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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of December 24, 1996 (the
"Agreement") by and among Xxxxxx Pharmaceuticals, Inc., a Nevada corporation
("Xxxxxx"), Dolphins Acquisition Corp., a Florida corporation and the
wholly-owned subsidiary of Xxxxxx ("Xxxxxx Sub"), and Royce Laboratories, Inc.,
a Florida corporation (the "Company").
WHEREAS, the Board of Directors of each of Xxxxxx and the Company have
determined that a business combination between Xxxxxx and the Company merging
their respective pharmaceutical businesses is in the best interests of their
respective companies and stockholders and accordingly have agreed to effect the
merger provided for herein upon the terms and subject to the conditions set
forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that (a) for
federal income tax purposes, the merger provided for herein shall qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and (b) for accounting purposes, the merger
provided for herein shall qualify as a "pooling of interests"; and
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.3 of this Agreement),
Xxxxxx Sub shall be merged with and into the Company in accordance with the laws
of the State of Florida and the terms of this Agreement (the "Merger"),
whereupon the separate corporate existence of Xxxxxx Sub shall cease, and the
Company shall be the surviving corporation of the Merger (the Company, as the
surviving corporation after the Merger is sometimes referred to herein as the
"Surviving Corporation").
1.2. Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the offices of
X'Xxxxxx & Xxxxxx, 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 at 10:00
a.m. three business days after all the conditions set forth in Article VI of
this Agreement (other than those that are waived by the party or parties for
whose benefit such conditions exist) are satisfied; or (b) at such other place,
time, and/or date as the parties hereto may otherwise agree. The date upon which
the Closing shall occur is referred to herein as the "Closing Date."
1.3. Effective Time. If all the conditions to the Merger set forth in
Article VI of this Agreement have been fulfilled or waived and this Agreement
shall not have been terminated as provided in Article VII hereof, the parties
hereto shall cause a certificate of merger (the "Certificate of Merger") to be
properly executed and filed in accordance with the laws of the State of Florida
and the terms of this Agreement on or before the Closing Date. The parties
hereto shall also take such further actions as may be required under the laws of
the State of Florida in connection with the consummation of the Merger. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of Florida or at such later time as is
specified in the Certificate of Merger (the "Effective Time"). From and after
the Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises and be subject to all of the restrictions,
disabilities and duties of the Company and Xxxxxx Sub, all as provided under
applicable law.
1.4. Conversion of Shares.
(a) At the Effective Time:
(i) each share of Common Stock, par value $0.01 per share, of Xxxxxx
Sub outstanding at the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, shall be converted into and
exchanged for one share of Common Stock, par value $0.01 per share, of the
Surviving Corporation; and
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(ii) each share of Common Stock, $0.005 par value per share, of the
Company (the "Company Common Stock") outstanding at the Effective Time, by
virtue of the Merger and without any action on the part of the holders
thereof, except as otherwise provided in Sections 1.4(c) and 1.4(e) hereof,
shall be converted into the right to receive the number of shares of Xxxxxx
Common Stock equal to the following: $7.25 divided by the Average Closing
Price (as defined herein) (the "Exchange Ratio").
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of Company Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of shares of Company Common Stock shall thereafter cease
to have any rights with respect to such shares of Company Common Stock, except
for the right to receive, without interest, the consideration set forth in this
Section 1.4 and cash for fractional shares of Xxxxxx Common Stock in accordance
with Section 1.6 of this Agreement upon the surrender of a certificate (each, a
"Certificate") representing such shares of Company Common Stock in accordance
with the provisions of this Article I.
(c) Each share of Company Common Stock and each share of Series A, B, C, D
or E Preferred Stock of the Company (collectively, the "Preferred Stock") held
by the Company as treasury stock or owned by Xxxxxx or any Subsidiary (as
defined in Section 1.4(d) of this Agreement) of Xxxxxx at the Effective Time
shall be canceled, and no payment shall be made with respect thereto.
(d) For purposes of this Agreement, (i) the term "Average Closing Price"
shall mean the average of the per share last daily closing price of Xxxxxx
Common Stock as quoted on the Nasdaq National Market ("Nasdaq") (and as reported
by The Wall Street Journal or, if not reported thereby, by another authoritative
source) during the ten (10) consecutive trading days ending on the trading day
immediately preceding the Closing Date; provided, however, that (A) if the
Average Closing Price is greater than $47, for purposes of this Agreement, the
Average Closing Price shall be deemed to be equal to $47; and (B) if the Average
Closing Price is less than $38, for purposes of this Agreement, the Average
Closing Price shall be deemed to be equal to $38; (ii) the word "Subsidiary"
when used with respect to any Person means any corporation or other
organization, whether incorporated or unincorporated, of which (A) at least
fifty percent (50%) of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries; or (B) such Person or any other Subsidiary
of such Person is a general partner, it being understood that representations
and warranties of a Person concerning any former Subsidiary of such Person shall
be deemed to relate only to the periods during which such former Subsidiary was
a Subsidiary of such Person; and (iii) the word "Person" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof, or any affiliate (as that
term is defined in the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Exchange Act")) of any of the
foregoing.
(e) As soon as practicable after the date hereof, the parties hereto will
negotiate in good faith to enter into an agreement to allow Xxxxxx to pay cash
to certain holders of small numbers of shares of Company Common Stock in lieu of
the consideration to be received by such holders of Company Common Stock
pursuant to Section 1.4(a) hereof; provided, however, that the aggregate cash
consideration to be paid to such holders may not exceed 9.9% of the aggregate
consideration to be paid to all holders of Company Common Stock upon
consummation of the transactions contemplated hereby.
1.5. Stock Options. All options and warrants to acquire Company Common
Stock (individually, a "Company Option" and collectively, the "Company Options")
outstanding at the Effective Time under the Company's 1992 Stock Option Plan,
the Company's 1995 Stock Option Plan or otherwise (the "Company Stock Option
Plans") shall remain outstanding following the Effective Time. At the Effective
Time, such Company Options, by virtue of the Merger and without any further
action on the part of the Company or the holder of such Company Options, shall
be assumed by Xxxxxx in such manner that Xxxxxx (a) is a corporation (or a
parent or a subsidiary corporation of such corporation) "assuming a stock option
in a transaction to which Section 424(a) applied" within the meaning of Section
424 of the Code; or (b) to the extent that Section 424 of the Code does not
apply to any such Company Options, would be such a
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corporation (or a parent or a subsidiary corporation of such corporation) were
Section 424 applicable to such option. Each Company Option assumed by Xxxxxx
shall be exercisable upon the same terms and conditions as under the applicable
Company Stock Option Plan and the applicable option agreement issued thereunder,
except that (x) the unexercised portion of each such Company Option shall be
exercisable for that whole number of shares of Xxxxxx Common Stock (rounded to
the nearest whole share, with 0.5 rounded upward) equal to the number of shares
of Company Common Stock subject to the unexercised portion of such Company
Option multiplied by the Exchange Ratio; and (y) the option exercise price per
share of Xxxxxx Common Stock shall be an amount equal to the option exercise
price per share of Company Common Stock subject to such Company Option in effect
at the Effective Time divided by the Exchange Ratio (the option price per share,
as so determined, being rounded to the nearest full cent, with $0.005 rounded
upward). No payment shall be made for fractional interests. The term,
exercisability, vesting schedule, status as an "incentive stock option" under
Section 422 of the Code, if applicable, and all of the other terms of the
Company Options shall otherwise remain unchanged unless modified by or as a
result of the transaction contemplated by this Agreement. As soon as practicable
after the Effective Time, Xxxxxx shall deliver to the holders of Company Options
appropriate notices setting forth such holders' rights pursuant to such Company
Options, as amended by this Section 1.5 as well as notice of Xxxxxx'x assumption
of the Company's obligations with respect thereto (which occurs by virtue of
this Agreement). Xxxxxx shall take all corporate actions necessary to reserve
for issuance such number of shares of Xxxxxx Common Stock as will be necessary
to satisfy exercises in full of all Company Options after the Effective Time.
1.6. Exchange of Certificates Representing Company Common Stock.
(a) American Stock Transfer & Trust Company shall act as exchange agent
(the "Exchange Agent") in the Merger.
(b) As of the Effective Time and in any event, no later than five (5)
business days after the Effective Time, Xxxxxx shall deposit or cause to be
deposited with the Exchange Agent for exchange in accordance with this Article
I, the shares of Xxxxxx Common Stock issuable pursuant to Section 1.4 in
exchange for shares of Company Common Stock outstanding at the Effective Time
and a sufficient amount of cash to satisfy the cash payments to be made by
Xxxxxx to certain holders of Company Common Stock pursuant to Sections 1.4(e)
and 1.6(f) hereof.
(c) On or promptly after the Effective Time, Xxxxxx shall cause the
Exchange Agent to mail to each holder of record of shares of Company Common
Stock (i) a letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to such shares of Company Common Stock
shall pass, only upon delivery of the Certificates representing such shares to
Xxxxxx; and (ii) instructions for use in effecting the surrender of such
Certificates in exchange for the consideration to be received by such holder
pursuant to Sections 1.4 and 1.6 hereof. Upon surrender of a Certificate
representing shares of Company Common Stock for cancellation to Xxxxxx, together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, the holder of the shares represented by such
Certificate shall be entitled to receive in exchange therefor either (i) cash in
accordance with Section 1.4(e) hereof; or (ii)(A) a certificate representing
that number of whole shares of Xxxxxx Common Stock; and (B) a check representing
the amount of cash in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, which such holder has the right to receive in respect
of the Certificate surrendered pursuant to the provisions of this Section 1.6,
in each case, after giving effect to any required withholding tax, and the
shares represented by the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash payable pursuant to
Section 1.4(e) hereof, the cash in lieu of fractional shares and unpaid
dividends and distributions, if any, payable to holders of shares of Company
Common Stock who receive shares of Xxxxxx Common Stock pursuant to Section 1.4
hereof. In the event of a transfer of ownership of Company Common Stock which is
not registered in the transfer records of the Company, the consideration to be
paid to such holder of Company Common Stock pursuant to Sections 1.4 and 1.6
hereof may be issued to such a transferee if the Certificate representing such
Company Common Stock is presented to Xxxxxx, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid or, alternatively, payments of
such transfer tax to the Exchange Agent. Until so surrendered, each Certificate
that, at the Effective Time, represented shares of Company Common Stock will be
deemed from and after the
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Effective Time, for all corporate purposes other than the payment of dividends
(except to the extent provided in Section 1.6(d) below), to evidence the
consideration to be received by the holders of Company Common Stock pursuant to
Sections 1.4 and 1.6 hereof.
(d) Notwithstanding anything to the contrary contained herein, no dividends
or other distributions declared after the Effective Time on Xxxxxx Common Stock
shall be paid with respect to any shares of Company Common Stock entitled to be
converted into shares of Xxxxxx Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of
Xxxxxx Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of Xxxxxx Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Xxxxxx Common Stock, less
the amount of any withholding taxes which may be required thereon.
(e) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock which
were outstanding at the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the consideration set forth in this Article I deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 1.6. Certificates surrendered for exchange by any person
constituting an "affiliate" of the Company for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act") shall not be exchanged
until Xxxxxx has received an Affiliate Letter (as defined herein) from such
person as provided in Section 5.9.
(f) No fractional shares of Xxxxxx Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Xxxxxx Common Stock
pursuant to Section 1.4, cash adjustments will be paid to holders in respect of
any fractional share of Xxxxxx Common Stock that would otherwise be issuable,
and the amount of such cash adjustment shall be equal to such fractional
proportion of the Average Closing Price of a share of Xxxxxx Common Stock.
(g) All former stockholders of the Company (each, a "Stockholder" and
collectively the "Stockholders") shall look only to Xxxxxx for payment of cash
(if a Stockholder is to receive cash pursuant to Section 1.4(e) hereof), shares
of Xxxxxx Common Stock, cash in lieu of fractional shares and unpaid dividends
and distributions on the Xxxxxx Common Stock, as the case may be, deliverable in
respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon.
(h) None of Xxxxxx, Xxxxxx Sub, the Company, the Surviving Corporation or
any other person shall be liable to any former holder of shares of Company
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(i) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, Xxxxxx will issue in exchange
for such lost, stolen or destroyed Certificate, the consideration to be received
by the holder of such Certificate pursuant to Sections 1.4 and 1.6 hereof.
(j) Any portion of the property delivered to the Exchange Agent in
accordance with this Section 1.6 that remains unclaimed by the Stockholders one
year after the Effective Time shall be delivered to Xxxxxx. Any Stockholders who
have not theretofore complied with this Section 1.6 shall thereafter look only
to Xxxxxx for payment of their consideration to be received by such Stockholder
pursuant to Sections 1.4 and 1.6 hereof deliverable in respect of each share of
the Company Common Stock such Stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
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1.7. Adjustment of Exchange Ratio. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, the outstanding shares
of Xxxxxx Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification, split,
combination, exchange, recapitalization or other similar transaction, the
Exchange Ratio and the Average Closing Price shall be appropriately adjusted.
1.8. Tax Consequences and Accounting Treatment. It is intended by the
parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Code and that the transaction be accounted for as
a pooling of interests.
1.9. Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Xxxxxx Sub, the officers and directors of the
Company and Xxxxxx Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
2.1. Certificate of Incorporation of the Surviving Corporation. The
certificate of incorporation of Xxxxxx Sub in effect at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation until amended
in accordance with its terms and pursuant to applicable law; provided however,
that Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is Royce
Laboratories, Inc.".
2.2. By-Laws of the Surviving Corporation. The By-Laws of Xxxxxx Sub in
effect at the Effective Time shall be the By-Laws of the Surviving Corporation
until amended in accordance with the terms of such By-Laws and pursuant to
applicable law and the Certificate of Incorporation of the Surviving
Corporation.
2.3. Directors of the Surviving Corporation. The directors of the
Surviving Corporation immediately after the Effective Time shall consist of the
persons listed on Exhibit A attached hereto, to hold office until their
successors are duly appointed or elected in accordance with applicable law.
2.4. Officers of the Surviving Corporation. The officers of the Surviving
Corporation immediately after the Effective Time shall consist of the persons
listed on Exhibit B attached hereto who shall hold the offices listed opposite
their respective names until their successors are duly appointed or elected in
accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
XXXXXX AND XXXXXX SUB
Xxxxxx and Xxxxxx Sub represent and warrant to the Company that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure statement delivered by Xxxxxx and Xxxxxx Sub to the
Company concurrently herewith and identified as the "Xxxxxx Disclosure
Statement." All exceptions noted in the Xxxxxx Disclosure Statement shall be
numbered to correspond to the applicable sections to which such exception
refers; provided, however that any disclosure set forth on any particular
schedule shall be deemed disclosed in reference to all applicable schedules.
3.1 Existence, Good Standing, Corporate Authority. Each of Xxxxxx and
Xxxxxx Sub (i) is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation; (ii)
has all requisite power and authority to own or lease, and operate its
properties and assets, and to carry on its business as now conducted and as
currently proposed to be conducted, except where the failure to have such power
and authority would not have a Xxxxxx Material Adverse Effect (as defined
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herein) and to consummate the transactions contemplated hereby; (iii) is duly
qualified or licensed to do business and is in good standing in all
jurisdictions in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed, except where the failure to
so qualify, individually or in the aggregate, would not have a Xxxxxx Material
Adverse Effect; and (iv) has obtained all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of its
properties or the conduct of its business, except where the failure to have
obtained such licenses, permits, franchises or authorizations would not have a
Xxxxxx Material Adverse Effect. The copies of Xxxxxx'x and Xxxxxx Sub's Articles
or Certificate of Incorporation and By-Laws as in effect on the date hereof have
been previously delivered to the Company or have been made available for the
Company's review and are true and correct. For purposes of this Agreement, a
"Material Adverse Effect" when used with respect to any entity means (a) a
material adverse effect on the business, results of operations, financial
condition or prospects of such entity and its subsidiaries, taken as a whole, or
(b) a material impairment in the ability of such entity or its subsidiaries to
perform any of their obligations under this Agreement or to consummate the
Merger.
3.2 Authorization of Agreement and Other Documents. The execution and
delivery of this Agreement and the other documents executed or to be executed in
connection herewith to which Xxxxxx or Xxxxxx Sub is a party (collectively, the
"Xxxxxx Ancillary Documents"), have been duly authorized by the Board of
Directors of Xxxxxx and Xxxxxx Sub and no other proceedings on the part of
Xxxxxx or Xxxxxx Sub or their stockholders are necessary to authorize the
execution, delivery or performance of this Agreement or any Xxxxxx Ancillary
Document. This Agreement is, and, as of the Closing Date, each of the Xxxxxx
Ancillary Documents will be, a valid and binding obligation of Xxxxxx and/or
Xxxxxx Sub, as the case may be, enforceable against Xxxxxx and/or Xxxxxx Sub, as
the case may be, in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency; reorganization,
moratorium, fraudulent conveyance or other similar laws affecting enforcement of
creditors' rights generally, and by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).
3.3 No Violation. Neither the execution and delivery by Xxxxxx and Xxxxxx
Sub of this Agreement or the Xxxxxx Ancillary Agreements, nor the consummation
by Xxxxxx and Xxxxxx Sub of the transactions contemplated hereby and thereby in
accordance with their respective terms, will (a) conflict with or result in a
breach of any provisions of the Articles or Certificate of Incorporation or
By-Laws of Xxxxxx or Xxxxxx Sub; (b) result in a breach or violation of, a
default under, or the triggering of any payment or other material obligations
pursuant to, or accelerate vesting under, any of the Xxxxxx stock option plans,
or any grant or award made under any of the foregoing; (c) violate, conflict
with, result in a breach of any provision of, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
result in the termination, or in a right of termination or cancellation of,
accelerate the performance required by, result in the triggering of any payment
or other material obligations pursuant to, result in the creation of any lien,
security interest, charge or encumbrance upon any of the material properties of
Xxxxxx or Xxxxxx Sub under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which Xxxxxx or Xxxxxx Sub is a party, or by which Xxxxxx or
Xxxxxx Sub or any of their respective properties is bound or affected, except
for any of the foregoing matters which would not have a Xxxxxx Material Adverse
Effect; (d) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgement, injunction, order or decree binding
upon or applicable to Xxxxxx or Xxxxxx Sub, except for any of the foregoing
matters which would not have a Xxxxxx Material Adverse Effect; or (e) other than
the filings provided for in Sections 1.3 and 5.7, filings required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), the
Exchange Act, the Securities Act, or applicable state securities and "Blue Sky"
laws or filings in connection with the maintenance of qualification to do
business in other jurisdictions (collectively, the "Regulatory Filings"),
require any material consent, approval or authorization of, or declaration of,
or filing or registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have a Xxxxxx Material
Adverse Effect.
3.4 SEC Documents. Xxxxxx has delivered or made available to the Company
each registration statement, report, proxy statement or information statement
(as defined in Regulation 14C under the
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Xxxxxxxx Xxx) prepared by it since January 1, 1994, which reports constitute all
of the documents required to be filed by Xxxxxx with the Securities and Exchange
Commission ("SEC") since such date, each in the form (including exhibits and any
amendments thereto) filed with the SEC (collectively, the "Xxxxxx Reports"). As
of their respective dates, the Xxxxxx Reports and any Xxxxxx Reports filed after
the date hereof and prior to the Effective Time (a) complied as to form in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations thereunder; and
(b) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. Xxxxxx has timely filed with the SEC all reports required to be
filed under Sections 13, 14 and 15(d) of the Exchange Act since January 1, 1994.
Each of the consolidated balance sheets of Xxxxxx included in or incorporated by
reference into the Xxxxxx Reports (including the related notes and schedules)
fairly present in all material respects the consolidated financial position of
Xxxxxx and the Xxxxxx Subsidiaries as of its date (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), and each of the consolidated statements of
income, retained earnings and cash flows of Xxxxxx included in or incorporated
by reference into the Xxxxxx Reports (including any related notes and schedules)
fairly present in all material respects the results of operations, retained
earnings or cash flows, as the case may be, of Xxxxxx and the Xxxxxx
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). The financial statements of Xxxxxx, including the
notes thereto, included in or incorporated by reference into the Xxxxxx Reports
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, and have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") (except as may be indicated
in the notes thereto). Since January 1, 1994, there has been no material change
in Xxxxxx'x accounting methods or principles except as described in the notes to
such Xxxxxx financial statements. All transactions entered into by Xxxxxx or its
Subsidiaries with Related Parties (as defined herein) that are required to be
disclosed in the Xxxxxx Reports have been properly disclosed, in all material
respects.
3.5 No Brokers. Xxxxxx has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of the
Company or Xxxxxx, Xxxxxx Sub or their respective Subsidiaries to pay any
finder's fee, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that Xxxxxx has retained Bear
Xxxxxxx & Co. Inc. as its financial advisor, the arrangements with which have
been disclosed in writing to the Company prior to the date hereof.
3.6 Opinion of Financial Advisor. Xxxxxx has received the opinion of Bear
Xxxxxxx & Co. Inc., to the effect that, as of the date of such opinion, the
consideration to be paid by Xxxxxx pursuant to the Merger is fair to Xxxxxx from
a financial point of view.
3.7 Xxxxxx Common Stock. The issuance and delivery by Xxxxxx of shares of
Xxxxxx Common Stock in connection with the Merger and this Agreement have been
duly and validly authorized by all necessary corporate action on the part of
Xxxxxx. The shares of Xxxxxx Common Stock to be issued in connection with the
Merger and this Agreement, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable and free of
preemptive rights.
3.8 Capitalization
(a) The total authorized capital stock of Xxxxxx consists of (i)
500,000,000 shares of Xxxxxx Common Stock, 36,818,957 shares of which are issued
and outstanding as of December 1, 1996 and (ii) 2,500,000 shares of Preferred
Stock, none of which are issued and outstanding as of the date of this
Agreement. The authorized capital stock of Xxxxxx Sub consists of 1,000 shares
of Common Stock, $0.01 par value per share, 100 shares of which, as of the date
hereof, are issued and outstanding and are held by Xxxxxx. There are no shares
of capital stock of Xxxxxx or Xxxxxx Sub of any other class authorized, issued
or outstanding. Except as set forth in the Xxxxxx Disclosure Statement, Xxxxxx
has not issued any shares of Xxxxxx Common Stock
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or Preferred Stock since December 1, 1996. All of such outstanding shares of
Xxxxxx Common Stock have been validly issued, are fully paid and nonassessable
and were issued in compliance with all preemptive rights.
(b) Except as set forth in the Xxxxxx Disclosure Statement, there are
currently no outstanding, and as of the Closing; there will be no outstanding
(i) securities convertible into or exchangeable for any capital stock of Xxxxxx
or any of the Xxxxxx Significant Subsidiaries (as defined below), (ii) options,
warrants or other rights to purchase or subscribe to capital stock of Xxxxxx or
any of the Xxxxxx Significant Subsidiaries or securities convertible into or
exchangeable for capital stock of Xxxxxx or any of the Xxxxxx Significant
Subsidiaries, or (iii) contracts, commitments, agreements, understandings,
arrangements, calls or claims of any kind relating to the issuance of any
capital stock of Xxxxxx or any of the Xxxxxx Significant Subsidiaries. For
purposes of this Agreement, a "Xxxxxx Significant Subsidiary" shall mean each
Subsidiary of Xxxxxx which has total assets or total revenues for the previous
fiscal year in excess of $10,000,000.
3.9 Material Adverse Change. Since September 30, 1996 to the date of this
Agreement, Xxxxxx, Xxxxxx Sub and their Subsidiaries, taken as a whole, have not
suffered any change in their businesses, operations, assets, liabilities,
financial condition or prospects which would reasonably have a Xxxxxx Material
Adverse Effect; provided, that a Xxxxxx Material Adverse Effect will not be
deemed to have occurred solely as a result of fluctuations in the value of
Xxxxxx Common Stock due to or arising from any public disclosures by Xxxxxx
(including its 50% Subsidiary, Somerset Pharmaceuticals, Inc.), including,
without limitation, disclosures relating to Xxxxxx'x entering into any other
transactions (including, without limitation, transactions relating to the
acquisition of assets, stock or merger transactions). Since September 30, 1996
to the date of this Agreement, (a) Xxxxxx, Xxxxxx Sub and their Subsidiaries
have not entered into any transaction outside the ordinary course of business
which will be required to be disclosed in Xxxxxx'x Form 10-K for the year ended
December 31, 1996; (b) Xxxxxx has not (i) declared, set aside or paid any
dividend or made any other distribution or payment with respect to any shares of
its capital stock or other ownership interests; or (ii) directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock, or
made any commitment for any such action; or (c) neither Xxxxxx nor any Xxxxxx
Significant Subsidiary has voluntarily elected to alter the manner of keeping
its books, accounts or records, or changed in any manner the accounting
practices therein reflected, except for (i) changes that would not have a Xxxxxx
Material Adverse Effect; or (ii) changes in accounting laws which effect all
pharmaceutical companies generally.
3.10 Litigation. There is no litigation or proceeding, in law or in
equity, and there are no proceedings or governmental investigations before any
commission or other administrative authority, pending or, to Xxxxxx'x knowledge,
threatened against Xxxxxx, any of the Xxxxxx Significant Subsidiaries or any of
Xxxxxx'x or the Xxxxxx Significant Subsidiaries' respective officers, directors
or affiliates, with respect to or affecting Xxxxxx'x or any of the Xxxxxx
Significant Subsidiaries' operations, business, products, sales practices or
financial condition, or related to the consummation of the transactions
contemplated hereby, or by the Xxxxxx Ancillary Documents or the Ancillary
Documents which, in each case, if conducted with results unfavorable to Xxxxxx
or any of the Xxxxxx Significant Subsidiaries, would have a Xxxxxx Material
Adverse Effect. There are no facts known to Xxxxxx which, if known by a
potential claimant or governmental authority, would reasonably give rise to a
claim or proceeding which, if asserted or conducted with results unfavorable to
Xxxxxx or any of the Xxxxxx Significant Subsidiaries, would have a Xxxxxx
Material Adverse Effect.
3.11 Disclosure Documents. The Proxy Statement/Prospectus to be delivered
to the Stockholders in connection with the approval of the transactions
contemplated by this Agreement, or any amendment or supplement thereto (the
"Proxy Statement") at the time of mailing thereof and at the time of the meeting
of Stockholders, or, in the case of the Form S4 (as defined in Section 5.7 of
this Agreement) and each amendment or supplement thereto, at the time it is
filed or becomes effective under the Securities Act, will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any such untrue statement
of a material fact or omission to state a material fact was made by Xxxxxx in
reliance upon and in conformity with written information concerning the Company
furnished to Xxxxxx by the Company specifically for use in the Proxy Statement.
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3.12 Tax Reorganization; Accounting Matters. Neither Xxxxxx nor any of its
Subsidiaries has taken or failed to take any action which would prevent the
Merger from (a) constituting a reorganization within the meaning of section
368(a) of the Code; or (b) being treated as a "pooling or interests" in
accordance with Accounting Principles Board Opinion No. 16, the interpretative
releases issued pursuant thereto, and the pronouncements of the SEC.
3.13 Compliance with Laws -- General. Xxxxxx and each of the Xxxxxx
Significant Subsidiaries are in substantial compliance with all foreign,
federal, state or local laws, ordinances or regulations of any court, arbitral,
tribunal, administrative agency or commissioner or other governmental or other
regulatory authority or agency ("Governmental Entities") (including, but not
limited to, those related to occupational health and safety, controlled
substances, Environmental Laws (as defined herein), Tax (as defined herein)
laws, labor, ERISA (as defined herein), the Foreign Corrupt Practices Act,
employment and employment practices or EEOC matters) that are applicable to
Xxxxxx and each Xxxxxx Significant Subsidiary or affect or relate to this
Agreement or the transactions contemplated hereby, except for any such
noncompliance that would not, individually or in the aggregate, have a Xxxxxx
Material Adverse Effect. To Xxxxxx'x knowledge, there has been no storage,
treatment, generation, transportation or Release (as defined herein) of any
Materials of Environmental Concern (as defined herein) by Xxxxxx, any Xxxxxx
Significant Subsidiary or by any other person or entity for which Xxxxxx or any
Xxxxxx Significant Subsidiary is or may be held responsible, at any Facility (as
herein defined) or any Offsite Facility (as herein defined) in violation of, or
which could give rise to any material obligation under, Environmental Laws,
where such liability or obligation would be reasonably likely to have a Xxxxxx
Material Averse Effect.
3.14 Compliance with Laws -- FDA.
(a) Xxxxxx and each Xxxxxx Significant Subsidiary are in substantial
compliance with all Federal and state laws applicable to the manufacture,
processing, packing, testing and sale of pharmaceutical products to the extent
such laws are applicable to them, all rules and regulations of the Food and Drug
Administration ("FDA") and the U.S. Drug Enforcement Agency (the "DEA"), to the
extent such rules and regulations are applicable to them, each new drug
application ("NDA") and abbreviated new drug application ("ANDA") and each of
its establishment license applications ("ELA") and/or product license
applications ("PLA") in which Xxxxxx or any of the Xxxxxx Significant
Subsidiaries have sold any product on or after July 17, 1995, except where the
failure to be in such compliance would not have a Xxxxxx Material Adverse
Effect.
(b) At any time after July 17, 1995, neither Xxxxxx, the Xxxxxx Significant
Subsidiaries nor, to the knowledge of Xxxxxx, their respective officers,
employees, or agents have made an untrue statement of material fact or
fraudulent statement to the FDA or the DEA, failed to disclose a material fact
required to be disclosed to the FDA or the DEA, or committed an act, made a
statement, or failed to make a statement that could reasonably be expected to
provide a basis for the FDA to invoke its policy respecting "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities," set forth in 56
Fed. Reg 46191 (September 10, 1991).
(c) At any time after July 17, 1995, neither Xxxxxx nor any of the Xxxxxx
Significant Subsidiaries have received any written notice that the FDA or the
DEA has commenced, or threatened to initiate, any judicial action against or to
withdraw its approval or request the recall of any product of Xxxxxx or any of
the Xxxxxx Significant Subsidiaries, where such product withdrawal or recall
would have a Xxxxxx Material Adverse Effect, or commenced or threatened to
initiate, any action to enjoin production at any facility owned or used by
Xxxxxx or any of the Xxxxxx Significant Subsidiaries or any other facility at
which any of Xxxxxx'x or any of the Xxxxxx Significant Subsidiaries' products
are manufactured, processed, packaged, labeled, stored, distributed, tested or
otherwise handled (the "Manufacturing Locations"), where such action would have
a Xxxxxx Material Adverse Effect.
(d) Xxxxxx has made available to the Company copies of any and all material
reports of inspection observations, establishment inspection reports, warning
letters and any other material documents received from or issued by the FDA or
the DEA since January 1, 1995 that indicate or suggest a lack of material
compliance with the FDA or the DEA regulatory requirements by Xxxxxx or by any
Xxxxxx Significant Subsidiary.
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3.15 Books and Records. Xxxxxx'x and each Xxxxxx Significant Subsidiary's
books, accounts and records are, in all material respects, maintained in
Xxxxxx'x and such Xxxxxx Significant Subsidiary's usual, regular and ordinary
manner, in accordance with GAAP and with respect to Xxxxxx and the Xxxxxx
Significant Subsidiaries other than Circa Pharmaceuticals, Inc. ("Circa"), since
January 1, 1995, and, with respect to Circa, since July 18, 1995, all material
transactions to which Xxxxxx or any Xxxxxx Significant Subsidiary is or has been
a party, taken as a whole, are properly reflected therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Xxxxxx and Xxxxxx Sub that the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure statement delivered by the Company to Xxxxxx and Xxxxxx
Sub concurrently herewith and identified as the "Disclosure Statement." All
exceptions noted in the Disclosure Statement shall be numbered to correspond to
the applicable sections to which such exception refers; provided, however that
any disclosure set forth on any particular schedule shall be deemed disclosed in
reference to all applicable schedules.
4.1. Organization, Standing and Qualification. The Company and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation; (ii)
has all requisite power and authority to own or lease, and operate their
respective properties and assets, and to carry on their respective businesses as
now conducted and as currently proposed to be conducted except where the failure
to have such power and authority would not have a Company Material Adverse
Effect and to consummate the transactions contemplated hereby; (iii) is duly
qualified or licensed to do business and is in good standing in all
jurisdictions in which they own or lease property or in which the conduct of
their respective businesses requires them to so qualify or be licensed except
where the failure to so qualify, individually or in the aggregate, would not
have a Company Material Adverse Effect; and (iv) has obtained all licenses,
permits, franchises and other governmental authorizations necessary to the
ownership or operation of their respective properties or the conduct of their
respective businesses except where the failure to have obtained such licenses,
permits, franchises or authorizations would not have a Company Material Adverse
Effect.
4.2. Capitalization.
(a) The total authorized capital stock of the Company consists of (i)
35,000,000 shares of common stock, par value $0.005 per share, 13,519,213 shares
of which are issued and outstanding as of the date of this Agreement; (ii)
38,500 shares of Series A Preferred Stock, par value $0.005 per share, none of
which are issued and outstanding as of the date of this Agreement; (iii) 10,000
shares of Series B Preferred Stock, par value $0.005 per share, none of which
are issued and outstanding as of the date of this Agreement; (iv) 35,000 shares
of Series C Preferred Stock, par value $0.005 per share, none of which are
issued and outstanding as of the date of this Agreement; (v) 10,000 shares of
Series D Preferred Stock, par value $0.005 per share, none of which are issued
and outstanding as of the date of this Agreement; (vi) 27,000 shares of Series E
Preferred Stock, par value $10 per share, none of which are issued and
outstanding as of the date of this Agreement; and (iii) 128,000 shares of
preferred stock, none of which are issued and outstanding as of the date of this
Agreement. There are no shares of capital stock of the Company of any other
class authorized, issued or outstanding.
(b) Except as set forth in the Disclosure Statement, each share of the
outstanding Company Common Stock is (i) duly authorized and validly issued; (ii)
fully paid and nonassessable and free of preemptive and similar rights; and
(iii) to the knowledge of the Company, with respect to the shares of Company
Common Stock owned by the directors and officers of the Company, free and clear
of all liens, pledges, security interests, claims or other encumbrances and
restrictions on voting and transfer other than restrictions on transfer imposed
by Federal and state securities laws.
(c) Except as set forth in the Disclosure Statement, there are currently no
outstanding, and, except as permitted pursuant to Section 5.2 or the exercise or
cancellation of outstanding options in accordance with
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their terms, as of the Closing, there will be no outstanding (i) securities
convertible into or exchangeable for any capital stock of the Company or any of
its Subsidiaries, (ii) options, warrants or other rights to purchase or
subscribe to capital stock of the Company or any of its Subsidiaries or
securities convertible into or exchangeable for capital stock of the Company or
any of its Subsidiaries, or (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind to which the Company
or any of its Subsidiaries is a party or is bound relating to the issuance of
any capital stock of the Company or any of its Subsidiaries. The Disclosure
Statement identifies, as of the date hereof, the option holder, the number of
shares subject to each option, the exercise price, the vesting schedule and the
expiration date of each outstanding option or warrant to purchase capital stock
of the Company or any of its Subsidiaries.
4.3. Subsidiaries. The Company owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of each of the
Company's Subsidiaries indicated in the Disclosure Schedule as being owned by
the Company. Each of the outstanding shares of capital stock owned by the
Company of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
the Company free and clear of all liens, pledges, security interests, claims or
other encumbrances other than liens imposed by local law which are not material.
The following information for each Subsidiary of the Company is listed in the
Disclosure Schedule, if applicable: (a) its name and jurisdiction of
incorporation or organization; (b) the location of its chief executive office;
(c) a summary of its lines of business and products; (d) its authorized capital
stock or share capital; and (e) the number of issued and outstanding shares of
capital stock or share capital.
4.4. Ownership Interests. Except for the interests in the Company's
Subsidiaries and the interests disclosed in the Disclosure Schedule, neither the
Company nor any of its Subsidiaries owns any direct or indirect interest in any
corporation, joint venture, limited liability company, partnership, association
or other entity. Since January 1, 1992, the Company has not (i) disposed of the
capital stock (other than Company Common Stock) or all or substantially all of
the assets of any ongoing business, or (ii) purchased the business and/or all or
substantially all of the assets of another person, firm or corporation (whether
by purchase of stock, assets, merger or otherwise).
4.5. Constituent Documents. True and complete copies of the Certificate of
Incorporation and all amendments thereto, the By-Laws as amended and currently
in force, all stock records, and all corporate minute books and records of the
Company and each of its Subsidiaries have been furnished or made available by
the Company to Xxxxxx for inspection to the extent requested by Xxxxxx. Said
stock records accurately reflect all stock transactions and the current stock
ownership of the Company and its Subsidiaries. Since April 1, 1990, the
corporate minute books and records of the Company and its Subsidiaries contain
true and complete copies of all resolutions adopted by the stockholders or the
board of directors of the Company and its Subsidiaries and any other action
formally taken by them respectively as such.
4.6. Authorization of Agreement and Other Documents. The execution and
delivery of this Agreement and the other documents executed or to be executed in
connection herewith to which the Company is a party (collectively, the
"Ancillary Documents"), have been duly authorized by the Board of Directors of
the Company and no other proceedings on the part of the Company are necessary to
authorize the execution, delivery or performance of this Agreement or any
Ancillary Document, except the approval of the Merger by the Stockholders. This
Agreement is, and, as of the Closing Date, each of the Ancillary Documents will
be, a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting enforcement of creditors'
rights generally, and by general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity) and subject to
the receipt of Stockholder approval of the Merger.
4.7. No Violation. Neither the execution and delivery of this Agreement
nor the Ancillary Documents by the Company nor the consummation by the Company
of the transactions contemplated hereby and thereby in accordance with their
respective terms, will (a) conflict with or result in a breach of any provisions
of the Certificate of Incorporation or By-Laws of the Company or any of its
Subsidiaries; (b) result in a breach or
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violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of the
Company Stock Option Plans, or any grant or award made under any of the
foregoing; (c) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of the Company or any of its Subsidiaries
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which the
Company or any of its Subsidiaries is a party, or by which the Company or any of
its Subsidiaries or any of their respective properties is bound or affected; (d)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or any of its Subsidiaries, except for any of the
foregoing matters which would not have a Company Material Adverse Effect; or (e)
other than the Regulatory Filings, require any material consent, approval or
authorization of, or declaration of, or filing or registration with, any
domestic governmental or regulatory authority, the failure to obtain or make
which would have a Company Material Adverse Effect.
4.8. Compliance with Laws -- General.
(a) The Company and each of its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of any Governmental Entities
necessary for the lawful conduct of its business (the "Permits"), except where
the failure to hold such permits would not have a Company Material Adverse
Effect.
(b) The Company and its Subsidiaries are in substantial compliance with the
terms of its Permits.
(c) The Company and its Subsidiaries are in substantial compliance with all
laws, ordinances or regulations of all Governmental Entities (including, but not
limited to, those related to occupational health and safety, controlled
substances or employment and employment practices) that are applicable to the
Company or any of its Subsidiaries or affect or relate to this Agreement or the
transactions contemplated hereby, except for any noncompliance that would not
have a Company Material Adverse Effect.
(d) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Entity with
respect to the Company or any of its Subsidiaries is to the knowledge of the
Company, pending or threatened.
(e) Neither the Company nor any of its Subsidiaries are subject to any
agreement, contract or decree with any Governmental Entities arising out of any
current or previously existing violations of any laws, ordinances or regulations
applicable to the Company or any of its Subsidiaries.
4.9. Compliance with Laws -- FDA.
(a) As to each drug of the Company for which a new drug application or
abbreviated new drug application has been approved by the FDA, which drug is
described in the Disclosure Statement, the applicant and all persons performing
operations covered by the application are in substantial compliance with 21
U.S.C. sec.sec. 355 or 357, 21 C.F.R. Parts 314 or 430 et. seq., respectively,
and all terms and conditions of the application.
(b) As to each biologic product of the Company or its Subsidiaries for
which an ELA and/or PLA has been filed, which products are described in the
Disclosure Statement, the applicant and all persons performing operations
covered by the application are in substantial compliance with 42 U.S.C.
sec. 262, 21 C.F.R. Part 601 et. seq., and all terms and conditions of the ELA
and/or PLA.
(c) The Company and each of its Subsidiaries are in substantial compliance
with all applicable registration and listing requirements set forth in 21 U.S.C.
sec. 360 and 21 C.F.R. Part 207. To the extent required, the Company and each of
its Subsidiaries have obtained licenses from the DEA and are in substantial
compliance with all such licenses and all applicable regulations promulgated by
the DEA.
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(x) All manufacturing operations conducted by or, to the knowledge of the
Company, for the benefit of the Company and its Subsidiaries have been and are
being conducted in substantial compliance with the good manufacturing practice
regulations set forth in 21 C.F.R. Parts 210 and 211.
(e) Neither the Company, its Subsidiaries nor, to the knowledge of the
Company, their respective officers, employees, or agents have made an untrue
statement of material fact or fraudulent statement to the FDA or the DEA, failed
to disclose a material fact required to be disclosed to the FDA or the DEA, or
committed an act, made a statement, or failed to make a statement that could
reasonably be expected to provide a basis for the FDA to invoke its policy
respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities," set forth in 56 Fed. Reg 46191 (September 10, 1991).
(f) The Company has made available to Xxxxxx copies of any and all reports
of inspection observations, establishment inspection reports, warning letters
and any other documents received from or issued by the FDA or the DEA within the
last three years that indicate or suggest lack of compliance with the FDA or the
DEA regulatory requirements by the Company, its Subsidiaries or persons covered
by product applications or otherwise performing services for the benefit of the
Company or its Subsidiaries.
(g) Neither the Company nor its Subsidiaries have received any written
notice that the FDA or the DEA has commenced, or threatened to initiate, any
action to withdraw its approval or request the recall of any product of the
Company or its Subsidiaries or commenced or threatened to initiate, any action
to enjoin production at any facility owned or used by the Company or its
Subsidiaries or any of the Company's or its Subsidiaries' Manufacturing
Locations.
(h) As to each article of drug or consumer product currently manufactured
and/or distributed by the Company or its Subsidiaries, which products are
described in the Disclosure Statement, such article is not adulterated or
misbranded within the meaning of the FDCA, 21 U.S.C. sec.sec. 301c et. seq.
(i) As to each drug referred to in (a), the Company, and its officers,
employees, agents and affiliates have included or caused to be included in the
application for such drug, where required, the certification described in 21
U.S.C. sec. 335a(k)(l) and the list described in 21 U.S.C. sec. 335a(k)(2), and
such certification and such list was in each case true and accurate when made
and remained true and accurate thereafter.
(j) Neither the Company, its Subsidiaries, nor, to the knowledge of the
Company, their respective officers, employees, agents or affiliates, has been
convicted of any crime or engaged in any conduct for which debarment is mandated
by 21 U.S.C. sec. 335a(a) or authorized by 21 U.S.C. sec. 335a(b).
(k) As to each application or abbreviated application submitted to, but not
approved by, the FDA, and not withdrawn by the Company or its Subsidiaries, or
applicants acting on its behalf as of the date of this Agreement, the Company
and its Subsidiaries have complied in all material respects with the
requirements of 21 U.S.C. sec.sec. 355 and 357 and 21 C.F.R. Parts 312, 314 and
430 et. seq. and has provided, or will provide, all additional information and
taken, or will take, all additional action requested by the FDA in connection
with the application.
4.10. Books and Records. The Company's and its Subsidiaries' books,
accounts and records are, and have been, in all material respects, maintained in
the Company's and its Subsidiaries usual, regular and ordinary manner, in
accordance with GAAP, and since July 1, 1990, all material transactions to which
the Company or any of its Subsidiaries is or has been a party are properly
reflected therein.
4.11. SEC Documents. The Company has delivered or made available to Xxxxxx
each registration statement, report, proxy statement or information statement
(as defined in Regulation 14C under the Exchange Act) prepared by it since
January 1, 1993, which reports constitute all of the documents required to be
filed by the Company with the SEC since such date, each in the form (including
exhibits and any amendments thereto) filed with the SEC (collectively, the
"Company Reports"). As of their respective dates, the Company Reports and any
Company Reports filed after the date hereof and prior to the Effective Time (a)
complied as to form in all material respects with the applicable requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations thereunder; and (b) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to
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make the statements made therein, in the light of the circumstances under which
they were made, not misleading. The Company has timely filed with the SEC all
reports required to be filed under Section 13, 14 and 15(d) of the Exchange Act
since January 1, 1993. Each of the consolidated balance sheets of the Company
included in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of its
date (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect, and each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly present in all material
respects the results of operations, retained earnings or cash flows, as the case
may be, of the Company and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect). The financial
statements of the Company, including the notes thereto, included in or
incorporated by reference into the Company Reports comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, and have been prepared in
accordance with GAAP (except as may be indicated in the notes thereto). Since
January 1, 1993, there has been no material change in the Company's accounting
methods or principles except as described in the notes to such Company financial
statements.
4.12. Accounts Receivables. To the knowledge of the Company, none of the
trade receivables and notes receivable which are reflected in the financial
statements contained in the Company Reports or which arose subsequent to
September 30, 1996, is or was subject to any counterclaim or set off. All of
such trade receivables arose out of bona fide, arms-length transactions for the
sale of goods or performance of services, and to the Company's knowledge, all
such trade receivables and notes receivable are good and collectible (or have
been collected) in the ordinary course of business using normal collection
practices at the aggregate recorded amounts thereof, less the amount of
applicable reserves for doubtful accounts and for allowances and discounts. All
such reserves, allowances and discounts, were and are adequate and materially
consistent in extent with reserves, allowances and discounts previously
maintained by the Company in the ordinary course of its business, subject to
industry changes due to shelf restocking or customer rebates. Since September
30, 1996, there has not been a material write-down or write-off of the Company's
aggregate trade receivables or a material adverse change in the aging thereof.
The Company does not have, to a material extent, any outstanding sales on
consignment, sales on approval, sales on return or guaranteed sales.
4.13. Inventory. All inventory of the Company or any of its Subsidiaries
which is held for sale or resale, including raw materials, work in process and
finished goods (collectively, "Inventory"), consists of items of a quantity and
quality historically useable and/or saleable in the normal course of business,
except for items of obsolete and slow-moving material and materials which are
below standard quality, all of which have been written down to estimated net
realizable value on an item by item basis. None of such write-downs have had a
Company Material Adverse Effect since September 30, 1996. With the exception of
items of below standard quality which have been written down to their estimated
net realizable value, no material portion of the materials and/or workmanship
comprising the Inventory is defective. All Inventory reflected in the Company
Reports is valued at the lower of cost or market with cost determined by the
first in first out accounting method. Since September 30, 1996, there has not
been a material change in the level of the Inventory. All Inventory is, and, to
the knowledge of the Company, all tools, dies, jigs, patterns, molds, equipment,
supplies and other materials used in the production of Inventory are, located at
the Real Estate (as defined herein), the Leased Premises (as defined herein) or
the Company's or its Subsidiaries' Manufacturing Locations.
4.14. Bank Accounts. The Disclosure Statement contains a list showing: (a)
the name of each bank, safe deposit company or other financial institution in
which the Company or any of its Subsidiaries has an account, lock box or safe
deposit box; (b) the names of all persons authorized to draw thereon or to have
access thereto and the names of all persons and entities, if any, holding powers
of attorney from the Company or any of its Subsidiaries; and (c) all instruments
or agreements to which the Company or any of its Subsidiaries is a party as an
endorser, surety or guarantor, other than checks or other instruments endorsed
for collection or deposit.
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4.15. Intellectual Property.
(a) The Disclosure Statement identifies all of the following which are used
in the Company's or any of its Subsidiaries' businesses and in which the Company
or any of its Subsidiaries claims any ownership rights: (i) all registered
trademarks, service marks, slogans, trade names, trade dress and the like
(collectively with the associated goodwill of each, "Trademarks"), together with
information regarding all registrations and pending applications to register any
such rights; (ii) all common law Trademarks; (iii) all patents on and pending
applications to patent any technology or design; (iv) all registrations of and
applications to register copyrights; and (v) all licenses or rights in computer
software, Trademarks, patents, copyrights, unpatented formulations,
manufacturing methods and other know-how, whether to or by the Company or any of
its Subsidiaries, other than licenses to commercially available computer
software and other know-how acquired or entered into by the Company or any of
its Subsidiaries in the ordinary course of business. The rights required to be
so identified, together with all proprietary formulation, manufacturing methods,
know-how and trade secrets that are material to the Company's or any of its
Subsidiaries' businesses, are referred to herein collectively as the
"Intellectual Property".
(b)(i) The Company or its Subsidiaries is the owner of or duly licensed to
use each Trademark and its associated goodwill; (ii) each of the Trademark
registrations exists and has been maintained in good standing; (iii) each patent
and application included in the Intellectual Property exists, is owned by or
licensed to the Company or its Subsidiaries and, to the Company's knowledge, has
been maintained in good standing; (iv) each copyright registration exists and is
owned by the Company or its Subsidiaries; (v) to the Company's knowledge, no
other firm, corporation, association or person claims the right to use in
connection with similar or closely related goods and in the same geographic
area, any xxxx which is identical or confusingly similar to any of the
Trademarks; (vi) the Company has no knowledge of any claim that any third party
asserts ownership rights in any of the Intellectual Property; (vii) the Company
has no knowledge of any claim or knowledge of any facts that would give the
Company any reason to reasonably believe that the Company's or its Subsidiaries'
use of any Intellectual Property infringes any right of any third party; (viii)
the Company has no knowledge and there are no facts known to the Company that
would give the Company any reasonable basis to believe that any third party is
infringing on any of the Company's or its Subsidiaries' rights in any of the
Intellectual Property; (ix) the Company has no knowledge and there are no facts
known to the Company that would give the Company any reasonable basis to believe
that any of its actions or the actions of its Subsidiaries has infringed or is
infringing on any third party's Intellectual Property rights; (x) to the
Company's knowledge, there are no undisclosed government restrictions, domestic
or foreign, which specifically limit the manner in which any of the Intellectual
Property may be used or licensed; and (xi) to the Company's knowledge, neither
the Company, its Subsidiaries nor any of their respective officers or directors
has disclosed any confidential information of the Company or any of its
Subsidiaries which would constitute trade secrets under Florida law, except in
the ordinary course of business of the Company and its Subsidiaries or with the
authority of the Company or its Subsidiaries.
(c) Xxxxxx understands and acknowledges that the Surviving Corporation must
continue to assert control over the quality of the goods or services offered in
connection with the Company's Trademarks or its Subsidiaries in order to
maintain its claim of ownership in the Trademarks after the Closing.
4.16. Title to Properties. Attached to the Disclosure Statement is a list
and description of each item of real or tangible personal property owned by the
Company or any of its Subsidiaries which has a net book value in excess of
$50,000. The Company or its Subsidiaries (i) has good, marketable, legal and
valid title to such property free and clear of all liens, claims, encumbrances
or security interests (collectively, "Liens"), except for (A) Liens set forth on
the Disclosure Statement and (B) (x) mechanic's, materialmen's, and similar
liens, (y) liens arising under worker's compensation, unemployment insurance,
social security, retirement, and similar legislation and (z) liens on goods in
transit incurred pursuant to documentary letters of credit; and (ii) enjoys
peaceful and undisturbed possession under all leases to which it is a party as
lessee. All of the leases to which the Company or any of its Subsidiaries is a
party (other than leases for Leased Premises) are legal, valid and binding
obligations of the Company or its Subsidiaries and in full force and effect, and
no default by the Company or its Subsidiaries, or, to the knowledge of the
Company, any other party thereto has occurred or is continuing thereunder. The
Disclosure Schedule lists all properties and assets used by the
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Company or any of its Subsidiaries in connection with the operation of their
respective businesses which are held under any lease or under any conditional
sale or other title retention agreement to the extent the Company or its
Subsidiaries remaining obligations under any such lease or agreement exceeds
$50,000. Except for such assets and facilities as are immaterial to the business
of the Company or its Subsidiaries, all tangible assets and facilities of the
Company and its Subsidiaries are in good operating condition and repair
(ordinary wear and tear excepted) and, in the aggregate with the intangible
assets of the Company, are sufficient to conduct the business of the Company and
its Subsidiaries as previously conducted prior to the date hereof.
4.17. Real Estate.
(a) Neither the Company nor any of its Subsidiaries owns any real estate,
or has the option to acquire any real estate, other than the premises identified
in the Disclosure Statement (the "Real Estate"). The Disclosure Statement
accurately sets forth the street addresses of the Real Estate. The Real Estate
is not subject to any leases or tenancies. None of the improvements comprising
the Real Estate or the businesses conducted or proposed to be conducted by the
Company or its Subsidiaries thereon, are, to the Company's knowledge, in
violation of any material use or occupancy restriction, limitation, condition or
covenant of record or any zoning or building law, code, ordinance or public
utility easement or any other applicable law. No material expenditures are
required to be made for the repair or maintenance of any improvements on the
Real Estate or for the Real Estate to be used for its intended purpose.
(b) Neither the Company nor any of its Subsidiaries leases any real estate
other than the premises identified in the Disclosure Statement as being so
leased (the "Leased Premises"). The Leased Premises are leased to the Company or
its Subsidiaries, pursuant to written leases, true, correct and complete copies
of which have been provided to Xxxxxx or its counsel. None of the improvements
comprising the Leased Premises, or the businesses conducted or proposed to be
conducted by the Company or its Subsidiaries thereon, are, to the Company's
knowledge, in violation of any building line or use or occupancy restriction,
limitation, condition or covenant of record or any zoning or building law, code
or ordinance, public utility or other easements or other applicable law, except
for violations which do not have a Company Material Adverse Effect or materially
interfere with the conduct of the business of the Company or its Subsidiaries.
No material expenditures are required to be made for the repair or maintenance
of any improvements on the Leased Premises or for the Leased Premises to be used
for its intended purpose. Neither the Company nor its Subsidiaries are in
default under any agreement relating to the Leased Premises nor, to the
knowledge of the Company, is any other party thereto in default thereunder. All
options in favor of the Company or its Subsidiaries to purchase any of the
Leased Premises, if any, are in full force and effect.
(c) The Real Estate, the Leased Premises, each facility located on the Real
Estate and the Leased Premises and, to the Company's knowledge, each of the
Company's or its Subsidiaries' Manufacturing Locations are currently served by
gas, electricity, water, sewage and waste disposal and other utilities adequate
to operate such Real Estate, Leased Premises, Manufacturing Locations and/or
facility at its current rate of production, and none of the utility companies
serving any such Real Estate, Leased Premises, any facility and, to the
Company's knowledge, each of such Manufacturing Locations has threatened the
Company or its Subsidiaries with any reduction in service.
(d) There are no challenges or appeals pending regarding the amount of the
taxes on, or the assessed valuation of, the Real Estate or the Leased Premises,
and no special arrangements or agreements exist with any governmental authority
with respect thereto (the representations and warranties contained in this
Section 4.17(d) shall not be deemed to be breached by any prospective general
increase in real estate tax rates).
(e) There are no condemnation proceedings pending against the Company or,
to the Company's knowledge, threatened with respect to any portion of the Real
Estate or the Leased Premises.
(f) There is no tax assessment (in addition to the normal, annual general
real estate tax assessment) pending against the Company or, to the Company's
knowledge, threatened with respect to any portion of the
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Xxxx Xxxxxx or, to the extent the Company or its Subsidiaries is liable for
payment therefor, the Leased Premises.
(g) The buildings and other facilities located on the Real Estate and the
Leased Premises are free of any material latent structural or engineering
defects known to the Company or any material patent structural or engineering
defects.
4.18. Contracts.
(a) Neither the Company nor any of its Subsidiaries is a party to, or bound
by, or the issuer or beneficiary of, any undischarged written or oral: (i)
agreement or arrangement obligating the Company or its Subsidiaries to pay or
receive, or pursuant to which the Company or its Subsidiaries has previously
paid or received, an amount in excess of $50,000 (excluding purchase and sale
orders entered into by the Company or its Subsidiaries in the ordinary course of
business consistent with past practices); (ii) employment or consulting
agreement or arrangement; (iii) collective bargaining agreement; (iv) plan or
contract or arrangement providing for bonuses, severance, options, deferred
compensation, retirement payments, profit sharing, medical and dental benefits
or the like covering employees of the Company, other than Plans, Welfare Plans
and Employee Benefit Plans (in each case as defined herein) described in the
Disclosure Statement; (v) agreement restricting in any manner the Company's
right to compete with any other person or entity, the Company's right to sell to
or purchase from any other person or entity, the right of any other party to
compete with the Company, or the ability of such person or entity to employ any
of the Company's employees; (vi) secrecy or confidentiality agreements; (vii)
any distributorship, non-employee commission or marketing agent, representative
or franchise agreement providing for the marketing and/or sale of the products
or services of the Company or any of its Subsidiaries; (viii) agreement between
the Company and any of its affiliates or other Related Parties (as herein
defined); (ix) guaranty, performance, bid or completion bond, or surety or
indemnification agreement; (x) requirements contract; (xi) loan or credit
agreement, pledge agreement, note, security agreement, mortgage, debenture,
indenture, factoring agreement or letter of credit; (xii) agreement for the
treatment or disposal of Materials of Environmental Concern (as defined herein);
(xiii) power of attorney; (xiv) any agreement relating to the ownership or
control of any interest in a partnership, corporation, limited liability
company, joint venture or other entity or similar arrangement; (xvi) any
contract, agreement or arrangement containing change of control provisions; or
(xvii) any other agreement not entered into in the ordinary course of business.
Neither the Company nor any of its Subsidiaries are currently negotiating (and
have not entered into preliminary discussions with respect to) any transaction
involving an aggregate payment by the Company or its Subsidiaries and/or
receipts to the Company or its Subsidiaries in excess of $150,000 excluding
purchase and sale orders entered into by the Company or its Subsidiaries in the
ordinary course of business consistent with past practices.
(b) All agreements, leases, subleases and other instruments referred to in
this Section 4.18, are, pursuant to their terms, in full force and binding upon
the Company or its Subsidiaries, and, to the knowledge of the Company, the other
parties thereto. Neither the Company nor any of its Subsidiaries is and, to the
Company's knowledge, none of the other parties thereto are in default of a
material provision under any such agreement, lease, sublease or other
instrument. No event, occurrence or condition exists which, with the lapse of
time, the giving of notice, or both, or the happening of any further event or
condition, would become a default of a material provision under any such
agreement, lease, sublease or other instrument by the Company or its
Subsidiaries, or, to the knowledge of the Company, the other contracting party.
Neither the Company nor any of its Subsidiaries has released or waived any
material right under any such agreement, lease, sublease or other instrument
other than in the ordinary course of business consistent with past practices.
(c) Immediately after the Closing, except as contemplated by this
Agreement, neither the Company nor any of its Subsidiaries will be bound by the
terms of any stock option agreement, registration rights agreement, stockholders
agreement, management agreement, consulting agreement or any other agreement
relating to the equity or management of the Company or its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries is a party to, or bound
by, any unexpired, undischarged or unsatisfied written or oral contract,
agreement, indenture, mortgage, debenture, note or other instrument under the
terms of which performance by the Company or its Subsidiaries according to the
terms
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of this Agreement will be a default of a material provision under or an event of
acceleration, or grounds for termination, or whereby timely performance by the
Company of this Agreement may be prohibited, prevented or delayed.
4.19. Insurance. The Disclosure Statement contains a true and correct list
of all insurance policies which are owned by the Company or its Subsidiaries or
which name the Company or any of its Subsidiaries as an insured (or loss payee),
including without limitation those which pertain to the Company's or its
Subsidiaries' assets, employees or operations. All such insurance policies are
in full force and effect and neither the Company nor any of its Subsidiaries
have received notice of cancellation of any such insurance policies. In the two
(2) year period ending on the date hereof, neither the Company nor any of its
Subsidiaries have received any written notice from, or on behalf of, any
insurance carrier relating to or involving an annual increase by over 10% in
insurance rates (except to the extent that insurance risks may be increased for
all similarly situated risks) or non-renewal of a policy, or requiring or
suggesting material alteration of any of the Company's or its Subsidiaries'
assets, purchase of additional equipment, or material modification of any of the
Company's or its Subsidiaries' methods of doing business. Neither the Company
nor any of its Subsidiaries made any claim for reimbursement from its insurance
carriers since June 30, 1993.
4.20. Litigation. Except as set forth in the Disclosure Schedule or
matters which are immaterial to the Company or its Subsidiaries, there is no
litigation or proceeding, in law or in equity, and there are no proceedings or
governmental investigations before any commission or other administrative
authority, pending or, to the Company's knowledge, threatened against the
Company or any of its Subsidiaries, or any of the Company's or its Subsidiaries'
respective officers, directors or affiliates, with respect to or affecting the
Company's or its Subsidiaries' respective operations, businesses, products,
sales practices or financial condition, or related to the consummation of the
transactions contemplated hereby or by the Xxxxxx Ancillary Documents or the
Ancillary Documents. There are no facts known to the Company which, if known by
a potential claimant or governmental authority, would reasonably give rise to a
claim or proceeding which, if asserted or conducted with results unfavorable to
the Company or its Subsidiaries, would have a Company Material Adverse Effect.
4.21. Warranties. To the Company's knowledge, neither the Company nor any
of its Subsidiaries has made any oral or written warranties with respect to the
quality or absence of defects of its products or services which they have sold
or performed which are in force as of the date hereof except as are described in
the Disclosure Statement. There are no material claims pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries with respect to the quality of or absence of defects in such
products or services nor are there any facts known to the Company relating to
the quality of or absence of defects in such products or services which, if
known by a potential claimant or governmental authority, would reasonably give
rise to a material claim or proceeding. The Disclosure Statement sets forth a
summary, which is accurate in all material respects, of all returns of products
during the period beginning January 1, 1995 and ending on the date hereof, and
all credits and allowances for returned products given to customers during said
period to the extent that such returns, credits and allowances with respect to
any one product exceeds $50,000 in the aggregate, and said summary contains a
description of any reoccurring product defects (other than returns due to date
expirations). The Company has no knowledge of or reason to believe that the
percentage of warranty claims or product returns for products sold by the
Company and its Subsidiaries prior to the Closing Date will exceed historical
levels.
4.22. Products Liability. Neither the Company nor any of its Subsidiaries
have received any written notice relating to, nor does the Company have
knowledge of any facts or circumstances which could reasonably give rise to, any
claim involving any product manufactured, produced, distributed or sold by or on
behalf of the Company or its Subsidiaries resulting from an alleged defect in
design, manufacture, materials or workmanship, or any alleged failure to warn,
or from any breach of implied warranties or representations, other than notices
or claims that have been settled or resolved by the Company or its Subsidiaries
prior to the date of this Agreement.
4.23. Arbitration. Neither the Company nor any of its Subsidiaries is a
party to, or bound by, any decree, order or arbitration award (or agreement
entered into in any administrative, judicial or arbitration
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proceeding with any governmental authority) with respect to or affecting the
properties, assets, personnel or business activities of the Company or its
Subsidiaries.
4.24. Taxes.
(a) As used in this Agreement, (i) the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatever of a nature similar to taxes,
together with any interest and any penalties, additions to tax or additional
amounts with respect thereto, and the term "Tax" means any one of the foregoing
Taxes; and (ii) the term "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes, and the
term "Return" means any one of the foregoing Returns.
(b) There have been properly completed and filed on a timely basis and in
correct form all material Returns required to be filed by the Company or any of
its Subsidiaries. As of the time of filing, the foregoing Returns were correct
and complete in all material respects. An extension of time within which to file
any Return which has not been filed has not been requested or granted.
(c) With respect to all amounts in respect of Taxes imposed upon the
Company or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries is or could be liable, whether to taxing authorities (as, for
example, under law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before September 30, 1996, (i) all applicable tax laws and
agreements have been complied with in all material respects, and (ii) all
amounts required to be paid by the Company or its Subsidiaries, to taxing
authorities or others, on or before the date hereof have been paid or adequately
reserved for on the financial statements contained in the Company Reports, and
any Taxes accrued but not due and payable as of September 30, 1996 have been
accrued or otherwise reserved for in financial statements contained in the most
recent Company Report. No Taxes have been (or will prior to the Closing Date be)
recorded by the Company or any of its Subsidiaries other than in the ordinary
course of business. There are no Liens filed against any asset of the Company or
any of its Subsidiaries resulting from the failure to pay any Tax when due.
(d) To the Company's knowledge, no issues have been raised (and are
currently pending) by any taxing authority in connection with any of the
Returns. No waivers of statutes of limitation with respect to the Returns have
been given by the Company or any of its Subsidiaries (or with respect to any
Return which a taxing authority has asserted should have been filed by the
Company or any of its Subsidiaries) which waivers are still in effect. The
Disclosure Statement sets forth those years for which examinations have been
completed, those years for which examinations are presently being conducted, and
those years for which Returns will be required but are not yet due to be filed
and have not yet been filed. All deficiencies asserted or assessments made as a
result of any examinations have been fully paid, or are fully reflected as a
liability in the financial statements contained in the Company Report, or are
being contested and an adequate reserve therefor has been established and is
fully reflected as a liability in the financial statements contained in the most
recent Company Report.
(e) The unpaid Taxes of the Company or any of its Subsidiaries do not
materially exceed the reserve for tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and tax
income) set forth or included in the financial statements included in the most
recent Company Report, as adjusted for the passage of time through the Closing.
(f) Neither the Company nor any of its Subsidiaries is or at any time has
been a party to or bound by (nor will the Company or any of its Subsidiaries
become a party to or bound by) any tax indemnity, tax sharing or tax allocation
agreement.
(g) Neither the Company nor any of its Subsidiaries has ever been a member
of an affiliated group of corporations, within the meaning of section 1504 of
the Code.
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(h) All material elections with respect to Taxes affecting the Company or
any of its Subsidiaries that are currently effective as of the date hereof that
are not reflected in the Company's Returns are set forth in the Disclosure
Statement.
4.25. ERISA. The Disclosure Schedule contains a list and brief description
of all "employee pension benefit plans" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA and referred to herein as a "Welfare
Plan") and all other Benefit Plans (defined herein as any Pension Plan, Welfare
Plan and any other plan, fund, program, arrangement or agreement to provide
employees, directors, independent contractors, officers or agents of any
Commonly Controlled Entity with medical, health, life, bonus, stock (option,
ownership or purchase), deferred compensation, severance, salary continuation,
vacation, sick leave, fringe, incentive insurance or other benefits) maintained,
or contributed to, or required to be contributed to, by the Company or any of
its subsidiaries or any other Person that, together with the Company at any time
during the last six years, is or was treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (the Company and each such other Person, a
"Commonly Controlled Entity") for the benefit of any current or former
employees, officers or directors of any Commonly Controlled Entity. The Company
has delivered or made available to Xxxxxx true, complete and correct copies of
(i) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Forms 5500 and 990,
if any, filed with the Internal Revenue Service with respect to each Benefit
Plan (if any such report was required), (iii) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required, (iv) each trust agreement and group annuity contract relating to any
Benefit Plan; and (v) a list of all assets and liabilities of, allocated to or
accounted for separately with respect to every Benefit Plan (including insurance
contracts associated with every Benefit Plan regardless of whether any current
cash value exists). Each Benefit Plan has been established, funded, maintained
and administered in all material respects in accordance with its terms and is in
compliance with the applicable provisions of ERISA, the Code, all other
applicable laws and all applicable collective bargaining agreements except where
the failure to comply would not be reasonably expected to result in a Company
Material Adverse Effect.
(b) All Pension Plans have been the subject of favorable and up-to-date
(through any applicable remedial amendment period) determination letters from
the Internal Revenue Service, or have filed a timely application therefor, to
the effect that such Pension Plans are qualified and exempt from federal income
taxes under Section 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor has any such Pension Plan been amended
since the date of its most recent determination letter or application therefor
in any respect that would adversely affect its qualification or materially
increase its costs.
(c) No Commonly Controlled Entity has adopted or been obligated to
contribute to any "defined benefit pension plan" as defined in Section 3(35) of
ERISA subject to Title IV of ERISA in the five years preceding the date hereof.
(d) No Commonly Controlled Entity has been required at any time within the
five calendar years preceding the date hereof or is required currently to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA ) or has withdrawn from any multiemployer plan where such withdrawal has
either: (i) resulted or would result in any "withdrawal liability" (within the
meaning of Section 4201 of ERISA) that has not been fully paid; or (ii) engaged
in a transaction that might have resulted in withdrawal liability but for the
application of Section 4204 of ERISA.
(e) With respect to any Welfare Plan, (i) no such Welfare Plan is funded
through a "welfare benefits fund", as such term is defined in Section 419(e) of
the Code, (ii) no such Welfare Plan is self-insured, and (iii) each such Welfare
Plan that is a "group health plan", as such term is defined in Section
5000(b)(1) of the Code, complies with the applicable requirements of Section
4980B(f) of the Code.
(f) Except as set forth in the Disclosure Schedule, neither the Company or
any Commonly Controlled Entity nor any Person acting on behalf of the Company or
any Commonly Controlled Entity has, in contemplation of any corporate
transaction involving Xxxxxx, issued any written communication to, or otherwise
made or entered into any legally binding commitment with, any employees of the
Company or of
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any Commonly Controlled Entity to the effect that, following the date hereof,
(i) any benefits or compensation provided to such employees under existing
Benefit Plans or under any other plan or arrangement will be enhanced, (ii) any
new plans or arrangements providing benefits or compensation will be adopted,
(iii) any Benefit Plans will be continued for any period of time or cannot be
amended or terminated at any time or for any reason, or (iv) any plans or
arrangements provided by Xxxxxx will be made available to such employees.
(g) No Commonly Controlled Entity has ever promised or been obligated to
provide former employees with coverage or benefits under Benefit Plans, other
than as required by Section 4980B of the Code.
(h) All contributions or premiums owed by Commonly Controlled Entities with
respect to Benefit Plans under law, contract or otherwise have been made in full
and on a timely basis and Commonly Controlled Entities are not obligated to
contribute with respect to any Benefit Plan that involves a retroactive
contribution, assessment or funding waiver arrangement. All administrative costs
attributable to Benefit Plans have been paid when due.
(i) To the Company's knowledge, no Pension Plan or Welfare Plan or any
"fiduciary" or "party-in-interest" (as such terms are respectively defined by
Sections 3(21) and 3(14) of ERISA) thereto has engaged in a transaction
prohibited by Section 406 of ERISA or 4975 of the Code for which a valid
exception is not available.
(j) There are no pending or, to the Company's knowledge, threatened likely
claims, lawsuits, arbitrations or audits asserted or instituted against any
Benefit Plan, any fiduciary (as defined by Section 3(21) of ERISA thereto, any
Commonly Controlled Entity or any employee or administrator thereof in
connection with the existence, operation or administration of a Benefit Plan,
other than routine claims for benefits.
(k) Nothing in this Agreement or the transaction contemplated hereunder
will: (i) cause the termination or repricing of any insurance contract to which
a Commonly Controlled Entity or Benefit Plan is a party to the purposes of
providing employee benefits; (ii) trigger a right of any employee of any
Commonly Controlled Entity to severance, deferred compensation or retirement
benefits; or (iii) cause any early withdrawal or premature termination penalty
with respect to any asset held in connection with any Benefit Plan.
(l) No Commonly Controlled Entity maintains any unfunded plan of deferred
compensation.
4.26. Labor Matters. Except as set forth in the Disclosure Statement or
for events that occur after the date hereof which are disclosed in writing by
the Company to Xxxxxx, (a) there is no labor strike, dispute, slowdown, work
stoppage or lockout pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries and during the past
three years, there has not been any such action; (b) there are no union claims
to represent the employees of the Company or any of its Subsidiaries, (c)
neither the Company nor any of its Subsidiaries is a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of its Subsidiaries; (d) none of
the employees of the Company or any of its Subsidiaries are represented by any
labor organization and the Company does not have any knowledge of any current
union organizing activities among the employees of the Company or any of its
Subsidiaries, nor to the knowledge of the Company does any question concerning
representation exist with respect to such employees; (e) to the knowledge of the
Company, the Company and its Subsidiaries are, and has at all times been, in
material compliance with all applicable employment laws and practices,
including, without limitation, any such laws relating to employment
discrimination, occupational safety and health and unfair labor practices; (f)
there is no unfair labor practice charge or complaint against the Company or any
of its Subsidiaries pending or, to the knowledge of the Company, threatened
before the National Labor Relations Board or, to the knowledge of the Company,
any charges or complaints, or facts which could reasonably give rise to a charge
or complaint, pending or threatened with any Governmental Entity who has
jurisdiction over unlawful employment practices; (g) there is no grievance or
arbitration proceeding arising out of any collective bargaining agreement or
other grievance procedure pending relating to the Company or any of its
Subsidiaries; (h) neither the Company nor any of its Subsidiaries is delinquent
in payments to any of its employees for any wages, salaries, commissions,
bonuses or other direct compensation
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for any services performed by them to the date of this Agreement or amounts
required to be reimbursed to such employees; (i) upon termination of the
employment of any of the employees of the Company or any of its Subsidiaries
after the Closing, neither the Company nor any of its Subsidiaries will be
liable to any of its employees for severance pay, except as otherwise required
by federal law; (j) the employment of each of the Company's or its Subsidiaries'
employees is terminable at will without cost to the Company or any of its
Subsidiaries except for payments disclosed on the Disclosure Statement or
required under the Plans, Welfare Plans and Employee Benefit Plans and payment
of accrued salaries or wages and vacation pay; (k) no employee or former
employee of the Company or any of its Subsidiaries has any right to be rehired
by the Company or its Subsidiaries prior to the Company's or its Subsidiaries'
hiring a person not previously employed by the Company or its Subsidiaries; and
(l) the Disclosure Statement contains a true and complete list of all employees
who are employed by the Company or any of its Subsidiaries as of December 1,
1996, and said list correctly reflects their salaries, wages, other compensation
(other than benefits under the Plans, Welfare Plans and Employee Benefit Plans),
dates of employment and positions. Neither the Company nor any of its
Subsidiaries owes any past or present employee any sum in excess of $25,000
individually or $50,000 in the aggregate other than for accrued wages or
salaries for the current payroll period, and amounts payable under Plans,
Welfare Plans or Employee Benefit Plans. No employee owes any sum to the Company
or any of its Subsidiaries in excess of $25,000, and all employees together do
not owe the Company or any of its Subsidiaries in excess of $50,000.
4.27. Environmental Matters.
(a) The Company, its Subsidiaries and their respective assets and
businesses are in substantial compliance with all Environmental Laws and
Environmental Permits (as herein defined) applicable to them. A copy of any
notice, citation, inquiry or complaint which the Company or any of its
Subsidiaries has received in the past three years of any alleged violation of
any Environmental Law or Environmental Permit is contained in the Disclosure
Schedule, and all violations alleged in said notices have been or are being
corrected. A description of all such violations currently being corrected is
contained in the Disclosure Statement. The Company and its Subsidiaries possess
all Environmental Permits which are required for the operation of their
respective businesses, and are in substantial compliance with the provisions of
all such Environmental Permits. Copies of all Environmental Permits issued to
the Company or any of its Subsidiaries have been provided or made available to
Xxxxxx or its counsel. The Company has delivered to Xxxxxx copies of all
environmental reports with respect to the Real Estate and the Leased Premises in
its possession (other than reports prepared by or on behalf of Xxxxxx) which
were conducted during the last five years.
(b) The Disclosure Statement sets forth a complete list of all Materials of
Environmental Concern stored, treated, generated, used, transported or Released
(as herein defined) in connection with the operation of the Company's business.
There has been no storage, treatment, generation, transportation or Release of
any Materials of Environmental Concern by the Company or any of its
Subsidiaries, or, to the knowledge of the Company, by any other person or entity
for which the Company or any of its Subsidiaries is or may be held responsible,
at any Facility (as herein defined) or any Offsite Facility (as herein defined)
in violation of, or which could give rise to any material obligation under,
Environmental Laws.
(c) The Disclosure Statement sets forth a complete list of all Containers
(as herein defined) that are now present at, or have heretofore been removed
during the last two years from, the Real Estate or the Leased Premises. All
Containers which have been heretofore removed from the Real Estate or the Leased
Premises have been removed substantially in accordance with all applicable
Environmental Laws.
(d) For the purposes of this Agreement: (i) "Environmental Laws" means all
federal, state and local statutes, regulations, ordinances, rules, regulations
and policies, all court orders and decrees and arbitration awards, and the
common law, which pertain to environmental matters or contamination of any type
whatsoever. Environmental Laws include, without limitation, those relating to:
manufacture, processing, use, distribution, treatment, storage, disposal,
generation or transportation of Materials of Environmental Concern; air, surface
or ground water or noise pollution; Releases; protection of wildlife, endangered
species, wetlands or natural resources; Containers; health and safety of
employees and other persons; and notification requirements relating to the
foregoing; (ii) "Environmental Permits" means licenses, permits, registrations,
governmental
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approvals, agreements and consents which are required under or are issued
pursuant to Environmental Laws; (iii) "Materials of Environmental Concern" means
(A) pollutants, contaminants, pesticides, radioactive substances, solid wastes
or hazardous or extremely hazardous, special, dangerous or toxic wastes,
substances, chemicals or materials within the meaning of any Environmental Law,
including without limitation any (i) "hazardous substance" as defined in CERCLA,
and (ii) any "hazardous waste" as defined in the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C., Sec. 6902 et. seq., and all amendments thereto
and reauthorizations thereof; and (B) even if not prohibited, limited or
regulated by Environmental Laws, all pollutants, contaminants, hazardous,
dangerous or toxic chemical materials, wastes or any other substances, including
without limitation, any industrial process or pollution control waste (whether
or not hazardous within the meaning of RCRA) which could pose a hazard to the
environment or the health and safety of any person, or impair the use or value
of any portion of the Real Estate or the Leased Premises; (iv) "Release" means
any spill, discharge, leak, emission, escape, injection, dumping, or other
release or threatened release of any Materials of Environmental Concern into the
environment, whether or not notification or reporting to any governmental agency
was or is, required, including without limitation any Release which is subject
to CERCLA; (v) "Facility" means any facility as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et.
seq., as amended and reauthorized ("CERCLA"); (vi) "Offsite Facility" means any
Facility which is not presently, and has not heretofore been, owned, leased or
occupied by the Company; and (vii) "Containers" means above-ground and
under-ground storage tanks, vessels and related equipment and containers.
4.28. Interim Conduct of Business. Except as otherwise contemplated by
this Agreement, since September 30, 1996, neither the Company nor any of its
Subsidiaries has:
(a) sold, assigned, leased, exchanged, transferred or otherwise disposed of
any material portion of its assets or property, except for sales of Inventory
and cash applied in the payment of the Company's or its Subsidiaries'
liabilities in the usual and ordinary course of business in accordance with the
Company's or its Subsidiaries' past practices;
(b) written off any asset which has a net book value which exceeds $25,000
individually or $50,000 in the aggregate in value, or suffered any casualty,
damage, destruction or loss, or interruption in use, of any material asset,
property or portion of Inventory (whether or not covered by insurance), on
account of fire, flood, riot, strike or other hazard or Act of God;
(c) waived any material right arising out of the conduct of, or with
respect to, its business;
(d) made (or committed to make) capital expenditures in an amount which
exceeds $25,000 for any item or $100,000 in the aggregate;
(e) made any change in accounting methods or principles;
(f) borrowed any money or issued any bonds, debentures, notes or other
corporate securities (other than equity securities), including without
limitation, those evidencing borrowed money;
(g) entered into any transaction with, or made any payment to, or incurred
any liability to, any Related Party (as defined herein) in an amount which
exceeds $15,000 or $50,000 in the aggregate (except for payment of salary and
other customary expense reimbursements made in the ordinary course of business
to Related Parties who are employees of the Company or its Subsidiaries);
(h) increased the compensation payable to any employee, except for normal
pay increases in the ordinary course of business consistent with past practices;
(i) made any payments or distributions to its employees, officers or
directors except such amounts as constitute currently effective compensation for
services rendered, or reimbursement for reasonable ordinary and necessary
out-of-pocket business expenses;
(j) paid or incurred any management or consulting fees, or engaged any
consultants, except in the ordinary course of business;
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(k) hired any employee who has an annual salary in excess of $35,000, or
employees with aggregate annual salaries or wages in excess of $70,000;
(l) terminated any employee having an annual salary or wages in excess of
$35,000 or employees with aggregate annual salaries or wages in excess of
$70,000;
(m) adopted any new Plan, Welfare Plan or Employee Benefit Plan;
(n) issued or sold any securities of any class, except for the grant or
exercise of options to purchase Company Common Stock under the Company Option
Plans;
(o) paid, declared or set aside any dividend or other distribution on its
securities of any class, or purchased, exchanged or redeemed any of its
securities of any class; or
(p) without limitation by the enumeration of any of the foregoing, entered
into any transaction other than in the usual and ordinary course of business in
accordance with past practices.
Notwithstanding the foregoing, the Company shall not be deemed to have breached
the terms of this Section 4.28 by entering into this Agreement or by
consummating the transactions contemplated hereby.
4.29. Affiliated Transactions. Since January 1, 1995, neither the Company
nor any of its Subsidiaries has been a party to any transactions (other than
employee compensation and other ordinary incidents of employment) in excess of
$15,000 individually or $50,000 in the aggregate with a "Related Party" other
than loans to Company employees made in connection with the exercise of Company
stock options, all of which have been paid in full as of the date hereof. For
purposes of this Agreement, the term "Related Party" shall mean: any present or
former officer or director, 10% stockholder or present affiliate of the Company
or any of its Subsidiaries, any present or former known spouse, ancestor or
descendant of any of the aforementioned persons or any trust or other similar
entity for the benefit of any of the foregoing persons. No property or interest
in any property (including, without limitation, designs and drawings concerning
machinery) which relates to and is or will be necessary or useful in the present
or currently contemplated future operation of the Company's or its Subsidiaries'
respective businesses, is presently owned by or leased or licensed by or to any
Related Party. Prior to the Closing, all amounts due and owing to or from the
Company or its Subsidiaries by or to any of the Related Parties (excluding
employee compensation and other incidents of employment) shall be paid in full.
Except for the ownership of securities representing less than a 2% equity
interest in various publicly traded companies, neither the Company, its
Subsidiaries, nor to the Company's knowledge, any Related Party has an interest,
directly or indirectly, in any business, corporate or otherwise, which is in
competition with the Company's or its Subsidiaries' respective businesses.
4.30. Significant Customers, Suppliers and Employees. The Disclosure
Statement sets forth an accurate list of the Company's and its Subsidiaries'
Significant Customers (as defined herein), Significant Suppliers (as defined
herein) and Significant Employees (as defined herein). The Company has no
knowledge of any intention or indication of intention by a (a) Significant
Customer to terminate its business relationship with the Company or its
Subsidiaries or to limit or alter its business relationship with the Company or
its Subsidiaries in any material respect; (b) Significant Supplier to terminate
its business relationship with the Company or its Subsidiaries or to limit or
alter its business relationship with the Company or its Subsidiaries in any
material respect; or (c) Significant Employee intends to terminate his
employment with the Company or its Subsidiaries. Notwithstanding the foregoing,
nothing contained herein shall be deemed to be a covenant or guaranty by the
Company that any particular Significant Customer, Significant Supplier or
Significant Employee will continue to conduct business with the Company and its
Subsidiaries after the date hereof. As used herein, (w) "Significant Customer"
means the 10 largest customers of the Company and its Subsidiaries, taken as a
whole, including distributors of the Company's products, measured in terms of
sales volume in dollars for the year ended December 31, 1995 and for the eleven
month period ending November 30, 1996, (x) "Significant Supplier" means any
supplier of the Company and its Subsidiaries from whom the Company or its
Subsidiaries has purchased $250,000 or more of goods during the year ended
December 31, 1995 or $229,000 or more goods during the eleven month period
ending November 30, 1996, for use in the Company's or its Subsidiaries'
respective businesses; and (y) "Significant Employee" means the Chief Executive
Officer,
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the President, the Senior Director of Research and Development, any Vice
President, the Director of Field Sales or any regional sales manager of the
Company or its Subsidiaries.
4.31. Material Adverse Change. Since September 30, 1996 to the date of
this Agreement, neither the Company nor its Subsidiaries has suffered any
material adverse change in the business, operations, assets, liabilities,
financial condition or prospects of the Company or its Subsidiaries, taken as a
whole.
4.32. Bribes. Since April 1, 1990, neither the Company, its Subsidiaries
nor, to the Company's knowledge, any of their respective officers, directors,
employees, agents or representatives has made, directly or indirectly, with
respect to the Company, its Subsidiaries or their respective business
activities, any bribes or kickbacks, illegal political contributions, payments
from corporate funds not recorded on the books and records of the Company or its
Subsidiaries, payments from corporate funds to governmental officials, in their
individual capacities, for the purpose of affecting their action or the action
of the government they represent, to obtain favorable treatment in securing
business or licenses or to obtain special concessions, or illegal payments from
corporate funds to obtain or retain business.
4.33. Absence of Indemnifiable Claims, etc. There are no pending claims
and, to the knowledge of the Company, no facts that would reasonably entitle any
director, officer or employee of the Company or its Subsidiaries to
indemnification by the Company or its Subsidiaries under applicable law, the
Certificate of Incorporation or By-laws of the Company or its Subsidiaries or
any insurance policy maintained by the Company or its Subsidiaries.
4.34. No Undisclosed Liabilities. There are no liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) of the
Company or its Subsidiaries other than (i) liabilities disclosed or provided for
in the most recent financial statements contained in the Company Reports; (ii)
liabilities which, individually or in the aggregate, are not material to the
Company or its Subsidiaries; (iii) liabilities under this Agreement (or
contemplated hereby) or disclosed in the Disclosure Statement and (iv)
liabilities incurred since September 30, 1996 in the ordinary course of business
and consistent with past practices.
4.35. No Brokers. Neither the Company nor any of its Subsidiaries has
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of the Company or Xxxxxx, Xxxxxx Sub or their
respective Subsidiaries to pay any finder's fee, brokerage or agent's
commissions or other like payments in connection with negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby,
except that the Company has retained Gruntal & Co., Incorporated as its
financial advisor, the arrangements with which have been disclosed in writing to
Xxxxxx prior to the date hereof.
4.36. Tax Reorganization. Neither the Company nor any of its Subsidiaries
has taken or failed to take any action which would prevent the Merger from (a)
constituting a reorganization within the meaning of section 368(a) of the Code
or (b) being treated as a "pooling or interests" in accordance with Accounting
Principles Board Opinion No. 16, the interpretative releases issued pursuant
thereto, and the pronouncements of the SEC.
4.37. Opinion of Financial Advisor. The Company has received the opinion
of Gruntal & Co., Incorporated to the effect that, as of the date hereof, the
consideration to be received by the Stockholders pursuant to the Merger is fair
to such Stockholders from a financial point of view.
4.38. Information Supplied. The information supplied or to be supplied in
writing by the Company, its Subsidiaries, or any of their respective officers,
directors, representatives, agents or employees, for inclusion or incorporation
by reference in (a) the Proxy Statement will not, at the time the Proxy
Statement is first mailed to the Stockholders, at the time such Stockholders
vote on adoption of this Agreement, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading and (b) the Form S-4, together with all amendments and
supplements thereto, will not, at the time the Form S-4 is filed or becomes
effective under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. No representation is made by the Company with
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respect to statements made or incorporated by reference therein based on
information supplied by Xxxxxx or any of Xxxxxx'x Subsidiaries specifically for
inclusion or incorporation by reference in the Proxy Statement or the Form S-4.
4.39. Takeover Statutes. No "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States, applicable to the Company or any of
its Subsidiaries is applicable to the Merger or the other transactions
contemplated hereby.
ARTICLE V
COVENANTS
5.1 Alternative Proposals. Prior to the Effective Time, the Company agrees
(a) that neither it nor any of its Subsidiaries shall, and it shall direct and
cause its officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) not to, initiate or solicit, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its Stockholders) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or its Subsidiaries (any such proposal or
offer being hereinafter referred to as an "Alternative Proposal") or engage in
any negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal; (b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 5.1; and (c) that it will notify the other
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 5.1 shall prohibit the Board of Directors of the
Company from (A) furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
proposal to acquire the Company pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of assets, business combination or
other similar transaction, if, and only to the extent that, (i) the Board of
Directors of the Company determines in good faith that such action is required
for the Board of Directors to comply with its fiduciary duties to stockholders
imposed by law; (ii) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Company provides
written notice to Xxxxxx to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity; and (iii)
subject to any confidentiality agreement with such person or entity (which the
Company determined in good faith was required to be executed in order for its
Board of Directors to comply with its fiduciary duties to stockholders imposed
by law), the Company keeps Xxxxxx informed of the status of any such discussions
or negotiations; and (B) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Alternative Proposal.
Nothing in this Section 5.1 shall (x) permit the Company to terminate this
Agreement (except as specifically provided in Article 7 hereof); (y) permit the
Company to enter into any agreement with respect to an Alternative Proposal
during the term of this Agreement (it being agreed that during the term of this
Agreement, the Company shall not enter into any agreement with any person that
provides for, or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)); or (z) affect any other
obligation of the Company under this Agreement.
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5.2 Interim Operations.
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, except
as set forth in the Disclosure Statement, unless Xxxxxx has consented in writing
thereto (which consent shall not be unreasonably withheld), the Company shall,
and shall cause each of its Subsidiaries to,:
(i) conduct their respective operations according to their usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
(ii) to the extent consistent with their respective businesses, use
commercially reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(iii) not amend their respective Certificates of Incorporation or
By-Laws or comparable governing instruments;
(iv) promptly notify Xxxxxx of any material emergency or other Company
Material Adverse Effect, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that
the same may be contemplated), or the material breach of any representation
or warranty contained herein;
(v) promptly deliver to Xxxxxx true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(vi) not (A) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date hereof
and disclosed pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
existed on the date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire
any shares of its capital stock; (C) increase any compensation or enter
into or amend any employment agreement with any of its present or future
officers, directors or employees, except for normal increases consistent
with past practice; (D) grant any severance or termination package to any
employee or consultant, except to the extent consistent with past
practices; (E) hire any new employee who shall have, or terminate the
employment of any employee who has, an annual salary in excess of $80,000;
or (F) adopt any new employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any existing employee
benefit plan in any material respect, except for changes which are less
favorable to participants in such plans;
(vii) not (A) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interests; or (B) directly or indirectly, redeem, purchase
or otherwise acquire any shares of its capital stock, or make any
commitment for any such action;
(viii) not enter into any agreement or transaction, or agree to enter
into any agreement or transaction, outside the ordinary course of business,
including, without limitation, any transaction involving a merger,
consolidation, joint venture, license agreement partial or complete
liquidation or dissolution, reorganization, recapitalization, restructuring
or a purchase, sale, lease or other disposition of a material portion of
assets or capital stock;
(ix) not enter into any additional research and development contracts
which call for the payment or receipt of funds in excess of $10,000
individually or $50,000 in the aggregate, other than the contracts
contemplated by the Company's research and development plan which has been
disclosed by the Company to Xxxxxx prior to the date hereof;
(x) not incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of others other than in the
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ordinary course of its business, but in no event in an amount exceeding
$2,500,000 in the aggregate (other than normal expenditures for the
purchase of raw materials or other supplies);
(xi) not make any loans, advances or capital contributions to, or
investments in, any other Person;
(xii) Except as described in the Disclosure Statement, not make or
commit to made any capital expenditures in excess of $25,000 individually
or $50,000 in the aggregate;
(xiii) not apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate or Related Party of the
Company or any of its Subsidiaries or enter into any transaction with any
affiliate or Related Party of the Company or its Subsidiaries (except for
payment of salary and other customary expense reimbursements made in the
ordinary course of business to Related Parties who are employees of the
Company or its Subsidiaries);
(xiv) not voluntarily elect to alter the manner of keeping its books,
accounts or records, or change in any manner the accounting practices
therein reflected, except for changes in accounting laws which effect all
pharmaceutical companies generally;
(xv) not grant or make any mortgage or pledge or subject itself or any
of its material properties or assets to any lien, charge or encumbrance of
any kind, except Liens for taxes not currently due and liens granted to
incur the indebtedness contemplated by Section 5.2(a)(x) hereof; and
(xvi) maintain insurance on its tangible assets and its businesses in
such amounts and against such risks and losses as are currently in effect.
(b) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, except
as set forth in the Disclosure Statement, unless the Company has consented in
writing thereto (which consent shall not be unreasonably withheld), Xxxxxx
shall, and shall cause each of its Subsidiaries to,:
(i) conduct their respective operations according to their usual,
regular and ordinary course in substantially the same manner as heretofore
conducted (except for entering into transactions described in 5.2(b)(v)
below);
(ii) promptly deliver to the Company true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(iii) promptly notify the Company of any material emergency or other
Xxxxxx Material Adverse Effect, any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the material breach of
any representation or warranty contained herein;
(iv) not amend their respective Certificates of Incorporation or
By-laws or comparable governing instruments;
(v) promptly notify the Company of its entering into any agreement
with respect to any material transaction involving a merger, consolidation,
joint venture, partial or complete liquidation or dissolution,
reorganization or recapitalization, restructuring or a purchase, sale,
lease or other disposition of a material portion of assets or capital
stock;
(vi) not take any action that would result in a failure to maintain
the trading of Xxxxxx Common Stock on the Nasdaq National Market;
(vii) with respect to Xxxxxx only (and not its Subsidiaries), not (A)
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests; or (B) directly or indirectly, redeem, purchase or otherwise
acquire any shares of its capital stock, or make any commitment for any
such action; and
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(viii) not voluntarily elect to alter the manner of keeping its books,
accounts or records, or change in any manner the accounting practices
therein reflected, except for (A) changes that would not have a Xxxxxx
Material Adverse Effect; or (B) changes in accounting laws which effect all
pharmaceutical companies generally.
5.3 Meetings of Stockholders. The Company will take all action necessary
in accordance with applicable law and its Certificate of Incorporation and
Bylaws to convene a meeting of the Stockholders as promptly as practicable to
consider and vote upon the approval of the Merger, this Agreement and the
transactions contemplated hereby. The Board of Directors of the Company shall
recommend such approval and the Company shall take all lawful action to solicit
such approval, including, without limitation, timely mailing the Proxy Statement
to the Stockholders; provided, however, that such recommendation or solicitation
is subject to any action (including any withdrawal or change of its
recommendation) taken by, or upon authority of, the Board of Directors of the
Company in the exercise of its good faith judgment as to its fiduciary duties to
the Stockholders imposed by law.
5.4 Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Xxxxxx shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; (c) use commercially reasonable efforts to obtain all
consents under or with respect to, any contract, lease, agreement, purchase
order, sales order or other instrument, Permit or Environmental Permit, where
the consummation of the transactions contemplated hereby would be prohibited or
constitute an event of default, or grounds for acceleration or termination, in
the absence of such consent; and (d) take, or cause to be taken, all other
commercially reasonable actions as are reasonably necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. If, at any time after the Effective Time, any further
commercially reasonable action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of Xxxxxx and the
Surviving Corporation shall take all such necessary action.
5.5 Inspection of Records. From the date hereof to the Effective Time, the
Company shall (a) allow all designated officers, attorneys, accountants and
other representatives of Xxxxxx reasonable access at all reasonable times to the
offices, records and files, correspondence, audits and properties, as well as to
all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of the Company and
its Subsidiaries; (b) furnish to Xxxxxx, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request; and (c) instruct
the employees, counsel and financial advisors of the Company and its
Subsidiaries to cooperate with Xxxxxx and its investigation of the business of
the Company and its Subsidiaries. From the date hereof to the Effective Time,
Xxxxxx shall (a) furnish to the Company, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request, and (b) instruct
the officers, counsel and financial advisors of Xxxxxx to cooperate with the
Company in its investigation of the business of Xxxxxx or its Subsidiaries. All
information disclosed by the Company to Xxxxxx and its representatives or by
Xxxxxx to the Company and its representatives shall be subject to the terms of
that certain Non-Disclosure Agreement (the "Confidentiality Agreement") dated as
of December 13, 1995 between Xxxxxx and the Company.
5.6 Publicity. Neither party hereto shall make any press release or public
announcement with respect to this Agreement, the Merger or the transactions
contemplated hereby without the prior written consent of the other party hereto
(which consent shall not be unreasonably withheld); provided, however, that each
party hereto may make any disclosure or announcement which such party, in the
opinion of its legal counsel, is obligated to make pursuant to applicable law or
regulation of any national securities exchange, in which case,
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the party desiring to make the disclosure shall consult with the other party
hereto prior to making such disclosure or announcement.
5.7 Registration Statement. Xxxxxx and the Company shall cooperate and
promptly prepare and Xxxxxx shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Xxxxxx Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the Proxy Statement. The
respective parties will cause the Proxy Statement and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. Xxxxxx shall use all reasonable efforts, and the Company will
cooperate with Xxxxxx, to have the Form S-4 declared effective by the SEC as
promptly as practicable. Xxxxxx shall use its best efforts to obtain, prior to
the effective date of the Form S-4, all necessary state securities law or "Blue
Sky" permits or approvals required to carry out the transactions contemplated by
this Agreement and will pay all expenses incident thereto. No amendment or
supplement to the Proxy Statement will be made by Xxxxxx or the Company without
the approval of the other party, which approval shall not be unreasonably
withheld. Xxxxxx will advise the Company, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Xxxxxx Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information and Xxxxxx
shall use its best efforts to promptly resolve any such stop order, suspension
or qualification.
5.8 Further Action. Each party hereto shall, subject to the fulfillment at
or before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger.
5.9 Affiliate Letters. At least 30 days prior to the Closing Date, the
Company shall deliver to Xxxxxx a list of names and addresses of those persons
who were or will be, in the Company's reasonable judgment, at the record date
for its Stockholders' meeting to approve the Merger, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. The Company shall
provide Xxxxxx such information and documents as Xxxxxx shall reasonably request
for purposes of reviewing such list. The Company shall deliver or cause to be
delivered to Xxxxxx, prior to the Closing Date, from each of the Affiliates of
the Company identified in the foregoing list, an Affiliate Letter in
substantially the form attached hereto as Exhibit X. Xxxxxx shall be entitled to
place legends as specified in such Affiliate Letters on the certificates
evidencing any Xxxxxx Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for the Xxxxxx Common Stock, consistent with the terms of
such Affiliate Letters.
5.10 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
(a) as otherwise expressly provided for herein; and (b) the expenses incurred in
connection with printing and mailing the Form S-4 and the Proxy Statement shall
be shared equally by the Company and Xxxxxx.
5.11 Tax Treatment of Merger. From and after the date hereof and until the
Effective Time, neither Xxxxxx nor the Company nor any of their respective
Subsidiaries or other affiliates shall (a) knowingly take any action, or
knowingly fail to take any action, that would jeopardize qualification of the
Merger as (i) a reorganization within the meaning of Section 368(a) of the Code;
or (ii) a "pooling of interests" for accounting purposes; or (b) enter into any
contract, agreement, commitment or arrangement with respect to the foregoing.
After the Effective Time, Xxxxxx shall not take or fail to take (and shall cause
the Surviving Corporation not to take or fail to take) any action that is
reasonably likely to jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
5.12 Employee Benefit Plans. Xxxxxx covenants and agrees that it will
continue the Company's existing benefit plans and arrangements for a period of
at least six months following the Effective Date. Thereafter, to
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the extent the existing benefit plans and arrangements provided by the Company
to its employees are terminated, such employees who remain employees of the
Surviving Corporation shall be entitled to participate in all benefit plans and
arrangements that are available and subsequently become available to Xxxxxx'x
employees on the same basis as Watson's employees in similar positions are
eligible to participate. For purposes of satisfying the terms and conditions of
such plans, Xxxxxx shall give full credit for eligibility, vesting or benefit
accrual for each participant's period of service with the Company prior to the
Effective Time. To the extent Xxxxxx'x benefit plans provide medical or dental
welfare benefits after the Closing Date, Xxxxxx shall cause all pre-existing
condition exclusions and actively at work requirements to be waived and Xxxxxx
shall provide that any expenses incurred on or before the Closing Date shall be
taken into account under Xxxxxx'x benefit plans for purposes of satisfying the
applicable deductible, coinsurance and maximum out-of-pocket provisions for such
employees and their covered dependents.
5.13 Company Options. Immediately after the Effective Time, but in any
event, no later than three business days after the Closing Date, Xxxxxx shall
register the shares of Xxxxxx Common Stock issuable upon exercise of such
Company Options with the SEC on Form S-8, to the extent that such Company
Options may be registered on such form. To the extent that all or any portion of
the Company Options may not be registered on Form S-8 (the "Non-Employee
Options"), Xxxxxx and the Company shall cooperate and promptly prepare and
Xxxxxx shall file with the SEC as soon as practicable a Registration Statement
on Form S-3 (the "Form S-3") under the Securities Act, with respect to the
Xxxxxx Common Stock issuable upon exercise of the Non-Employee Options. Xxxxxx
shall use all reasonable efforts, and the Company will cooperate with Xxxxxx, to
have the Form S-3 declared effective by the SEC on or prior to the Effective
Date. Xxxxxx will advise holders of such Non-Employee Options, promptly after it
receives notice thereof, of the time when the Form S-3 has become effective, the
issuance of any stop order or the suspension of the qualification of the Xxxxxx
Common Stock issuable in connection with the exercise of the Non-Employee
Options for offering or sale in any jurisdiction and Xxxxxx shall use its best
efforts to promptly resolve any such stop order, suspension or qualification.
5.14 Indemnification of Directors and Officers of the Company
(a) From and after the Effective Time of the Merger, Xxxxxx agrees to
indemnify and hold harmless, and to cause the Surviving Corporation to honor its
separate indemnification to, each person who is an officer or director of the
Company or its Subsidiaries on the date of this Agreement (an "Indemnified
Person") from and against all damages, liabilities, judgments and claims (and
related expenses including, but not limited to, attorney's fees and amounts paid
in settlement) based upon or arising from his or her capacity as an officer or
director of the Company or its Subsidiaries, to the same extent he or she would
have been indemnified under the Articles of Incorporation or By-laws of Xxxxxx
as such documents were in effect on the date of this Agreement and to the extent
permitted under applicable law. Subject to an Indemnified Person's obligation to
refund any advances in accordance with the Florida Business Corporation Act,
Xxxxxx shall advance all litigation costs reasonably incurred by such
Indemnified Person in accordance with applicable law.
(b) The rights granted to the Indemnified Persons hereby shall be
contractual rights inuring to the benefit of all Indemnified Persons and shall
survive this Agreement and any merger consolidation or reorganization of Xxxxxx.
(c) The rights to indemnification granted by this Section 5.14 are subject
to the following limitations: (i) amounts otherwise required to be paid by
Xxxxxx to an Indemnified Person pursuant to this Section 5.14 shall be reduced
by any amounts that such Indemnified Person has recovered by virtue of the claim
for which indemnification is sought and Xxxxxx shall be reimbursed for any
amounts paid by Xxxxxx that such Indemnified Person subsequently recovers by
virtue of such claim; (ii) any claim for indemnification pursuant to this
Section 5.14 must be submitted in writing to the Chief Executive Officer or
Chairman of Xxxxxx promptly upon such Indemnified Person becoming aware of such
claim, provided that any such failure to advise promptly will not cause a loss
of indemnity unless it has a prejudicial effect on Xxxxxx; and (iii) an
Indemnified Person shall not settle any claim for which indemnification is
provided herein without the prior written consent of Xxxxxx, which consent shall
not be unreasonably withheld.
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5.15 Publication of Post-Merger Results. Xxxxxx shall use its reasonable
best efforts to cause financial results covering at least thirty days of
post-Merger combined operations to be published in its first report of quarterly
financial statements as soon as practicable after such information is required
to be filed with the SEC.
5.16 Agreement with respect to Products under Development. As soon as
practicable after the date hereof, but in any event within ten (10) business
days after the date hereof, Xxxxxx and the Company shall negotiate in good faith
and shall use their best efforts to enter into an agreement with respect to the
development and sale of all of the Company's products under development.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions (unless waived by each of the parties hereto in accordance with the
provisions of Section 7.6 hereof):
(a) This Agreement and the Merger and other transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
Stockholders.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger or
materially changes the terms or conditions of this Agreement shall have
been issued and remain in effect. In the event any such order or injunction
shall have been issued, each party agrees to use its reasonable efforts to
have any such injunction lifted.
(d) The Form S-4 and Form S-3 shall have been declared effective by
the SEC and shall be effective at the Effective Time, and no stop order
suspending the effectiveness of the Form S-4 or the Form S-3 shall have
been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities laws
relating to the issuance or trading of the Xxxxxx Common Stock to be issued
to the Stockholders in connection with the Merger shall have been received.
(e) All material consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to
be filed after the Effective Time.
(f) The Xxxxxx Common Stock to be issued to the Stockholders in
connection with the Merger shall have been authorized for trading on the
Nasdaq National Market subject only to official notice of issuance.
(g) Xxxxxx shall have received the opinion of X'Xxxxxx & Xxxxxx,
counsel to Xxxxxx, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code, and that the Company and Xxxxxx
will each be a party to that reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, counsel shall be entitled to
rely upon, among other things, reasonable assumptions as well as
representations and covenants of Xxxxxx, Xxxxxx Sub and the Company.
(h) The Company shall have received the opinion of Akerman, Senterfitt
& Xxxxxx P.A., counsel to the Company, dated the Closing Date, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
the Company and Xxxxxx will each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
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In rendering such opinion, counsel shall be entitled to rely upon, among
other things, reasonable assumptions as well as representations and
covenants of Xxxxxx, Xxxxxx Sub and the Company.
(i) Xxxxxx shall have received the opinion of Price Waterhouse LLP,
dated the Closing Date, to the effect that the Merger will be treated as a
"pooling of interests" for accounting purposes.
(j) The Company shall have received from Price Waterhouse LLP a
letter, dated the Closing Date, indicating that the Company has not taken
any action that would preclude it from entering into a transaction that
would be treated as a "pooling of interests" for accounting purposes.
(k) Xxxxxxx X. XxXxxxx shall have entered into an Employment Agreement
in substantially the form attached hereto as Exhibit D.
6.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions (unless
waived by the Company in accordance with the provisions of Section 7.6 hereof):
(a) Xxxxxx shall have performed, in all material respects, all of its
agreements contained herein that are required to be performed by Xxxxxx on
or prior to the Closing Date, and the Company shall have received a
certificate of the Chairman or President of Xxxxxx, dated the Closing Date,
certifying to such effect.
(b) The representations and warranties of Xxxxxx and Xxxxxx Sub
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing in all material
respects, and the Company shall have received a certificate of the Chairman
or President of Xxxxxx, dated the Closing Date, certifying to such effect.
(c) The Company shall have received from Xxxxxx certified copies of
the resolutions of Xxxxxx'x and Xxxxxx Sub's Boards of Directors approving
and adopting this Agreement, the Xxxxxx Ancillary Documents and the
transactions contemplated hereby and thereby.
(d) The Company shall have received the opinion of X'Xxxxxx & Xxxxxx
to such matters as the Company or the Company's counsel shall reasonably
request.
(e) From the date of this Agreement through the Effective Time, there
shall not have occurred any event that has had, would have or would be
reasonably likely to have a material adverse effect in the financial
condition, business, operations or prospects of Xxxxxx and its
Subsidiaries, taken as a whole; provided, that such an event will not be
deemed to have occurred solely as a result of fluctuations in the value of
Xxxxxx Common Stock due to or arising from any public disclosures by Xxxxxx
(including its 50% subsidiary, Somerset Pharmaceuticals, Inc.), including,
without limitation, disclosures relating to Xxxxxx'x entering into any
other transactions (including, without limitation, transactions relating to
the acquisition of assets, stock or merger transactions).
(f) The Company shall have received the updated opinion of Gruntal &
Co., Incorporated dated the Closing Date, to the effect that the Merger or
the Exchange Ratio, as the case may be, continues to be fair to the
Stockholders from a financial point of view.
(g) Xxxxxx and Xxxxxx Sub shall have executed and delivered such other
documents and taken such other actions as the Company shall reasonably
request.
6.3 Conditions to Obligation of Xxxxxx and Xxxxxx Sub to Effect the
Merger. The obligations of Xxxxxx and Xxxxxx Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions (unless waived by the Company in accordance with the provisions of
Section 7.6 hereof):
(a) The Company shall have performed, in all material respects, all of
its agreements contained herein that are required to be performed by the
Company on or prior to the Closing Date, and Xxxxxx shall have received a
certificate of the Chairman or President of the Company, dated the Closing
Date, certifying to such effect.
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(b) The representations and warranties of the Company contained in
this Agreement and in any document delivered in connection herewith shall
be true and correct as of the Closing in all material respects, and Xxxxxx
shall have received a certificate of the Chairman or President of the
Company, dated the Closing Date, certifying to such effect.
(c) Xxxxxx shall have received from the Company certified copies of
the resolutions of the Company's Board of Directors and Stockholders
approving and adopting this Agreement, the Ancillary Documents and the
transactions contemplated hereby and thereby.
(d) Xxxxxx shall have received the opinion of Akerman, Senterfitt &
Xxxxxx P.A. to such matters as Xxxxxx or Xxxxxx'x counsel shall reasonably
request.
(e) From the date of this Agreement through the Effective Time, there
shall not have occurred any event that has had, would have or would be
reasonably likely to have a material adverse effect in the financial
condition, business, operations or prospects of the Company.
(f) The Company shall have received all necessary consents with
respect to any contract, lease, purchase order, sales order, license
agreement, Permit, Environmental Permit and license which are required as a
result of a change of control of the Company except in those instances
where failure to receive any such consent would not have a Company Material
Adverse Effect.
(g) The Company shall have executed and delivered such other documents
and taken such other actions as Xxxxxx shall reasonably request.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the Stockholders, by the mutual consent
of Xxxxxx and the Company.
7.2 Termination by Either Xxxxxx or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Xxxxxx or the Company if (a) the Merger shall not have been
consummated by March 31, 1997; provided, however, that the right to terminate
this Agreement under this Section 7.2(a) will not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Merger to occur on or before such date;
(b) the approval of the Stockholders required by Section 6.1(a) shall not have
been obtained at a meeting duly convened therefor or at any adjournment thereof;
provided, however, that the Company shall not have the right to terminate this
Agreement under this Section 7.2(b) if the Company caused (directly or
indirectly) or aided in the failure to obtain such approval; or (c) a court of
competent jurisdiction or a governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action either (i) permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement; or (ii) compelling Xxxxxx,
Xxxxxx Sub or the Surviving Corporation to dispose of or hold separate all or a
material portion of the respective businesses or assets of Xxxxxx and the
Company, or sell or license any material product of Xxxxxx or the Company, and
such order, decree, ruling or other action shall have become final and
non-appealable.
7.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the Stockholders, by action of the Board of
Directors of the Company, if (a) the Company receives an Alternative Proposal
and the Board of Directors of the Company determines in good faith and pursuant
to the exercise of its fiduciary duties to its Stockholders, to accept such
Alternative Proposal, and the Board of Directors of the Company recommends or
resolves to accept or recommend to the Stockholders such Alternative Proposal;
(b) the Board of Directors of the Company determines in good faith and pursuant
to the exercise of its fiduciary duties, to withdraw its recommendation of this
Agreement and/or the Merger; (c) the Board of Directors of Xxxxxx shall have
withdrawn or modified in a manner materially adverse to the Company, its
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approval or recommendation of this Agreement and/or the Merger (other than upon
the happening of an event described in Sections 7.4(b) or 7.4(c)); (d) there has
been a breach by Xxxxxx or Xxxxxx Sub of any representation or warranty
contained in this Agreement which would have a Xxxxxx Material Adverse Effect;
(e) there has been a material breach of any of the material covenants or
agreements set forth in this Agreement on the part of Xxxxxx, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by the Company to Xxxxxx; or (f) Xxxxxx enters into any
transaction, or series of related transactions, or enters into any agreement
relating to any of the foregoing, where Xxxxxx would (i) require the approval of
its shareholders pursuant to Nevada General Corporate Law; or (ii) issue or
propose to issue in excess of twenty-percent (20%) of the outstanding Xxxxxx
Common Stock in connection with such transaction, or series of related
transactions, calculated on a fully diluted basis after giving effect to the
consummation of the contemplated transaction between Xxxxxx and Oclassen
Pharmaceuticals, Inc. and the consummation of such new transaction or series of
related new transactions.
7.4 Termination by Xxxxxx. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the Stockholders, by action of the Board of Directors of Xxxxxx, if
(a) the Board of Directors of the Company shall have (i) recommended an
Alternative Proposal to the Stockholders or (ii) withdrawn or modified in a
manner materially adverse to Xxxxxx, its approval or recommendation of this
Agreement or the Merger (other than upon the happening of an event described in
Sections 7.3(d) or 7.3(e)); (b) there has been a breach by the Company of any
representation or warranty contained in this Agreement which would have a
Company Material Adverse Effect; or (c) there has been a material breach of any
of the material covenants or agreements set forth in this Agreement on the part
of the Company, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by Xxxxxx to the Company.
7.5 Effect of Termination and Abandonment.
(a) In the event that this Agreement is terminated by the Company pursuant
to Sections 7.3(a) or 7.3(b) or by Xxxxxx pursuant to Section 7.4(a) and the
Company enters into an agreement or an understanding with respect to an
Alternative Proposal within nine (9) months of the date of such termination and
thereafter, consummates such transaction, then the Company shall promptly pay
Xxxxxx a fee in an amount equal to $3,000,000. If (x) the Company terminates
this Agreement pursuant to Section 7.3(a) or Xxxxxx terminates this Agreement
pursuant to Section 7.4(a)(i); and (y) the Company does not enter into an
agreement or an understanding with respect to an Alternative Proposal within
nine (9) months after the termination of this Agreement or does not consummate
such transaction within eighteen (18) months after the termination of this
Agreement, the Company shall reimburse Xxxxxx for all actual out-of-pocket costs
and expenses incurred by Xxxxxx in connection with this Agreement and the
consummation and negotiation of the transactions contemplated hereby, including,
without limitation, legal, professional and service fees and expenses, which
amount shall be payable by wire transfer of same day funds within twelve months
from the date of termination of this Agreement. The Company acknowledges that
the agreements contained in this Section 7.5(a) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Xxxxxx and Xxxxxx Sub would not enter into this Agreement. Accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 7.5(a),
and, in order to obtain such payment, Xxxxxx or Xxxxxx Sub commences a suit
which results in a final, non-appealable judgment against the Company for the
fee set forth in this Section 7.5(a), the Company shall pay to Xxxxxx its costs
and expenses (including attorneys' fees) incurred by Xxxxxx in connection with
such suit, together with interest on the amount of the fee at the rate of 12%
per annum.
(b) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
7.5 and the provisions of Sections 5.6 and 5.10, which obligations shall survive
the termination of this Agreement.
7.6 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (b) waive any inaccuracies in the
representations and
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warranties made to such party contained herein or in any document delivered
pursuant hereto; and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and, shall not survive
the Merger, provided, however, that the agreements contained in Sections 1.4,
1.5, 1.6, 1.7, 1.9, 5.10, 5.11, 5.12, 5.13, 5.14 and 5.15 and Articles 2 and 8
and the agreements delivered pursuant to this Agreement shall survive the
Merger.
8.2 Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand by facsimile, or by nationally recognized private carrier
shall be deemed given on the day following receipt; provided, however, that a
notice delivered by facsimile shall only be effective if such notice is also
delivered by hand, or deposited in the United States mail, postage prepaid,
registered or certified mail, on or before two (2) business days after its
delivery by facsimile. All notices shall be addressed as follows:
If to Xxxxxx or Xxxxxx Sub: If to the Company:
Xxxxxx Pharmaceuticals, Inc. Royce Laboratories, Inc.
000 Xxxxxx Xxxxxx 0000 X.X. 000xx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000 Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000 Fax:
Attn: Xx. Xxxxx Xxxx, Attn: Xxxxxxx X. XxXxxxx, Chairman,
Chairman & CEO President and CEO
With copies to: With copies to:
X'Xxxxxx & Xxxxxx Akerman, Senterfitt & Xxxxxx P.A.
00 Xxxxx XxXxxxx, Xxxxx 0000 One S.E. 3rd Avenue
Chicago, Illinois 60602 Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx Attn: Xxxxxx X. Xxxxxxxx
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3 Assignment, Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.4, 1.5, 1.6, 1.7, 2.3, and 2.4, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
8.4 Entire Agreement. This Agreement, the Exhibits, the Disclosure
Statement, the Xxxxxx Disclosure Statement, the Confidentiality Agreement, the
Ancillary Documents, the Xxxxxx Ancillary Agreements, and any other documents
delivered by the parties in connection herewith constitute the entire agreement
among
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the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
Stockholders, but after any such Stockholder approval, no amendment shall be
made which by law requires the further approval of Stockholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its rules of
conflict of laws.
8.7 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
8.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11 Incorporation of Exhibits. The Disclosure Statement, the Xxxxxx
Disclosure Statement and all Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
8.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.13 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
XXXXXX PHARMACEUTICALS, INC.
By: /s/ Xxxxx Xxxx
-----------------------------------
Title: Chairman and CEO
--------------------------------
DOLPHINS ACQUISITION CORP.
By: /s/ Xxxxx Xxxx
-----------------------------------
Title: President
--------------------------------
ROYCE LABORATORIES, INC.
By: /s/ Xxxxxxx X. XxXxxxx
-----------------------------------
Title: Chairman, President and CEO
--------------------------------
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EXHIBIT A
DIRECTORS
Xx. Xxxxx Xxxx
Xxxxxxx XxXxxxx
Xxxx Xxxxxxxxx
40
EXHIBIT B
OFFICERS
Xx. Xxxxx Xxxx
Chairman
Xxxxxxx XxXxxxx
President
Xxxxxx Xxxxxxx
Secretary
