio-Quant, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. Other than
the approval of the holders of at least a majority of Bio-Quant’s voting stock
pursuant to Section 4.1 hereof, no further approvals are required on the part of
the Bio-Quant shareholders to approve this Agreement and the transactions
contemplated hereunder. Except as set forth in Section 2.4(a) of the
Bio-Quant Disclosure Schedule, the execution and delivery of this Agreement does
not, and the performance of this Agreement will not, (i) conflict with or
violate the Articles of Incorporation or Bylaws of Bio-Quant, (ii) subject to
compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Bio-Quant or by which its properties are bound or affected, or (iii) except
as would not reasonably be expected to have a Material Adverse Effect and
subject to obtaining the consents set forth in Section 2.4(a) of the Bio-Quant
Disclosure Schedule, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair Bio-Quant’s rights or alter the rights of obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Bio-Quant pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Bio-Quant is a party or by
which Bio-Quant or its properties are bound or affected, except, with respect to
clause (ii), for any such conflicts, violations, defaults or other occurrences
that would not have a Material Adverse Effect on Bio-Quant. Section
2.4 of the Bio-Quant Disclosure Schedule lists all material consents, waivers
and approvals under any of Bio-Quant’s agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
(b)
No consent, approval, license, permit, registration, waiver,
qualification, order or authorization, or registration, declaration or filing,
with or of, as appropriate (“Approval”) of (i) any person
or (ii) any Governmental Authority is required by or with respect to Bio-Quant
in connection with the execution, delivery and performance of this Agreement or
any related agreements required to be executed by this Agreement or the
consummation of the transactions contemplated hereby and thereby, except for (i)
the filing of the Certificates of Merger with the Secretary of State of the
State of Delaware and the State of Utah, as applicable, and (ii) such other
Approvals which, if not obtained or made, would not have a Material Adverse
Effect on Bio-Quant or would not have a material adverse effect on the ability
of the parties hereto to consummate the Merger. For purposes of this
Agreement, “Governmental
Authority” shall mean any governmental or administrative agency,
authority, department, commission, instrumentality, board, bureau, court or
arbitration tribunal of the United States, any domestic state, locality or any
foreign country, and any political subdivision or agency thereof, and includes
any authority having governmental or quasi-governmental powers, including any
administrative agency or commission, and any Self-Regulatory Organization, as
defined in Section 3(a)(26) of the Exchange Act.
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2.5.
BIO-QUANT FINANCIAL STATEMENTS.
(a) The
audited consolidated financial statements (including any related notes thereto)
of Bio-Quant and its subsidiaries for the two years ended December 31, 2008 and
the unaudited consolidated financial statements (including any related notes
thereto) of Bio-Quant for the nine months ended September 30, 2009
(collectively, the “Bio-Quant
Financials”) (x) were prepared in accordance with United States generally
accepted accounting principles (“GAAP”) applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and (y) fairly presented the financial position of Bio-Quant as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated. The Bio-Quant Financials are attached to
Section 2.5 of the Bio-Quant Disclosure Schedule. The balance sheet
of Bio-Quant as of September 30, 2009 is hereinafter referred to as the “Bio-Quant Balance Sheet.”
Except as disclosed in the Bio-Quant Financials, Bio-Quant has no liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to consolidated financial
statements prepared in accordance with GAAP which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of Bio-Quant, except liabilities (i) provided for in the Bio-Quant
Balance Sheet, or (ii) incurred since the date of the Bio-Quant Balance Sheet in
the ordinary course of business consistent with either past practices in both
type and amount.
(b) One
business day prior to Closing, Bio-Quant shall deliver to NexMed an unaudited
balance sheet dated within five (5) days prior to the Closing Date (the “Bio-Quant Closing Balance
Sheet”), which shall have been prepared in accordance with GAAP applied
on a consistent basis with the Bio-Quant Financials and which fairly presents
the financial condition of Bio-Quant as of the Bio-Quant Closing Balance Sheet
date.
2.6. ABSENCE
OF CERTAIN CHANGES OR EVENTS. Since the date of the Bio-Quant Balance
Sheet, except as contemplated by this Agreement, Bio-Quant has conducted their
business only in the ordinary course of business consistent with past practice,
and there has not been: (i) any event that has had, or that would be reasonably
expected to result in, a Material Adverse Effect on Bio-Quant, (ii) any material
change by Bio-Quant in its accounting methods, principles or practices, except
as required by concurrent changes in GAAP, or (iii) any revaluation or
disposition by Bio-Quant of any of its assets having a Material Adverse Effect
on Bio-Quant.
2.7. TAXES. Bio-Quant
and its subsidiaries have accurately prepared and timely filed or had prepared
and timely filed on their behalf, all returns, declarations, reports,
statements, information statements and other documents filed or required to be
filed (“Bio-Quant Tax
Returns”) with respect to any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including, without limitation, taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity concerning or attributable to
Bio-Quant or its subsidiaries or to their operations (“Bio-Quant Taxes”), and all
such Bio-Quant Tax Returns are true, complete and correct in all material
respects. Copies of all such returns filed after January 1, 2007 have
been delivered or made available to NexMed.
In
addition:
(a) Bio-Quant
and its subsidiaries: (i) have paid all Taxes they are obligated to
pay as reflected on the Tax Returns or otherwise; and (ii) have withheld all
federal, state, local and foreign Taxes required to be withheld with respect to
their employees or otherwise.
12
(b) There
is no Tax deficiency outstanding, proposed or assessed against Bio-Quant and its
subsidiaries that is not accurately reflected as a liability on the Bio-Quant
Balance Sheet, nor have Bio-Quant or its subsidiaries executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(c) Bio-Quant
and its subsidiaries do not have any liability for unpaid Taxes that has not
been properly accrued for under GAAP and reserved for on the Bio-Quant Balance
Sheet, whether asserted or unasserted, contingent or otherwise.
(d) Bio-Quant
is not a party to any agreement, plan, arrangement or other contract covering
any employee or independent contractor or former employee or independent
contractor that, individually or collectively with any other such contracts,
would reasonably be expected to give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or Section
162(m) of the Code (or any comparable provision of state or foreign tax
laws).
(e) Bio-Quant
is not, nor have ever been, a party to or bound by any tax indemnity agreement,
tax sharing agreement, tax allocation agreement or similar contract or
agreement.
(f) All
stock options, if any, granted under Bio-Quant’s equity based compensation plans
have an exercise price per share that was not less than the “fair market value”
of one share of Bio-Quant Common Stock (or predecessor security) on the date of
grant, as determined in accordance with the terms of the applicable plans and,
to the extent applicable, Sections 162(m), 409A and 422 of the Code or any
similar requirements of Law. All stock options, if any, granted under
Bio-Quant’s equity based compensation plans have been properly accounted for in
accordance with GAAP, and no change is expected in respect of any prior
financial statements relating to expenses for stock-based
compensation. There is no pending audit, investigation or inquiry by
any Governmental Authority or by the Bio-Quant or the board of directors of the
Bio-Quant (directly or indirectly) with respect to the Bio-Quant’s stock option
granting practices or other equity compensation practices. Each grant
of equity based compensation, if any, and all shares of Bio-Quant’s Common Stock
underlying each such grant, either (i) are subject to an effective registration
statement under the Securities Act or similar requirement of Law or (ii) are
exempt from such registration; and each such grant complies with all applicable
state or federal securities law requirements, including any “blue sky” laws
..
2.8. INTELLECTUAL
PROPERTY.
(a) Bio-Quant
owns, or has the right to use, sell or license, and has the right to bring
actions for the infringement of, all intellectual property, including cell
lines, utilized in its business as presently conducted, which intellectual
property is listed on Section 2.8(a) of the Bio-Quant Disclosure Schedule (such
intellectual property and the rights thereto are collectively referred to herein
as the “Bio-Quant IP
Rights”), except for any failure to own or have the right to use, sell or
license that would not reasonably be expected to have a Material Adverse Effect
on Bio-Quant.
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(b) The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not constitute a breach of any
instrument or agreement governing any Bio-Quant IP Rights (the “Bio-Quant IP Rights
Agreements”), will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any Bio-Quant IP Rights or impair the
right of Bio-Quant or the Surviving Corporation to use, sell or license any
Bio-Quant IP Rights or portion thereof, except for the occurrence of any such
breach, forfeiture, termination or impairment that would not individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect on
Bio-Quant. Each of the Bio-Quant IP Rights Agreements is valid and
binding on Bio-Quant and in full force and effect; (ii) Bio-Quant has not
received any notice of termination or cancellation under such agreement, or
received any notice of breach or default under such agreement, which breach has
not been cured or waived; and (iii) Bio-Quant, and to the knowledge of
Bio-Quant, any other party to such agreement, is not in breach or default
thereof in any material respect.
(c) (i)
Neither the manufacture, marketing, license, sale or intended use of any product
or technology currently licensed or sold or under development by Bio-Quant
violates any license or agreement between Bio-Quant and any third party or, to
the knowledge of Bio-Quant, infringes any intellectual property right of any
other party; (ii) to the knowledge of Bio-Quant, no third party is infringing
upon, or violating any license or agreement with Bio-Quant relating to any
Bio-Quant IP Rights; and (iii) to the knowledge of Bio-Quant, there is no
pending or threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Bio-Quant IP Rights, nor has
Bio-Quant received any written notice asserting that any Bio-Quant IP Rights or
the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party.
(d) Bio-Quant
has used reasonable efforts to maintain its material trade secrets in
confidence, including entering into licenses and contracts that generally
require licensees, contractors and other third persons with access to such trade
secrets to keep such trade secrets confidential and have otherwise taken
reasonable and practicable steps designed to safeguard and maintain the secrecy
and confidentiality of, and its proprietary rights in, all Bio-Quant IP
Rights.
2.9. COMPLIANCE;
PERMITS; RESTRICTIONS.
(a) Bio-Quant
is not in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to them or by which their
properties are bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Bio-Quant is a party or by which Bio-Quant or its properties
are bound or affected, except for any conflicts, defaults or violations which
would not reasonably be expected to have a Material Adverse Effect on
Bio-Quant. No investigation or review by any governmental or
regulatory body or authority is pending or, to the knowledge of Bio-Quant,
threatened against Bio-Quant, nor has any governmental or regulatory body or
authority indicated to Bio-Quant an intention to conduct the same.
(b) Bio-Quant
holds all permits, licenses, variances, exemptions, orders and approvals from
governmental authorities which are material to the operation of the business of
Bio-Quant (collectively, the “Bio-Quant Permits”). Bio-Quant
is in compliance with the terms of the Bio-Quant Permits, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect on Bio-Quant. No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to the knowledge of
Bio-Quant, threatened, which seeks to revoke or limit any Bio-Quant Permit. A
true, complete and correct list of the material Bio-Quant Permits is set forth
in Section 2.9(b) of the Bio-Quant Disclosure Schedule. The rights and benefits
of each material Bio-Quant Permit will be available to the Surviving Corporation
immediately after the Effective Time on terms substantially identical to those
enjoyed by Bio-Quant immediately prior to the Effective Time.
14
No
business activities of Bio-Quant are within the jurisdiction of the Food and
Drug Administration (“FDA”) or are regulated under
the Federal Food, Drug, and Cosmetic Act (“FDCA”), the Public Health
Service Act, their applicable implementing regulations, or comparable state laws
and regulations.
(c) Neither
Bio-Quant nor any subsidiary of Bio-Quant, has ever (i) filed or sponsored any
Investigational New Drug Application or any foreign equivalent, or (ii)
conducted any human clinical trials of any investigational new drug, whether
directly or indirectly and whether for itself or on behalf of a third
party.
(d) Neither
Bio-Quant nor any subsidiary of Bio-Quant nor, to the knowledge of Bio-Quant,
any of their officers, employees, agents or investigators acting for Bio-Quant
or its subsidiaries, has committed any act, made any statement or failed to make
any statement that would reasonably be expected to provide a basis for the FDA
to invoke its policy with respect to “Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191
(September 10, 1991) and any amendments thereof. Additionally,
neither Bio-Quant nor any subsidiary of Bio-Quant, nor to the knowledge of
Bio-Quant, any officer, key employee or agent of Bio-Quant or its subsidiaries
has been convicted of any crime or engaged in any conduct that would reasonably
be expected to result in (i) debarment under 21 U.S.C. Section 335a or any
similar state law or (ii) exclusion under 42 U.S.C. Section 1320a-7 or any
similar state law or regulation.
(e) All
animal studies or other preclinical tests conducted by or on behalf of Bio-Quant
or its subsidiaries on behalf of third parties as part of Bio-Quant’s Contract
Research Organization services: (1) were not required to be conducted in
accordance with Good Laboratory Practice requirements contained in 21 CFR Part
58, and (2) have employed the procedures and controls generally used by
qualified experts in animal or preclinical study of comparable products or
product candidates, as applicable.
(f) None
of Bio-Quant nor any subsidiary of Bio-Quant has ever (i) received any notice or
other written communication from the FDA, (ii) been the subject of any
inspections or investigations by the FDA or any Governmental
Authority.
(g) There
are no proceedings pending with respect to a violation by Bio-Quant or any
subsidiary of Bio-Quant of the FDCA, FDA regulations adopted thereunder, the
Controlled Substance Act or any other legislation or regulation promulgated by
any other United States Governmental Authority.
15
2.10.
LITIGATION. As of the date of this Agreement,
there is no action, suit, proceeding, claim, arbitration or investigation
pending, or as to which Bio-Quant has received any written notice of assertion,
nor, to the knowledge of Bio-Quant, is there any threatened action, suit,
proceeding, claim for arbitration or investigation against Bio-Quant, which, if
adversely determined, would have a Material Adverse Effect on
Bio-Quant. Section 2.10 of the Bio-Quant Disclosure Schedule sets
forth a complete and correct list and description of all resolved material
claims, suits, actions and proceedings made, filed or otherwise initiated in
connection with Bio-Quant or any subsidiary thereof since January 1, 2007 and
the resolution thereof. Except as set forth in Section 2.10 of the
Bio-Quant Disclosure Schedule, Bio-Quant is not (i) subject to any judgment,
order or decree of any Governmental Authority or (ii) engaged in any legal
action to recover monies due it or for damages sustained by it.
2.11.
BROKERS’ AND FINDERS’ FEES. Bio-Quant has not
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with this Agreement or any transaction contemplated
hereby.
2.12.
EMPLOYEE BENEFIT PLANS.
(a)
Section 2.12(a) of the Bio-Quant Disclosure Schedule lists
all written and describes all non-written employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)) and all
bonus, stock or other security option, stock or other security purchase, stock
or other security appreciation rights, incentive, deferred compensation,
retirement or supplemental retirement, profit sharing, severance, golden
parachute, vacation, cafeteria, dependent care, medical care, employee
assistance program, education or tuition assistance programs, insurance and
other similar fringe or employee benefit plans, programs or arrangements, and
any current or former employment or executive compensation or severance
agreements, written or otherwise, which are currently sponsored, maintained,
contributed to or entered into for the benefit of, or relating to, any present
or former employee or director of Bio-Quant, or any trade or business (whether
or not incorporated) which is a member of a controlled group or which is under
common control with Bio-Quant within the meaning of Section 414 of the Code (a
“Bio-Quant ERISA Affiliate”), whether or
not such plan is terminated (collectively, the “Bio-Quant Employee
Plans”).
(b)
With respect to each Bio-Quant Employee Plan, Bio-Quant has
provided to NexMed a true and complete copy of, to the extent applicable, (i)
such Bio-Quant Employee Plan, (ii) the most recent annual reports (Form 5500) as
filed with the United States Internal Revenue Service (the “IRS”), (iii) each trust
agreement related to such Bio-Quant Employee Plan, (iv) the most recent summary
plan description for each Bio-Quant Employee Plan for which such description is
required, along with all summaries of material modifications, amendments,
resolutions and all other material plan documentation related thereto, (v) the
most recent actuarial report relating to any Bio-Quant Employee Plan subject to
Title IV of ERISA and (vi) the most recent IRS determination letter issued with
respect to any Bio-Quant Employee Plan.
16
(c)
There are no actions or claims pending (other than routine
claims for benefits), or to the knowledge of Bio-Quant threatened, against any
Bio-Quant Employee Plan or against the assets of any Bio-Quant Employee Plan,
nor are there any current, or to the knowledge of Bio-Quant threatened,
encumbrances or liens on the assets of any Bio-Quant Employee
Plan. No audits, proceedings, investigations, claims or demands are
pending with any Governmental Authority, including the IRS or Department of
Labor with respect to any Bio-Quant Employee Plan. Each Bio-Quant
Employee Plan that is intended to be qualified under Section 401(a) of the Code,
and each trust related thereto, has received a favorable determination letter
from the IRS as to the qualification under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, of
such Bio-Quant Employee Plan and the tax-exempt status of such related trust,
and no event has occurred, and no condition exists, since the date of such
letter that could reasonably be expected to affect the qualified status of such
Bio-Quant Employee Plan or the tax-exempt status of such trust. Each Bio-Quant
Employee Plan and all related trusts, insurance contracts and funds (as
applicable) have been maintained, funded, operated and administered in all
material respects in accordance with its terms and the requirements of all
applicable law.
(d)
No Bio-Quant Employee Plan is (i) an “employee pension
benefit plan” (within the meaning of Section 3(2) of ERISA) subject to Title IV
of ERISA, (ii) a “multiemployer plan” (within the meaning of Section 3(37) of
ERISA) (a “Multiemployer
Plan”), (iii) a “single-employer plan under multiple controlled groups”
as described in Section 4063 of ERISA or (iv) a “multiple employer plan” within
the meaning of Section 413(c) of the Code or Section 3(40) of
ERISA. Neither Bio-Quant nor any Bio-Quant ERISA Affiliate has ever
maintained, contributed to, partially or fully withdrawn or incurred any
liability with respect to any such plan described in clauses (i) through
(iv).
(e)
Neither Bio-Quant nor any Bio-Quant ERISA Affiliate has ever maintained
any employee benefit plan or arrangement which provides benefits with respect to
employees or former employees following their termination of service with
Bio-Quant or such Bio-Quant ERISA Affiliate other than as required pursuant to
Section 601 of ERISA or Section 4980B of the Code or similar state
law.
(f)
Full payment has been made of all amounts which Bio-Quant or
any Bio-Quant ERISA Affiliate is required under the terms of each Bio-Quant
Employee Plan to have paid as contributions to such Bio-Quant Employee Plan on
or prior to the date hereof (excluding any amounts not yet due). All
required or discretionary (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all periods ending prior
to or as of the Effective Time shall have been made or properly accrued on the
Bio-Quant Financials or will be properly accrued on the books and records of
Bio-Quant as of the Effective Time in accordance with GAAP.
(g)
Based on Bio-Quant’s good faith interpretation of the
provisions of Section 409A of the Code and the guidance issued thereunder, any
Bio-Quant Employee Plan that is a “nonqualified deferred compensation plan”
within the meaning of Section 409A of the Code has been operated in accordance
with the requirements of Section 409A (including any interpretative guidance
issued by the IRS thereunder). No Bio-Quant Employee Plan that is a
“nonqualified deferred compensation plan” that was intended to be grandfathered
for purposes of Section 409A has been materially modified within the meaning of
Section 409A.
(h) Neither
Bio-Quant nor any Bio-Quant ERISA Affiliate has ever maintained or had any
actual or potential liability with respect to any employee benefit plan or
arrangement maintained outside of the United States.
17
2.13.
ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT. Bio-Quant has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all material
tangible properties and assets, real, personal and mixed, necessary for use in
their business, free and clear of any liens or encumbrances except as set forth
in Section 2.13 of the Bio-Quant Disclosure Schedule and except for (a) liens
for taxes not yet due and payable; (b) liens which secure a payment not yet due
that arises, and is customarily discharged, in the ordinary course of
Bio-Quant’s business; (c) liens relating to capitalized lease financings or
purchase money financings that have been entered into in the ordinary course of
business and are set forth in Section 2.13 of the Bio-Quant Disclosure Schedule
and (d) liens arising solely by the action of NexMed (collectively, “Bio-Quant Permitted Liens”). Each of the
material tangible assets is in a good state of maintenance and repair and in
good operating condition (subject to normal wear and tear) and is suitable for
the purposes for which it presently is used.
2.14.
ENVIRONMENTAL MATTERS.
(a) Hazardous Material.
No underground storage tanks and no amount of any substance that has been
designated by any Governmental Authority or by applicable federal, state or
local law, to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
(a “Hazardous
Material”), are present, as a result of the deliberate actions of
Bio-Quant or its subsidiaries, or, to Bio-Quant’s knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that
Bio-Quant or any of its subsidiaries have at any time owned, operated, occupied
or leased.
(b) Hazardous Material
Activities. Except as would not reasonably be expected to have a Material
Adverse Effect on Bio-Quant, Bio-Quant and its subsidiaries have not
transported, stored, used, manufactured, disposed of, released or exposed their
employees or others to Hazardous Materials in violation of any law in effect on
or before the date hereof, nor has Bio-Quant or its subsidiaries disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(collectively, “Hazardous
Material Activities”) in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Authority in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. Bio-Quant
currently holds all environmental approvals, permits, licenses, clearances and
consents (the “Bio-Quant
Environmental Permits”) necessary for the conduct of Bio-Quant’s
Hazardous Material Activities and other businesses of Bio-Quant as such
activities and businesses are currently being conducted, except where the
failure to so hold would not reasonably be expected to have a Material Adverse
Effect on Bio-Quant.
18
(d) Environmental
Liabilities. No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of Bio-Quant, threatened concerning any Bio-Quant Environmental
Permit, Hazardous Material or any Hazardous Material Activity of
Bio-Quant. Bio-Quant is not aware of any fact or circumstance which
could involve Bio-Quant in any environmental litigation or impose upon Bio-Quant
any environmental liability.
2.15.
LABOR MATTERS.
(a) Section
2.15(a) of the Bio-Quant Disclosure Schedule sets forth a true, complete and
correct list of all employees of Bio-Quant who were paid in excess of $100,000
in 2008 or who are expected to be paid more than $100,000 in the current year,
along with their position and actual annual rate of compensation. All
employees have entered into nondisclosure and assignment of inventions
agreements with Bio-Quant, true, complete and correct copies of which have
previously been made available to NexMed. To the knowledge of
Bio-Quant, no employee of Bio-Quant is in violation of any term of any patent
disclosure agreement, non-competition agreement, or any restrictive covenant (i)
to Bio-Quant, or (ii) to a former employer relating to the right of any such
employee to be employed because of the nature of the business conducted by
Bio-Quant or to the use of trade secrets or proprietary information of
others. No key employee or group of employees has threatened to
terminate employment with Bio-Quant nor, to the knowledge of Bio-Quant (which,
for purposes of this representation only, shall mean actual knowledge), has
plans to terminate such employment. Key employees are listed in
Section 2.15(a) of the Bio-Quant Disclosure Schedule. To its
knowledge, Bio-Quant has complied in all material respects with all applicable
state and federal equal employment opportunity and other laws related to
employment.
(b) Bio-Quant
is not party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes.
(c) Except
as disclosed in Section 2.15(c) of the Bio-Quant Disclosure Schedule, Bio-Quant
is not party to any written or oral: (i) agreement with any current or former
employee the benefits of which are contingent upon, or the terms of which will
be materially altered by, the consummation of the Merger or other transactions
contemplated by this Agreement; (ii) agreement with any current or former
employee of Bio-Quant providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or for the
payment of compensation in excess of $100,000 per annum; or (iii) agreement or
plan the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, upon the consummation of the Merger.
2.16.
AGREEMENTS, CONTRACTS AND
COMMITMENTS. Bio-Quant is not party to or bound by:
(a) except
as described in Section 2.12(a) of the Bio-Quant Disclosure Schedule, any bonus,
deferred compensation, incentive compensation, pension, profit-sharing or
retirement plans, or any other employee benefit plans or
arrangements;
19
(b) except
as described in Section 2.12(a) of the Bio-Quant Disclosure Schedule, any
employment or consulting agreement, contract or commitment with any officer or
employee, not terminable by Bio-Quant on thirty (30) days notice without
liability, except to the extent general principles of wrongful termination law
may limit Bio-Quant’s ability to terminate employees at will;
(c) except
as described in Section 2.12(a) of the Bio-Quant Disclosure Schedule, any
agreement or plan, including, without limitation, any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(d) any
agreement of indemnification or guaranty not entered into in the ordinary course
of business other than indemnification agreements between Bio-Quant and any of
their officers or directors;
(e) any
agreement, contract or commitment containing any covenant limiting the freedom
of Bio-Quant to engage in any line of business or compete with any
person;
(f) any
agreement, contract or commitment relating to capital expenditures and involving
future obligations in excess of $25,000 and not cancelable without
penalty;
(g) any
agreement, contract or commitment currently in force relating to the disposition
or acquisition of assets not in the ordinary course of business or any ownership
interest in any corporation, partnership, joint venture or other business
enterprise;
(h) any
mortgages, indentures, loans or credit agreements, security agreements or other
agreements or instruments relating to the borrowing of money or extension of
credit in excess of $25,000;
(i) any
joint marketing or development agreement;
(j) any
distribution agreement (identifying any that contain exclusivity
provisions);
(k) any
contract with any Governmental Authority; or
(l)
any other agreement, contract or commitment (excluding real and personal
property leases) which involve payment by or to Bio-Quant under any such
agreement, contract or commitment of $50,000 or more in the
aggregate.
Bio-Quant
has not, nor to Bio-Quant’s knowledge has any other party to a Bio-Quant
Contract (as defined below), breached, violated or defaulted under, or received
notice that it has breached, violated, or defaulted under, any of the terms or
conditions of, or terminated any of the agreements, contracts or commitments to
which Bio-Quant is a party or by which it is bound of the type described in
clauses (a) through (l) above (any such agreement, contract or commitment, a
“Bio-Quant Contract”) in
such manner as would permit any other party to cancel or terminate any such
Bio-Quant Contract, or would permit any other party to seek damages which would
reasonably be expected to have a Material Adverse Effect on Bio-Quant. As to
Bio-Quant, each Bio-Quant Contract is valid, binding, and enforceable and in
full force and effect, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity.
20
2.17.
CHANGE OF CONTROL PAYMENTS. Section 2.17 of
the Bio-Quant Disclosure Schedule sets forth each plan or agreement pursuant to
which any material amounts may become payable (whether currently or in the
future) to current or former officers and directors of Bio-Quant as a result of
or in connection with the Merger.
2.18.
BOARD APPROVAL. The Board of Directors
of Bio-Quant, as of the date of this Agreement, has (i) declared the
advisability of the Merger and this Agreement, and (ii) recommended that the
shareholders of Bio-Quant approve this Agreement and the Merger.
2.19.
BOOKS AND RECORDS. The minute books of
Bio-Quant made available to counsel for NexMed are the only minute books of
Bio-Quant and contain accurate summaries, in all material respects, of all
meetings of directors (or committees thereof) and shareholders or actions by
written consent since the time of incorporation of Bio-Quant. The
books and records of Bio-Quant accurately reflect in all material respects the
assets, liabilities, business, financial condition and results of operations of
Bio-Quant and have been maintained in accordance with good business and
bookkeeping practices.
2.20.
RESTRICTIONS ON BUSINESS
ACTIVITIES. Other than as contemplated by this Agreement, there is no
agreement, judgment, injunction, order or decree binding upon or otherwise
applicable to Bio-Quant which has, or would reasonably be expected to have, the
effect of prohibiting or materially impairing (i) any current business practice
of Bio-Quant; or (ii) any acquisition of any person or property by
Bio-Quant.
2.21.
REAL PROPERTY LEASES. Section 2.21 of the
Bio-Quant Disclosure Schedule sets forth all real property leases or subleases
to or by Bio-Quant. Bio-Quant has delivered to NexMed true, complete
and correct copies of the leases and subleases (as amended to date) listed in
Section 2.21 of the Bio-Quant Disclosure Schedule. With respect to
each lease and sublease listed in Section 2.21 of the Bio-Quant Disclosure
Schedule:
(a) As
to Bio-Quant, each lease or sublease is legal, valid, binding, enforceable and
in full force and effect, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity;
(b) Bio-Quant
is not in breach or violation of, or default under, any such lease or sublease,
and no event has occurred, is pending or, to the knowledge of Bio-Quant, is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by Bio-Quant or, to the knowledge of
Bio-Quant, any other party under such lease or sublease, except as would not
reasonably be expected to have a Material Adverse Effect;
(c) Bio-Quant
has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in any lease or sublease; and
21
(d) There
are no liens, easements, covenants or other restrictions applicable to the real
property subject to such lease, except for Bio-Quant Permitted
Liens.
2.22.
INSURANCE.
(a) Section
2.22(a) of the Bio-Quant Disclosure Schedule sets forth each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which Bio-Quant is a party (the
“Insurance
Policies”). The Insurance Policies are in full force and
effect, maintained with reputable companies against normal losses relating to
the business, operations and properties and such other losses as companies
engaged in similar business as Bio-Quant would, in accordance with good business
practice, customarily insure. All premiums due and payable under the
Insurance Policies have been paid on a timely basis and Bio-Quant is in
compliance in all material respects with all other terms
thereof. True, complete and correct copies of the Insurance Policies
have been made available to NexMed.
(b) There
are no material claims pending as to which coverage has been questioned, denied
or disputed. All material claims thereunder have been filed in a due
and timely fashion and Bio-Quant has not been refused insurance for which it has
applied or had any policy of insurance terminated (other than at its request),
nor has Bio-Quant received notice from any insurance carrier
that: (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated; or (ii) premium costs with respect to such
insurance will be increased, other than premium increases in the ordinary course
of business applicable on their terms to all holders of similar
policies.
(c) Bio-Quant
has made available to NexMed accurate and complete copies of the existing
policies (primary and excess) of directors’ and officers’ liability insurance
maintained by Bio-Quant as of the date of this Agreement.
2.23.
CERTAIN BUSINESS PRACTICES. Neither Bio-Quant or
any former subsidiary of Bio-Quant nor, to the knowledge of Bio-Quant, any
director, officer, employee or agent of Bio-Quant or any former subsidiary of
Bio-Quant, has: (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments relating to political activity; (ii)
made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii)
made any other unlawful payment.
2.24.
SUPPLIERS AND MANUFACTURERS; EFFECT OF
TRANSACTION.
(a) Section
2.24(a) of the Bio-Quant Disclosure Schedule sets forth a true, complete and
correct list of each supplier of any material product or service to
Bio-Quant. Since the Bio-Quant Balance Sheet Date, there has not
been: (A) any materially adverse change in the business relationship of
Bio-Quant with any supplier named in Section 2.24(a) of the Bio-Quant Disclosure
Schedule; or (B) any change in any material term (including credit terms) of the
sales agreements or related agreements with any supplier named in Section
2.24(a) of the Bio-Quant Disclosure Schedule.
22
(b) To
the knowledge of Bio-Quant, no creditor, supplier, employee, client, customer or
other person having a material business relationship with Bio-Quant has informed
Bio-Quant that such person intends to materially and adversely change its
relationship with Bio-Quant because of the transactions contemplated by this
Agreement or otherwise.
2.25.
GOVERNMENT CONTRACTS. Bio-Quant has not been suspended
or debarred from bidding on contracts with any Governmental Authority, and no
such suspension or debarment has been initiated or threatened. The
consummation of the Merger and other transactions contemplated by this Agreement
will not result in any such suspension or debarment of Bio-Quant.
2.26.
INTERESTED PARTY TRANSACTIONS. As of the
date hereof, no affiliate of Bio-Quant (a) owns any property or right, tangible
or intangible, which is used in the business of Bio-Quant, (b) has any claim or
cause of action against Bio-Quant, or (c) owes any money to, or is owed any
money by, Bio-Quant. Section 2.26 of the Bio-Quant Disclosure
Schedule describes any material transactions or relationships between Bio-Quant
and any affiliate thereof that involves payments or consideration in excess of
$50,000 in the aggregate.
2.27.
WORKER’S COMPENSATION. Section 2.27 of the
Bio-Quant Disclosure Schedule sets forth all expenses, obligations, duties and
liabilities relating to any material pending claims by employees and former
employees (including dependents and spouses) of Bio-Quant or predecessor of
Bio-Quant that are currently pending, and the extent of any specific accrual on
or reserve therefor set forth or required by GAAP to be set forth on the
Bio-Quant Balance Sheet, for (a) costs, expenses and other liabilities under any
workers’ compensation laws, requirements, insurance (including, but not limited
to, any captive insurance) or other programs and (b) any other medical costs and
expenses. Bio-Quant has no knowledge, and has not received written
notice, that the costs and expenses, including, but not limited to, premium
costs, for workers’ compensation insurance (including, but not limited to, any
captive insurance) with respect to Bio-Quant will increase in the next twelve
(12) months. Except as set forth in Section 2.27 of the Bio-Quant
Disclosure Schedule, to the knowledge of Bio-Quant, no claims, injuries, fact,
event or condition exists which could give rise to a claim by employees, leased
employees or former employees (including dependents and spouses) of Bio-Quant
under any workers’ compensation laws, requirements, insurance (including, but
not limited to, any captive insurance) or other programs or for any other
medical costs and expenses.
2.28.
ACCOUNTS RECEIVABLE AND ACCOUNTS
PAYABLE.
(a) All
accounts receivable of Bio-Quant thereof reflected on the Bio-Quant Balance
Sheet, and all accounts receivable arising subsequent to the date thereof,
represent sales actually made or services actually performed in the ordinary
course of business consistent with past practice and are legal, validly
subsisting and binding claims against the respective debtors as to which full
performance has been rendered. The reserves established for
respective accounts receivable for returns, allowances, chargebacks and bad
debts are consistent with past practices, which such reserves are commercially
reasonable and have been determined in accordance with GAAP. Except
to the extent reserved against any accounts receivable or as reflected by
prepayments or unused credits, no counterclaims or offsetting claims with
respect to such accounts receivable are pending or, to the knowledge of
Bio-Quant, threatened. Section 2.28 of the Bio-Quant Disclosure
Schedule accurately reflects as of the date hereof all accounts receivable of
Bio-Quant and the respective aging thereof.
23
(b) The
accounts payable of Bio-Quant reflected on the Bio-Quant Balance Sheet, and all
accounts payable arising subsequent to the date thereof, arose from bona fide
transactions in the ordinary course of business consistent with past
practice. The accrued liabilities of Bio-Quant have been incurred in
the ordinary course of business consistent with past practice. Bio-Quant has not
failed to pay in the ordinary course of business or in a manner consistent with
past practice any amounts described in this Section 2.28(b).
2.29.
DISCLOSURE. None of the representations or
warranties of Bio-Quant contained herein and none of the information contained
in the Bio-Quant Disclosure Schedule is false or misleading in any material
respect or omits to state a fact herein or therein necessary to make the
statements herein or therein, in light of the circumstance in which they were
made, not misleading in any material respect.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF NEXMED AND MERGER SUB
NexMed
and Merger Sub hereby jointly and severally represent and warrant to Bio-Quant
as follows, except as set forth in the NexMed SEC Reports (as defined in Section
3.6 below), or in the written disclosure schedule delivered by NexMed to
Bio-Quant (the “NexMed
Disclosure Schedule”). The NexMed Disclosure Schedule shall be arranged
in sections and subsections corresponding to the numbered and lettered sections
and subsections contained in this Article III to which such disclosure relates
(which, in each case, shall constitute the only valid disclosure with respect to
such sections and subsections); provided, however, to the extent that the
disclosure of an item is relevant and reasonably apparent on its face to apply
to the disclosure required by any other section, such item shall be deemed to be
disclosed in such other section whether or not an explicit cross-reference
appears. The inclusion of any information in the NexMed Disclosure
Schedule shall not be deemed to be an admission or acknowledgment, in and of
itself, that such information is required by the terms hereof to be disclosed,
is material, has resulted in or would result in a Material Adverse Effect, or is
outside the ordinary course of business. For purposes of this
Agreement, the phrase “to the knowledge of NexMed” or any phrase of similar
import shall mean and be limited to the actual knowledge of Xxxxxx X. Xxx and
Xxxx Xxxxxxxx, after due inquiry.
3.1.
ORGANIZATION OF NEXMED AND MERGER SUB. Each of
NexMed and Merger Sub (a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, (b)
has all requisite corporate power and authority to own, lease and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted, and (c) is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on NexMed. Each of NexMed and
Merger Sub has delivered or made available a true and correct copy of its
respective Articles of Incorporation and Bylaws, each as amended to date, as
applicable, to Bio-Quant. Section 3.1 of the NexMed Disclosure
Schedule lists each foreign jurisdiction in which NexMed is required to be
qualified to do business.
24
3.2.
OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. Merger Sub
is a direct, wholly-owned subsidiary of NexMed. Merger Sub was formed
in connection with the transactions contemplated by this Agreement and has
engaged in no business activity other than in connection with the transactions
contemplated by this Agreement.
3.3.
NEXMED AND MERGER SUB CAPITAL STRUCTURE. The
authorized capital stock of NexMed consists of 120,000,000 shares of NexMed
Common Stock, of which there were 95,288,416 shares issued and outstanding as of
November 20, 2009 and 10,000,000 shares of Preferred Stock, par value $0.001 per
share, none of which were issued and outstanding as of such date. All
outstanding shares of the NexMed Common Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of NexMed or any
agreement or document to which NexMed is a party or by which it is bound, and
were issued in compliance with all applicable federal and state securities
laws. As of November 20, 2009, NexMed had reserved an aggregate of:
(i) 5,012,138 shares of NexMed Common Stock, net of exercises, for issuance to
employees, directors and consultants pursuant to the 1996 and 2006 NexMed Stock
Incentive Plans (the latter, the “NexMed Stock Plan”) under
which options were outstanding for an aggregate of 2,950,702 shares, and (ii)
8,786,631 shares of NexMed Common Stock for issuance upon exercise of
warrants. All shares of the NexMed Common Stock issuable pursuant to
the aforementioned awards and agreements, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and
non-assessable. The NexMed SEC Reports provide a complete and
accurate summary of the aggregate number of outstanding options and warrants and
the weighted average exercise price of such options and warrants, excluding in
each case any options or warrants that have been forfeited or that have
terminated since the NexMed Balance Sheet Date. Prior to the
Effective Time, the NexMed Board of Directors will set aside its remaining
reserve of 1,323,064 shares of NexMed Common Stock under the NexMed Stock Plan
for potential issuance in connection with equity compensation awards that may be
granted from time to time after the Closing to eligible recipients under the
NexMed Stock Plan on terms to be recommended by to the NexMed Compensation
Committee by the Chief Executive Officer of NexMed.
3.4.
OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except
as set forth in Section 3.3, there are no equity securities of any class of
NexMed or Merger Sub, or any securities exchangeable or convertible into or
exercisable for such equity securities, authorized, issued, reserved for
issuance or outstanding. Except for securities NexMed or Merger Sub owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities of any class of any subsidiary of NexMed or Merger Sub, respectively,
or any security exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except as set forth in
Section 3.3 of this Agreement or Section 3.4 of the NexMed Disclosure Schedule,
there are no options, warrants, equity securities, calls, rights (including
preemptive rights), commitments or agreements or any character to which NexMed
or any of its subsidiaries is a party or by which they are bound obligating
NexMed or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock of
NexMed or Merger Sub or obligating NexMed or Merger Sub to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. Except as set forth
in Section 3.4 of the NexMed Disclosure Schedule, there are no registration
rights and, to the knowledge of NexMed there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of NexMed or Merger Sub.
25
3.5.
AUTHORITY.
(a) Each
of NexMed and Merger Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of NexMed and Merger Sub, subject
only to the filing and recordation of the Certificate of Merger pursuant to
Delaware Law and Utah Law. This Agreement has been duly executed and delivered
by NexMed and Merger Sub and, assuming the due authorization, execution and
delivery of this Agreement by the other parties hereto, this Agreement
constitutes the valid and binding obligation of NexMed and Merger Sub,
enforceable against such party in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by
NexMed and Merger Sub does not, and the performance of this Agreement by NexMed
and Merger Sub will not, (i) conflict with or violate the Articles of
Incorporation or Bylaws of NexMed or Merger Sub, (ii) subject to compliance with
the requirements set forth in Section 3.5(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to NexMed or Merger
Sub or by which its properties are bound or affected, or (iii) except as would
not reasonably be expected to have a Material Adverse Effect and subject to
obtaining the consents set forth in Section 3.5 of the NexMed Disclosure
Schedule, result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
NexMed’s or Merger Sub’s rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of NexMed or Merger Sub pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which NexMed or Merger
Sub is a party or by which NexMed or Merger Sub or each of its properties are
bound or affected, except, with respect to clause (ii), for any such conflicts,
violations, defaults or other occurrences that would not have a Material Adverse
Effect on NexMed. Section 3.5 of the NexMed Disclosure Schedule lists all
material consents, waivers and approvals under any of NexMed’s or Merger Sub’s
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
(b) No
Approval of any person or any Governmental Authority is required by or with
respect to NexMed or Merger Sub in connection with the execution, delivery and
performance of this Agreement or any related agreements required to be executed
by this Agreement or the consummation of the transactions contemplated hereby
and thereby, except for (i) the filing of the Proxy Statement with the SEC in
accordance with the Exchange Act, (ii) the filing of the Certificates of Merger
with the Secretary of State of the State of Delaware and the State of Utah, as
applicable, (iii) NexMed’s filing of a Current Report on Form 8-K with the SEC
with respect to the transactions contemplated hereby, (iv) if at the Effective
Time, the NexMed Common Stock is listed on NASDAQ, the listing of the NexMed
Common Stock issuable pursuant to this Agreement on NASDAQ, (v) the approval of
the Proposals by holders of a majority of the outstanding NexMed Common Stock,
(vi) such Approvals as may be required under applicable federal and state
securities laws and the laws of any foreign country, and (vii) such other
Approvals which, if not obtained or made, would not have a Material Adverse
Effect on NexMed or would not have a material adverse effect on the ability of
the parties hereto to consummate the Merger.
26
(c) Prior
to the Effective Time, NexMed and its Board of Directors will take such actions
as may be necessary or appropriate to exempt the issuances of NexMed
Common Stock in connection with the Merger (including shares issued in payment
of the Notes) from the terms of the NexMed Stockholder Rights Agreement by and
between NexMed and Xxxxx Fargo Bank, N.A., as Rights Agent, dated as April 3,
2000, such that no Bio-Quant shareholder will become an “Acquiring Person”
solely as a result of the NexMed Common Stock.
3.6.
NEXMED FINANCIAL STATEMENTS.
(a) NexMed
has filed all forms, reports and documents required to be filed with the SEC
since January 1, 2007 and all such required forms, reports and documents are
referred to herein as the “NexMed SEC Reports.” As of
their respective dates, the NexMed SEC Reports (i) were prepared in accordance
with the requirements of the Securities Act or the Securities Exchange Act of
1934, as amended (the “Exchange
Act”), as the case may be, and the rules and regulations of the SEC
thereunder applicable to such NexMed SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
certifications and statements required by (A) Rule 13a-14 under the Exchange Act
and (B) 18 U.S.C. §1350 (Section 906 of the Xxxxxxxx-Xxxxx Act) relating to the
NexMed SEC Reports are accurate and complete and comply as to form and content
with all applicable legal requirements.
(b) The
audited financial statements (including any related notes thereto) contained in
the NexMed SEC Reports or delivered to Bio-Quant representing the balance sheet
of NexMed at December 31, 2008 and the statements of operations, stockholders’
equity and cash flows for the three-year period then ended, and the unaudited
financial statements (including any related notes thereto) contained in the
NexMed SEC Reports representing the balance sheet of NexMed at September 30,
2009 and the statements of operations, stockholders’ equity and cash flows for
the nine-month period then ended (the “NexMed Financials”), (x)
complied with the published rules and regulations of the SEC with respect
thereto, (y) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and (z) fairly presented the results of its operations and cash flows
for the periods indicated. The balance sheet of NexMed as of September 30, 2009
is hereinafter referred to as the “NexMed Balance Sheet.” Except
as disclosed in the NexMed Financials, NexMed has no liabilities (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of NexMed except
liabilities (i) provided for in the NexMed Balance Sheet, or (ii) incurred since
the date of the NexMed Balance Sheet in the ordinary course of business
consistent with past practices in both type and amount.
27
(c) One
business day prior to Closing, NexMed shall deliver to Bio-Quant an unaudited
balance sheet dated within five (5) days prior to the Closing Date (the “NexMed Closing Balance Sheet”), which
shall have been prepared in accordance with GAAP applied on a consistent basis
with the NexMed Financials and which fairly presents the financial condition of
NexMed as of the NexMed Closing Balance Sheet date. NexMed represents
and warrants that its “Net Cash” at the Closing Balance Sheet date shall equal
or exceed $750,000. For purposes of this Section 3.6(c), “Net Cash” shall mean the
difference between (i) the sum of all NexMed cash and cash equivalents, and (ii)
the sum of all accrued liabilities and expenses, as well as any severance,
shut-down, termination, exit, disposal, transaction or other costs or expenses
related to this Agreement or the Merger or the transactions contemplated hereby
(e.g., attorneys’ fees, banker fees) that have not otherwise been
accrued.
(d) NexMed
maintains adequate disclosure controls and procedures designed to ensure that
material information relating to NexMed, is made known to the Chief Executive
Officer and the Principal Accounting Officer of NexMed by others within that
entity. To NexMed’s knowledge, there are no (i) significant deficiencies
and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect in any
material respect NexMed’s ability to record, process, summarize and report
financial information and (ii) fraud, or allegation of fraud, whether or
not material, that involves management or other employees who have a significant
role in NexMed’s internal controls over financial reporting.
(e) NexMed
maintains a system of internal accounting controls designed to provide
reasonable assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP principles and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.7.
ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
the date of the NexMed Balance Sheet, except as contemplated by this Agreement,
NexMed has conducted its business only in the ordinary course of business
consistent with past practice, and there has not been: (i) any event that has
had, or that would be reasonably expected to result in, a Material Adverse
Effect on NexMed, (ii) any material change by NexMed in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, or
(iii) any revaluation or disposition by NexMed of any of its assets having a
Material Adverse Effect on NexMed.
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3.8.
TAXES. NexMed has accurately prepared and
timely filed or had prepared and timely filed on its behalf all returns,
declarations, reports, statements, information statements and other documents
filed or required to be filed (“NexMed Tax Returns”) with
respect to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities, including,
without limitation, taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity concerning or attributable to NexMed or to their
operations (“NexMed
Taxes”), and all such Tax Returns are true, complete and correct in all
material respects. Copies of all such returns filed after January 1,
2007 have been delivered or made available to Bio-Quant.
In
addition:
(a) NexMed: (i)
has paid all Taxes they are obligated to pay as reflected on the Tax Returns or
otherwise; and (ii) has withheld all federal, state, local and foreign Taxes
required to be withheld with respect to their employees or
otherwise.
(b) There
is no Tax deficiency outstanding, proposed or assessed against NexMed and its
subsidiaries that is not accurately reflected as a liability on the NexMed
Balance Sheet, nor has NexMed executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any
Tax.
(c) NexMed
does not have any liability for unpaid Taxes that has not been properly accrued
for under GAAP and reserved for on the NexMed Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(d) NexMed
is not a party to any agreement, plan, arrangement or other contract covering
any employee or independent contractor or former employee or independent
contractor that, individually or collectively with any other such contracts,
would reasonably be expected to give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or Section
162(m) of the Code (or any comparable provision of state or foreign tax
laws).
(e) NexMed
is not, nor has ever been, a party to or bound by any tax indemnity agreement,
tax sharing agreement, tax allocation agreement or similar contract or
agreement.
3.9. BROKERS’
AND FINDERS’ FEES. Except as set forth in Section 3.9 of the NexMed
Disclosure Schedule, NexMed has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders’ fees or agents’ commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.10. BOARD
APPROVAL. The Boards of Directors of NexMed and Merger Sub, as of the
date of this Agreement, have approved this Agreement and the
Merger. The Board of Directors of Merger Sub has declared the
advisability of the Agreement and the Merger and recommended to the sole
shareholder of Merger Sub to approve the Agreement and the
Merger. The Board of Directors of NexMed has approved the issuance of
the NexMed Shares and Notes as Merger Consideration. The Board of Directors of
NexMed has, as of the date of this Agreement, determined to recommend that the
shareholders of NexMed approve the Proposals.
29
3.11.
VALID ISSUANCE. The NexMed Common Stock to
be issued in the Merger, when issued in accordance with the provisions of this
Agreement, shall be validly issued, fully paid and non-assessable.
3.12.
VOTING REQUIREMENTS. NexMed, acting in its
capacity as the sole stockholder of Merger Sub, has voted to approve the Merger.
3.13.
INTELLECTUAL PROPERTY.
(a) NexMed
or its subsidiaries owns, or has the right to use, sell or license, and has the
right to bring actions for the infringement of, all intellectual property
utilized in its business as presently conducted, which intellectual property is
listed on Section 3.13 of the NexMed Disclosure Schedule (such intellectual
property and the rights thereto are collectively referred to herein as the
“NexMed IP Rights”),
except for any failure to own or have the right to use, sell or license that
would not reasonably be expected to have a Material Adverse Effect on
NexMed.
(b) The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not constitute a breach of any
instrument or agreement governing any NexMed IP Rights (the “NexMed IP Rights Agreements”),
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any NexMed IP Rights or impair the right of NexMed
or the Surviving Corporation to use, sell or license any NexMed IP Rights or
portion thereof, except for the occurrence of any such breach, forfeiture,
termination or impairment that would not individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on NexMed. Each of
the NexMed IP Rights Agreements (i) is valid and binding on NexMed and in full
force and effect; (ii) NexMed has not received any notice of termination or
cancellation under such agreement, or received any notice of breach or default
under such agreement, which breach has not been cured or waived; and (iii)
NexMed, and to the knowledge of NexMed, any other party to such agreement, is
not in breach or default thereof in any material respect.
(c) (i)
Neither the manufacture, marketing, license, sale or intended use of any product
or technology currently licensed or sold or under development by NexMed violates
any license or agreement between NexMed and any third party or, to the knowledge
of NexMed, infringes any intellectual property right of any other party; (ii) to
the knowledge of NexMed, no third party is infringing upon, or violating any
license or agreement with NexMed relating to any NexMed IP Rights; and (iii) to
the knowledge of NexMed, there is no pending or threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any NexMed IP Rights, nor has NexMed received any written notice asserting that
any NexMed IP Rights or the proposed use, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party.
(d) NexMed
has used reasonable efforts to maintain its material trade secrets in
confidence, including entering into licenses and contracts that generally
require licensees, contractors and other third persons with access to such trade
secrets to keep such trade secrets confidential and has otherwise taken
reasonable and practicable steps designed to safeguard and maintain the secrecy
and confidentiality of, and its proprietary rights in, all NexMed IP
Rights.
30
3.14.
COMPLIANCE; PERMITS; RESTRICTIONS.
(a) NexMed
is not in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to it or by which its
properties are bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which NexMed is a party or by which NexMed or its properties are
bound or affected, except for any conflicts, defaults or violations which would
not reasonably be expected to have a Material Adverse Effect on
NexMed. No investigation or review by any governmental or regulatory
body or authority is pending or, to the knowledge of NexMed, threatened against
NexMed, nor has any governmental or regulatory body or authority indicated to
NexMed an intention to conduct the same.
(b) NexMed
holds all permits, licenses, variances, exemptions, orders and approvals from
governmental authorities which are material to the operation of its business
(collectively, the “NexMed
Permits”). NexMed is in compliance with the terms of the NexMed Permits,
except where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect on NexMed. No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending or, to the knowledge
of NexMed, threatened, which seeks to revoke or limit any NexMed Permit. A true,
complete and correct list of the material NexMed Permits is set forth in Section
3.14 of the NexMed Disclosure Schedule. The rights and benefits of each material
NexMed Permit will be available to the Surviving Corporation or its subsidiaries
immediately after the Effective Time on terms substantially identical to those
enjoyed by NexMed immediately prior to the Effective Time.
(c) All
products and product candidates being manufactured, distributed, developed or
tested by or on behalf of NexMed (“NexMed Products”) that are
subject to the jurisdiction of the FDA are being manufactured, labeled, stored,
tested, distributed, and marketed, to the extent applicable, in compliance in
all material respects with all applicable requirements under the FDCA, the
Public Health Service Act, their applicable implementing regulations, and all
comparable state laws and regulations.
(d) All
clinical trials conducted by NexMed (excluding any clinical trials conducted by
any party on behalf of or for the benefit of NexMed) are being conducted in
material compliance with the applicable requirements of Good Clinical Practice,
Informed Consent, and all applicable requirements relating to protection of
human subjects contained in 21 CFR Parts 50, 54, and 56.
(e) All
manufacturing operations for NexMed Products conducted by or for the benefit of
NexMed are being conducted in accordance, in all material respects, with the
FDA’s current Good Manufacturing Practices. In addition, NexMed is in
material compliance with all applicable registration and listing requirements
set forth in 21 U.S.C. Section 360 and 21 CFR Part 207 and all similar
applicable laws and regulations.
(f) Neither
NexMed, nor any representative of NexMed, nor, to the knowledge of NexMed, any
of NexMed’s licensees or assignees of NexMed IP Rights has received any notice
that the FDA or any other Governmental Authority has initiated, or threatened to
initiate, any action to suspend any clinical trial sponsored by NexMed or
otherwise restrict the preclinical research on or clinical study of any NexMed
Product being developed by any licensee or assignee of NexMed IP Rights based on
such intellectual property, or to recall, suspend or otherwise restrict the
development or manufacture of any NexMed Product.
31
(g) Neither
NexMed, nor, to the knowledge of NexMed, any of its officers, employees, agents
or clinical investigators acting for NexMed has committed any act, made any
statement or failed to make any statement that would reasonably be expected to
provide a basis for the FDA to invoke its policy with respect to “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56
Fed. Reg. 46191 (September 10, 1991) and any amendments
thereof. Additionally, neither NexMed, nor, to the knowledge of
NexMed, any of its officers, key employees or agents has been convicted of any
crime or engaged in any conduct that would reasonably be expected to result in
(i) debarment under 21 U.S.C. Section 335a or any similar state law or (ii)
exclusion under 42 U.S.C. Section 1320a-7 or any similar state law or
regulation.
(h) All
animal studies or other preclinical tests performed as the basis for any
regulatory approval required for the NexMed Products (excluding any animal
studies or other preclinical tests performed by any party other than NexMed on
behalf of or for the benefit of NexMed) (1) either (x) have been conducted in
accordance, in all material respects, with applicable Good Laboratory Practice
requirements contained in 21 CFR Part 58, or (y) were not required to be
conducted in accordance with Good Laboratory Practice requirements contained in
21 CFR Part 58 and (2) have employed the procedures and controls generally used
by qualified experts in animal or preclinical study of products comparable to
those being developed by NexMed.
(i)
NexMed has made available to Bio-Quant copies of
any and all written notices of inspectional observations, establishment
inspection reports and any other documents received from the FDA that indicate
or suggest lack of compliance with the regulatory requirements of the
FDA. NexMed has made available to Bio-Quant for review all
correspondence to or from the FDA, minutes of meetings, written reports of phone
conversations, visits or other contact with the FDA, notices of inspectional
observations, establishment inspection reports, and all other documents
concerning communications to or from the FDA, or prepared by the FDA or which
bear in any way on NexMed’s compliance with regulatory requirements of the FDA,
or on the likelihood of timing of approval of any NexMed Products.
(j)
There are no proceedings pending with
respect to a violation by NexMed of the FDCA, FDA regulations adopted
thereunder, the Controlled Substance Act or any other legislation or regulation
promulgated by any other United States Governmental Authority.
3.15.
LITIGATION. Except as described in
Section 3.15 of the NexMed Disclosure Schedule, as of the date of this
Agreement, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which NexMed has received any written notice of
assertion, nor, to the knowledge of NexMed, is there any threatened action,
suit, proceeding, claim for arbitration or investigation against NexMed, which,
if adversely determined, would have a Material Adverse Effect on
NexMed. Section 3.15 of the NexMed Disclosure Schedule sets forth a
complete and correct list and description of all resolved material claims,
suits, actions and proceedings made, filed or otherwise initiated in connection
with NexMed or any subsidiary thereof since January 1, 2007 and the resolution
thereof. Except as set forth in Section 3.15 of the NexMed Disclosure
Schedule, NexMed is not (i) subject to any judgment, order or decree of any
Governmental Authority or (ii) engaged in any legal action to recover monies due
it or for damages sustained by it.
32
3.16.
EMPLOYEE BENEFIT PLANS.
(a) Section
3.16 of the NexMed Disclosure Schedule lists all written and describes all
non-written employee benefit plans of ERISA and all bonus, stock or other
security option, stock or other security purchase, stock or other security
appreciation rights, incentive, deferred compensation, retirement or
supplemental retirement, profit sharing, severance, golden parachute, vacation,
cafeteria, dependent care, medical care, employee assistance program, education
or tuition assistance programs, insurance and other similar fringe or employee
benefit plans, programs or arrangements, and any current or former employment or
executive compensation or severance agreements, written or otherwise, which are
currently sponsored, maintained, contributed to or entered into for the benefit
of, or relating to, any present or former employee or director of NexMed, or any
trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with Bio-Quant within the
meaning of Section 414 of the Code (a “NexMed ERISA Affiliate”),
whether or not such plan is terminated, except as have been disclosed in the
NexMed SEC Reports (collectively, the “NexMed Employee
Plans”).
(b) With
respect to each NexMed Employee Plan, NexMed has provided to Bio-Quant a true
and complete copy of, to the extent applicable, (i) such NexMed Employee Plan,
(ii) the most recent annual reports (Form 5500) as filed with the IRS, (iii)
each trust agreement related to such NexMed Employee Plan, (iv) the most recent
summary plan description for each NexMed Employee Plan for which such
description is required, along with all summaries of material modifications,
amendments, resolutions and all other material plan documentation related
thereto, (v) the most recent actuarial report relating to any NexMed Employee
Plan subject to Title IV of ERISA and (vi) the most recent IRS determination
letter issued with respect to any NexMed Employee Plan.
(c) There
are no actions or claims pending (other than routine claims for benefits), or to
the knowledge of NexMed threatened, against any NexMed Employee Plan or against
the assets of any NexMed Employee Plan, nor are there any current, or to the
knowledge of NexMed threatened, encumbrances or liens on the assets of any
NexMed Employee Plan. No audits, proceedings, investigations, claims
or demands are pending with any Governmental Authority, including the IRS or
Department of Labor with respect to any NexMed Employee Plan. Each NexMed
Employee Plan that is intended to be qualified under Section 401(a) of the Code,
and each trust related thereto, has received a favorable determination letter
from the IRS as to the qualification under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, of
such NexMed Employee Plan and the tax-exempt status of such related trust, and
no event has occurred, and no condition exists, since the date of such Bio-Quant
Employee Plan or the tax-exempt status of such trust. Each NexMed Employee Plan
and all related trusts, insurance contracts and funds (as applicable) have been
maintained, funded, operated and administered in all material respects in
accordance with its terms and the requirements of all applicable
law.
33
(d) No
NexMed Employee Plan is (i) an “employee pension benefit plan” (within the
meaning of Section 3(2) of ERISA) subject to Title IV of ERISA, (ii) a
Multiemployer Plan, (iii) a “single-employer plan under multiple controlled
groups” as described in Section 4063 of ERISA or (iv) a “multiple employer plan”
within the meaning of Section 413(c) of the Code or Section 3(40) of ERISA.
Neither NexMed nor any NexMed ERISA Affiliate has ever maintained, contributed
to, partially or fully withdrawn or incurred any liability with respect to any
such plan described in clauses (i) through (iv).
(e) Neither
NexMed nor any NexMed ERISA Affiliate has ever maintained any employee benefit
plan or arrangement which provides benefits with respect to employees or former
employees following their termination of service with NexMed or such NexMed
ERISA Affiliate other than as required pursuant to Section 601 of ERISA or
Section 4980B of the Code or similar state law.
(f) Full
payment has been made of all amounts which NexMed or any NexMed ERISA Affiliate
is required under the terms of each NexMed Employee Plan to have paid as
contributions to such NexMed Employee Plan on or prior to the date hereof
(excluding any amounts not yet due). All required or discretionary
(in accordance with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
Effective Time shall have been made or properly accrued on the NexMed Financials
or will be properly accrued on the books and records of NexMed as of the
Effective Time in accordance with GAAP.
(g) Based
on NexMed’s good faith interpretation of the provisions of Section 409A of the
Code and the guidance issued thereunder, any NexMed Employee Plan that is a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code has been operated in accordance with the requirements of Section 409A
(including any interpretative guidance issued by the IRS thereunder). No NexMed
Employee Plan that is a “nonqualified deferred compensation plan” that was
intended to be grandfathered for purposes of Section 409A has been materially
modified within the meaning of Section 409A.
(h) Neither
NexMed nor any NexMed ERISA Affiliate has ever maintained or had any actual or
potential liability with respect to any employee benefit plan or arrangement
maintained outside of the United States.
3.17.
ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT. NexMed has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all material
tangible properties and assets, real, personal and mixed, necessary for use in
its business, free and clear of any liens or encumbrances except as set forth in
Section 3.17 of the NexMed Disclosure Schedule and except for (a) liens for
taxes not yet due and payable; (b) liens which secure a payment not yet due that
arises, and is customarily discharged, in the ordinary course of NexMed’s
business; (c) liens relating to capitalized lease financings or purchase money
financings that have been entered into in the ordinary course of business and
are set forth in Section 3.17 of the NexMed Disclosure Schedule, and (d) liens
arising solely by the action of Bio-Quant (collectively, “NexMed Permitted Liens”). Each of the
material tangible assets is in a good state of maintenance and repair and in
good operating condition (subject to normal wear and tear) and is suitable for
the purposes for which it presently is used.
34
3.18.
ENVIRONMENTAL MATTERS.
(a) Hazardous Material.
Except as set forth in Section 3.18(a) of the NexMed Disclosure Schedule, no
underground storage tanks and no amount of any Hazardous Materials are present,
as a result of the deliberate actions of NexMed, or, to NexMed’s knowledge, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that NexMed has at any time owned, operated, occupied or
leased.
(b) Hazardous Material
Activities. Except as would not reasonably be expected to have a Material
Adverse Effect on NexMed, NexMed has not engaged in any Hazardous Material
Activities in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Authority in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. NexMed
currently holds all environmental approvals, permits, licenses, clearances and
consents (the “NexMed
Environmental Permits”) necessary for the conduct of NexMed’s Hazardous
Material Activities and other businesses of NexMed as such activities and
businesses are currently being conducted, except where the failure to so hold
would not reasonably be expected to have a Material Adverse Effect on
NexMed.
(d) Environmental
Liabilities. No material action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to the knowledge
of NexMed, threatened concerning any NexMed Environmental Permit, Hazardous
Material or any Hazardous Material Activity of NexMed. NexMed is not aware of
any fact or circumstance that could involve NexMed in any environmental
litigation or impose upon NexMed any environmental liability.
3.19.
LABOR MATTERS.
(a) Section
3.19 of the NexMed Disclosure Schedule sets forth a true, complete and correct
list of all employees of NexMed who were paid in excess of $100,000 in 2008 or
who are expected to be paid more than $100,000 in the current year, along with
their position and actual annual rate of compensation. All employees
have entered into nondisclosure and assignment of inventions agreements with
NexMed, true, complete and correct copies of which have previously been made
available to Bio-Quant. To the knowledge of NexMed, no employee of
NexMed is in violation of any term of any patent disclosure agreement,
non-competition agreement, or any restrictive covenant (i) to NexMed, or (ii) to
a former employer relating to the right of any such employee to be employed
because of the nature of the business conducted by NexMed or to the use of trade
secrets or proprietary information of others.
(b) NexMed
is not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. To its knowledge, NexMed has complied
in all material respects with all applicable state and federal equal employment
opportunity and other laws related to employment.
35
(c) Except
as disclosed in Section 3.19 of the NexMed Disclosure Schedule, NexMed is not a
party to any written or oral: (i) agreement with any current or former employee
the benefits of which are contingent upon, or the terms of which will be
materially altered by, the consummation of the Merger or other transactions
contemplated by this Agreement; (ii) agreement with any current or former
employee of NexMed providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or for the
payment of compensation in excess of $100,000 per annum; or (iii) agreement or
plan the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, upon the consummation of the Merger.
3.20.
AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as
disclosed in the NexMed SEC Reports, NexMed is not a party to or bound
by:
(a) except
as described in Section 3.16 of the NexMed Disclosure Schedule, any bonus,
deferred compensation, incentive compensation, pension, profit-sharing or
retirement plans, or any other employee benefit plans or
arrangements;
(b) except
as described in Section 3.16 of the NexMed Disclosure Schedule, any employment
or consulting agreement, contract or commitment with any officer or employee,
not terminable by NexMed on thirty (30) days notice without liability, except to
the extent general principles of wrongful termination law may limit NexMed’s
ability to terminate employees at will;
(c) except
as described in Section 3.16 of the NexMed Disclosure Schedule, any agreement or
plan, including, without limitation, any stock option plan, stock appreciation
right plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(d) any
agreement of indemnification or guaranty not entered into in the ordinary course
of business other than indemnification agreements between NexMed and any of
their officers or directors;
(e) any
agreement, contract or commitment containing any covenant limiting the freedom
of NexMed to engage in any line of business or compete with any
person;
(f) any
agreement, contract or commitment relating to capital expenditures and involving
future obligations in excess of $25,000 and not cancelable without
penalty;
(g) any
agreement, contract or commitment currently in force relating to the disposition
or acquisition of assets not in the ordinary course of business or any ownership
interest in any corporation, partnership, joint venture or other business
enterprise;
36
(h) any
mortgages, indentures, loans or credit agreements, security agreements or other
agreements or instruments relating to the borrowing of money or extension of
credit in excess of $25,000;
(i)
any joint marketing or development
agreement;
(j) any
distribution agreement (identifying any that contain exclusivity
provisions);
(k) any
contract with any Governmental Authority;
(l)
any other agreement, contract or commitment (excluding real
and personal property leases) which involve payment by NexMed under any such
agreement, contract or commitment of $50,000 or more in the
aggregate.
NexMed
has not, nor to NexMed’s knowledge has any other party to an NexMed Contract (as
defined below), breached, violated or defaulted under, or received notice that
it has breached, violated, or defaulted under, any of the terms or conditions
of, or terminated any of the agreements, contracts or commitments to which
NexMed is a party or by which they are bound of the type described in clauses
(a) through (l) above (any such agreement, contract or commitment, a “NexMed Contract”) in such
manner as would permit any other party to cancel or terminate any such NexMed
Contract, or would permit any other party to seek damages which would reasonably
be expected to have a Material Adverse Effect on NexMed. As to NexMed, each
NexMed Contract is valid, binding, and enforceable and in full force and effect,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity.
3.21. SEVERANCE
PAYMENTS. Section 3.21 of the NexMed Disclosure Schedule sets forth
each plan or agreement pursuant to which any material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of NexMed as a result of or in connection with the Merger.
3.22.
BOOKS AND RECORDS. The minute books of NexMed made
available to counsel for Bio-Quant are the only minute books of NexMed and
contain accurate summaries, in all material respects, of all meetings of
directors (or committees thereof) and stockholders or actions by written consent
since the time of incorporation of NexMed. The books and records of
NexMed accurately reflect in all material respects the assets, liabilities,
business, financial condition and results of operations of NexMed and have been
maintained in accordance with good business and bookkeeping
practices.
3.23.
RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as
contemplated by this Agreement, there is no agreement, judgment, injunction,
order or decree binding upon or otherwise applicable to NexMed which has, or
would reasonably be expected to have, the effect of prohibiting or materially
impairing (i) any current business practice of NexMed; or (ii) any acquisition
of any person or property by NexMed.
3.24.
REAL PROPERTY LEASES. Section 3.24 of the NexMed
Disclosure Schedule sets forth all real property leases or subleases to or by
NexMed. NexMed has delivered to Bio-Quant true, complete and correct
copies of the leases and subleases (as amended to date) listed in Section 3.24
of the NexMed Disclosure Schedule. With respect to each lease and
sublease listed in Section 3.24 of the NexMed Disclosure
Schedule:
37
(a) As
to NexMed, each lease or sublease is legal, valid, binding, enforceable and in
full force and effect, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity;
(b) NexMed
is not in breach or violation of, or default under, any such lease or sublease,
and no event has occurred, is pending or, to the knowledge of NexMed, is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by NexMed or, to the knowledge of NexMed,
any other party under such lease or sublease, except as would not reasonably be
expected to have a Material Adverse Effect;
(c) NexMed
has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in any lease or sublease; and
(d) there
are no liens, easements, covenants or other restrictions applicable to the real
property subject to such lease, except for NexMed Permitted Liens.
3.25.
INSURANCE.
(a) Section
3.25(a) of the NexMed Disclosure Schedule sets forth each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which NexMed is a party (the
“NexMed Insurance
Policies”). The NexMed Insurance Policies are in full force
and effect, maintained with reputable companies against normal losses relating
to the business, operations and properties and such other losses as companies
engaged in similar business as NexMed would, in accordance with good business
practice, customarily insure. All premiums due and payable under the
NexMed Insurance Policies have been paid on a timely basis and NexMed is in
compliance in all material respects with all other terms
thereof. True, complete and correct copies of the NexMed Insurance
Policies have been made available to Bio-Quant.
(b) There
are no material claims pending as to which coverage has been questioned, denied
or disputed. All material claims thereunder have been filed in a due
and timely fashion and NexMed has not been refused insurance for which it has
applied or had any policy of insurance terminated (other than at its request),
nor has NexMed received notice from any insurance carrier that: (i)
such insurance will be canceled or that coverage thereunder will be reduced or
eliminated; or (ii) premium costs with respect to such insurance will be
increased, other than premium increases in the ordinary course of business
applicable on their terms to all holders of similar policies.
(c) NexMed
has made available to Bio-Quant accurate and complete copies of the existing
policies (primary and excess) of directors’ and officers’ liability insurance
maintained by NexMed as of the date of this Agreement.
38
3.26.
CERTAIN BUSINESS PRACTICES. Neither NexMed
nor, to the knowledge of NexMed, any director, officer, employee or agent of
NexMed has: (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments relating to political activity; (ii)
made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii)
made any other unlawful payment.
3.27.
SUPPLIERS AND MANUFACTURERS; EFFECT OF
TRANSACTION.
(a) Section
3.27 of the NexMed Disclosure Schedule sets forth a true, complete and correct
list of each supplier and manufacturer that is the sole supplier or manufacturer
of any material product or service to NexMed. Since the NexMed
Balance Sheet Date, there has not been: (A) any materially adverse change in the
business relationship of NexMed with any supplier or manufacturer named in the
NexMed Disclosure Schedule; or (B) any change in any material term (including
credit terms) of the sales agreements or related agreements with any supplier or
manufacturer named in Section 3.27 of the NexMed Disclosure
Schedule.
(b) To
the knowledge of NexMed, no creditor, supplier, employee, client, customer or
other person having a material business relationship with NexMed has informed
NexMed that such person intends to materially and adversely change its
relationship with NexMed because of the transactions contemplated by this
Agreement or otherwise.
3.28. GOVERNMENT
CONTRACTS. NexMed has not been suspended or debarred from bidding on
contracts with any Governmental Authority, and no such suspension or debarment
has been initiated or threatened. The consummation of the Merger and
other transactions contemplated by this Agreement will not result in any such
suspension or debarment of NexMed.
3.29.
INTERESTED PARTY TRANSACTIONS. As of the
date hereof, no affiliate of NexMed (a) owns any property or right, tangible or
intangible, which is used in the business of NexMed, (b) has any claim or cause
of action against NexMed, or (c) owes any money to, or is owed any money by,
NexMed. Except as set forth in the NexMed SEC Reports, since the date
of NexMed’s last proxy statement filed with the SEC, no event has occurred
between NexMed and any affiliate thereof that involves payments or consideration
in excess of $50,000 in the aggregate.
3.30.
WORKER’S COMPENSATION. Section 3.30 of the
NexMed Disclosure Schedule sets forth all expenses, obligations, duties and
liabilities relating to any material pending claims by employees and former
employees (including dependents and spouses) of NexMed or predecessor of NexMed
that are currently pending, and the extent of any specific accrual on or reserve
therefor set forth or required by GAAP to be set forth on the NexMed Balance
Sheet, for (a) costs, expenses and other liabilities under any workers’
compensation laws, requirements, insurance (including, but not limited to, any
captive insurance) or other programs and (b) any other medical costs and
expenses. NexMed has no knowledge, and has not received written
notice, that the costs and expenses, including, but not limited to, premium
costs, for workers’ compensation insurance (including, but not limited to, any
captive insurance) with respect to NexMed will increase in the next twelve (12)
months. Except as set forth in Section 3.30 of the NexMed Disclosure
Schedule, to the knowledge of NexMed, no claims, injuries, fact, event or
condition exists which could give rise to a claim by employees, leased employees
or former employees (including dependents and spouses) of NexMed under any
workers’ compensation laws, requirements, insurance (including, but not limited
to, any captive insurance) or other programs or for any other medical costs and
expenses.
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3.31.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.
(a) All
accounts receivable of NexMed thereof reflected on the NexMed Balance Sheet, and
all accounts receivable arising subsequent to the date thereof, represent sales
actually made or services actually performed in the ordinary course of business
consistent with past practice and are legal, validly subsisting and binding
claims against the respective debtors as to which full performance has been
rendered. The reserves established for respective accounts receivable
for returns, allowances, chargebacks and bad debts are consistent with past
practices, which such reserves are commercially reasonable and have been
determined in accordance with GAAP. Except to the extent reserved
against any accounts receivable or as reflected by prepayments or unused
credits, no counterclaims or offsetting claims with respect to such accounts
receivable are pending or, to the knowledge of NexMed, threatened.
(b) The
accounts payable of NexMed reflected on the NexMed Balance Sheet, and all
accounts payable arising subsequent to the date thereof, arose from bona fide
transactions in the ordinary course of business consistent with past
practice. The accrued liabilities of NexMed have been incurred in the
ordinary course of business consistent with past practice. NexMed has not failed
to pay in the ordinary course of business or in a manner consistent with past
practice any amounts described in this Section 3.31(b).
3.32.
DISCLOSURE. None of the representations or
warranties of NexMed contained herein and none of the information contained in
the NexMed Disclosure Schedule is false or misleading in any material respect or
omits to state a fact herein or therein necessary to make the statements herein
or therein, in light of the circumstance in which they were made, not misleading
in any material respect.
ARTICLE
IV
ADDITIONAL
AGREEMENTS
4.1.
BIO-QUANT SHAREHOLDERS MEETING.
(a) As
promptly as practicable after the date hereof, Bio-Quant will take all action
necessary in accordance with the Utah Law and its Articles of Incorporation and
Bylaws to convene a special meeting of the shareholders of Bio-Quant (the “Bio-Quant Special Meeting”) to
be held as promptly as practicable, and in any event within thirty (30) days
after the mailing of the Bio-Quant Proxy Statement (as defined below), for the
purpose of approving this Agreement, all other Transaction Documents to which it
is a party, and all transactions contemplated hereby or thereby, including,
without limitation, the Merger (the “Bio-Quant
Proposal”).
40
(b) Prior
to calling the Bio-Quant Special Meeting, Bio-Quant shall prepare a proxy
statement for the purpose of soliciting proxies to be voted at the Bio-Quant
Special Meeting (the “Bio-Quant
Proxy Statement”). The Bio-Quant Proxy Statement shall include
a notice to shareholders of dissenter’s rights pursuant to Section 16-10a-1320
of the Utah Law, as well as restated audited consolidated financial statements
of Bio-Quant and its subsidiaries for the years ended December 31, 2008 and 2007
and the Bio-Quant Balance Sheet. Bio-Quant shall permit NexMed’s
counsel to review the Bio-Quant Proxy Statement for a reasonable period of time,
but in any event no less than five (5) business days, prior to the mailing of
the Bio-Quant Proxy Statement, and shall incorporate NexMed’s counsel’s comments
thereto unless outside legal counsel to Bio-Quant objects in writing that the
inclusion of such comments would render the disclosure in the Bio-Quant Proxy
Statement materially misleading or incomplete. The Bio-Quant Proxy
Statement shall also include the recommendation of the Board of Directors of
Bio-Quant that the Bio-Quant shareholders vote in favor of the Bio-Quant
Proposal. The Bio-Quant Proxy Statement will comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Bio-Quant shall use commercially reasonable
efforts to solicit from its shareholders proxies in favor of the approval of the
Bio-Quant Proposal and to take all other action necessary or advisable to secure
the vote or consent of its shareholders required by under applicable law to
obtain such approvals, except if the Board of Directors of Bio-Quant reasonably
concludes in good faith, after having received the advice of its outside legal
counsel, that taking such actions would be inconsistent with the Board of
Directors’ fiduciary duties under applicable law.
(c) Each
of the Bio-Quant Principals hereby agrees that, at the Bio-Quant Special
Meeting, such Bio-Quant Principals shall cause all Subject Shares (as defined
below) to be voted in favor of the Bio-Quant Proposal. Each Bio-Quant
Principal further agrees that, prior to the date of the Bio-Quant Special
Meeting, such Bio-Quant Principal shall not enter into any agreement or
understanding with any person or entity to vote or give instructions in any
manner inconsistent with this Section 4.1(c). Without limiting the
generality of the foregoing, during the period from the date of this Agreement
through the date of the Bio-Quant Special Meeting, each Bio-Quant Principal
shall ensure that: (a) none of the Subject Shares is deposited into a
voting trust; and (b) no proxy is granted, and no voting agreement or similar
agreement is entered into, with respect to any of the Subject Shares, other than
a proxy consistent with the terms of this Section 4.1(c). Each
Bio-Quant Principal further agrees that, from the date hereof until the
Bio-Quant Special Meeting, such Bio-Quant Principal shall not sell, transfer,
assign, pledge or otherwise hypothecate or dispose of any voting securities of
Bio-Quant (including, without limitation, shares of Bio-Quant Common Stock)
beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by
such Bio-Quant Principal. For purposes of this Agreement, “Subject Shares” means all
shares of Bio-Quant Common Stock beneficially owned (within the meaning of Rule
13d-3 under the Exchange Act) by the Bio-Quant Principal and his affiliates as
of the record date established by Bio-Quant for voting at the Bio-Quant Special
Meeting (the “Bio-Quant Record
Date”), and (ii) all shares of Bio-Quant Common Stock of which the
Bio-Quant Principal or any of his affiliates acquires beneficial ownership or
purchases after the date of this Agreement and prior to the close of business on
the Bio-Quant Record Date, including, without limitation, any shares issued or
issuable upon the conversion, exercise or exchange, as the case may be, of any
securities held by the Bio-Quant Principal or his affiliates which are
convertible into, or exercisable or exchangeable for, shares of Bio-Quant Common
Stock.
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4.2. NEXMED
PROXY STATEMENT. As promptly as practicable after the Effective Time,
NexMed will prepare and promptly file with the SEC a proxy statement on Schedule
14A (the “Proxy
Statement”) for the purpose of soliciting proxies to be voted at the
Special Meeting to approve the Proposals (as defined below). NexMed
will respond to any comments of the SEC and will use its commercially reasonable
efforts to file the definitive Proxy Statement as promptly as practicable after
such filing and will cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable time. The Proxy Statement will comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. The Proxy Statement will also
include the recommendations of the Board of Directors of NexMed in favor of
approval of the Proposals (except that the Board of Directors of NexMed may
withdraw, modify or refrain from making such recommendation if the NexMed Board
of Directors reasonably concludes in good faith, after having received the
advice of its outside legal counsel, that not taking such actions would be
inconsistent with the Board of Directors’ fiduciary duties under applicable
law).
4.3. NEXMED
MEETING OF SHAREHOLDERS. As promptly as practicable after the
Effective Time, NexMed will take all action necessary in accordance with the
Nevada Corporations Code (the “Nevada Law”) and its Articles
of Incorporation and Bylaws to convene a special meeting of the stockholders of
NexMed (the “Special
Meeting”) to be held as promptly as practicable, and in any event within
thirty (30) days after the filing of the definitive Proxy Statement, for the
purposes of approving: (i) an increase in the number of authorized shares of
NexMed Common Stock to a total of 270,000,000 shares; (ii) approving the
addition of 15,000,000 shares of NexMed Common Stock to the authorized share
reserve under the NexMed Stock Plan; (iii) re-election of the directors of
NexMed; (iv) confirmation of the independent auditor of NexMed; and (v)
approving NexMed’s ability to pay the Notes in shares of NexMed Common Stock
pursuant to the terms of the Notes (collectively, the “Proposals”). NexMed
shall use commercially reasonable efforts to solicit from its stockholders
proxies in favor of the approval of the Proposals and to take all other action
necessary or advisable to secure the vote or consent of its stockholders
required by the rules of the SEC, NASDAQ or under applicable law to obtain such
approvals, except, if the Board of Directors of NexMed reasonably concludes in
good faith, after having received the advice of its outside legal counsel, that
taking such actions would be inconsistent with the Board of Directors’ fiduciary
duties under applicable law.
4.4. EQUITY
AWARDS. As soon as practicable following the approval of Proposals
(i) and (ii) set forth above under Section 4.3, NexMed shall issue to those
employees of Bio-Quant set forth in Section 4.4(a) of the Bio-Quant Disclosure
Schedule a total of 2,370,878 shares of restricted NexMed Common
Stock or restricted stock units and on such terms (including, without
limitation, the vesting schedule with respect to such shares) as set forth in
Section 4.4(a) of the Bio-Quant Disclosure Schedule. Additionally,
following the approval of Proposals (i) and (ii) set forth above under Section
4.3, NexMed shall issue to certain employees of NexMed and its subsidiaries
options to purchase NexMed Common Stock in the amounts and on the terms
(including, without limitation, the exercise prices and expiration dates
thereof) set forth in Section 4.4(b) of the Bio-Quant Disclosure Schedule, with
the optionees and the grant of such awards to be recommended to the NexMed
Compensation Committee by the Chief Executive Officer of
NexMed. Subject to the approval of Proposal (i) set forth above under
Section 4.3, NexMed shall also issue warrants to purchase NexMed Common Stock in
the amounts and on the terms (including, without limitation, the exercise prices
and expiration dates thereof) set forth in Section 4.4(c) of the Bio-Quant
Disclosure Schedule to such persons and at such times as determined by the Chief
Executive Officer of NexMed.
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4.5.
RESTRICTED STOCK. The parties acknowledge that the
NexMed Shares, the Notes and all shares of NexMed Common Stock issued or
issuable under the Notes (collectively, the “Merger Securities”) are being
issued in a private placement transaction that is intended to be exempt from
registration under the Securities Act pursuant to Regulation S under the
Securities Act and Section 4(2) of the Securities Act. Accordingly,
all instruments representing the Merger Securities shall bear a legend in
substantially the form set forth below and NexMed will be entitled to issue
appropriate stop transfer instructions to the transfer agent for the NexMed
Common Stock.
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.6.
DIRECTOR AND OFFICER INDEMNIFICATION MATTERS.
(a)
Subject to Section 4.6(f), from and after the Effective Time, the
Surviving Corporation will fulfill and honor in all respects the obligations of
Bio-Quant which exist prior to the date hereof to indemnify Bio-Quant’s present
and former directors, officers, employees and their heirs, executors and
assigns. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to indemnification and
elimination of liability for monetary damages set forth in Bio-Quant’s
Certificate of Incorporation and Bylaws on the date hereof, which provisions
will not be amended, repealed or otherwise modified for a period of six (6)
years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who, at the Effective Time, were directors,
officers, employees or agents of Bio-Quant, unless such modification is required
by law and then only to the minimum extent required by such
law.
43
(b)
Subject to Section 4.6(f), after the Effective Time, the Surviving
Corporation will, to the fullest extent permitted under applicable law or under
the Surviving Corporation’s Certificate of Incorporation or Bylaws, indemnify
and hold harmless, each present and former director, officer or employee of
Bio-Quant and his or her heirs, executors and assigns (collectively, the “Bio-Quant Indemnified
Parties”) against any costs or expenses (including attorneys’ fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the transactions contemplated by this Agreement or
otherwise pertaining to any action or omission in his or her capacity as a
director, officer, employee or agent of Bio-Quant occurring prior to the
Effective Time to the same extent as provided in Bio-Quant’s Articles of
Incorporation and Bylaws or any applicable contract or agreement as in effect on
the date hereof and disclosed on Section 4.6(b) of the Bio-Quant Disclosure
Schedule, in each case for a period of six (6) years after the Effective
Time. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) and subject
to the specific terms of any indemnification contract, (i) any counsel retained
by the Bio-Quant Indemnified Parties for any period after the Effective Time
will be reasonably satisfactory to the Surviving Corporation, (ii) after the
Effective Time, the Surviving Corporation will pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received and
(iii) the Surviving Corporation will cooperate in the defense of any such
matter; provided, however, that the
Bio-Quant Indemnified Parties shall not settle, and the Surviving Corporation
will not be liable for any settlement, effected without the Surviving
Corporation’s prior written consent (which consent will not be unreasonably
withheld); and provided, further, that, in the
event that any claim or claims for indemnification are asserted or made within
such six-year period, all rights to indemnification in respect of any such claim
or claims will continue until the disposition of any and all such claims. The
Bio-Quant Indemnified Parties as a group may retain only one law firm to
represent them in each applicable jurisdiction with respect to any single action
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Bio-Quant
Indemnified Parties, in which case each Bio-Quant Indemnified Party which
respect to whom such a conflict exists (or group of such Bio-Quant Indemnified
Parties who among them have no such conflict) may retain one separate law firm
in each applicable jurisdiction.
(c)
From and after the Effective Time, NexMed shall unconditionally
guarantee the timely payment of all funds owing by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section 4.6 if
requested to do so by the Surviving Corporation and if legally permitted to do
so.
(d)
This Section 4.6 will survive the consummation of the Merger
at the Effective Time, is intended to benefit Bio-Quant, the Surviving
Corporation and the Bio-Quant Indemnified Parties, and will be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the Bio-Quant Indemnified Parties.
(e)
Except as set forth in Section 4.6(f) below, nothing contained in this
Section 4.6 is intended to limit in any manner and at any time rights that any
Bio-Quant Indemnified Party may have under and in accordance with all provisions
of Bio-Quant’s Articles of Incorporation and Bylaws, which rights shall survive
the Effective Time and shall be binding on the Surviving Corporation and all
successors and assigns of the Surviving Corporation, in accordance with their
respective terms.
(f)
Notwithstanding anything to the contrary contained in this Section
4.6, the indemnities and obligations of the Surviving Corporation arising
pursuant to this Section 4.6 shall not apply in the event that it is determined
that the underlying claims for which the Bio-Quant Indemnified Parties are
seeking indemnification pursuant to this Section 4.6 are a breach of the
representations, warranties or covenants of Bio-Quant set forth in this
Agreement and subject to a right of offset and adjustment in accordance with
Article VIII of this Agreement.
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4.7.
FURTHER ACTION. Upon the terms and
subject to the conditions hereof, each of the parties hereto in good faith shall
use all commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to otherwise satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement.
4.8.
LISTING OF NEXMED COMMON
STOCK. NexMed shall use its commercially reasonable efforts to
maintain the listing of the NexMed Common Stock on NASDAQ through the Effective
Time. To the extent that the NexMed Common Stock is listed on NASDAQ,
NexMed shall cause the NexMed Shares and, subject to receipt of any required
stockholder approvals, any shares of NexMed Common Stock issued under the Notes
to be approved for listing on NASDAQ.
4.9.
CONVEYANCE TAXES. NexMed and Bio-Quant shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time. NexMed shall
pay all such taxes and fees.
4.10.
TAX-FREE REORGANIZATION. Notwithstanding anything herein to
the contrary, each of Merger Sub, NexMed and Bio-Quant shall use reasonable best
efforts to cause the Merger to qualify, and will not take any actions, or fail
to take any action, which could reasonably be expected to prevent the Merger
from qualifying as a reorganization under the provisions of Section 368(a) of
the Code. Merger Sub shall, and shall cause the Surviving Corporation
and NexMed to, report, to the extent required by the Code or the regulations
thereunder, the Merger for United States federal income tax purposes as a
reorganization within the meaning of Section of 368(a) of the Code. NexMed and
Bio-Quant will each make available to the other party and their respective legal
counsel copies of all returns requested by the other party.
4.11.
BOARD OF DIRECTORS AND OFFICERS OF NEXMED. The
Board of Directors of NexMed shall cause NexMed’s Board of Directors,
immediately after the Effective Time, to consist of no more than seven persons,
and with respect to such Board of Directors: (i) to appoint three
Bio-Quant nominees, who shall be Xxxxx Xxxxx, Ph.D., Xxxxxx Xxxxx, Ph.D. and
Xxxxxxx Xxxx, (the “Bio-Quant
Nominees”), (ii) to appoint four NexMed nominees, who shall be Xxxxxx X.
Xxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxxx and a fourth director to be named
by the current NexMed Board prior to the Effective Time and who shall be
reasonably acceptable to Bio-Quant (which approval will not be unreasonably
withheld or delayed). In addition, NexMed shall cause Xxxxxx Xxxxx to
be appointed as Chief Executive Officer of NexMed and Xxxxxx X. Xxx to be
appointed as Chairman of the Board and Executive Vice President of NexMed, in
each case immediately subsequent to the Effective Time.
4.12.
CONDUCT OF BUSINESS OF BIO-QUANT. During the period from the
date of this Agreement to the earlier of the Closing Date and the termination of
this Agreement in accordance with ARTICLE VII, Bio-Quant shall conduct its
business and operations in the ordinary course consistent with past practices
and use its commercially reasonable efforts to preserve intact its business
organizations, to retain the services of its executive officers and key
employees and to preserve the goodwill of its material customers and suppliers,
and, without the prior written consent of NexMed (which consent shall not be
unreasonably withheld or delayed), to not undertake any of the following
actions:
45
(a)
issue, sell or pledge, or authorize or propose the issuance, sale or
pledge of (i) additional shares of capital stock of any class of Bio-Quant or
any of its subsidiaries, or securities convertible into or exchangeable for any
such shares, or any rights, warrants or options to acquire any such shares or
other convertible securities of Bio-Quant or (ii) any other securities in
respect of, in lieu of, or in substitution for shares of capital stock of
Bio-Quant (including the Shares) outstanding on the date hereof;
(b)
redeem, purchase or otherwise acquire any outstanding shares of the
capital stock of Bio-Quant;
(c)
adopt any amendment to the Articles of Incorporation or Bylaws of
Bio-Quant;
(d)
incur any indebtedness for borrowed money (other than for working capital
purposes in the ordinary course consistent with past practices borrowings and
for performance bonds or letters of credit entered into in the ordinary course
of business consistent with past practice);
(e)
(i) increase in any material manner the rate or terms of compensation or
benefits of any of its directors, or senior officers except as may be required
under existing employment agreements or such increases as are granted in the
ordinary course of business consistent with past practices, or (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit not
contemplated by any Bio-Quant Employee Plan to any director, officer or
employee, whether past or present, other than in the ordinary course of business
consistent with past practice, or (iii) enter into, adopt or amend any
employment, bonus, severance or retirement contract or adopt any employee
benefit plan, other than in the ordinary course of business consistent with past
practices or as required by law, including Section 409A of the
Code;
(f)
except in the ordinary course of business consistent with past practice,
sell, lease, transfer or otherwise dispose of, any of its material property or
assets or (ii) create any lien or encumbrance (other than a Bio-Quant Permitted
Lien) on any material property or assets;
(g)
make any loans, advances or capital contributions, except advances for
travel and other normal business expenses to officers and employees in the
ordinary course of business consistent with past practices;
(h)
acquire any business or person, by merger or consolidation, purchase of
substantial assets or equity interests, or by any other manner, in a single
transaction or a series of related transactions;
(i)
make any change in any method of accounting other than those required by
GAAP;
(j)
amend or modify any material contracts other than in the ordinary course
of business consistent with past practices;
46
(k)
make any capital expenditures in excess of $50,000 individually or
$100,000 in the aggregate, other than in the ordinary course of business
consistent with past practices;
(l)
declare, pay or otherwise make any dividend or distribution (in cash or
in any other form) to the Bio-Quant shareholders; or
(m) authorize,
propose or agree in writing to take any of the foregoing actions.
4.13. CONDUCT
OF BUSINESS OF NEXMED. During the period from the date of this
Agreement to the earlier of the Closing Date and the termination of this
Agreement in accordance with ARTICLE VII, NexMed shall conduct its business and
operations in the ordinary course consistent with past practices and use its
commercially reasonable efforts to preserve intact its business organizations,
to retain the services of its executive officers and key employees and to
preserve the goodwill of its material customers and suppliers, and, without the
prior written consent of Bio-Quant (which consent shall not be unreasonably
withheld or delayed), to not undertake any of the following
actions:
(a)
issue, sell or pledge, or authorize or propose the issuance, sale or
pledge of (i) additional shares of capital stock of any class of NexMed, or
securities convertible into or exchangeable for any such shares, or any rights,
warrants or options to acquire any such shares or other convertible securities
of NexMed other than shares of capital stock issued pursuant to outstanding
stock options exercised in the ordinary course of business and shares of
restricted stock in lieu of cash fees to its directors in accordance with past
practice or (ii) any other securities in respect of, in lieu of, or in
substitution for shares of capital stock of the NexMed outstanding on the date
hereof;
(b)
redeem, purchase or otherwise acquire any outstanding shares of the
capital stock of NexMed;
(c)
adopt any amendment to the Articles of Incorporation or Bylaws of
NexMed;
(d)
incur any indebtedness for borrowed money (other than for working capital
purposes in the ordinary course consistent with past practices borrowings and
for performance bonds or letters of credit entered into in the ordinary course
of business consistent with past practice);
(e)
(i) increase in any material manner the rate or terms of compensation or
benefits of any of its directors, or senior officers except as may be required
under existing employment agreements or such increases as are granted in the
ordinary course of business consistent with past practices, or (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit not
contemplated by any NexMed Employee Plan to any director, officer or employee,
whether past or present, other than in the ordinary course of business
consistent with past practice, or (iii) enter into, adopt or amend any
employment, bonus, severance or retirement contract or adopt any employee
benefit plan, other than in the ordinary course of business consistent with past
practices or as required by law, including Section 409A of the
Code;
47
(f)
(i) except in the ordinary course of business consistent with past
practice, sell, lease, transfer or otherwise dispose of, any of its material
property or assets or (ii) create any lien or encumbrance (other than a NexMed
Permitted Lien) on any material property or assets;
(g)
acquire any business or person, by merger or consolidation, purchase of
substantial assets or equity interests, or by any other manner, in a single
transaction or a series of related transactions;
(h)
make any change in any method of accounting other than those required by
GAAP;
(i)
amend or modify any material contracts other than in the ordinary course
of business consistent with past practices;
(j)
make any capital expenditures in excess of $50,000 individually or
$100,000 in the aggregate, other than in the ordinary course of business
consistent with past practices;
(k)
declare, pay or otherwise make any dividend or distribution (in cash or
in any other form) to the shareholders of NexMed; or
(l)
authorize, propose or agree in writing to take any of the foregoing
actions.
4.14.
NO SOLICITATION.
(a)
From the date hereof until the Closing, and subject to Section 4.14(b)
hereof, neither Bio-Quant nor NexMed nor any of their respective directors,
officers, employees, agents or advisors (including, without limitation,
attorneys, accountants, consultants, financial advisors and investment bankers)
(collectively, such party’s “Representatives”), shall,
directly or indirectly, solicit, initiate, knowingly encourage, participate in
negotiations with, provide any confidential information to, enter into any
agreement with or otherwise cooperate in any way with, any Third Party (as
hereinafter defined) concerning any Competing Transaction (as hereinafter
defined). Both parties shall promptly (and in any event within twelve
hours of the occurrence of the relevant event) inform the other party orally and
in writing of any unsolicited proposals or inquiries from a Third Party (x)
concerning a potential Competing Transaction or (y) that could reasonably be
expected to lead to a potential Competing Transaction, including the identity of
the Third Party making the inquiry or proposal and the material terms and
conditions thereof. Both parties agrees to terminate, immediately
following the execution of this Agreement, all pending discussions or
negotiations with any Third Party with respect to any possible Competing
Transaction. For purposes of this agreement, the term “Third Party” shall mean any
individual, group (as defined in Section 13(d)(3) of the Exchange Act) of which
each party is not a part, corporation, partnership, or other entity, and the
term “Competing
Transaction” shall mean any of the following involving either
party: (i) any acquisition, consolidation, business combination or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or substantially all of the assets of such
party; or (iii) any tender offer or exchange offer for 15% or more of the
outstanding shares of such party’s common stock.
48
(b)
Notwithstanding anything to the contrary contained in this Agreement
(including, without limitation, Section 4.14(a) hereof), at any time prior to
the Closing, the Board of Directors of NexMed may withhold, amend, withdraw or
modify its resolutions adopting this Agreement and approving the Merger (a
“Withdrawal”) if (i)
based upon a material development or change in circumstances occurring, arising
or coming to the attention of such directors after the date hereof that was
neither known to such directors nor reasonably foreseeable as of or prior to the
date hereof (an “Intervening
Event”), determines in good faith, following consultation with its
outside legal counsel, that in light of such Intervening Event the failure to
make a Withdrawal is reasonably likely to result in a breach of its fiduciary
duties under applicable laws, or (ii) NexMed has not breached this Section 4.14
and receives a proposal to engage in a Competing Transaction that is on terms
and conditions that the NexMed Board of Directors determines, in its good faith
judgment, after obtaining and taking into account such matters that it deems
relevant following consultation with its outside legal counsel and financial
advisors, is (x) materially more favorable financially to NexMed or NexMed’s
stockholders than the terms of this Agreement and the Merger and (y) is
reasonably capable of being consummated (a “Superior
Proposal”). In such event, NexMed may terminate this Agreement
in accordance with the provisions of Section 7.1(e) hereof.
4.15. RESIGNATIONS
OF CERTAIN BIO-QUANT DIRECTORS AND OFFICERS. Prior to Closing,
Bio-Quant shall obtain resignations, effective as of the Effective Time, from
(a) Xxxxx Xxxxx, as Chairman of the Board of Bio-Quant (but not as a director)
and (b) Xxxxx Xxxxx and Xxxxxx Xxx as directors of Bio-Quant.
ARTICLE
V
CONDITIONS
TO BIO-QUANT’S OBLIGATIONS TO CLOSE
The obligations of Bio-Quant to
consummate the Merger on the Closing Date are subject to the satisfaction or
waiver, on or prior to the Closing Date, of each of the following
conditions:
5.1. Representations, Warranties
and Covenants. All representations and warranties of NexMed
and Merger Sub contained in this Agreement shall be true and correct in all
material respects (provided that any representations and warranties qualified by
materiality shall be true and correct in all respects) when made and, except for
changes that have occurred in the ordinary course of business that are
specifically permitted or contemplated by this Agreement, at and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date, and NexMed and Merger Sub shall have performed in all material
respects all agreements and covenants required hereby to be performed by each of
them prior to or at the Closing Date.
5.2. No
Injunction. No injunction, stay or restraining order shall be
in effect prohibiting the consummation of the transactions contemplated by this
Agreement, and no action or proceeding shall be pending seeking to make illegal,
to delay materially or otherwise indirectly restrain or prohibit the
consummation of the transactions contemplated hereby or otherwise seeking
material damages.
49
5.3. Shareholder
Approval. The shareholders of Bio-Quant shall have approved
the Merger in accordance with Utah Law.
5.4. Payments. NexMed
shall have tendered the Merger Consideration to the Exchange Agent pursuant to
Article I.
5.5. Certificates. NexMed
and Merger Sub shall have furnished Bio-Quant with such certificates of its
officers, and others to evidence compliance with the conditions set forth in
this Article V as may be reasonably requested by and satisfactory to Bio-Quant
and their counsel.
5.6. Consents. All
consents, approvals and waivers from Governmental Authorities and other parties
required or necessary as a result of the transactions contemplated hereby and
set forth in Section 5.6 of the Bio-Quant Disclosure Schedule shall have been
obtained.
5.7. Documents to be Delivered by
NexMed and Merger Sub. At the Closing, NexMed shall have
delivered to Bio-Quant the documents required to be delivered by NexMed pursuant
to Section 1.1(d).
5.8. Compliance
Certificate. A certificate signed by the chief executive
officer of NexMed and Merger Sub that each of the representations and warranties
made by NexMed and Merger Sub in this Agreement is true and correct in all
material respects (provided that any representations and warranties qualified by
materiality shall be true and correct in all respects) on and as of the Closing
Date with the same effect as though such representations and warranties had been
made or given on and as of the Closing Date, and that NexMed has performed and
complied with all of its obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date.
5.9. Incumbency
Certificate. Incumbency certificates relating to each person
executing (as corporate officer or otherwise on behalf of another person) any
document executed and delivered to Bio-Quant pursuant to the terms
hereof.
5.10. Other
Documents. All other documents, instruments or writings
required to be delivered to Bio-Quant at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Bio-Quant may reasonably request.
5.11. No Material Adverse
Effect. No Material Adverse Effect shall have occurred with
respect to NexMed between the date hereof and the Closing Date.
ARTICLE
VI
CONDITIONS TO NEXMED’S AND MERGER SUB’S
OBLIGATIONS TO CLOSE
The obligations of NexMed and Merger
Sub to consummate the Merger as provided hereby are subject to the satisfaction
or waiver, on or prior to the Closing Date, of each of the following
conditions:
50
6.1. Representations, Warranties
and Covenants. All representations and warranties of Bio-Quant
contained in this Agreement shall be true and correct in all material respects
(provided that any representations and warranties qualified by materiality shall
be true and correct in all respects) when made and, except for changes that have
occurred in the ordinary course of business that are specifically permitted or
contemplated by this Agreement, at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Bio-Quant shall have performed, in all material respects, all agreements and
covenants required hereby to be performed by it prior to or at the Closing
Date.
6.2. Consents. All
consents, approvals and waivers from Governmental Authorities and other parties
required or necessary as a result of the transactions contemplated hereby set
forth in Section 6.2 of the NexMed Disclosure Schedule shall have been
obtained.
6.3. Bio-Quant Shareholder
Approval. The shareholders of Bio-Quant shall have approved
the Merger in accordance with Utah Law, and Bio-Quant shareholders holding less
than five percent (5%) of the issued and outstanding shares of Bio-Quant Common
Stock shall have perfected their dissenter’s rights with respect to the Merger
in accordance with Utah Law.
6.4. No
Injunction. No injunction, stay or restraining order shall be
in effect prohibiting the consummation of the transactions contemplated by this
Agreement and no action or proceeding shall be pending seeking to make illegal,
to delay materially or otherwise indirectly restrain or prohibit the
consummation of the transactions contemplated hereby or otherwise seeking
material damages.
6.5. Documents to be Delivered by
Bio-Quant. At the Closing, Bio-Quant shall have delivered to
NexMed the documents required to be delivered by Bio-Quant pursuant to Section
1.1(c).
6.6. Compliance
Certificate. A certificate signed by an officer of Bio-Quant
that each of the representations and warranties made by Bio-Quant in this
Agreement is true and correct in all material respects (provided that any
representations and warranties qualified by materiality shall be true and
correct in all respects) on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as of
the Closing Date, and that Bio-Quant has performed and complied in all material
respects with all of its obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date.
6.7. Incumbency
Certificate. Incumbency certificates relating to each person
executing for Bio-Quant any document executed and delivered to NexMed
pursuant to the terms hereof.
6.8. Other
Documents. All other documents, instruments or writings
required to be delivered to NexMed by Bio-Quant at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as NexMed may reasonably request with respect to
Bio-Quant.
6.9. No Material Adverse
Effect. No Material Adverse Effect shall have occurred with
respect to Bio-Quant between the date hereof and the Closing Date.
51
ARTICLE
VII
TERMINATION
7.1. TERMINATION. This
Agreement may be terminated at any time prior to the Effective Time,
notwithstanding approval thereof by the Boards of Directors of NexMed, Bio-Quant
and Merger Sub:
(a)
by mutual written consent duly authorized by the Boards of Directors of
NexMed and Bio-Quant; or
(b)
by either NexMed or Bio-Quant if the Merger shall not have been
consummated on or prior to January 15, 2010 (unless a registration statement is
required to be filed, in which event such date shall be March 31, 2010); provided, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date; or
(c)
by either NexMed or Bio-Quant in the event that a condition to the
terminating party’s obligations to consummate the transactions contemplated by
this Agreement shall become incapable of satisfaction, without fault by the
terminating party; or
(d)
by either NexMed or Bio-Quant if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a non-appealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger; or
(e)
by NexMed if (i)(A) the Board of Directors of NexMed has made a
Withdrawal in accordance with Section 4.14(b)(i) hereof and (B) immediately
prior to the termination of this Agreement, NexMed pays to Bio-Quant the amount
of $650,000 plus Bio-Quant’s reasonable documented fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(provided, that such fees and expenses shall in no event exceed $200,000) (such
aggregate amount, the “Break-Up
Fee”), or (ii) immediately prior to entering into a definitive agreement
with respect to a Superior Proposal, provided that (A) NexMed has not breached
Section 4.14 of this Agreement, and the Board of Directors of NexMed has made a
Withdrawal in accordance with Section 4.14(b)(ii) and authorized NexMed to enter
into a definitive agreement for a transaction that constitutes a Superior
Proposal, (B) immediately prior to the termination of this Agreement, NexMed
pays to Bio-Quant the Break-Up Fee and (C) immediately following such
termination, NexMed enters into a definitive agreement to effect such Superior
Proposal.
7.2. NOTICE
OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any party hereto or any of its affiliates, directors, officers or
shareholders except that nothing herein shall relieve any party from liability
for any willful breach hereof. No termination of this Agreement shall
affect the obligations of the parties contained in the Confidentiality
Agreement, all of which obligations shall survive termination of this Agreement
in accordance with its terms; provided that such Confidentiality Agreement shall
not be deemed to prohibit such public disclosure as may be required by
applicable law or regulations.
52
7.3. FEES
AND EXPENSES. All fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated (except as set
forth in Section 7.1(e) hereof); in addition, NexMed shall be solely responsible
for all fees and expenses incurred in relation to the preparation, printing and
filing of the Proxy Statement (including the preliminary materials related
thereto), in each case, including without limitation any amendments or
supplements thereto.
ARTICLE
VIII
RIGHTS OF
OFFSET, ADJUSTMENT AND INDEMNIFICATION; ESCROWS;
SHAREHOLDER
REPRESENTATIVE
8.1. SURVIVAL
OF REPRESENTATIONS, WARRANTIES, ETC. The representations, warranties
and covenants contained in this Agreement or any certificate delivered pursuant
to or in connection with this Agreement shall survive the execution and delivery
of this Agreement and the Closing hereunder and thereafter the respective
representations and warranties of the NexMed and Bio-Quant shall continue to
survive in full force and effect for a period of one year after the Effective
Time; provided, however, that the representations, warranties and covenants of
Bio-Quant set forth in Sections 2.1, 2.2, 2.3, 2.7 and 2.12 hereof, and the
representations, warranties and covenants of NexMed set forth in Sections 3.1,
3.2, 3.3 and 3.13 hereof shall survive in full force and effect for a period of
three years after the Effective Time. Notwithstanding the foregoing,
(i) in the case of any fraudulent breach of a representation or warranty or
intentional breach of a covenant, the representations, warranties and/or
covenants that are the subject of such fraud or intentional conduct shall not
terminate until the expiration of the applicable statute of limitations, and
(ii) representations, warranties and covenants shall not terminate to the extent
claims relating to such representations, warranties and/or covenants were made
under this Article VIII before the termination thereof, and such
representations, warranties and/or covenants shall continue until such claims
are finally resolved.
8.2. RIGHTS
OF OFFSET, ADJUSTMENT AND INDEMNIFICATION.
(a)
NexMed Offset
Right. Subject to Section 8.2(e) hereof, from the Effective
Time until the earlier of (i) such time as the Notes are fully paid (the “Repayment Date”), or (ii) the
first anniversary of Closing, NexMed shall have a right of offset, on a
dollar-for-dollar basis, against any unpaid portion of the Notes with respect to
any Losses in excess of $50,000 in the aggregate (the “Deductible Amount”) suffered
or incurred by NexMed, the Surviving Corporation or any NexMed Affiliate as a
result of or in connection with (i) any actual or alleged breach by Bio-Quant of
any representation, warranty or covenant contained herein and (ii) any liability
of Bio-Quant arising due to a breach of the Subsidiary Purchase Agreements or
the transition services agreements entered into in connection
therewith. Any such adjustment shall be retroactive from the
Effective Time and shall result in the cancellation of any interest that accrued
but was unpaid with respect to the cancelled principal amount.
53
(b)
Bio-Quant
Adjustment Right. From the Effective Time through the first
anniversary of Closing, the principal amount owed under the Notes shall be
increased on a dollar-for-dollar basis for any Losses in excess of the
Deductible Amount suffered or incurred by NexMed or the Surviving Corporation as
a result of or in connection with any actual or alleged breach by NexMed of any
representation, warranty or covenant contained herein. Any such
adjustment shall be retroactive from the Effective Time and shall result in the
accruing of interest with respect to such additional amount from the Effective
Time. Notwithstanding anything herein to the contrary, in no event
shall the total amount of adjustments provided pursuant to this Section 8.2(b)
exceed $3,250,000 in the aggregate.
(c)
NexMed General
Indemnification Right. Subject to Section 8.2(e) hereof, from
and after the Repayment Date until the one (1) year anniversary of the Closing,
but subject to (i) the survival periods for representations, warranties and
covenants set forth in Section 8.1 hereof and (ii) the provisions of Section
8.2(f) below, the Bio-Quant shareholders shall indemnify and hold harmless
NexMed against any Losses in excess of the Deductible Amount (including, for
purposes of calculating whether the Deductible Amount has been met, any Losses
claimed pursuant to Section 8.2(a) hereof) suffered by NexMed, the Surviving
Corporation or any NexMed Affiliate as a result of or in connection with (i) any
actual or alleged breach by Bio-Quant of any representation, warranty or
covenant contained herein and (ii) any liability of Bio-Quant arising due to a
breach of the Subsidiary Purchase Agreements or the transition services
agreements entered into in connection therewith; provided, that
NexMed’s sole and exclusive remedy for such indemnification shall be the General
Escrowed Proceeds (as defined below), subject to the provisions of the General
Escrow Agreement (as defined below) and Section 8.2(f) below.
(d)
NexMed Special
Indemnification Right. Subject to Section 8.2(e) hereof, from
and after the one (1) year anniversary of the Closing until the three (3) year
anniversary of the Closing, the Bio-Quant Principals shall jointly (but not
severally) indemnify and hold harmless NexMed against any Losses in excess of
the Deductible Amount (including, for purposes of calculating whether the
Deductible Amount has been met, any Losses claimed pursuant to Sections 8.2(a)
and 8.2(c) hereof) suffered by NexMed, the Surviving Corporation or any NexMed
Affiliate as a result of or in connection with (i) any actual or alleged breach
by Bio-Quant of the representations and warranties set forth in Section 2.7
hereof and (ii) any liability of Bio-Quant arising due to a breach of the
Subsidiary Purchase Agreements or the transition services agreements entered
into in connection therewith; provided, that the
indemnification provided by this Section 8.2(d) shall not exceed the lesser of
(i) $500,000 in the aggregate, or (ii) the difference between $3,250,000 and the
aggregate amount of all offsets pursuant to Section 8.2(a) and all
indemnification claims pursuant to Sections 8.2(c).
(e)
Maximum Offset
and Indemnification Amount. Notwithstanding anything herein to
the contrary, in no event shall the total amount to be offset pursuant to
Section 8.2(a) and the amounts for which NexMed is indemnified pursuant to
Sections 8.2(c) and 8.2(d) exceed, in the aggregate,
$3,250,000.
54
(f)
Escrows.
(i) General
Escrow. Upon any repayment of the Notes (whether such
repayment is made in cash or shares of NexMed Common Stock pursuant to the terms
of such Note) prior to the one (1) year anniversary of the Closing, NexMed shall
deposit with an escrow agent reasonably acceptable to NexMed and the Shareholder
Representative (the “Escrow
Agent”) a portion of the payment otherwise due to the holders of the
Notes, pro rata in proportion to the original principal amount of the Notes held
by such Note holders, with an aggregate value equal to (x) $3,250,000, less (y)
the amount of all offsets made pursuant to Section 8.2(a) hereof (such net
amount, the “General Escrowed
Proceeds”). The Escrow Agent shall hold the General Escrowed
Proceeds in escrow until the one (1) year anniversary of the Closing Date, at
which time the Escrow Agent shall, in accordance with the terms of the escrow
agreement to be entered into among the Escrow Agent, NexMed and the Shareholder
Representative (the “General
Escrow Agreement”), release the General Escrowed Proceeds, if any,
remaining after payment or reserve as provided in the next sentence to the
respective holders of the Notes. In the event that NexMed is entitled
to indemnification from the Bio-Quant shareholders pursuant to Section 8.2(c)
hereof, then NexMed may, upon written notice to the Shareholder Representative
and the Escrow Agent, and subject to the dispute resolution mechanisms to be set
forth in the General Escrow Agreement, direct the Escrow Agent to release and
transfer to NexMed all or a portion of the General Escrowed Proceeds, pro rata
in proportion to the original principal amount of the Notes held by each Note
holder, having an aggregate value equal to the amount owed to NexMed pursuant to
Section 8.2(c).
(ii) Bio-Quant Principals
Escrow. Upon any repayment of the Notes (whether such
repayment is made in cash or shares of NexMed Common Stock pursuant to the terms
of such Note) prior to the date eighteen (18) months after the Closing Date (the
“Bio-Quant Principals Escrow
Release Date”), NexMed shall deposit with the Escrow Agent an aggregate
amount (in addition to any General Escrowed Proceeds) of such repayment
otherwise due to the Bio-Quant Principals, pro rata in proportion to the
original principal amount of the Notes held by the Bio-Quant Principals, equal
to (x) $500,000 less (y) in the event that all offsets made pursuant to Section
8.2(a) exceed $2,750,000, the difference between $3,250,000 and the amount of
all offsets made pursuant to Section 8.2(a) (such net amount, the “Bio-Quant Principals Escrowed
Proceeds”). The Escrow Agent shall hold the Bio-Quant
Principals Escrowed Proceeds in escrow until the Bio-Quant Principals Escrow
Release Date, at which time the Escrow Agent shall, in accordance with the terms
of the escrow agreement to be entered into among the Escrow Agent, NexMed and
the Bio-Quant Principals, release the Bio-Quant Principals Escrowed Proceeds, if
any, remaining after payment or reserve as provided in the next sentence to the
Bio-Quant Principals. In the event that NexMed is entitled to
indemnification from the Bio-Quant Principals pursuant to Section 8.2(d) hereof prior to or on
the Bio-Quant Principals Escrow Release Date, then NexMed may, upon written
notice to the Bio-Quant Principals and the Escrow Agent, and subject to the
dispute resolution mechanisms to be set forth in the General Escrow Agreement,
direct the Escrow Agent to release and transfer to NexMed all or a portion of
the Bio-Quant Principals Escrowed Proceeds, pro rata in proportion to the
original principal amount of the Notes held by each Bio-Quant Principal, having
an aggregate value equal to the amount owed to NexMed pursuant to Section
8.2(d).
55
(iii) Value of NexMed Common
Stock. For all purposes of this Section 8.2(f), in the event
the General Escrowed Proceeds or Bio-Quant Principals Escrowed Proceeds include
shares of NexMed Common Stock, the value of such shares of NexMed Common Stock
shall be fixed at $0.168 per share.
(g)
Definition of
Losses. For purposes of this Section 8.2, “Losses” shall mean any claims,
losses, liability, obligations, lawsuits, judgments, settlements, governmental
investigations, deficiencies, damages, costs or expenses of whatever nature,
whether known or unknown, accrued, absolute, contingent or otherwise including,
without limitation, interest, penalties, attorneys’ fees, costs of investigation
and all amounts paid in defense or settlement of the foregoing, reduced by and
to the extent of any insurance proceeds received with respect to any of the
foregoing and the amount of any recovery against a third party in respect of the
same matter.
(h)
Pending
Claims. To the extent that a claim for offset is asserted
under Section 8.2(a) prior to the Repayment Date (a “Pending
Offset”), payment on that portion of the Notes with an aggregate value
equal to the amount of the Pending Offset may be withheld until the resolution
of the Pending Offset as set forth below. Following the resolution of
any Pending Offset, and subject to Section 8.2(f) with respect to the General
Escrowed Proceeds and the Bio-Quant Principals Escrowed Proceeds, the balance
due under the Notes shall thereafter be paid in accordance with the terms of the
Notes. To the extent that a claim for adjustment is asserted under Section
8.2(b) prior to the
Repayment Date (a “Pending
Adjustment”), the holders of Shares at the Effective Time shall remain
entitled to receive such additional amounts under the Notes upon the resolution
of the Pending Adjustment as set forth below, notwithstanding the subsequent
passing of the Repayment Date.
(i)
Fraudulent and
Intentional Breaches. Notwithstanding anything to the contrary
contained herein, the Deductible Amount shall not be applied against Losses
arising from any fraudulent breach of a representation or warranty or
intentional breach of a covenant by either NexMed or Bio-Quant, as applicable,
and the applicable party entitled to a right of offset, adjustment or
indemnification pursuant to this Section 8.2 shall be entitled to the full
amount of such Losses incurred.
8.3. SHAREHOLDER
REPRESENTATIVE. The approval of this Agreement by the Bio-Quant
shareholders shall also be deemed to constitute the approval and appointment of
Ali Xxxxx Xx-Xxxxxx as of the Effective Time (together with his permitted
successors, the “Shareholder
Representative”), as the true and lawful agent, proxy and
attorney-in-fact for the Bio-Quant shareholders, to (i) serve as the named party
with respect to any claims for offset, adjustment or indemnification as
contemplated in Section 8.2 (each, a “Claim”), (ii) assert,
negotiate and approve the settlement of any Claim, (iii) negotiate and enter
into the Escrow Agreement on behalf of the Bio-Quant shareholders; and (iv)
perform each such act and thing whatsoever that Bio-Quant shareholders may or
are required to do pursuant to this Agreement, and Ali Xxxxx Xx-Xxxxxx, as
Shareholder Representative, hereby accepts such appointment. This
power of attorney is coupled with an interest and is irrevocable and shall
survive the dissolution, death or incapacity of each of the Bio-Quant
shareholders.
56
8.4. ASSERTION
OF CLAIMS. To the extent that a Claim is asserted pursuant to this
ARTICLE VIII, a reasonably detailed notice of such Claim shall be delivered in
writing to the NexMed Chairman of the Board, in the case of a Claim being
asserted pursuant to Section 8.2(b), to the Shareholder Representative, in the
case of a Claim being asserted pursuant to Sections 8.2(a) or 8.2(c), or to the
Bio-Quant Principals, in the case of a Claim being asserted pursuant to Section
8.2(d). Within 30 days from the assertion of such a Claim, the party
receiving the Claim will notify the other party whether it accepts the Claim and
the amount of the adjustment or offset, if and as applicable, or whether it
disputes the Claim, setting forth in reasonable detail the basis for such
dispute. If the Claim is accepted, then the claiming party may
exercise the applicable rights and remedies set forth in Section 8.2
hereof. If the Claim is disputed, then the parties shall, within 30
days, attempt to resolve the dispute. If a final resolution of the
dispute is reached during this time period, then the claiming party may exercise
the applicable rights and remedies set forth in Section 8.2 hereof with respect
to the agreed amount of the Claim. If no final resolution of the
dispute is reached within 30 days after the notice of dispute is delivered, then
the dispute shall be finally settled by a binding arbitration to be conducted
under the Rules of Arbitration of the Judicial Arbitration Mediation Services by
one or more arbitrators appointed in accordance with the said
rules. The arbitration shall be held in San Diego City and
County. Such arbitrator shall have the ability to order discovery
with respect to the parties, and shall provide to the parties a reasoned opinion
with respect to his or her final determination.
ARTICLE
IX
GENERAL
PROVISIONS
9.1. EFFECTIVENESS
OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Except as otherwise
provided in this Agreement, the representations, warranties and agreements of
each party hereto shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers or directors, whether prior
to or after the execution of this Agreement. The Confidentiality
Agreement shall remain in full force and effect and shall survive termination of
this Agreement as provided therein; provided that such Confidentiality Agreement
shall not be deemed to prohibit such public disclosure as may be required by
applicable law or regulations.
9.2. NOTICES. All
notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered if delivered personally, three (3) days after being sent by registered
or certified mail (postage prepaid, return receipt requested), one day after
dispatch by recognized overnight courier (provided delivery is confirmed by the
carrier), to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address):
57
(a)
If to NexMed or
Merger Sub:
NexMed,
Inc.
00 Xxxx
Xxxxxx Xxxxx
Xxxx
Xxxxxxx, XX 00000
Attn: Chairman
of the Board
With a
copy to (which shall not constitute notice):
Xxxxxx
Xxxxxx Xxxxxxxx LLP
000
Xxxxxxx Xxxxxx
Xxx Xxxx,
XX 00000-0000
Attn:
Xxxxxx X. Xxxx
(b)
If to Bio-Quant:
Bio-Quant,
Inc.
0000
Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attn:
Chief Executive Officer
With a
copy to (which shall not constitute notice):
Xxxxxxx
Procter LLP
0000
Xxxxxxxxx Xxxxx, 0xx
Xxxxx
Xxx
Xxxxx, XX 00000
Attn:
Xxxx X. Xxxx
(c)
If to Shareholder Representative:
Ali Xxxxx
Xx-Xxxxxx
000 Xxx
Xxxxxxx
Xxxxxxxx
Xxxxxxx, XX 00000
9.3. CERTAIN
DEFINITIONS. For purposes of this Agreement, the term:
(a)
“affiliates” means a person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned person,
including, without limitation, any partnership or joint venture in which
Bio-Quant or NexMed, as the case may be, (either alone, or through or together
with any other subsidiary) has, directly or indirectly, an interest of ten
percent (10%) or more;
(b)
“Closing” means the closing of
the transactions contemplated by Article I of this Agreement, which shall occur
on the Closing Date. For accounting purposes, the Closing shall be
deemed to occur at 11:59 pm on the Closing Date.
58
(c)
“Closing Date” means, subject
to the satisfaction of the conditions set forth herein, the date five (5)
business days following the satisfaction or waiver of the conditions set forth
in Article V and Article VI.
(d) “business day” means any day
other than a day on which banks in California are required or authorized to be
closed;
(e) “person” means a person,
corporation, partnership, association, trust, unincorporated organization, other
entity or group (as defined in Section 13(d)(3) of the Exchange
Act);
(f) “subsidiary” or “subsidiaries” of the Surviving
Corporation, NexMed, Bio-Quant or any other person means any corporation,
partnership, joint venture or other legal entity of which the Surviving
Corporation, NexMed, Bio-Quant or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, more than fifty percent (50%) of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity;
(g) “Subsidiary Purchase
Agreements” mean (i) the Asset Purchase Agreement between Fastrack
Pharmaceuticals, Inc. and Bio-Quant dated as of October 1, 2009, and (ii) the
Asset Purchase Agreement between Sorrento Pharmaceuticals, Inc. and Bio-Quant
dated as of October 1, 2009;
(h) “trading day” means any day on
which the NASDAQ is open and available for at least five (5) hours for the
trading of NexMed Common Stock; and
(i) “Transaction Documents” means
this Agreement, the Damaj Employment Agreement, the Certificates of Merger, the
Notes, the Voting Agreements and all other agreements, documents, certificates
and instruments to be delivered pursuant to the terms of this
Agreement.
9.4.
AMENDMENT. This Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
9.5.
WAIVER. At any time prior to the
Effective Time, any party hereto may, with respect to any other party hereto,
(a) extend the time for the performance of any of the obligations or other acts,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound.
9.6.
HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
59
9.7.
SEVERABILITY. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
9.8.
ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement and supersedes all prior agreements and undertakings (other
than the Confidentiality Agreement), both written and oral, among the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
person any rights or remedies hereunder.
9.9.
ASSIGNMENT. No party may assign this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other parties hereto.
9.10.
PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, expressed or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
9.11.
FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of any party hereto in
the exercise of any right hereunder shall impair such right or be construed to
be a waiver of, or acquiescence in, any breach of any representation, warranty
or agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
9.12.
GOVERNING LAW AND VENUE. This agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
Delaware applicable to contracts executed and fully performed within the State
of Delaware and without regard to conflict-of-law principles. Any
dispute arising out of or relating to this Agreement shall be resolved by
binding arbitration to be conducted in accordance with the Rules of Arbitration
of the Judicial Arbitration Mediation Services by one or more arbitrators
appointed in accordance with the said rules. The arbitration shall be
held in San Diego City and County and the parties hereto agree to the sole and
exclusive jurisdiction of such arbitrator(s) and agree to waive any grounds for
objection to the venue, such as forum
non-conveniens. Such arbitrator shall have the ability to
order discovery with respect to the parties, and shall provide to the parties a
reasoned opinion with respect to his or her final
determination.
60
9.13.
OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as
otherwise provided herein, any and all remedies herein expressly conferred upon
a party (including, without limitation, the remedies set forth in Section 8.2)
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court having jurisdiction under Section 9.13, this being the
addition to any other remedy to which they are entitled at law or in
equity.
9.14.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
61
IN
WITNESS WHEREOF, NexMed, Merger Sub, Bio-Quant and Shareholder Representative
have caused this Agreement to be executed as of the date first written above by
their respective officers or representatives thereunto duly
authorized.
NEXMED,
INC.
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||
By:
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/s/ Xxxxxx X. Xxx
|
|
Name:
|
Xxxxxx
X. Xxx
|
|
Title:
|
Chief
Executive Officer
|
|
BQ
ACQUISITION CORP.
|
||
By:
|
/s/ Xxxxxx X. Xxx
|
|
Name:
|
Xxxxxx
X. Xxx
|
|
Title:
|
Chief
Executive Officer
|
|
BIO-QUANT,
INC.
|
||
By:
|
/s/ Xxxxxx Xxxxx
|
|
Name:
|
Xxxxxx
Xxxxx
|
|
Title:
|
Chief
Executive Officer
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|
SHAREHOLDER
REPRESENTATIVE
|
||
/s/ Ali Xxxxx Xx-Xxxxx
|
||
Ali
Xxxxx Xx-Xxxxxx
|
||
As
to Sections 4.1(c) and Article VIII hereof:
|
||
/s/ Xxxxxx Xxxxx
|
||
Xxxxxx
Xxxxx
|
||
/s/ Xxxxxx Xxx
|
||
Xxxxxx
Xxx
|
||
/s/ Xxxxx Xxxxx
|
||
Xxxxx
Xxxxx
|
Exhibit
A
FORM
OF NOTE
THIS NOTE
AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, SUBJECT TO THE TERMS SET FORTH IN THIS NOTE, IN THE
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER
OF THIS NOTE AND SUCH SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
NEXMED,
INC.
PROMISSORY
NOTE
US
$[____________]
|
Date:
[_________, 20___]
|
FOR VALUE
RECEIVED, the undersigned, NexMed, Inc., a Nevada corporation (“NexMed”), promises to
pay as provided herein to [____________] (the “Holder”), in lawful
money of the United States of America the principal sum of [______________]
dollars ($[________]), as such principal amount may be adjusted from time to
time pursuant to Section 1.15 and Article VIII of the Merger Agreement (as
defined below), together with interest on such principal sum accruing from and
including the date hereof at the rate of ten percent (10%) per annum (which will
be computed on the basis of a 365-day year and paid for the actual number of
days elapsed). This Promissory Note (this “Note”) is one of the
Promissory Notes (collectively, the “Notes”) being issued
pursuant to Section 1.6 of that certain Agreement and Plan of Merger dated as of
November 20, 2009 by and among NexMed, BQ Acquisition Corp., Bio-Quant, Inc.,
Ali-Xxxxx Xx-Xxxxxx, as Shareholder Representative, and the other parties
thereto (the “Merger
Agreement”). Capitalized terms used but not otherwise defined
herein will have the meanings ascribed thereto in the Merger
Agreement.
1. Maturity. Unless
the obligation to pay the principal hereunder is previously satisfied as set
forth in Section 2 hereof, the principal amount of this Note, plus interest
accrued thereon, will be due and payable in full, in the manner set forth in
Section 2 herein, on [__________, 20___]1,
(the “Maturity
Date”). This Note may be prepaid in whole or in part at any
time without penalty hereunder, provided that any payments or prepayments shall
be made ratably among the Notes.
1
|
This
date shall be the first anniversary of the Closing
Date.
|
2. Payment.
(a) On
the Maturity Date, the principal amount of this Note, plus interest accrued
thereon as provided in this Note up to but not including the Maturity Date, will
be paid by NexMed, subject to the provisions of Section 8.2 of the Merger
Agreement, through deposit of immediately available cash in the amount of such
principal and accrued interest with the Exchange Agent or an escrow agent
mutually acceptable to NexMed and the Shareholder Representative (the “Payment Agent”) for
prompt payment by such Payment Agent to the Holder. Upon such deposit
to the Payment Agent, all obligations under this Note will have been performed
and discharged in full.
(b) Notwithstanding
anything to the contrary herein and provided that (i) NexMed is current with its
filings obligations under the Securities Exchange Act of 1934 (the “Exchange Act”) and
(ii) no Change of Control of NexMed (as defined below) has occurred, then, in
such case, NexMed may, in its sole discretion and subject to Section 1.6(d) of
the Merger Agreement, issue to the Holder [_____] shares of NexMed
common stock in payment of every $100 of principal and accrued interest due
hereunder (the “Note
Satisfaction Shares”). In the event NexMed elects to issue
Note Satisfaction Shares, NexMed will deliver the Note Satisfaction Shares to
the Payment Agent for prompt disbursement and payment by the Payment Agent to
the Holder.
(c) If,
at any time before the Maturity Date, the number of shares of NexMed Common
Stock outstanding is increased by a stock dividend payable in shares of NexMed
Common Stock or by a subdivision or split-up of shares of NexMed Common Stock,
then, following the record date fixed for the determination of holders of NexMed
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the number of shares issuable as Note Satisfaction Shares pursuant to Section
2(b) above will be increased in proportion to such increase in outstanding
shares. If, at any time before the Maturity Date, the number of
shares of NexMed Common Stock outstanding is decreased by a combination of the
outstanding shares of NexMed Common Stock, then, following the record date for
such combination, the number of shares issuable as Note Satisfaction Shares
pursuant to Section 2(b) above will be decreased in proportion to such decrease
in outstanding shares.
(d) For
the purposes hereof, a “Change of Control of
NexMed” will mean (i) the reorganization, merger, consolidation of NexMed
with or into any other corporation or entity, or (ii) the sale, conveyance or
encumbrance of all or substantially of the assets of NexMed, in each case in
which transaction or series of related transactions in which NexMed’s
stockholders immediately prior to such transaction own, immediately following
such transaction, less than fifty percent (50%) of the outstanding voting power
of the surviving corporation or its parent.
3.
Presentment;
Demand. NexMed hereby waives any presentment, demand, protest
or notice of dishonor and protest of this Note.
4.
Securities Law
Compliance; Legend. This Note and any Note Satisfaction Shares are
subject to the terms of Section 4.5 of the Merger Agreement. The
certificates representing Note Satisfaction Shares will bear the following
legend:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
2
5. Miscellaneous.
(a) Governing
Law. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware applicable to
contracts executed and fully performed within the State of Delaware and without
regard to conflict-of-law principles. Any dispute arising out of or
relating to this Note shall be resolved by a court of competent jurisdiction
located in the City and County of San Diego, California and the parties hereto
agree to the sole and exclusive jurisdiction of such court(s) and agree to waive
any grounds for objection to the venue, such as forum
non-conveniens.
(b) Amendments and
Waivers. Any term of this Note may be amended and the
observance of any term of this Note may be waived only with the written consent
of NexMed and the holders of at least a majority of the aggregate principal
amount then outstanding under all of the Notes (the “Requisite
Holders”).
(c) Assignment and
Successors. This Note will be binding on and inure to the
benefit of NexMed and the Holder and their respective successors and assigns;
provided, however, that (i)
NexMed may not assign this Note in whole or part without the prior written
consent of the Requisite Holders and (ii) the Holder may not assign this Note in
whole or part on or prior to the Maturity Date without the prior written consent
of NexMed.
(d) Severability. If
any provision of this Note is held invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this Note
are not affected or impaired in any way and NexMed and the Holder agree to
negotiate in good faith to replace such invalid, illegal and unenforceable
provision with a valid, legal and enforceable provision, that achieves, to the
greatest lawful extent under this Note, the economic, business and other
purposes of such invalid, illegal or unenforceable provision.
(e) Limitation of
Liability. IN NO EVENT WILL NEXMED HAVE ANY LIABILITY ARISING
HEREUNDER OR IN CONNECTION HEREWITH TO ANY PARTY OR OTHER PERSON FOR ANY LOST
PROFITS OR OTHER CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, COLLATERAL OR
PUNITIVE DAMAGES OF ANY KIND, REGARDLESS OF WHETHER SUCH PARTY OR PERSON WILL BE
ADVISED, WILL HAVE OTHER REASON TO KNOW, OR IN FACT WILL KNOW OF THE POSSIBILITY
OF THE FOREGOING.
[Remainder of Page Intentionally Left
Blank]
3
In Witness
Whereof, the undersigned has executed this Promissory Note as of the date
set forth above.
NexMed, Inc., a Nevada
corporation
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By:
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|
Name:
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|
Title:
|
Exhibit
B
Term of
Employment Agreement: 3 years
Annual
Base Salary: $300,000
Annual
Bonus: up to 65% of base pay based on performance of the Company and achievement
of goals pre-determined with the Comp Committee. One of the goals
shall be that Xx. Xxxxx is entitled to receive $100,000 for every $1 million in
revenue growth realized through non-acquisition and non-licensing
activities.
Stock
Option Grants: 1.5 million restricted stock to be issued from the NexMed Inc.
2006 Stock Incentive Plan (the ‘Plan”). The shares will vest in 3
installments: 300,000 shares on the first anniversary of his employment with
NexMed, 500,000 shares on the second anniversary and 700,000 shares on the third
anniversary. In the event of a change in control or termination w/o cause,
all unvested shares shall vest immediately. The grant is subject to the
NexMed stockholders approving additional shares for the Plan.
Severance
Pay: one year of base salary
Exhibit
C
FORM
OF VOTING AGREEMENT
VOTING
AGREEMENT
This
Voting Agreement (this “Agreement”) is made and
entered into as of [________], 2010, by and between Bio-Quant, Inc., a Utah
corporation (“Bio-Quant”), and the
undersigned stockholder (the “Stockholder”) of NexMed, Inc.,
a Nevada corporation (“NexMed”). Capitalized
terms used but otherwise not defined herein shall have the meanings given to
such terms in the Merger Agreement (as defined below).
RECITALS
WHEREAS, the Stockholder is
the holder of record and/or the “beneficial owner” (within the meaning of Rule
13d-3 under the Exchange Act) of the Subject Shares (as defined
below);
WHEREAS, concurrently with the
execution and delivery of this Agreement, BQ Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of NexMed (the “Merger Sub”) is merging into
Bio-Quant (the “Merger”), pursuant to an
Agreement and Plan of Merger, dated November 20, 2009, by and among NexMed,
Bio-Quant, the Merger Sub, Ali-Xxxxx Xx-Xxxxxx, as Shareholder Representative,
and the other parties thereto (the “Merger Agreement”);
and
WHEREAS, pursuant to the
Merger Agreement, the Stockholder has agreed to execute and deliver this
Agreement.
AGREEMENT
NOW, THEREFORE, the parties to
this Agreement, intending to be legally bound, agree as follows:
1.
Agreement to Vote Subject
Shares. The
Stockholder hereby agrees that, at the Special Meeting, the Stockholder shall
cause all Subject Shares to be voted in favor of the Proposals. The
Stockholder further agrees that, prior to the date of the Special Meeting, the
Stockholder shall not enter into any agreement or understanding with any person
or entity to vote or give instructions in any manner inconsistent with this
Section 1. Without limiting the generality of the foregoing, during
the period from the date hereof through the date of the Special Meeting, the
Stockholder shall ensure that: (a) none of the Subject Shares is deposited into
a voting trust; and (b) no proxy is granted, and no voting agreement or similar
agreement is entered into, with respect to any of the Subject Shares, other than
a proxy consistent with the terms of this Section 1. For purposes of
this Agreement, “Subject
Shares” means (i) all shares of NexMed Common Stock beneficially owned
(within the meaning of Rule 13d-3 under the Exchange Act) by the Stockholder as
of the record date established by NexMed for voting at the Special Meeting (the
“Record Date”), and (ii)
all shares of NexMed Common Stock of which the Stockholder acquires beneficial
ownership or purchases after the date hereof and prior to the close of business
on the Record Date, including, without limitation, any shares issued or issuable
upon the conversion, exercise or exchange, as the case may be, of any securities
held by the Stockholder which are convertible into, or exercisable or
exchangeable for, shares of NexMed Common Stock.
2.
Term. This
Agreement shall be effective from the date hereof through the date of the
Special Meeting.
3.
Miscellaneous.
(a) Assignment; Binding
Effect. Except as provided herein, neither this Agreement nor
any of the interests or obligations hereunder may be assigned or delegated by
the Stockholder, and any attempted or purported assignment or delegation of any
of such interests or obligations shall be void. Subject to the
preceding sentence, this Agreement shall be binding upon the Stockholder and the
Stockholder’s
heirs, estate, executors, personal representatives, successors and assigns, and
shall inure to the benefit of Bio-Quant and its successors and
assigns. Nothing in this Agreement is intended to confer on any
person or entity (other than Bio-Quant and its successors and assigns) any
rights or remedies of any nature.
(b)
Waiver. No
failure on the part of Bio-Quant to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of Bio-Quant in exercising
any power, right, privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or
remedy. Bio-Quant shall not be deemed to have waived any claim
available to Bio-Quant arising out of this Agreement, or any power, right,
privilege or remedy of Bio-Quant under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Bio-Quant; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
(c)
Governing
Law. This agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Nevada applicable to
contracts executed and fully performed within the State of Nevada and without
regard to conflict-of-law principles.
(d)
Counterparts. This
Agreement may be executed in two or more counterparts (including by facsimile),
each of which shall be deemed an original and all of which together shall
constitute one instrument.
[Signature page
follows]
The
parties have caused this Agreement to be duly executed on the date first above
written.
STOCKHOLDER:
|
|
Name:
|
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BIO-QUANT,
INC.
|
|
By:
|
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Name:
|
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Title:
|
[Signature Page to Voting
Agreement]
Exhibit
D
[DATE
PRIOR TO CLOSING], 2009
Bio-Quant,
Inc.
Xxxxx
Xxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Re: Acknowledgment
and Release regarding Prior Equity Commitments by Bio-Quant,
Inc.
Ladies
and Gentlemen:
NexMed,
Inc. (“NexMed”)
and Bio-Quant, Inc. (“Bio-Quant”) have
entered into an Agreement and Plan of Merger dated November 20, 2009 (the “Merger
Agreement”). In consideration for NexMed’s promise to issue to
the undersigned ____ shares of restricted NexMed Common Stock (the “NexMed Equity
Issuance”), which shares
shall vest over the three year period following the closing of the transactions
contemplated by the Merger Agreement, the undersigned hereby certifies to
Bio-Quant and NexMed and agrees as follows:
1.
Satisfaction of Bio-Quant
Equity Commitments. The
undersigned acknowledges that the NexMed Equity Issuance shall be in full
satisfaction of any and all prior agreements, obligations and commitments by
Bio-Quant to issue or grant to the undersigned any equity security or right to
receive or acquire any equity security, derivative security or other equity
interest in Bio-Quant or any of its subsidiaries that has not been issued to
date, including without limitation as set forth in the employment offer letter
agreement dated
____________ between Bio-Quant and the undersigned (collectively, the
“Bio-Quant Equity
Commitments”).
2.
Release. The
undersigned hereby releases and discharges Bio-Quant and NexMed and each of
Bio-Quant’s and NexMed’s subsidiaries and affiliates, and their respective
stockholders, lenders, partners, members, officers, directors, employees,
agents, successors and assigns (the “Released Parties”)
from all actions, causes of action, suits, debts, sums of money, accounts,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, executions, claims, and
demands whatsoever, in law, equity or otherwise, and whether arising under
federal, state, local or foreign law, that the undersigned may have or purport
to have against the Released Parties arising out of or with respect to the
Bio-Quant Equity Commitments. The undersigned hereby waives any
rights that the undersigned may have under Section 1542 of the California Civil
Code, as amended from time to time, and acknowledges that he or she understands
the significance and consequences of the releases herein and such specific
waiver of Section 1542 of the California Civil Code, as amended from time to
time. Section 1542 of the Civil Code of the State of California
provides:
A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
3.
Acknowledgment regarding NexMed Equity
Issuance. The undersigned acknowledges and agrees that the
NexMed Equity Issuance shall be contingent on the closing of the proposed merger
transaction between Bio-Quant and NexMed and subject, among other things, to:
(a) the availability of a sufficient number of shares of NexMed Common Stock
under NexMed’s articles of incorporation to consummate the NexMed Equity
Issuance, and (b) the availability of a sufficient number of shares of NexMed
Common Stock reserved for issuance under NexMed’s equity incentive plans to
consummate the NexMed Equity Issuance.
4.
Governing
Law. This letter agreement shall be governed and construed in
accordance with the laws of the State of California, without regard to
principles of conflicts of laws.
Sincerely,
|
Printed
Name
|
Acknowledged
and accepted:
BIO-QUANT,
INC.
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By:
|
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Name:
|
Xxxxxx Xxx
|
Title:
|
President
|