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STOCK PURCHASE AGREEMENT
dated
March 23, 2000
between
IMPAX LABORATORIES, INC.
and
PURCHASER
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SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.................................................1
SECTION 2. CLOSING..............................................................................2
SECTION 3. DEFINITIONS..........................................................................2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................15
4.1. Corporate Existence, Power and Authority............................................15
4.2. Capital Stock.......................................................................16
4.3. Subsidiaries........................................................................17
4.4. Business............................................................................17
4.5. No Defaults or Conflicts............................................................17
4.6. Disclosure Materials; Other Information.............................................18
4.7. Litigation..........................................................................19
4.8. Taxes...............................................................................19
4.9. ERISA...............................................................................19
4.10. Legal Compliance....................................................................21
4.11. Outstanding Securities..............................................................22
4.12. Permits, Licenses and Approvals; Intellectual Property and Other Rights.............22
4.13. Key Employees.......................................................................22
4.14. Properties..........................................................................22
4.15. Suppliers and Customers.............................................................23
4.16. Environmental Compliance............................................................23
4.18. Offering of Shares..................................................................24
4.19. SEC Reports.........................................................................24
4.20. Indebtedness........................................................................25
4.21. Use of Proceeds.....................................................................25
4.22. Other Names.........................................................................25
4.23. Brokers.............................................................................25
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................................26
5.1. Corporate Power and Authority.......................................................26
5.2. Investment Intent...................................................................26
5.3. Brokers.............................................................................26
SECTION 6. RESTRICTIONS ON TRANSFER............................................................27
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SECTION 7. INFORMATION AS TO THE COMPANY.......................................................27
7.1. Financial Information...............................................................27
7.2. Communication with Accountants......................................................29
7.3. Inspection..........................................................................29
7.4. Notices.............................................................................30
SECTION 8. AFFIRMATIVE COVENANTS...............................................................31
8.1. Maintenance of Existence, Properties and Franchises; Compliance with Law;
Taxes; Insurance....................................................................31
8.2. Office for Payment, Exchange and Registration; Location of Office; Notice of
Change of Name or Office............................................................32
8.3. Fiscal Year.........................................................................32
8.4. Environmental Matters...............................................................33
8.5. Reservation of Shares...............................................................34
8.6. Securities Exchange Act Registration................................................34
8.7. Delivery of Information for Rule 144A Transactions..................................34
8.8. Senior Securities...................................................................35
8.9. Shelf Registration..................................................................35
8.10. Further Assurances..................................................................35
SECTION 9. NEGATIVE COVENANTS..................................................................36
9.1. No Dilution or Impairment; No Changes in Capital Stock..............................36
9.2. Indebtedness........................................................................37
9.3. Dissolution.........................................................................37
9.4. No Change in Business...............................................................37
9.5. Restricted Payments; Investments....................................................37
9.6. Affiliate Loans and Guaranties......................................................37
9.7. Transactions with Affiliates........................................................38
9.8. Liens...............................................................................38
9.9. Private Placement Status............................................................38
9.10. Maintenance of Public Market........................................................39
9.11. Actions Prior to the Closing Date...................................................39
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS...............................................39
10.1. Series 2 Certificate of Designations; Series 1 Waiver;
Stockholders' Agreement; Registration Rights Agreement..............................40
10.2. Certificates for Shares.............................................................40
10.3. Senior Status.......................................................................40
10.4. Accuracy of Representations and Warranties..........................................40
10.5. Compliance with Agreements..........................................................40
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10.6. Officers' Certificates..............................................................41
10.7. Proceedings.........................................................................41
10.8. Legality; Governmental and Other Authorization......................................41
10.9. No Material Adverse Change..........................................................41
10.10. Opinion of Counsel..................................................................41
10.11. Acceptance of Agent for Service of Process..........................................42
10.12. Other Documents and Opinions........................................................42
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS.................................42
SECTION 12. SPECIFIC PERFORMANCE................................................................42
SECTION 13. EXPENSES............................................................................43
SECTION 14. DIRECT PAYMENTS.....................................................................45
SECTION 15. AMENDMENTS AND WAIVERS..............................................................45
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT.................45
SECTION 17. NOTICES.............................................................................46
SECTION 18. MISCELLANEOUS.......................................................................46
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Schedule 1 Purchasers; Number of Shares; Number of Warrants
Schedule 2 Indebtedness
Schedule 3 Investments
Schedule 4 Disclosure Material
Schedule 5 Liens
Schedule 6 Capital Stock
EXHIBIT A-1 Series 2 Certificate of Designations
EXHIBIT A-2 Series 1 Waiver
EXHIBIT B Disclosure Schedule
EXHIBIT C Stockholders' Agreement Amendment
EXHIBIT D-1 Registration Rights Agreement
EXHIBIT D-2 Registration Rights Amendment
EXHIBIT E Opinion of Counsel for the Company
EXHIBIT F Form of Confidentiality Agreement
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of March 23, 2000 between Impax
Laboratories, Inc., a Delaware corporation (the "Company"), and the Purchaser
listed on the signature page of this Agreement (the "Purchaser").
W I T N E S S E T H :
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WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, shares of the Company's Series 2
Convertible Preferred Stock, par value $.01 per share (the "Series 2 Convertible
Preferred Stock"), upon the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject to the terms
and conditions hereof and in reliance upon the representations and warranties of
the Company contained herein or made pursuant hereto, the Purchaser agrees to
purchase from the Company at the Closing provided for in Section 2 hereof, the
number of shares of Series 2 Convertible Preferred Stock set forth opposite the
Purchaser's name on Schedule 1 hereto. The shares of Series 2 Convertible
Preferred Stock being acquired under this Agreement and by the other Purchasers
under the other Stock Purchase Agreements (as hereinafter defined) are
collectively referred to herein as the "Shares", containing rights and
privileges as more fully set forth in the Series 2 Certificate of Designations
of the Company in the form attached hereto as Exhibit A (the "Series 2
Certificate of Designations").
(b) The aggregate purchase price to be paid to the Company by the Purchaser
for the Shares to be purchased by the Purchaser pursuant to this Agreement shall
be the amount set forth opposite the Purchaser's name on Schedule 1 hereto. No
further payment shall be required from the Purchaser for the Shares. The parties
further acknowledge and agree that the Shares do not constitute "preferred
stock" as that term is used in Section 305(b)(4) of the Code and Treasury
Regulation ss. 1.305-5(a) and agree not to take any position inconsistent with
the
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characterization of the Shares as common stock for purposes of Section 305 of
the Code on any Tax Return or before any Taxing Authority.
(c) The Shares are being sold to the purchasers listed on Schedule 1 hereto
(the "Purchasers") pursuant to this Agreement and the other Series 2 Convertible
Preferred Stock Purchase Agreements (such agreements collectively, as from time
to time assigned, supplemented or amended or as the terms thereof may be waived,
the "Stock Purchase Agreements"). Each Stock Purchase Agreement shall be dated
the date hereof and shall be identical except as to the identities of the
respective Purchasers. The sale of Shares to each Purchaser under each Stock
Purchase Agreement is to be a separate sale, and no Purchaser shall have any
liability under any Stock Purchase Agreement other than the Stock Purchase
Agreement to which it is a party.
(d) The Company will use the proceeds from the sale of the Shares, together
with other funds it will receive on the Closing Date to fund future development
opportunities and for working capital and general corporate purposes.
SECTION 2. CLOSINGS
(a) Subject to the terms and conditions hereof, the closing of the purchase
and sale of the Shares to be purchased by the Purchaser and the other Purchasers
will take place at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue,
New York, New York at 10:00 A.M., New York City time on March 23, 2000, or such
other time and date as shall be mutually agreed to by the Company and the
Purchasers (the "Closing") (such time and date are herein referred to as the
"Closing Date").
(b) Subject to the terms and conditions hereof, at the Closing (i) the
Company will deliver to each Purchaser a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of Shares set forth opposite the Purchaser's name
on Schedule 1 and (ii) upon the Purchaser's receipt thereof, the Purchaser will
deliver to the Company a certified or official bank check (or wire transfer) in
an amount equal to the aggregate purchase price (as specified in Section 1(b)
hereof) for the Shares to be purchased by the Purchaser payable to the order of
the Company in federal or other immediately available funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall apply
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
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"Affiliate", when used with respect to any Person, means (i) if such Person
is a corporation, any officer or director thereof (other than a director elected
pursuant to Section 4(c) of the Series 1 Certificate of Designations) and any
Person which is, directly or indirectly, the beneficial owner (by itself or as
part of any group) of more than five percent (5%) of any class of any equity
security (within the meaning of the Securities Exchange Act) thereof, and, if
such beneficial owner is a partnership, any general partner thereof, or if such
beneficial owner is a corporation, any Person controlling, controlled by or
under common control with such beneficial owner, or any officer or director of
such beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or limited
partner thereof, and (iii) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the correlative terms
"controlling", "controlled by" and "under common control with"), with respect to
any Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
The holding of Shares (or of Conversion Shares obtained upon conversion of
Shares) and the rights under any Stock Purchase Agreement or under the Series 2
Certificate of Designations, the Stockholders' Agreement or the Registration
Rights Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or a Board committee) of the
Company and or sending an observer to a Board (or Board committee) meetings of
the Company), shall not cause a Purchaser to be deemed to be an "Affiliate" of
the Company.
"Agreement" means this Stock Purchase Agreement (together with exhibits and
schedules) as from time to time assigned, supplemented or amended or as the
terms hereof may be waived.
"Benefit Plan" means any Plan, existing at the Closing, established or to
which contributions have at any time been made by the Company, or any
predecessor of any of the foregoing, or under which any employee, former
employee or director of the Company or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"Board" or "Board of Directors" means with respect to any Person which is a
corporation, a business trust or other entity, the board of directors or other
group, however, designated, which is charged with legal responsibility for the
management of such Person, or any committee of such board of directors or group,
however designated, which is authorized to exercise the power of such board or
group in respect of the matter in question.
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"Business Day" means any day other than a Saturday, Sunday or any day on
which banks in the location of the office of the Company provided for in Section
17 hereof are authorized or obligated to close.
"Capitalized Leases" means any lease to which the Company is party as
lessee, or by which it is bound, under which it leases any property (real,
personal or mixed) from any lessor other than the Company, and which either is
required to be capitalized in accordance with generally accepted accounting
principles consistently applied, or, even if not so required to be capitalized,
shall have (or have had), at the time first entered into, an initial term of
greater than three (3) years (including leases of shorter duration which are or
were extendible to a total term greater than three (3) years at the option of
the lessor). The value of Capitalized Leases, as of the time of any
determination thereof, shall mean the sum of the then present values, determined
as hereinafter provided, of future obligations of lessees under then existing
Capitalized Leases. To compute the value of any Capitalized Lease, the following
methods shall be used, as applicable:
(i) values of leases required to be capitalized in accordance with
generally accepted accounting principles shall be computed in
accordance with such principles; and
(ii) values of other leases (and values of contracts or other items which
this Agreement provides are to be valued as if they were Capitalized
Leases) shall be computed by discounting, to the date of
determination, at an assumed interest rate of eight percent (8%) per
annum, the minimum amount of future rental payments that will be due
under the related documentation, including rental payments that may be
due during extensions which are at the other party's option, but
excluding any amounts in respect of insurance on, taxes on and/or
maintenance of the properties subject to such leases (provided that
such amounts are owed and paid only to the extent actually incurred).
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government administering the
Securities Act or the Securities Exchange Act.
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"Common Stock" means the Company's Common Stock, par value $.01 per share,
and shall also include any common stock of the Company hereafter authorized and
any capital stock of the Company of any other class hereafter authorized which
is not preferred as to dividends or assets over any other class of capital stock
of the Company or which has ordinary voting power for the election of directors
of the Company; provided that Common Stock shall not include the Series 1
Preferred or the Series 2 Convertible Preferred Stock.
"Company" means Impax Laboratories, Inc., a Delaware corporation, its
successors and assigns.
"Consolidated" or "consolidated", when used with reference to any financial
term in this Agreement, means the aggregate for the Company of the amounts
signified by such term for all such Persons, with intercompany items eliminated,
and, with respect to net worth, after eliminating the portion of net worth
properly attributable to minority interests, if any, in the capital of any such
Person (other than in the capital of the Company) and otherwise as determined in
accordance with generally accepted accounting principles consistently applied
(except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of the Company's
Common Stock obtained or obtainable upon conversion of Shares and shall also
include any capital stock or other securities into which Conversion Shares are
changed and any capital stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend on, any
Conversion Shares. In the event that any Conversion Shares are sold either in a
public offering pursuant to a registration statement under the Securities Act or
pursuant to a Rule 144 Transaction, then the transferees of such Conversion
Shares shall not be entitled to any benefits under this Agreement with respect
to such Conversion Shares and such Conversion Shares shall no longer be
considered to be "Conversion Shares" for purposes of any consent or waiver
provision of this Agreement.
"Disclosure Material" has the meaning specified in Section 4.6(a) hereof.
"Environmental Laws" means all federal, state, local, foreign, civil and
criminal laws, statutes, ordinances, orders, codes, Environmental Permits,
rules, policies, and regulations and common law relating to the protection of
the environment and human health or relating to the handling, use, generation,
treatment, storage, transportation or disposal of Hazardous Materials, including
but not limited to the Resource Conservation and Recovery Act of 1976, 42
U.S.C.ss. 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C.ss. 2601 et
seq.; the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C.ss. 9601 et seq.; the Federal Water Pollution Control Act, 33
U.S.C.ss. 1251 et seq.; the Clean Air Act, 42 U.S.C.ss. 7401 et seq.; the
Hazardous
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Materials Transportation Act, 49 U.S.C.ss. 1801 et seq.; The Occupational Safety
and Health Act, 29 U.S.C.ss. 651; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C.ss. 136y et seq.; and the Oil Pollution Act of 1990, 33
U.S.C.ss. 2701 et seq., all as may be amended or superseded from time to time.
"Environmental Lien" has the meaning set forth in Section 4.16 hereof.
"Environmental Permits" means all permits, licenses, approvals,
authorizations or consents required by any Governmental Authority under any
applicable Environmental Law and includes any and all orders, consent orders or
binding agreements issued or entered into by a Governmental Authority under any
applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" means each "person" (as defined in Section 3(9) of ERISA)
which is under "common control" with the Company (within the meaning of Section
414(b), (c), (m) or (o) of the Code).
"Fleming Funds" means Fleming US Discovery Fund III, L.P. and Fleming US
Discovery Offshore Fund III, L.P.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"Governmental Authority" means any federal, state, or local governmental
agency or authority (including regulatory authority) having jurisdiction over
the Company or any of its respective assets or businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment or
performance of, or any contingent obligation in respect of, any indebtedness or
other obligation of any other Person, (ii) any other arrangement whereby credit
is extended to one obligor (directly or indirectly) on the basis of any promise
or undertaking of another Person (a) to pay the indebtedness of such obligor,
(b) to purchase an obligation owed by such obligor, (c) to purchase or lease
assets (or to provide funds, goods or services) under circumstances that would
enable such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial condition
of such obligor, in each case whether or not such arrangement is disclosed in
the balance sheet of such other Person or is referred to in a footnote thereto
and (iii) any liability as a general partner of a partnership in respect of
indebtedness or other obligations of such partnership; provided, however, that
the term "Guaranty" shall not include (1) endorsements for collection or deposit
in the ordinary course of business,
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(2) any guaranty of indebtedness of the Company by a subsidiary of the Company
or (3) obligations of the Company which would constitute Guaranties solely by
virtue of the continuing liability of a Person which has sold assets subject to
liabilities for the liabilities which were assumed by the Person acquiring the
assets, unless such liability is required to be carried on the consolidated
balance sheet of the Company. The amount of any Guaranty and the amount of
indebtedness resulting from such Guaranty shall be the maximum amount of the
guarantor's potential obligation in respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum hydrocarbons,
petroleum waste or petroleum products, underground storage tanks, asbestos or
asbestos-containing materials, pesticides, lead and lead-containing materials,
urea formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing and
non-ionizing radiation including radon and electromagnetic frequency radiation;
and any chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any applicable Environmental Law.
"Indebtedness" of any Person means, without duplication, as of any date as
of which the amount thereof is to be determined, (i) all obligations of such
Person to repay money borrowed (including, without limitation, all notes payable
and drafts accepted representing extensions of credit, all obligations under
letters of credit, all obligations evidenced by bonds, debentures, notes or
other similar instruments and all obligations upon which interest charges are
customarily paid), (ii) all Capitalized Leases in respect of which such Person
is liable as lessee or as the guarantor of the lessee, (iii) all monetary
obligations which are secured by any Lien existing on property owned by such
Person whether or not the obligations secured thereby have been incurred or
assumed by such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual obligations
(whether absolute or contingent) of such Person to repurchase goods sold and
distributed. "Indebtedness" shall not include, however, any unfunded obligations
in any employee pension benefit plan (as defined in ERISA) of the Company.
"Initial Shelf Registration" has the meaning set forth in Section 8.10
hereof.
"Investment" means, with respect to any Person, (i) any loan, advance or
extension of credit by such Person to, and any contributions to the capital of,
any other Person, (ii) any Guaranty by such Person, (iii) any interest in any
capital stock, equity interest or other securities of any other Person, (iv) any
transfer or sale of property of such Person to any other Person other than upon
full payment, in cash or other
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consideration, of not less than the agreed sale price bargained on an
arms-length basis and (v) any commitment or option to make an Investment if, in
the case of an option, the consideration therefor exceeds $10,000, and any of
the foregoing under clauses (i) through (v) shall be considered an Investment
whether such Investment is acquired by purchase, exchange, merger or any other
method; provided, that the term "Investment" (1) shall not include an Investment
in the Company, (2) shall not include current trade and customer accounts
receivable and allowances, provided they relate to goods furnished in the
ordinary course of business and are given in accordance with the customary
practices of the Company, (3) shall not include temporary investments of excess
cash of the Company in any of the following: (A) investment grade obligations
maturing within one year of their issuance which as to principal and interest
constitute direct obligations of, or obligations guaranteed by, the United
States of America, (B) negotiable certificates of deposit of banks or trust
companies which are organized under the laws of the United States of America or
any state thereof and which have capital and surplus of at least $500,000,000,
(C) commercial paper which is rated not less than prime-one or A-1 or their
equivalents by Moody's Investor Service, Inc. or Standard & Poor's Corporation
or their successors, (D) any repurchase agreement secured by any one or more of
the foregoing and (E) money market funds primarily investing in any of the
foregoing securities and sponsored by or affiliated with nationally recognized
brokerage or investment advisory firms, and (4) shall not include Investments of
the Company existing on the date hereof and disclosed on Schedule 3 hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, or preference, priority or other security interest of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing, any assignment or other
conveyance of any right to receive income and any assignment of receivables with
recourse against the assignor), any filing of a financing statement as debtor
under the Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; provided that the term "Lien" shall not
include Permitted Liens.
"Outside Directors" means those directors on the Company's Board of
Directors at any time who are not otherwise Affiliates of or employed by the
Company.
"Outstanding" or "outstanding" means (a) when used with reference to the
Shares or the Conversion Shares as of a particular time, all Shares or
Conversion Shares theretofore duly issued except (i) Shares and Conversion
Shares theretofore reported as lost, stolen, mutilated or destroyed or
surrendered for transfer, exchange or replacement, in respect of which new or
replacement Shares or Conversion Shares have been issued by the Company,
(ii) Shares and Conversion Shares theretofore canceled by the Company and
(iii) Shares and
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Conversion Shares registered in the name of, as well as Shares owned
beneficially by, the Company, or any of its Affiliates. For purposes of the
preceding sentence, in no event shall "Affiliates" include (x) the persons which
are identified as "Purchasers" on Schedule 1 hereto or (y) any Affiliates of any
such persons.
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental charges or
levies not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP, (ii) any imperfections of title, easements, rights of way or similar
Liens, zoning laws or land use restrictions as normally exist with respect to
property similar in character to the property affected thereby and which
individually or in the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the property
subject to such Liens, zoning laws or land use restrictions or interfere with
the use of such property in the conduct of the business of the Company and which
do not secure obligations for money borrowed, (iii) Liens imposed by any law,
such as mechanic's, materialman's, landlord's, warehouseman's and carrier's
Liens, securing obligations incurred in the ordinary course of business which
are not yet overdue or which are being diligently contested in good faith by
appropriate proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, and (iv) any Lien resulting from purchase by the Company of goods
in the ordinary course of business as to which Liens are not filed of record.
"Person" or "person" means an individual, corporation, partnership, firm,
association, joint venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Preferred Stock" means any class of the capital stock of a corporation
(whether or not convertible into any other class of such capital stock) which
has any right, whether absolute or contingent, to receive dividends or other
distributions of the assets of such corporation (including, without limitation,
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amounts payable in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of such corporation), which right is superior to the
rights of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series 1 Preferred and the Series 2
Convertible Preferred Stock.
"Purchaser" means the person who accepts and agrees to the terms hereof as
indicated by such person's signature (as "the undersigned Purchaser") on the
execution page of this Agreement, together with its successors and assigns.
"Purchaser Holders" means (i) each Purchaser, (ii) any Affiliate, officer
or employee of an Affiliate or investment fund managed by an Affiliate of a
Purchaser to which any Purchaser may transfer record and/or beneficial ownership
of any shares of the Shares or the Conversion Shares and (iii) any transferee of
Shares or Conversion Shares from a Purchaser Holder other than a transferee of
Shares or Conversion Shares sold in either a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule 144
Transaction, except that for purposes of Section 9 hereof, such transferee shall
be a Purchaser Holder only if such transferee is reasonably acceptable to the
Company. The transferor and the transferee shall notify the Company in writing
as to the transferee's status as a Purchaser Holder in accordance with this
definition, and shall notify the Company if such transferee ceases to be a
Purchaser Holder.
"Purchasers" has the meaning set forth in Section 1(c) hereof, together
with their respective successors and assigns.
"Registrable Securities" means (i) any shares of Common Stock issued or
issuable upon (x) conversion of the Series 1 Preferred, (y) conversion of the
Series 2 Convertible Preferred Stock or (z) exercise of the Warrants purchased
by the Fleming Funds pursuant to the Series D Purchase Agreements and (ii) any
securities issued or issuable with respect to the Common Stock referred to in
clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have (x) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (y) been transferred pursuant
to a Rule 144 Transaction (or any similar rule then in force) under the
Securities Act.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Closing Date, among the Company and each of the Purchasers.
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"Registration Rights Amendment" means Amendment No. 1 to the Amended and
Restated Registration Rights Agreement, dated as of the Closing Date, among the
Company, the Purchaser and the other stockholders of the Company named therein.
"Restricted Payment" means (i) every payment in connection with the
redemption, purchase, retirement or other acquisition by or on behalf of the
Company of any shares of the Company's capital stock (as defined below), whether
or not owned by the Company, (ii) any prepayments or repayments made on
Indebtedness of the Company, (iii) every payment to or on behalf of any
Affiliate of the Company on account of or with respect to any lease
arrangements, and (iv) every payment by or on behalf of the Company (whether as
repayment or prepayment of principal or as interest or otherwise) on or with
respect to (A) any obligation to repay money borrowed owing to any Affiliate of
the Company or (B) any obligation, to any Person, of any Affiliate of the
Company or to any other holder of shares of the Company's capital stock (as
defined below), which obligation is assumed, or is the subject of a Guaranty, by
the Company; provided, however, (a) that the restrictions of the foregoing
clause (i) shall not apply to (A) any payment in respect of capital stock of the
Company to the extent payable in shares of the capital stock of the Company, (B)
any redemption of the Series 1 Preferred or the Series 2 Convertible Preferred
Stock or (C) any redemption or repurchase pursuant to the 1995 Stock Incentive
Plan as in effect on the date hereof, (b) that the restrictions of the foregoing
clause (ii) shall not apply to any regularly scheduled prepayment or repayment
of Indebtedness, provided that such Indebtedness being prepaid or repaid is not
at the time of such prepayment or repayment or at any prior time thereto owing
to an Affiliate of the Company, and (c) that none of the foregoing clauses shall
apply to any payments, distributions or other transfers or actions on or with
respect to the Shares or the Conversion Shares or to the Purchasers (or holders
of Shares or the Conversion Shares) under the Stock Purchase Agreements. For
purposes of this definition, "capital stock" shall also include warrants and
other rights and options to acquire shares of capital stock (whether upon
exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule is in
effect from time to time and (ii) any successor rule, regulation or law, as in
effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such Rule is in
effect from time to time and (ii) any successor rule, regulation or law, as in
effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A) complying
with Rule 144 as such Rule is in effect on the date of such transfer (but not
including a sale other than pursuant to "brokers' transactions" as defined in
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clauses (1) and (2) of paragraph (g) of such Rule as in effect on the date
hereof) and (B) occurring at a time when Conversion Shares are registered
pursuant to Section 12 of the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules, regulations and interpretations thereunder.
"Series 1 Certificate of Designations" means the Certificate of
Designations of the Series 1 Preferred.
"Series 1 Preferred" means, collectively, the Series 1-A Convertible
Preferred Stock and the Series 1-B Convertible Preferred Stock.
"Series 1 Waiver" means the Waiver of Certain Rights Under the Series 1
Certificate of Designations.
"Series 1-A Convertible Preferred Stock" means the Company's Series 1-A
Convertible Preferred Stock, par value $.01 per share.
"Series 1-B Convertible Preferred Stock" means the Company's Series 1-B
Convertible Preferred Stock, par value $.01 per share.
"Series 2 Certificate of Designations" has the meaning set forth in Section
1(a) hereof.
"Series 2 Convertible Preferred Stock" means the Company's Series 2
Convertible Preferred Stock, par value $.01 per share, which will have the
rights, powers and privileges on the Closing Date as more fully set forth in the
Series 2 Certificate of Designations.
"Series D Purchase Agreements" means, collectively, the separate Stock and
Warrant Purchase Agreements, dated as of March 2, 1999 (as amended by Amendment
No. 1, dated as of May 18, 1999), between the Company and each of the Fleming
Funds.
"Shares" has the meaning set forth in Section 1(a) hereof. In the event
that any Shares are sold either in a public offering pursuant to a registration
statement under Section 5 of the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Shares shall not be entitled to any
benefits under this
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Agreement with respect to such Shares and such Shares shall no longer be
considered to be "Shares" for purposes of any consent or waiver provision of
this Agreement.
"Shelf Registration" has the meaning set forth in Section 8.10 hereof.
"Stock Purchase Agreements" has the meaning set forth in Section 1(c)
hereof.
"Stockholders' Agreement" means the Stockholders' Agreement, dated as of
December 14, 1999, among the Company, the Purchasers and certain other
stockholders of the Company, as amended by the Stockholders' Agreement
Amendment.
"Stockholders' Agreement Amendment" means Amendment No. 1 to the
Stockholders' Agreement, dated as of the Closing Date, among the Company, the
Purchasers and the other stockholders of the Company named therein.
"Subsequent Shelf Registration" has the meaning set forth in Section 8.10
hereof.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting power of
shares of stock or other equity interests (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is, at the time as of which any determination is being made, owned or
controlled, directly or indirectly, by such Person or one or more of its
Subsidiaries, or both. The term "Subsidiary" or "Subsidiaries" when used herein
without reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatsoever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction, or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
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"Transferees" shall mean any transferee (except for a Purchaser Holder) of
Shares or Conversion Shares from a Purchaser Holder. Transferees shall not
include a transferee of Shares or Conversion Shares sold in either a public
offering pursuant to a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), or pursuant to Rule 144 under the Securities
Act.
(b) For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
(ii) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (except as otherwise
provided herein);
(iii) all computations provided for herein, if any, shall be made in
accordance with GAAP (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender shall also
be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company, such as "create",
"sell", "transfer", "dispose of", etc., mean such action whether voluntary
or involuntary, by operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be deemed a
part of this Agreement;
(vii) each of the representations and warranties of the Company
contained in Section 4 hereof is separate and is not limited, qualified or
modified by the existence, wording or satisfaction of any other
representation or warranty of the Company in Section 4 or otherwise;
(viii) each of the covenants of the Company contained in Sections 7, 8
and 9 hereof or otherwise contained in any Stock Purchase Agreement, the
Series 2 Certificate of Designations, the Stockholders' Agreement or the
Registration Rights Agreement is separate and is not limited or satisfied
by the existence, wording or satisfaction of any other covenant of the
Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from being taken)
by any Person or the Company shall apply to such Person or the
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Company, as the case may be, whether such action is taken directly or
indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as of the
date hereof and as of the Closing Date, except as set forth in the Disclosure
Schedule attached hereto as Exhibit B:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. The Company
is duly qualified, licensed and authorized to do business and is in good
standing in each jurisdiction in which it owns or leases any property or in
which the conduct of its business requires it to so qualify or be so licensed,
except for such jurisdictions where the failure to so qualify or be so licensed
would not have a material adverse effect on the Company's assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects.
(b) No proceeding has been commenced looking toward the dissolution or
merger of the Company or the amendment of its certificate of incorporation
(other than the Series 2 Certificate of Designations). The Company is not in
violation in any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite power, authority (corporate and other)
and legal right to own or to hold under lease and to operate the properties it
owns or holds and to conduct its business as now being conducted.
(d) The Company has all requisite power, authority (corporate and other)
and legal right to execute, deliver, enter into, consummate the transactions
contemplated by and perform its obligations under (i) the Stock Purchase
Agreements, including, without limitation, the issuance by the Company of the
Shares and the Conversion Shares as contemplated herein and in the Series 2
Certificate of Designations (subject to the proper filing with the Secretary of
State of the State of Delaware of the Series 2 Certificate of Designations),
(ii) the Series 1 Waiver, (iii) the Stockholders' Agreement, (iv) the
Stockholders' Agreement Amendment, (v) the Registration Rights Agreement and
(vi) the Registration Rights Amendment. The execution, delivery and performance
of the Stock Purchase Agreements, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment by the Company (including,
without limitation, the issuance by the Company of the Shares and the Conversion
Shares as contemplated herein and in the Series 2 Certificate of Designations)
have been duly authorized by all required corporate and other actions. The
Company has duly executed and delivered the
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Stock Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement and the
Registration Rights Amendment. The Stock Purchase Agreements, the Series 1
Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment, the
Registration Rights Agreement and Registration Rights Amendment constitute the
legal, valid and binding obligations of the Company enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of creditors generally.
4.2. Capital Stock.
(a) Schedule 6(a) hereto correctly and completely lists (i) the authorized
capital stock of the Company (Common Stock and Preferred Stock), (ii) the number
of designated shares of Preferred Stock in each series or class thereof after
giving effect to the Series 2 Certificate of Designations and (iii) on February
29, 2000, after giving effect to the issuance of Shares contemplated by the
Stock Purchase Agreements, the number of shares outstanding in each series or
class thereof. All of such outstanding shares are, or on the Closing Date will
be, duly authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series 1 Preferred and Series 2 Convertible Preferred Stock
will be, when issued in accordance with the respective terms of the Series 1
Certificate of Designations and Series 2 Certificate of Designations, duly
authorized, validly issued, fully paid and non-assessable. Except as provided in
the Series 2 Certificate of Designations and the Series 1 Certificate of
Designations, none of the shares of the Company's capital stock which will be
outstanding at the Closing (i) were or will be subject to preemptive rights when
issued or (ii) provide the holders thereof with any preemptive rights with
respect to any issuances of capital stock.
(b) Schedule 6(b) hereto correctly and completely lists the number and
purpose for which such shares of the Company's Common Stock are reserved for
issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no outstanding
options, warrants, subscriptions, rights, convertible securities or other
agreements or plans under which the Company may become obligated to issue, sell
or transfer shares of its capital stock or other securities.
(d) Except as set forth on Schedule 6(c) hereto and except for the
registration rights contained in the Registration Rights Agreement, there are
and will be no outstanding registration rights with respect to any capital stock
of the Company, which (in either case) will be outstanding on the Closing Date,
or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Company of which the
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Company is a party, except as provided herein, in the Series 2 Certificate of
Designations and the Series 1 Certificate of Designations and Schedule 6(d)
hereto.
(f) Except as set forth in Schedule 6(e) hereto, there are no anti-dilution
protections or other adjustment provisions in existence with respect to any
capital stock of the Company or any capital stock referred to in Section 4.2(b)
or 4.2(c).
(g) The Series 2 Certificate of Designations has been duly adopted by the
Company and is fully effective as an amendment to the Company's certificate of
incorporation. The Shares have all of the rights, priorities and terms set forth
in the Series 2 Certificate of Designations. The Series 1 Preferred have all of
the rights, priorities and terms set forth in the Series 1 Certificate of
Designations.
(h) To the knowledge of the Company, those persons who own, directly or
indirectly, more than 5% (calculated in accordance with Rule 13d-3 of the
Securities Exchange Act) of the Company's outstanding Common Stock are as
follows: (i) Charles Hsiao, (ii) Chemical Company of Malaysia, (iii) Chiin Hsiao
Children Irrevocable Trust, (iv) Larry Hsu, (v) Kingdom Capital Management
Corporation, (vi) Shushen (John) Hsiao, (vi) Bear Stearns Asset Management, Inc.
and (vii) Hsu Children Irrevocable Trust.
4.3. Subsidiaries.
The Company has no Subsidiaries. The Company has no Investments in any
other Person.
4.4. Business.
The Company is engaged primarily in the business of manufacturing and
distributing immediate release and controlled release solid oral pharmaceutical
products as well as providing product development services to major
pharmaceutical companies. The Company neither currently engages in, nor has any
intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material respect (and
is not in default in any respect regarding any Indebtedness) under any
indenture, agreement or instrument to which it is a party or by which it or its
properties may be bound. The Company is not in default in any material respect
under any material order, writ, injunction, judgment or decree of any court or
other governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders'
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Agreement Amendment, the Registration Rights Agreement and the Registration
Rights Amendment and any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares and the Conversion
Shares as contemplated herein and therein and in the Series 2 Certificate of
Designations and the adoption of the Series 2 Certificate of Designations as an
amendment to the Company's certificate of incorporation) do not and will not (i)
violate or conflict with, with or without the giving of notice or the passage of
time or both, any provision of (A) the certificate of incorporation or by-laws
of the Company, (B) any law, rule, regulation or order of any federal, state,
county, municipal or other governmental authority, (C) any judgment, writ,
injunction, decree, award or other action of any court or governmental authority
or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its respective properties, (ii) result in the creation
of any Lien upon any of the Company's properties, assets or revenues, except as
provided in the Series 2 Certificate of Designations, (iii) require the consent,
waiver, approval, order or authorization of, or declaration, registration,
qualification or filing with, any Person (whether or not a governmental
authority and including, without limitation, any shareholder approval), or (iv)
cause antidilution clauses of any outstanding securities to become operative or
give rise to any preemptive rights. No provision referred to in Sections (A) and
(C) of the preceding clause (i) materially adversely affects the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis or
the ability of the Company to perform its obligations under the Stock Purchase
Agreements, the Series 2 Certificate of Designations, the Series 1 Certificate
of Designations, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment or any of the transactions contemplated hereby or
thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchaser the materials
described on Schedule 4.6 hereto (the "Disclosure Material"). The audited and
unaudited financial statements referred to or contained in the materials
referred to on Schedule 4.6 fairly present the consolidated financial condition
of the Company as of the respective dates thereof and the consolidated results
of the operations of the Company for such periods and have been prepared in
accordance with GAAP, except that any such unaudited statements may omit notes
and may be subject to year-end adjustment.
(b) Since December 31, 1999, (i) the business of the Company has been
conducted in the ordinary course and (ii) there has been no material adverse
change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis. As of the Closing Date and as of the date hereof, there are
no material liabilities of the Company which would be required to be provided
for in a consolidated balance sheet of the Company as of either such date
prepared in accordance with GAAP, other than liabilities provided for in the
financial statements referred to in Section 4.6(a). Since December 31, 1999, no
amount or property has directly or indirectly been declared,
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ordered, paid, made or set aside for any Restricted Payment nor has any such
action been agreed to.
(c) There are no material liabilities, contingent or otherwise, of the
Company that have not been disclosed in the financial statements referred to in
Section 4.6(a) or otherwise disclosed in the Disclosure Material.
(d) The financial projections included in the Disclosure Material conform
with the internal operating forecasts of the Company and were based on
reasonable assumptions when made and have been prepared in good faith.
(e) There is no fact known to the Company which is not in the Disclosure
Material and which materially and adversely affects, or in the future would be
reasonably likely (as far as the Company currently can reasonably foresee) to
materially and adversely affect, the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis.
4.7. Litigation.
There is no action, suit, proceeding, investigation or claim pending or, to
the knowledge of the Company, threatened in law, equity or otherwise before any
court, administrative agency or arbitrator which (i) questions the validity of
the Stock Purchase Agreements, the Series 2 Certificate of Designations, the
Series 1 Certificate of Designations, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement, the Registration Rights Amendment, the Shares or the Conversion
Shares, or (iii) might result in a material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis.
4.8. Taxes.
The Company has duly and timely filed all Tax Returns required to be filed
by it, and each such Tax Return correctly and completely reflects the Tax
liability and all other information required to be reported thereon. The Company
has paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company, as of the end of the period covered by such financial statement,
and as of the Closing Date, such provision, as adjusted for the passage of time
through such date, will be sufficient for the then-accrued and unpaid Taxes not
yet due and payable of the Company. No Tax Returns of the Company have ever been
audited by any Taxing Authority, there is no dispute concerning any Tax
liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in
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respect of it for any past period. The Company has withheld and paid, or, if not
yet due for payment, set aside in accounts for such purposes, all Taxes required
to have been withheld in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party. Other than stamp taxes,
the Company has no liability for Taxes of any Person other than the Company (i)
as a transferee or successor, (ii) by contract, or (iii) otherwise. There are no
applicable Taxes payable by the Company in connection with the execution and
delivery of the Stock Purchase Agreements, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement or the Registration Rights Amendment or the issuance by the
Company of the Shares or the Conversion Shares.
4.9. ERISA.
(a) All Benefit Plans are listed in Exhibit B, and copies of all
documentation relating to such Benefit Plans have been delivered to or made
available for review by Purchasers (including copies of written Benefit Plans,
written descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications, and
IRS determination letters).
(b) Each Benefit Plan has at all times been maintained and administered in
all material respects in accordance with its terms and with the requirements of
all applicable law, including ERISA and the Code, and each Benefit Plan intended
to qualify under section 401(a) of the Code has at all times since its adoption
been so qualified, and each trust which forms a part of any such plan has at all
times since its adoption been tax-exempt under section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding deficiency"
within the meaning of section 302 of ERISA or section 412 of the Code, and the
"amount of unfunded benefit liabilities" within the meaning of section
4001(a)(18) of ERISA does not exceed zero with respect to any Benefit Plan
subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043 of ERISA) has
occurred with respect to any Benefit Plan or any Plan maintained by an ERISA
Affiliate since the effective date of said section 4043 for which notice is not
waived under the regulations issued pursuant to said Section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning of section
3(37) of ERISA.
(f) No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company under Title IV of ERISA to any party with
respect to any Benefit Plan, or with respect to any other Plan presently or
heretofore maintained or contributed to by any ERISA Affiliate.
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(g) Neither the Company nor any ERISA Affiliate has incurred any liability
for any tax imposed under section 4971 through 4980B of the Code or civil
liability under section 502(i) or (l) of ERISA.
(h) No benefit under any Benefit Plan, including, without limitation, any
severance or parachute payment plan or agreement, will be established or become
accelerated, vested or payable by reason of any transaction contemplated under
this Agreement.
(i) No Benefit Plan provides health or death benefit coverage beyond the
termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of plan activities and any other claim which
could reasonably be expected to result in a material liability or expense to the
Company) has been brought or, to the knowledge of the Company, threatened
against or with respect to any Benefit Plan and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such suit, action or other litigation.
(k) All contributions to Benefit Plans that were required to be made under
such Benefit Plans have been made, and all benefits accrued under any unfunded
Benefit Plan have been paid, accrued or otherwise adequately reserved in
accordance with generally accepted accounting principles, all of which accruals
under unfunded Benefit Plans are as disclosed in Exhibit B, and the Company has
performed all material obligations required to be performed under all Benefit
Plans.
(l) The execution, delivery and performance of the Stock Purchase
Agreements, the Series 1 Waiver, the Stockholders' Agreement, the Stockholders'
Agreement Amendment, the Registration Rights Agreement and the Registration
Rights Amendment and the consummation of the transactions contemplated hereby
and thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares and the Conversion
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code with respect to any Benefit Plan.
4.10. Legal Compliance.
(a) The Company's manufacturing, distribution and marketing practices are
in compliance in all material respects with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, including, without limitation, laws and regulations administered by the
Food and Drug Administration ("FDA") and the Drug Enforcement Administration
("DEA").
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(b) The Company possesses all material Food and Drug Administration new
drug applications, abbreviated new drug applications, and new animal drug
applications as are necessary for the conduct of its business as now being
conducted, a list of such which will be provided to the Purchaser upon the
Purchaser's request.
(c) Other than the May 25, 1993 "Richlyn Order," there are no adverse
orders, judgments, writs, injunctions, decrees, or demands of any court or
administrative body, domestic or foreign, or of any governmental agency or
instrumentality, domestic or foreign, outstanding against the Company.
(d) The Company has not and will not use the services of any person
debarred under the provisions of the Generic Drug Enforcement Act of 1992, 21
U.S.C. ss. 335(a)(b). None of the Company's officers or employees has been
convicted of a felony under federal law for conduct relating to the development,
approval or regulation of any product subject to the Federal Food, Drug, and
Cosmetic Act or the Controlled Substances Act.
4.11. Outstanding Securities.
All securities (as defined in the Securities Act) of the Company have been
offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
4.12. Permits, Licenses and Approvals; Intellectual Property and Other
Rights.
The Company owns or possesses and holds free from material conflicts with
the rights of others all franchises, licenses, permits, consents, approvals and
other authority (governmental or otherwise), patents, patent rights, trademarks,
trademark rights, trade names, trade name rights and copyrights (each of which
patent, trademark or copyright is listed on Exhibit B hereto), and all rights
and privileges with respect to any of the foregoing, as are necessary for the
conduct of its business as now being conducted and as currently proposed to be
conducted; provided that, no such representation is made with respect to
government franchises, licenses, permits, consents, approvals or other authority
which may be required with respect to the Company's business as proposed to be
conducted. The Company is not in default in any material respect under any of
such franchises, licenses, permits, consents, approvals or other authority. The
rights of (and use by) the Company with respect to such or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis, and no such claim of conflict
or infringement has been asserted by any Person.
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4.13. Key Employees.
The Company has good relationships with its employees and has not had and
does not expect any substantial labor problems. The Company has no knowledge as
to any intentions of any key employee or any group of employees to leave the
employ of the Company. The employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company.
4.14. Properties.
Other than the Permitted Liens, the Company has good and marketable title
to its real property, all of which is disclosed on Exhibit B hereto, and good
and marketable title to each of its other properties other than leased
properties. Certain real property used by the Company in the conduct of their
respective businesses is held under lease (as identified on Exhibit B hereto),
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate any such lease. All such leases are
valid and in full force and effect, and none of such leases is in default. None
of the properties owned or leased by the Company is subject to any Liens which
could materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) The Company has adequate sources of supply for its business as
currently conducted and as proposed to be conducted. The Company has good
relationships with all of its material sources of supply of goods and services
and does not anticipate any material problem with any such material sources of
supply.
(b) The Company has no knowledge that the customer base of the Company
might materially decrease.
4.16. Environmental Compliance.
(a) There is no Hazardous Material on, about, under or in, any property,
real or personal, in which the Company has any interest in an amount or
concentration which could constitute a violation that would result in a
liability in excess of $5,000 or otherwise result in a liability in excess of
$5,000 to the Company under any applicable Environmental Law.
(b) There is no (and has not been any) off-site use, handling, storage or
disposal or on-site use, handling, storage or disposal of Hazardous Material at
or from any locations currently or formerly owned, leased, operated or occupied
by the Company as a result
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of which use, handling, storage or disposal there would exist a risk that the
Company could incur a material liability or obligation under any applicable
Environmental Law.
(c) The Company has not received any verbal or written notice, citation,
subpoena, summons, complaint or other correspondence or communication from any
person with respect to the presence of any non-indigenous Hazardous Material
upon, into, beneath, or emanating from or affecting any of the real property
(including improvements) currently or formerly owned or occupied by the Company
that could result in a liability to the Company in excess of $5,000.
(d) There has been no intentional or unintentional, gradual or sudden,
release, disposal or discharge by the Company or, to the Company's knowledge, by
others, upon, into or beneath the real property (including improvements)
currently or formerly owned or occupied by the Company that has caused or is
causing soil or groundwater contamination which, under applicable Environmental
Laws could require investigation or remediation or could otherwise create a
material liability or obligation on the part of the Company.
(e) The Company is in material compliance with all applicable Environmental
Laws and the terms and conditions of all Environmental Permits.
(f) To the best knowledge of the Company after reasonable inquiry, there
are no Liens arising under or pursuant to any Environmental Law ("Environmental
Liens") relating to any real property (including improvements thereon) currently
owned by the Company.
(g) There are no (i) underground storage tanks, (ii) polychlorinated
biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, operated or leased by the Company, except in compliance with
all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company, other than this Agreement and
the related documents, the Company is not a party to any contract or agreement
with any Affiliate of the Company, the terms of which are less favorable to the
Company than those which might have been obtained, at the time such contract or
agreement was entered into, from a person who was not such an Affiliate.
4.18. Offering of Shares.
None of the Company, any agent or any other person acting on its behalf,
directly or indirectly, (i) offered any of the Shares or any similar security of
the Company (A) by any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) or (B) for sale to
or solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any person other than the Purchasers and
not
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more than twenty-four (24) other institutional investors each of which the
Company reasonably believed was an "accredited investor" within the meaning of
Regulation D under the Securities Act or (ii) has done or caused to be done (or
has omitted to do or to cause to be done) any act which act (or which omission)
would result in bringing the issuance or sale of the Shares within the
provisions of Section 5 of the Securities Act or the filing, notification or
reporting provisions of any state securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other documents
required to be filed by it under the Securities Exchange Act. The Company has
furnished the Purchaser with copies of (i) its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1998, (ii) its Quarterly Reports on Form
10-QSB for the fiscal quarters ended March 31, 1999, June 30, 1999 and September
30, 1999, (iii) its Proxy Statement dated April 12, 1999 and (iv) the Joint
Proxy Statement/Prospectus dated November 9, 1999 filed by the Company and Impax
Pharmaceuticals, Inc. (collectively, the "SEC Reports"). Each SEC Report was in
substantial compliance with the requirements of its respective form and none of
the SEC Reports, nor the financial statements (and the notes thereto) included
in the SEC Reports, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.20. Indebtedness.
Schedule 2 hereto sets forth (i) the amount of all Indebtedness of the
Company outstanding as of February 29, 2000 (and there is no additional material
amount of Indebtedness of the Company outstanding other than that listed as of
February 29, 2000 or as set forth in Exhibit B), (ii) any Lien with respect to
such Indebtedness and (iii) a description of each instrument or agreement
governing such Indebtedness. The Company has made available to the Purchaser a
complete and correct copy of each such instrument or agreement (including all
amendments, supplements or modifications thereto). No material default exists
with respect to or under any such Indebtedness or any instrument or agreement
relating thereto and no event or circumstance exists with respect thereto that
(with notice or the lapse of time or both) could give rise to such a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of the Shares to
fund future development opportunities and for working capital and general
corporate purposes. No portion of such proceeds will be used for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying, within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended from time to time, any "margin stock" as defined in said Regulation
U, or any "margin stock" as defined in Regulation G of the Board of Governors of
the
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Federal Reserve System, as amended from time to time, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company includes any such "margin stock."
The Company has no present intention of acquiring any such "margin stock."
4.22. Other Names.
Except for "Global Pharmaceutical Corporation" and "Impax Pharmaceuticals,
Inc.", the businesses previously or presently conducted by the Company has not
been conducted under any corporate, trade or fictitious name.
4.23. Brokers.
No broker, finder or investment banker or other party is entitled to any
brokerage, finder's or other similar fee or commission in connection with any
Stock Purchase Agreement, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment or the Series 2 Certificate of Designations or any
of the transactions contemplated hereby or thereby, based upon arrangements made
by or on behalf of the Company or any of its Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement and the Registration Rights Amendment. The execution, delivery
and performance of this Agreement, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment by the Purchaser have been duly
authorized by all required corporate and other actions. The Purchaser has duly
executed and delivered this Agreement, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment, and this Agreement, the Series
1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment,
the Registration Rights Agreement and the Registration Rights Amendment
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance
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with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of creditors generally.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its investment in the
Shares being purchased by it and is able to bear the economic risk of such
investment. The Purchaser has had the opportunity to request and receive all
information deemed necessary by it to evaluate an investment in the Company. The
Purchaser is purchasing the Shares for its own account for investment and not
with a present view to any distribution thereof in violation of applicable
securities laws; provided, however, that the Purchaser may transfer record
and/or beneficial ownership of the Shares or the Conversion Shares to one or
more Affiliates, officers or employees of Affiliates or investment funds managed
by Affiliates of the Purchaser, in all cases in compliance with federal
securities laws. It is understood that the disposition of the Purchaser's
property shall at all times be within the Purchaser's control. If the Purchaser
should in the future decide to dispose of any of its Shares or Conversion
Shares, it is understood that it may do so only in compliance with the
Securities Act, applicable securities laws and this Agreement. The Purchaser is
an "accredited investor" as defined in Rule 501(a) under the Securities Act. If
domiciled in the United States, Purchaser's domicile is in the state indicated
on Schedule 1 hereto.
5.3. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or investment
banker or other party is entitled to any brokerage, finder's or other similar
fee or commission in connection with any Stock Purchase Agreement, the Series 1
Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment, the
Registration Rights Agreement, the Registration Rights Amendment or the Series 2
Certificate of Designations or any of the transactions contemplated hereby or
thereby, based upon arrangements made by or on behalf of the Purchaser or any of
its Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise dispose of any
Shares or Conversion Shares unless such Shares or Conversion Shares have been
registered under the Securities Act and, to the extent required, under any
applicable state securities laws, or pursuant to an applicable exemption from
such registration requirements. The Company may endorse on all Share
certificates a legend stating or referring to such transfer restrictions;
provided, that no such legend shall be endorsed on any Share certificates which,
when issued, are no longer subject to the restrictions of this Section 6.
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SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied.
(b) So long as any holder of Series 2 Convertible Preferred Stock owns at
least 20,000 Shares, the Company will deliver to such holder the following:
(i) as soon as practicable but not later than five (5) Business Days
after their issuance, and in any event within ninety (90) days after the close
of each fiscal year of the Company, (A) a consolidated balance sheet of the
Company as of the end of such fiscal year and (B) consolidated statements of
operations, stockholders' equity and cash flows of the Company for such fiscal
year, in each case setting forth in comparative form the corresponding figures
for the preceding fiscal year, all such balance sheets and statements to be in
reasonable detail and certified without qualification by Price Waterhouse
Coopers LLC or any "Big Five" independent public accounting firm selected by the
Company, and such statements shall be accompanied by a management analysis of
any material differences between the results for such fiscal year and the
corresponding figures for the preceding year; the Company's Annual Report on
Form 10-KSB shall satisfy such requirement provided that it is in compliance
with all applicable requirements of the SEC and is certified by a "Big Five"
accounting firm;
(ii) as soon as practicable, copies (A) of all financial statements,
proxy material or reports sent to the Company's stockholders, (B) of any public
press releases and (C) of all reports or registration statements filed with the
Commission pursuant to the Securities Act or the Securities Exchange Act;
(iii) as soon as practicable and in any event within forty-five (45)
days after the close of each of the first three (3) fiscal quarters of the
Company, (A) a consolidated balance sheet of the Company as of the end of such
fiscal quarter, (B) consolidated statements of operations, stockholders' equity
and cash flows of the Company for the portion of the fiscal year ended with the
end of such quarter, in each case in reasonable detail, certified by the Chief
Financial Officer, Chief Executive Officer or the President of the Company and
setting forth in comparative form the corresponding figures for the comparable
period one year prior thereto (subject to normal year-end adjustments), together
with a management analysis of any material differences between such results and
the corresponding figures for such prior period and (C) a certificate of the
Chief Financial Officer, Chief Executive Officer or the President certifying the
Company's compliance with the covenants contained in Section 9 of this
Agreement; the
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Company's Quarterly Report on Form 10-QSB shall satisfy such requirement
provided that it is in compliance with all applicable requirements of the SEC;
(iv) as soon as practicable and without duplication of any of the above
items, any other materials furnished to the Company's Board of Directors or to
holders of the Company's capital stock or Indebtedness, including, without
limitation, any compliance certificates furnished in respect of such
Indebtedness; and
(v) as soon as practicable, such other information as may reasonably be
requested by such holder.
(c) The Company will deliver to each member of the Company's Board of
Directors as soon as practicable (and in the case of (iii), prior to the end of
each fiscal year) and without duplication of any of the items listed below, the
following:
(i) copies of any annual, special or interim audit reports or
management or comment letters with respect to the Company or their operations
submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared on a quarterly
basis regarding the Company on a consolidated basis as presented to the Board
and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan for the next fiscal
year;
(iv) copies of all formal communications, from time to time, to
directors of the Company (including without limitation all information furnished
to such directors in connection with such communications), and copies of minutes
of meetings of the Board of Directors (and of any executive committees thereof)
of the Company;
(v) notice of default under any material agreement, contract or other
instrument to which the Company is a party or by which it is bound;
(vi) notice of any action or proceeding which has been commenced or
threatened against the Company and which, if adversely determined, would have,
individually or in the aggregate, a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(vii) copies of all filings made with the Commission.
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(d) All such financial statements referred to in this Section 7.1 shall be
prepared in accordance with generally accepted accounting principles
consistently applied (except for any change in accounting principles specified
in the accompanying certificate, in the financial statements themselves or
required by GAAP, and except that any interim financial statements may omit
notes and may be subject to normal year-end adjustments).
(e) Without limiting the foregoing provisions of this Section 7.1, the
Company agrees that, if requested in writing by any holder of Shares, it will
not deliver to such holder (until otherwise instructed by such holder) (x) any
non-public information or non-public materials regarding the Company (whether
described in this Section 7.1 or otherwise) and (y) any information (whether or
not included in clause (x)) which such holder specifies that it does not want to
receive. The Company shall comply with any such request with respect to each
such Purchaser and any subsequent holders of Shares acquired directly or
indirectly (through one or more transfers) from such Purchaser, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
The Company hereby authorizes any Purchaser to communicate directly with
the independent certified public accountants for the Company and authorizes such
accountants to disclose to such Purchaser any and all financial statements and
any other information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company. The Company shall deliver
a letter addressed to such accountants instructing them to comply with the
provisions of this Section 7.2.
7.3. Inspection.
So long as a holder of Series 2 Convertible Preferred Stock owns at least
20,000 Shares, the Company will permit such holder and any authorized
representative of such holder, to visit and inspect any of the properties of the
Company, to examine their respective books and records and to discuss with their
officers their books and records and the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, all at such reasonable times, all on reasonable notice
and as often as may be reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly after it
learns (other than by notice from all of such holders) of the existence of any
of the following:
(a) any default under any Indebtedness (or under any indenture, mortgage or
other agreement relating to any Indebtedness) which Indebtedness is in an
aggregate principal
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amount exceeding $250,000 (or the equivalent thereof in other currencies) in
respect of which the Company is liable;
(b) any action or proceeding which has been commenced or threatened against
the Company and which, if adversely determined, would have, individually or in
the aggregate, a material adverse effect on the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock Purchase Agreements, the Series 1
Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment, the
Registration Rights Agreement, the Registration Rights Amendment or the Series 2
Certificate of Designations;
(c) any dispute which may exist between the Company and any governmental
regulatory body which, in the reasonable opinion of the Company is reasonably
likely to, individually or in the aggregate, materially adversely affect the
normal business operations of the Company or the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock Purchase Agreements, the
Series 1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement, the Registration Rights Amendment
or the Series 2 Certificate of Designations; and
(d) if any (i) "reportable event" (as such term is described in Section
4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency" (within
the meaning of Section 412(a) of the Code) has been incurred with respect to a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate that is subject to the
funding requirements of ERISA and the Code or that an application may be or has
been made to the Secretary of the Treasury for a waiver or modification of the
minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code, in each case
with respect to such a Pension Plan; or (iii) Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate has been terminated, reorganized, petitioned or declared
insolvent under Title IV of ERISA; or (iv) Pension Plan maintained or
contributed to (or required to be maintained or contributed to) by the Company
or any ERISA Affiliate has an unfunded current liability giving rise to a lien
under ERISA or the Code; or (v) proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA),
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maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate.
Such notice (i) with respect to (a), shall specify the nature and period of
existence of any such default and what the Company proposes to do with respect
thereto and (ii) with respect to (b), (c) or (d), shall specify the nature of
any such matter referred to in such clause, what action the Company proposes to
take with respect thereto and what action any other relevant Person is taking or
proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information under this
Section 7 or otherwise to any person other than members of its Board of
Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit F (the "Confidentiality
Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises; Compliance with
Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other franchises in full
force and effect;
(b) maintain its tangible assets in good repair, working order and
condition so far as necessary or advantageous to the proper carrying on of its
businesses;
(c) comply with all applicable laws and with all applicable orders, rules,
rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
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(d) pay promptly when due all Taxes imposed upon its properties, assets or
income and all claims or indebtedness (including, without limitation, vendor's,
workmen's and like claims) which might become a lien upon such properties or
assets; provided, that payment of any such Tax shall not be necessary so long as
(i) the applicability or validity thereof shall be contested in good faith by
appropriate proceedings and a reserve, if appropriate, shall have been
established with respect thereto and (ii) failure to make such payment will not
have a material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(e) keep adequately insured, by financially sound and reputable insurers of
nationally recognized stature, all its properties of a character customarily
insured by entities similarly situated, against loss or damage of the kinds and
in amounts customarily insured against by such entities and with such
deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration; Location of Office;
Notice of Change of Name or Office.
(a) So long as any of the Shares is outstanding, the Company will maintain
an office or agency where Shares may be presented for redemption, exchange,
conversion, exercise or registration of transfer as provided in this Agreement.
Such office or agency initially shall be the office of the Company specified in
Section 17 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least twenty (20) days'
prior written notice of any change in (i) the name of the Company as then in
effect or (ii) the location of the office of the Company required to be
maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company for tax, accounting and any other purposes
shall end on December 31 of each calendar year.
8.4. Environmental Matters.
(a) The Company and shall keep and maintain any property either owned
leased, operated or occupied by the Company free and clear of any Environmental
Liens, and the Company shall keep all such property free of Hazardous Material
contamination and in compliance with all applicable Environmental Laws and the
terms and conditions of any Environmental Permits; provided, however, that the
Company shall have the right at its cost and expense, and acting in good faith,
to contest, object or appeal by appropriate legal proceeding the validity of any
Environmental Lien. The contest, objection or appeal with respect to the
validity of an Environmental Lien shall suspend the Company's obligation to
eliminate such Environmental Lien under this paragraph pending a final
determination by appropriate administrative or judicial authority of the
legality, enforceability or status of such Environmental
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Lien, provided that the following conditions are satisfied: (i)
contemporaneously with the commencement of such proceedings, the Company shall
give written notice thereof to each holder of Shares or Conversion Shares; and
(ii) if under applicable law any real property or improvements thereon are
subject to sale or forfeiture for failure to satisfy the Environmental Lien
prior to a final determination of the legal proceedings, the Company must
successfully move to stay such sale, forfeiture or foreclosure pending final
determination of the Company's action; and (iii) the Company must, if requested,
furnish to the holders of Shares or Conversion Shares a good and sufficient
bond, surety, letter of credit or other security satisfactory to such holders
equal to the amount (including any interest and penalty) secured by the
Environmental Lien.
(b) The Company will, by administrative or judicial process, enforce the
obligations of any other Person who is potentially liable for damages,
contribution or other relief in connection with any violation of Environmental
Laws, including, but not limited to, asbestos abatement, Hazardous Material
remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each current,
former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal,
discharge, storage or transportation by the Company on behalf of any
predecessors thereof of any Hazardous Material upon, into, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the Company; (ii) any judicial or administrative action,
suit or proceeding, actual or threatened, relating to Hazardous Material upon,
in, from or affecting any real property (including improvements) currently or
formerly owned, leased, operated or occupied by the Company for which the
Company could be liable; (iii) any violation of any Environmental Law, by the
Company or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company; and (v) any liability arising out of or related
to the off-site shipment, disposal, treatment, handling or disposal of Hazardous
Materials. This Section 8.4(c) and Section 8.4(d) shall survive any payment,
conversion or transfer of Shares and any termination of this Agreement.
(d) To the extent that the Company is strictly liable without regard to
fault under any environmental law, regulation or ordinance, the Company's
obligations to the holders of Shares or Conversion Shares under any of the
indemnification provisions of the Stock Purchase Agreements shall likewise be
strict without regard to fault with respect to the violation of any
environmental law, regulation or ordinance which results in any liability to any
of the indemnified persons referred to in Section 8.4(c).
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8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times keep reserved,
free from preemptive rights, out of its authorized Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of the conversion
rights provided in Section 5 of the Series 2 Certificate of Designations.
8.6. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares, make
whatever other filings with the Commission, or otherwise make generally
available to the public such financial and other information, as any such holder
may deem reasonably necessary or desirable in order to enable such holder to be
permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
If a holder of Shares proposes to transfer any such Shares pursuant to Rule
144A under the Securities Act (as in effect from time to time), the Company
agrees to provide (upon the request of such holder or the prospective
transferee) to such holder and (if requested) to the prospective transferee any
financial or other information concerning the Company which is required to be
delivered by such holder to any transferee of such Shares pursuant to such Rule
144A, subject to confidentiality provisions, if applicable.
8.8. Senior Securities.
The Company shall maintain the senior status of the Series 2 Convertible
Preferred Stock such that it shall rank senior in all respects, including the
payment on limitation and redemption, to all other equity securities of the
Company, except that the Series 1 Preferred shall rank pari passu with the
Series 2 Convertible Preferred Stock.
8.9. Shelf Registration.
On or before June 30, 2000, the Company shall prepare and file with the SEC
a registration statement for an offering to be made on a delayed or continuous
basis pursuant to
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Rule 415 of the Securities Act (a "Shelf Registration") registering the resale
from time to time by the Purchaser Holders of all the Registrable Securities
(the "Initial Shelf Registration"). The registration statement shall be on Form
S-3 or another appropriate form permitting registration of such Registrable
Securities for resale by the Purchaser Holders. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time, the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within thirty (30) days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or to promptly file an additional
Shelf Registration covering all the Registrable Securities (a "Subsequent Shelf
Registration"). All fees and expenses incident to the Company's or any Purchaser
Holder's performance of or compliance with a Shelf Registration pursuant to this
Agreement shall be borne by the Company whether or not any of the Registration
Statements become effective. At such time that all Purchaser Holders are able to
sell their common stock under Rule 144 without any restrictions, then the
obligation of the Company to maintain the Shelf Registration pursuant to this
Section 8.9 shall terminate.
8.10. Further Assurances.
The Company will from time to time, upon the request of any Purchaser
Holder, promptly and duly execute and deliver any and all such further
instruments and documents as such holder may reasonably deem necessary or
desirable to obtain the full benefits of (i) the obligations of the Company
under this Agreement and (ii) the other rights and powers herein granted. Upon
the instructions from time to time of (I) any Purchaser Holder or (II) any
Transferee, provided that such Transferee holds not less than an aggregate of
20,000 Shares, the Company shall execute and cause to be filed any document or
filing presented to the Company in proper form for signing or filing, in each
case as the Purchaser Holder or such Transferee may reasonably deem necessary or
desirable in light of the Company's obligations under this Agreement, and the
Company shall pay or cause to be paid any filing or other fees in connection
therewith.
SECTION 9. NEGATIVE COVENANTS
So long as the Purchaser Holders hold any Shares (except as otherwise
provided in Section 9.2 herein), the Company covenants and agrees that without
the prior written consent of the holders of (A) at least 70% of outstanding
Shares with respect to Sections 9.1, 9.3 and 9.5 to 9.10 herein and (B) at least
50% of the outstanding Shares with respect to Sections 9.2 and 9.4 herein:
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9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Stock
Purchase Agreements, the Series 1 Waiver, the Series 2 Certificate of
Designations, the Registration Rights Agreement, the Registration Rights
Amendment, the Stockholders' Agreement or the Stockholders' Agreement Amendment.
The Company will at all times in good faith assist in the carrying out of all
such terms, and in the taking of all such action, as may be necessary or
appropriate in order to protect the rights of the holders of Shares (as such
rights are set forth in the Stock Purchase Agreements, Series 1 Waiver, the
Series 2 Certificate of Designations, the Registration Rights Agreement, the
Registration Rights Agreement Amendment, the Stockholders' Agreement and the
Stockholders' Agreement Amendment) against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not issue any
shares or class or series of equity or equity-linked security, which is senior
to, or pari passu with, the Series 2 Convertible Preferred Stock as to dividend
payments or amounts payable in the event of liquidation or winding up of the
Company, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under the Stock Purchase Agreements, the Series 1
Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment, the
Registration Rights Agreement, the Registration Rights Amendment or the Series 2
Certificate of Designations, (c) will not amend its certificate of incorporation
or by-laws in any manner which would impair or reduce the rights of the
Preferred Stock, including, without limitation, an amendment which would alter
or change the powers, privileges or preferences of the holders of the Series 2
Convertible Preferred Stock (including, without limitation, changing the Series
2 Certificate of Designations after any Shares have been called for redemption),
(d) except as otherwise provided in the Series 2 Certificate of Designations or
in accordance with Section 6(a) of the Series 1 Certificate of Designations, as
in effect on the date hereof, will not redeem, repurchase or otherwise acquire
any shares of capital stock of the Company or any other rights or options to
subscribe for or purchase any capital stock of the Company or any other
securities convertible into or exchangeable for capital stock of the Company,
(e) will not permit the par value or the determined or stated value of any
shares of Common Stock receivable upon the conversion of the Shares to exceed
the amount payable therefor upon such conversion, (f) will take all such action
as may be necessary or appropriate in order that the Company may at all times
validly and legally issue duly authorized, fully paid and nonassessable shares
of the Common Stock free from all taxes, Liens and charges with respect to the
issue thereof, upon the conversion of the Shares from time to time outstanding,
(g) will not take any action which results in any adjustment of the current
conversion price under the Series 2 Certificate of Designations if the total
number of shares of the Common Stock (or other securities) issuable after the
action upon the conversion of all of the then outstanding Shares would exceed
the total number of shares of Common Stock (or other securities) then authorized
by the Company's certificate of incorporation and available for the purpose of
issuance upon such conversion or exercise, (h) will not have any authorized
Common Stock (and will not issue any Common Stock) other than its
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existing authorized Common Stock, $.01 par value per share, and (i) will not
amend its certificate of incorporation to change any terms of its Common Stock.
9.2. Indebtedness.
So long as the Purchaser Holders hold at least 20% of the aggregate number
of shares of the Series 2 Convertible Preferred Stock purchased pursuant to the
Stock Purchase Agreements, the Company will not (i) incur Indebtedness,
excluding any Indebtedness set forth on Schedule 2 hereto, in excess of $20
million in aggregate principal amount; or (ii) enter into any agreement,
amendment or modification with respect to any Indebtedness, which agreement,
amendment or modification under clause (ii) restricts or prohibits (or was
intended primarily to restrict or prohibit) the Company from making any payments
under, or otherwise performing under the Stock Purchase Agreements.
9.3. Dissolution.
The Company will not (or will not agree to) wind up, liquidate or dissolve
its affairs.
9.4. No Change in Business.
The Company will not change substantially the character of its business as
conducted on the Closing Date as represented in Section 4.4 hereof and described
in the Disclosure Material.
9.5. Restricted Payments; Investments.
The Company will not declare or make or permit to be declared or made:
(a) any Restricted Payment; or
(b) any Investment.
9.6. Affiliate Loans and Guaranties.
The Company may not incur or permit to exist any of the following:
(a) any obligation of the Company to repay money borrowed owing to (i) any
Affiliate of the Company or (ii) any other holder of shares of the capital stock
of the Company; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company and which is an obligation of (i) any Affiliate of the
Company or (ii) any other
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holder of shares of the capital stock of the Company (excluding, in the case of
this clause (b), any obligation of the Company which is not owed to an Affiliate
of the Company or to any other holder of shares of the capital stock of the
Company).
This Section 9.6 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof or (3) Indebtedness identified on Schedule 2
hereto.
9.7. Transactions with Affiliates.
The Company will not directly or indirectly, enter into any transaction or
agreement (including, without limitation, the purchase, sale, distribution,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company, unless such transaction or agreement (a) is approved
by a majority of the Outside Directors on the Board of Directors, and (b) is on
terms that are no less favorable to the Company, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is not
such an Affiliate; provided, however, that this Section 9.7 shall not limit, or
be applicable to, (i) employment arrangements with (and general salary and
benefits compensation for) any individual who is a full-time employee of the
Company if such arrangements are approved by a majority of the Outside Directors
on the Board of Directors; (ii) the payment of reasonable and customary regular
fees to directors of the Company who are not employees of the Company; (iii)
existing arrangements as disclosed on the Disclosure Schedule; and (iv) the
transactions expressly contemplated by this Agreement.
9.8. Liens.
The Company will not create or permit to exist, to create or suffer to
exist, any Lien upon or with respect to any of its assets or income, other than
Permitted Liens and existing liens set forth on Schedule 5 hereto.
9.9. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the Company's
behalf will do or cause to be done (or will omit to do or to cause to be done)
any act which act (or which omission) would result in bringing the issuance or
sale of the Shares or the Conversion Shares within the provisions of Section 5
of the Securities Act or the filing, notification or reporting requirements of
any state securities law (other than in accordance with a registration and
qualification of Conversion Shares pursuant to the Registration Rights
Agreement).
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9.10. Maintenance of Public Market.
The Company will not proceed with a program of acquisition of its Common
Stock, initiate a corporate reorganization or recapitalization or undertake a
consolidation or merger or authorize, consent to or take any action which would
have the effect of:
(a) removing the Company from registration with the Commission under the
Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of the
Securities Exchange Act;
(c) reducing substantially or eliminating the public market for shares of
Common Stock of the Company;
(d) causing a delisting of the Company's Common Stock as a Small Cap Market
Security on the NASDAQ Stock Market (unless such stock is delisted as a result
of being listed on the NASDAQ National Market or a national securities
exchange); or
(e) if any shares of the Company's Common Stock are at any time listed on a
national exchange, causing a delisting of such stock from such exchange.
9.11. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company will not, (a)
issue or agree to issue any capital stock or any securities exercisable for, or
convertible or exchangeable into, capital stock or (b) purchase, redeem or
otherwise acquire any of its capital stock; provided, however, that this Section
9.11 shall not limit, or be applicable to, (i) the transactions contemplated by
the Stock Purchase Agreements, including any issuance of capital stock in
connection with the transactions contemplated by Sections 9.1 and 9.10 hereof,
(ii) grants of options or issuances of Common Stock to officers, directors or
employees of the Company pursuant to the current terms of the Company's 1995
Stock Incentive Plan and (iii) the conversion of the Series 1 Preferred or the
exercise of existing warrants.
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS
Purchaser's obligation to purchase Shares hereunder is subject to
satisfaction of the following conditions at the Closing (any of which may be
waived by Purchaser):
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10.1. Series 2 Certificate of Designations; Series 1 Waiver; Stockholders'
Agreement; Registration Rights Agreement.
(a) The certificate of incorporation of the Company shall have been duly
amended by the filing of the Series 2 Certificate of Designations in the form of
Exhibit A-1 hereto.
(b) The Company, the Purchasers and the other stockholders of the Company
named therein shall have entered into the Stockholders' Agreement Amendment
substantially in the form of Exhibit C hereto.
(c) The Company shall have entered into a Registration Rights Agreement
with the Purchasers substantially in the form of Exhibit D-1 hereto, and the
Company, the Purchasers and certain other stockholders of the Company shall have
entered into the Registration Rights Amendment substantially in the form of
Exhibit D-2 hereto.
(d) The Company, the Purchasers and certain other stockholders of the
Company shall have entered into the Series 1 Waiver substantially in the form of
Exhibit A-2 hereto.
10.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for Shares
contemplated by Section 2(b) hereof.
10.3. Senior Status.
The Company shall have taken all of the necessary actions, including the
amendment of the appropriate existing agreements, so that, except as provided in
this Section 10.3, the Series 2 Convertible Preferred Stock shall rank senior in
all respects, including the payment on limitation and redemption, to all other
equity securities of the Company, except that the Series 1 Preferred shall rank
pari passu with the Series 2 Convertible Preferred Stock.
10.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in the Stock
Purchase Agreement herein or in any certificate or document delivered pursuant
hereto shall be correct and complete on and as of the Closing Date with the same
effect as though made on and as of such date.
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10.5. Compliance with Agreements.
The Company shall have performed and complied in all material respects with
all agreements, covenants and conditions contained in the Stock Purchase
Agreements and any other document contemplated hereby or thereby which are
required to be performed or complied with by the Company on or before the
Closing Date.
10.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the Closing Date and
signed by the President or Chief Executive Officer and by the Secretary or the
Treasurer of the Company, to the effect that the conditions of Sections 10.4,
10.5, 10.8 (second sentence only) and 10.10 have been satisfied.
10.7. Proceedings.
All corporate and other proceedings in connection with the transactions
contemplated by the Stock Purchase Agreements, and all documents incident
thereto, shall be in form and substance satisfactory to the Purchaser and its
counsel, and the Purchaser shall have received all such originals or certified
or other copies of such documents as the Purchaser or its counsel may reasonably
request.
10.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be prohibited by any
law or governmental order, rule, ruling, regulation, release, interpretation or
opinion applicable to the Purchaser and shall not subject the Purchaser to any
penalty, tax, liability or other onerous condition. Any necessary consents,
approvals, licenses, permits, orders and authorizations of, and any filings,
registrations or qualifications with, any governmental or administrative agency
or other Person, with respect to the transactions contemplated by the Stock
Purchase Agreements shall have been obtained or made and shall be in full force
and effect. The Company shall have delivered to the Purchaser, upon its
reasonable request setting forth what is required, factual certificates or other
evidence, in form and substance satisfactory to the Purchaser and its counsel,
to enable the Purchaser to establish compliance with this condition.
10.9. No Material Adverse Change.
There shall have been no material adverse change in the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis since
December 31, 1999.
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10.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the Closing Date and
addressed to the Purchasers, of Blank Rome Comisky & McCauley LLP, counsel for
the Company, which opinion shall be in form and substance satisfactory to the
Purchaser and its counsel and shall be to the effect set forth in Exhibit E
hereto.
10.11. Acceptance of Agent for Service of Process.
CSC, The United States Corporation Company shall have accepted its
appointment as the Company's agent in New York to receive service of process
pursuant to Section 18(i) hereof.
10.12. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions, in
form and substance reasonably satisfactory to the Purchaser and its counsel,
relating to matters incident to the transactions contemplated hereby as the
Purchaser may reasonably request.
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and the Purchaser contained in this Agreement, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement, the Registration Rights Amendment or in any document or
certificate delivered pursuant hereto or thereto or in connection herewith shall
survive for a period of two (2) years from the Closing Date, and shall continue
in effect following, the execution and delivery of the Stock Purchase
Agreements, the Series 1 Waiver, the Stockholders' Agreement, the Registration
Rights Agreement, the Registration Rights Amendment, the closings hereunder and
thereunder, any investigation at any time made by the Purchaser or on its behalf
or by any other Person, the issuance, sale and delivery of the Shares, any
disposition thereof and any payment, conversion or cancellation of the Shares;
provided that Section 9 shall terminate upon conversion of all of the Shares (or
as earlier provided therein). All statements contained in any certificate or
other document delivered by or on behalf of the Company pursuant hereto shall
constitute representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchaser harmless from
and against and will pay to the Purchaser the full amount of any loss, damage,
liability or expense (including amounts paid in settlement and reasonable
attorneys' fees and expenses) to the Purchaser resulting either directly or
indirectly from any breach of the representations, warranties, covenants or
agreements of the Company contained in any Stock Purchase Agreement, or in the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the
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Registration Rights Agreement, the Registration Rights Amendment or any other
document or certificate delivered pursuant hereto or thereto or in connection
herewith or therewith.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event that
this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated are consummated,
the Company shall pay (i) the costs, fees and expenses of the Company and its
counsel in connection with the Stock Purchase Agreements, the Series 2
Certificate of Designations, the Series 1 Waiver, the Stockholders' Agreement,
the Stockholders' Agreement Amendment, the Registration Rights Agreement, and
the Registration Rights Amendment, other related documentation and the issuance
of the Shares and the Conversion Shares and the furnishing of all opinions by
counsel for the Company, (ii) the costs, fees and expenses of Morgan, Lewis &
Bockius LLP in connection with the Stock Purchase Agreements, the Series 2
Certificate of Designations, the Series 1 Waiver, the Stockholders' Agreement,
the Stockholders' Agreement Amendment, the Registration Rights Agreement and the
Registration Rights Amendment, other related documentation and the transactions
contemplated hereby and thereby (whether or not a Closing occurs hereunder);
provided, however, that such fees and expenses shall not exceed $45,000 without
the approval of the Company, (iii) the fees and expenses of counsel to the
Purchasers in connection with any amendments to or modifications or waivers of
any provisions of the Stock Purchase Agreements, the Series 1 Waiver, the Series
2 Certificate of Designations, the Stockholders' Agreement, the Stockholders'
Agreement Amendment, the Registration Rights Agreement or the Registration
Rights Amendment, other related documentation or in connection with any other
agreements between the Purchasers and the Company and (iv) the fees and expenses
(including attorneys' fees and expenses) of any holder of Shares or Conversion
Shares in enforcing its rights against the Company if the Company defaults in
its obligations hereunder, under the Series 1 Waiver, Series 2 Certificate of
Designations, the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement or the Registration Rights
Amendment.
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(b) In addition to all other sums due hereunder or provided for in this
Agreement, the Company shall pay to the Purchaser or its agents, respectively,
an amount sufficient to indemnify such persons (net of any Taxes on any
indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding against any or all of the Company, the
Purchasers, or their agents, arising out of or in connection with the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment or purchase of the Shares (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of the Purchaser or its agents or is
commenced or filed against the Purchaser or its agents because of the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment, the purchase of the Shares or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by Purchaser of any
provision of any confidentiality agreement between the Company and the
Purchaser, in any case, which was not taken by them in reliance upon any of the
Company's representations, warranties, covenants or agreements in the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment, or in any other documents or instruments
contemplated hereby or thereby or executed herewith or therewith or pursuant
hereto or thereto. The Company shall assume the defense, and shall have its
counsel represent the Purchaser and such agents, in con nection with
investigating, defending or preparing to defend any such action, suit, claim or
proceeding (including any inquiry or investigation); provided, however, that the
Purchaser, or any such agent, shall have the right (without releasing the
Company from any of its obligations hereunder) to employ its own counsel and
either to direct its own defense or to participate in the Company's defense, but
the fees and expenses of such counsel shall be at the expense of such person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with such defense, (ii) the Company shall not have
provided its counsel to take charge of such defense or (iii) there may be
defenses available to the Purchaser, or such agent of the Purchaser which are
different from or additional to those available to the Company, then in any of
such events referred to in clauses (i), (ii) or (iii) such counsel fees and
expenses (but only for one counsel for the Purchaser and its agents) shall be
borne by the Company. Any settlement of any such action, suit, claim or
proceeding shall require the consent of both the Company and such indemnified
person (neither of which shall unreasonably withhold its consent).
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(c) The Company agrees to pay, or to cause to be paid, all documentary,
stamp and other similar Taxes, other than transfer taxes payable upon the
transfer by the Purchaser of Shares to a Transferee, levied under the laws of
the United States of America, any state or local Taxing Authority thereof or
therein or any other applicable jurisdiction in connection with the issuance and
sale of the Shares and the execution and delivery of the Stock Purchase
Agreements, the Series 1 Waiver, the Stockholders' Agreement, the Stockholders'
Agreement Amendment, the Registration Rights Agreement, the Registration Rights
Amendment and any other documents or instruments contemplated hereby or thereby
and any modification of the Series 2 Certificate of Designations, the Series 1
Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment, the
Registration Rights Agreement, the Registration Rights Amendment or the Stock
Purchase Agreements or any such other documents or instruments and will hold the
Purchaser harmless without limitation as to time against any and all liabilities
with respect to all such Taxes.
(d) The obligations of the Company under this Section 13 shall survive any
Closing hereunder and any termination of the Stock Purchase Agreements.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is a direct or
indirect transferee (as a result of one or more transfers) from the Purchaser
shall be the holder of any Shares, the Company will make all redemption
payments, liquidation payments and other distributions by wire transfer to the
Purchaser's or such other holder's (or its nominee's) account at any bank or
trust company, notwithstanding any contrary provision herein or in the Company's
certificate of incorporation with respect to the place of payment. The Purchaser
has provided an address on Schedule 1 hereto for payments by wire transfer, and
such address may be changed for the Purchaser or any subsequent holder by notice
to the Company. All such payments shall be made in U.S. dollars and in federal
or other immediately available funds.
SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended, waived,
modified or terminated only with the written consent of the holders of more than
70% of outstanding Shares; provided, however, that no such amendment, waiver,
modification or termination shall change this Section 15(a) without the written
consent of the holders of all the Shares and Conversion Shares then outstanding.
(b) Promptly after obtaining the written consent of the holders as herein
provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares and
Conversions Shares then
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outstanding, but failure to transmit copies shall not in any way affect the
validity of any such amendment, waiver, modification or termination.
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any holder
of Shares to the Company at its address provided under Section 17 hereof, the
Company at its expense (except for any transfer tax arising out of the exchange)
will issue and deliver to or upon the order of the holder in exchange therefor a
new certificate or certificates in such amount or amounts as such holder may
request in the aggregate representing the number of Shares represented by such
surrendered certificates, and registered in the name of such holder or as such
holder may direct.
(b) Any Share certificate which is converted into Conversion Shares in
whole or in part shall be canceled by the Company, and no new Share certificates
shall be issued in lieu of any Shares which have been converted into Conversion
Shares. The Company shall issue a new certificate with respect to any Shares
which were not converted into Conversion Shares and were represented by a
certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Share certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company (if requested by the Company and
unsecured in the case of the Purchaser or another similar institutional holder),
or in the case of any such mutilation, upon surrender of such Share certificate
(which surrendered Share certificate shall be cancelled by the Company), the
Company will issue a new Share certificate of like tenor in lieu of such lost,
stolen, destroyed or mutilated Share certificate as if the lost, stolen,
destroyed or mutilated Share certificate were then surrendered for exchange.
SECTION 17. NOTICES
All notices, requests, demands, consents and other communications hereunder
shall be in writing and shall be delivered by hand or shall be sent by telex or
telecopy (confirmed by registered, certified or overnight mail or courier,
postage and delivery charges prepaid), (i) if to the Company, to Impax
Laboratories, Inc., 30831 Huntwood Avenue, Hayward, California 94544, Attention:
Barry R. Edwards, Co-Chief Executive, with a copy to Blank Rome Comisky &
McCauley LLP, One Logan Square, Philadelphia, PA 19103-6998, Attention: Sol B.
Genauer or (ii) if to the Purchaser, at the address indicated on Schedule 1
hereto, with a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York,
NY 10178-0060, Attention: David W. Pollak, Esq., or at such other address as a
party may from time to time designate as its address
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in writing to the other party to this Agreement. Whenever any notice is required
to be given hereunder, such notice shall be deemed given and such requirement
satisfied only when such notice is delivered or, if sent by telex or telecopier,
when received.
SECTION 18. MISCELLANEOUS
(a) The Stock Purchase Agreements, Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement, the Registration Rights Amendment and, upon any closing hereunder and
the Series 2 Certificate of Designations together with any further agreements
entered into by the Purchaser and the Company at any closing hereunder, contain
the entire agreement between the Purchaser and the Company, and supersede any
prior oral or written agreements, commitments, terms or understandings,
regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, whether so expressed
or not; provided, that (a) the Company may not assign any of its rights, duties
or obligations under this Agreement, except with the Purchaser's written
consent, and (b) the Purchaser may assign any of its rights, duties or
obligations under this Agreement to a purchaser of its Shares, provided that
such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the Purchaser may
assign, in whole or in part, any or all of its rights (and/or obligations) under
this Agreement to any permitted transferee of any or all of its Shares or
Conversion Shares and (unless such assignment expressly provides otherwise) any
such assignment shall not diminish the rights the Purchaser would otherwise have
under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party hereto in
exercising any right, power, or remedy conferred by this Agreement shall operate
as a waiver thereof or otherwise prejudice such party's rights, powers and
remedies. No single or partial exercise of any right, power or remedy conferred
by this Agreement shall preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
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(f) The headings and captions in this Agreement are for convenience of
reference only and shall not define, limit or otherwise affect any of the terms
or provisions hereof.
(g) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York (other than any conflict of laws rule which
might result in the application of the laws of any other jurisdiction).
(h) 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,
and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY
AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE SERIES 1 WAIVER, THE SERIES 2 CERTIFICATE OF
DESIGNATIONS, THE STOCKHOLDERS' AGREEMENT, THE STOCKHOLDERS' AGREEMENT
AMENDMENT, THE REGISTRATION RIGHTS AGREEMENT, THE REGISTRATION RIGHTS AMENDMENT,
THE SHARES OR THE CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE SERIES 1
WAIVER, THE SERIES 2 CERTIFICATE OF DESIGNATIONS, THE STOCKHOLDERS' AGREEMENT,
THE STOCKHOLDERS' AGREEMENT AMENDMENT, THE REGISTRATION RIGHTS AGREEMENT, THE
REGISTRATION RIGHTS AMENDMENT, THE SHARES OR THE CONVERSION SHARES. THE COMPANY
DESIGNATES AND APPOINTS CSC, THE UNITED STATES CORPORATION COMPANY, AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY AND WHICH IRREVOCABLY
AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF
PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE
COMPANY HEREBY AGREES THAT
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SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF
PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PURCHASER TO BRING
PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE SERIES 1 WAIVER, THE SERIES 2 CERTIFICATE OF DESIGNATIONS, THE
STOCKHOLDERS' AGREEMENT, THE STOCKHOLDERS' AGREEMENT AMENDMENT, THE REGISTRATION
RIGHTS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AMENDMENT, THE SHARES OR THE
CONVERSION SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY
OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL- ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT,
THE SERIES 1 WAIVER, THE SERIES 2 CERTIFICATE OF DESIGNATIONS, THE STOCKHOLDERS'
AGREEMENT, THE STOCKHOLDERS' AGREEMENT AMENDMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE REGISTRATION RIGHTS AMENDMENT, THE SHARES OR THE CONVERSION
SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
IMPAX LABORATORIES, INC.
By /s/ Barry R. Edwards
--------------------------------
Name: Barry R. Edwards
Title: Co-Chief Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
CHINA DEVELOPMENT INDUSTRIAL BANK, INC.
By: /s/ Brian C. Keng
-----------------
Name: Brian C. Keng
Title: Senior Vice President
