SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): March 30, 1995
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Circa Pharmaceuticals, Inc.
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(Exact Name of Registrant as specified in its charter)
New York 0-8049 11-1966265
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
33 Ralph Avenue, Copiague, New York 11726
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 842-8383
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Former name or former address, if changed since last report
<PAGE>
Item 5. Other Events.
On March 29, 1995, Circa Pharmaceuticals, Inc. (the
"Registrant") entered into a definitive Agreement and Plan of
Merger, dated as of March 29, 1995, by and among Watson
Pharmaceuticals, Inc. ("Watson"), Gum Acquisition Corp., a
wholly-owned subsidiary of Watson ("Watson Sub") and the
Registrant (the "Merger Agreement"), pursuant to which Watson Sub
will merge (the "Merger") with and into the Registrant, with the
Registrant being the surviving corporation in the Merger. As a
result of the Merger, Circa will become a wholly-owned subsidiary
of Watson. It is intended that the Merger will qualify as a
"pooling of interests" for accounting purposes and that the
Merger will constitute a tax free reorganization for federal
income tax purposes.
Pursuant to the terms and conditions of the Merger
Agreement, at the effective time of the Merger, each share of
common stock, par value $.01 per share, of the Registrant (the
"Registrant Common Stock") will be converted into the right to
receive .86 of a share (the "Exchange Ratio") of the common
stock, par value $.0033 per share, of Watson (the "Watson Common
Stock"). If, during a measurement period prior to the date
scheduled for the Registrant's stockholders' vote on the Merger,
the average price of Watson Common Stock is less than $25.00, the
Registrant may terminate the Merger Agreement unless Watson
agrees to a specified upward adjustment in the Exchange Ratio.
Consummation of the Merger is subject to the
satisfaction of certain conditions, including approval by the
Registrant's stockholders of the Merger Agreement, receipt of
regulatory approvals and treatment of the Merger as a "pooling of
interests" for accounting purposes. In the event of termination
under specified conditions, one party to the Merger Agreement may
be entitled to receive a fee of up to $15 million from the other
and payment of its expenses. A copy of the Merger Agreement is
attached as Exhibit 10.1 and is hereby incorporated by reference.
A copy of the joint press release of the Registrant and
Watson, dated March 30, 1995, is attached as Exhibit 10.2 and is
hereby incorporated by reference.
Item 7. Financial Statements, Pro Formal Financial Information
and Exhibits.
(c) Exhibits
10.1 Agreement and Plan of Merger, dated as of March
29, 1995, by and among the Registrant, Watson and
Watson Sub.
10.2 Press Release, dated March 30, 1995.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated: March 30, 1995 CIRCA PHARMACEUTICALS, INC.
By: /s/ Melvin Sharoky, M.D.
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Name: Melvin Sharoky, M.D.
Title: President and Chief Executive
Officer
<PAGE>
INDEX
Exhibit
Number Description of Document
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10.1 Agreement and Plan of Merger, dated as of March 29,
1995, by and among the Registrant, Watson and Watson
Sub.
10.2 Press Release, dated March 30, 1995.
Exhibit 10.1
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
Among
WATSON PHARMACEUTICALS, INC.,
GUM ACQUISITION CORP.
and
CIRCA PHARMACEUTICALS, INC.
DATED AS OF MARCH 29, 1995
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<PAGE>
TABLE OF CONTENTS
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger. . . . . . . . . . . . . . . . . 1
Section 1.2 Closing . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effective Time. . . . . . . . . . . . . . . 2
Section 1.4 Conversion of Shares. . . . . . . . . . . . 2
Section 1.5 Stock Options; Restricted Stock . . . . . . 4
Section 1.6 Exchange of Certificates Representing
CIRCA Common Stock . . . . . . . . . . . . 5
Section 1.7 Adjustment of Exchange Ratio. . . . . . . . 8
Section 1.8 Dissenting Shares . . . . . . . . . . . . . 8
ARTICLE II CERTAIN MATTERS RELATING TO THE SURVIVING
CORPORATION . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Certificate of Incorporation of the
Surviving Corporation. . . . . . . . . . . 9
Section 2.2 By-Laws of the Surviving Corporation. . . . 9
Section 2.3 Directors of the Surviving Corporation. . . 9
Section 2.4 Officers of the Surviving Corporation . . . 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF WATSON
AND MERGER SUB. . . . . . . . . . . . . . . . . . 9
Section 3.1 Existence, Good Standing, Corporate
Authority. . . . . . . . . . . . . . . . . 10
Section 3.2 Authorization, Validity and Effect of
Agreements . . . . . . . . . . . . . . . . 10
Section 3.3 Compliance with Laws--General . . . . . . . 10
Section 3.4 Compliance with Laws--FDA/DEA . . . . . . . 11
Section 3.5 Capitalization. . . . . . . . . . . . . . . 13
Section 3.6 Subsidiaries. . . . . . . . . . . . . . . . 13
Section 3.7 Other Interests . . . . . . . . . . . . . . 14
Section 3.8 No Violation. . . . . . . . . . . . . . . . 15
Section 3.9 Conduct of Business . . . . . . . . . . . . 15
Section 3.10 SEC Documents . . . . . . . . . . . . . . . 16
Section 3.11 Disclosure Documents. . . . . . . . . . . . 16
Section 3.12 Litigation. . . . . . . . . . . . . . . . . 17
Section 3.13 Products Liability. . . . . . . . . . . . . 17
Section 3.14 Absence of Certain Changes. . . . . . . . . 17
Section 3.15 Trademarks and Patents. . . . . . . . . . . 17
Section 3.16 Properties. . . . . . . . . . . . . . . . . 18
Section 3.17 Material Contracts. . . . . . . . . . . . . 19
Section 3.18 Taxes . . . . . . . . . . . . . . . . . . . 20
Section 3.19 Employee Benefit Plans. . . . . . . . . . . 20
Section 3.20 Labor Matters . . . . . . . . . . . . . . . 21
Section 3.21 Environmental Matters . . . . . . . . . . . 22
Section 3.22 Absence of Indemnifiable Claims, etc. . . . 22
Section 3.23 No Brokers. . . . . . . . . . . . . . . . . 22
Section 3.24 Opinion of Financial Advisor. . . . . . . . 23
Section 3.25 CIRCA Stock Ownership . . . . . . . . . . . 23
Section 3.26 Watson Common Stock . . . . . . . . . . . . 23
Section 3.27 Convertible Securities. . . . . . . . . . . 23
Section 3.28 Pooling of Interests, Tax Reorganization. . 23
Section 3.29 Takeover Statutes . . . . . . . . . . . . . 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CIRCA . . . . . 24
Section 4.1 Existence, Good Standing, Corporate
Authority. . . . . . . . . . . . . . . . . 24
Section 4.2 Authorization, Validity and Effect of
Agreements . . . . . . . . . . . . . . . . 24
Section 4.3 Compliance with Laws--General . . . . . . . 25
Section 4.4 Compliance with Laws--FDA/DEA . . . . . . . 25
Section 4.5 Capitalization. . . . . . . . . . . . . . . 27
Section 4.6 Subsidiaries. . . . . . . . . . . . . . . . 27
Section 4.7 Other Interests . . . . . . . . . . . . . . 28
Section 4.8 No Violation. . . . . . . . . . . . . . . . 28
Section 4.9 Conduct of Business . . . . . . . . . . . . 29
Section 4.10 SEC Documents . . . . . . . . . . . . . . . 29
Section 4.11 Information Supplied. . . . . . . . . . . . 30
Section 4.12 Litigation. . . . . . . . . . . . . . . . . 30
Section 4.13 Products Liability. . . . . . . . . . . . . 30
Section 4.14 Absence of Certain Changes. . . . . . . . . 31
Section 4.15 Trademarks and Patents. . . . . . . . . . . 31
Section 4.16 Properties. . . . . . . . . . . . . . . . . 32
Section 4.17 Material Contracts. . . . . . . . . . . . . 32
Section 4.18 Taxes . . . . . . . . . . . . . . . . . . . 33
Section 4.19 Employee Benefit Plans. . . . . . . . . . . 33
Section 4.20 Labor Matters . . . . . . . . . . . . . . . 34
Section 4.21 Environmental Matters . . . . . . . . . . . 35
Section 4.22 Takeover Statutes . . . . . . . . . . . . . 35
Section 4.23 Absence of Indemnifiable Claims, etc. . . . 35
Section 4.24 No Brokers. . . . . . . . . . . . . . . . . 35
Section 4.25 Opinion of Financial Advisors . . . . . . . 35
Section 4.26 Watson Stock Ownership. . . . . . . . . . . 36
Section 4.27 Pooling of Interests, Tax Reorganization. . 36
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . 36
Section 5.1 Alternative Proposals . . . . . . . . . . . 36
Section 5.2 Interim Operations. . . . . . . . . . . . . 37
Section 5.3 Meetings of Stockholders. . . . . . . . . . 39
Section 5.4 Filings; Other Action . . . . . . . . . . . 40
Section 5.5 Inspection of Records . . . . . . . . . . . 41
Section 5.6 Publicity . . . . . . . . . . . . . . . . . 42
Section 5.7 Registration Statement. . . . . . . . . . . 42
Section 5.8 Further Action. . . . . . . . . . . . . . . 43
Section 5.9 Affiliate Letters . . . . . . . . . . . . . 43
Section 5.10 Expenses. . . . . . . . . . . . . . . . . . 43
Section 5.11 Insurance; Indemnity. . . . . . . . . . . . 43
Section 5.12 Restructuring of Merger . . . . . . . . . . 45
Section 5.13 Rights Agreement. . . . . . . . . . . . . . 45
Section 5.14 Governance. . . . . . . . . . . . . . . . . 45
Section 5.15 Pooling; Reorganization . . . . . . . . . . 45
Section 5.16 Employee Benefit Plans. . . . . . . . . . . 46
Section 5.17 NASD Listing. . . . . . . . . . . . . . . . 46
Section 5.18 Assumption of Agreements, etc . . . . . . . 47
Section 5.19 Cause . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI CONDITIONS. . . . . . . . . . . . . . . . . . . . 47
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger. . . . . . . . . . . . . 47
Section 6.2 Conditions to Obligation of CIRCA to
Effect the Merger. . . . . . . . . . . . . 48
Section 6.3 Conditions to Obligation of Watson and
Merger Sub to Effect the Merger. . . . . . 49
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . 50
Section 7.1 Termination by Mutual Consent . . . . . . . 50
Section 7.2 Termination by Either Watson or CIRCA . . . 50
Section 7.3 Termination by CIRCA. . . . . . . . . . . . 51
Section 7.4 Termination by Watson . . . . . . . . . . . 52
Section 7.5 Effect of Termination and Abandonment.. . . 53
Section 7.6 Extension; Waiver . . . . . . . . . . . . . 54
ARTICLE VIII GENERAL PROVISIONS. . . . . . . . . . . . . . . . 54
Section 8.1 Nonsurvival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . 54
Section 8.2 Notices . . . . . . . . . . . . . . . . . . 55
Section 8.3 Assignment, Binding Effect. . . . . . . . . 55
Section 8.4 Entire Agreement. . . . . . . . . . . . . . 55
Section 8.5 Amendment . . . . . . . . . . . . . . . . . 56
Section 8.6 Governing Law . . . . . . . . . . . . . . . 56
Section 8.7 Counterparts. . . . . . . . . . . . . . . . 56
Section 8.8 Headings. . . . . . . . . . . . . . . . . . 56
Section 8.9 Interpretation. . . . . . . . . . . . . . . 56
Section 8.10 Waivers . . . . . . . . . . . . . . . . . . 56
Section 8.11 Incorporation of Exhibits . . . . . . . . . 56
Section 8.12 Severability. . . . . . . . . . . . . . . . 56
Section 8.13 Enforcement of Agreement. . . . . . . . . . 57
Exhibit A Affiliate Letter
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of March 29,
1995 (the "Agreement") among Watson Pharmaceuticals, Inc., a Nevada
corporation ("Watson"), Gum Acquisition Corp., a Nevada corporation
and the wholly-owned subsidiary of Watson ("Merger Sub"), and Circa
Pharmaceuticals, Inc., a New York corporation ("CIRCA").
WHEREAS, the Board of Directors of each of Watson and CIRCA
have determined that a business combination between Watson and
CIRCA is in the best interests of their respective companies and
stockholders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits,
and, accordingly, have approved and adopted this Agreement and the
transactions contemplated hereby and recommend approval thereof by
their respective stockholders; and
WHEREAS, the respective Boards of Directors of Watson and
CIRCA have determined that the merger provided for herein is fair
to their respective stockholders; and
WHEREAS, it is the intention of the parties to this Agreement
that for federal income tax purposes, the merger provided for
herein shall qualify as a "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests;" and
WHEREAS, Watson has delivered to CIRCA voting agreements
executed by the holders of more than 17% of Watson's outstanding
voting stock;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth
herein, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in
Section 1.3 of this Agreement), Merger Sub shall be merged with and
into CIRCA in accordance with the laws of the States of Nevada and
New York and the terms of this Agreement (the "Merger"), whereupon
the separate corporate existence of Merger Sub shall cease, and
<PAGE>
CIRCA shall be the surviving corporation of the Merger (sometimes
referred to herein as the "Surviving Corporation").
Section 1.2 Closing. Subject to the terms and conditions of
this Agreement, the closing of the Merger (the "Closing") shall
take place (a) at the offices of D'Ancona & Pflaum, 30 North
LaSalle Street, Suite 2900, Chicago, Illinois 60602 at 10:00 a.m.
on the second business day after all the conditions set forth in
Article VI of this Agreement (other than those that are waived by
the party or parties for whose benefit such conditions exist) are
satisfied; or (b) at such other place, time, and/or date as the
parties hereto may otherwise agree. The date upon which the
Closing shall occur is referred to herein as the "Closing Date."
Section 1.3 Effective Time. As soon as practical after all
the conditions to the Merger set forth in Article VI of this
Agreement have been fulfilled or waived and this Agreement shall
not have been terminated as provided in Article VII hereof, the
parties hereto shall cause certificates of merger to be properly
executed and filed in accordance with the laws of the States of
Nevada and New York and the terms of this Agreement. The parties
hereto shall also take such further actions as may be required
under the laws of the States of Nevada and New York in connection
with the consummation of the Merger. The Merger shall become
effective at such time as the certificates of merger are duly filed
with the Secretary of State of the States of Nevada and New York or
at such later time as is specified in the certificates of merger
(the "Effective Time"). From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges,
powers and franchises and be subject to all of the restrictions,
disabilities, liabilities and duties of CIRCA and Merger Sub, all
as provided under applicable law.
Section 1.4 Conversion of Shares.
(a) At the Effective Time: (i) each share of Common Stock,
par value $.01 per share, of Merger Sub outstanding immediately
prior to the Effective Time shall be converted into and exchanged
for one share of Common Stock, par value $.01 per share, of the
Surviving Corporation; and (ii) each share of Common Stock, par
value $0.01 per share (the "CIRCA Common Stock"), of CIRCA
outstanding immediately prior to the Effective Time plus the
associated rights described in Section 5.13 hereof (the "CIRCA
Rights"), by virtue of the Merger and without any action on the
part of the holder thereof, except as otherwise provided in
Sections 1.4(c) or 1.8 hereof, shall be converted into the right to
receive 0.86 of a share of Common Stock, par value $0.0033 per
share (the "Watson Common Stock"), of Watson (such ratio, as
adjusted as contemplated pursuant to Section 1.7 and 7.3(g), being
referred to herein as the "Exchange Ratio"). The Exchange Ratio
shall be rounded to the nearest ten-thousandth of a share. To the
extent such plan is adopted on or prior to the Effective Time, each
2
share of Watson Common Stock issued to holders of CIRCA Common
Stock in the Merger shall be issued together with one associated
stock purchase right (a "Right") in accordance with a Rights
Agreement to be entered into by Watson. References herein to the
shares of Watson Common Stock issuable in the Merger shall be
deemed to include the associated Rights, if so issued; and
references herein to shares of CIRCA Common Stock to be cancelled
pursuant to the Merger shall be deemed to include the associated
CIRCA Rights.
(b) As a result of the Merger and without any action on the
part of the holder thereof, at the Effective Time, all shares of
CIRCA Common Stock shall cease to be outstanding and shall be
cancelled and retired and shall cease to exist, and each holder of
shares of CIRCA Common Stock shall thereafter cease to have any
rights with respect to such shares of CIRCA Common Stock, except
for the right to receive (except as otherwise provided in Section
1.8 hereof), without interest, the Watson Common Stock and cash for
fractional shares of Watson Common Stock in accordance with Section
1.6 of this Agreement upon the surrender of a certificate (each, a
"Certificate") representing such shares of CIRCA Common Stock in
accordance with the provisions of this Article I.
(c) Each share of CIRCA Common Stock held by CIRCA as
treasury stock or owned by Watson or any Subsidiary (as defined in
Section 1.4(d) of this Agreement) of Watson immediately prior to
the Effective Time shall be canceled, and no payment shall be made
with respect thereto.
(d) For purposes of this Agreement, (i) the term "Average
Closing Price" shall mean the average of the per share daily
closing price of Watson Common Stock as quoted on the NASDAQ
National Market System ("NASDAQ") (and as reported by The Wall
Street Journal or, if not reported thereby, by another
authoritative source) during the twenty (20) consecutive trading
days ending on the Determination Date (as defined in Section 7.3);
(ii) the word "Subsidiary" when used with respect to any Person
means any corporation or other organization, whether incorporated
or unincorporated, of which (A) at least 15% of the securities or
other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such
Person or by any one or more of its Subsidiaries or (B) such Person
or any other Subsidiary of such Person is a general partner, it
being understood that representations and warranties of a Person
concerning any former Subsidiary of such Person shall be deemed to
relate only to the periods during which such former Subsidiary was
a Subsidiary of such Person, provided, however, that "Subsidiary"
shall not include any non-wholly owned entity of such Person if (a)
such Person has, in the aggregate, invested or committed to invest
less than $1,000,000 and (b) such entity generated less than
3
$10,000,000 of net revenues in such entity's last fiscal year;
(iii) the word "Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
any agency or instrumentality thereof, or any affiliate (as that
term is defined in the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange
Act")) of any of the foregoing; (iv) the term "executive officers
of Watson" (and similar formulations) shall mean those persons
identified as such in the Watson Disclosure Letter (as hereinafter
defined); and (v) the term "executive officers of CIRCA" (and
similar formulations) shall mean those persons identified as such
in the CIRCA Disclosure Letter (as hereinafter defined).
Section 1.5 Stock Options; Restricted Stock.
(a) All options (individually, a "CIRCA Option" and
collectively, the "CIRCA Options") outstanding at the Effective
Time under any CIRCA Stock Option Plan or Purchase Plan (the "CIRCA
Stock Option Plans") shall remain outstanding following the
Effective Time. At the Effective Time, such CIRCA Options shall,
by virtue of the Merger and without any further action on the part
of CIRCA or the holder of such CIRCA Options, be assumed by Watson
in such manner that Watson (a) is a corporation (or a parent or a
subsidiary corporation of such corporation) "assuming a stock
option in a transaction to which Section 424(a) applied" within the
meaning of Section 424 of the Code; or (b) to the extent that
Section 424 of the Code does not apply to any such CIRCA Options,
would be such a corporation (or a parent or a subsidiary
corporation of such corporation) were Section 424 applicable to
such option. At the Effective Time, (i) all references in the
CIRCA Stock Option Plans to CIRCA shall be deemed to refer to
Watson and (ii) Watson shall issue to each holder of a CIRCA Option
a document evidencing the assumption of such option by Watson in
accordance herewith. Each CIRCA Option assumed by Watson (as
assumed, the "Watson Options") shall be exercisable upon the same
terms and conditions including, without limitation, vesting (other
than those options the vesting of which is accelerated by virtue of
the Merger, as described in the CIRCA Disclosure Letter), as under
the applicable CIRCA Stock Option Plan and the applicable option
agreement issued thereunder, except that (x) each such CIRCA Option
shall be exercisable for that whole number of shares of Watson
Common Stock (to the nearest whole share) into which the number of
shares of CIRCA Common Stock subject to such CIRCA Option
immediately prior to the Effective Time would be converted under
Section 1.4 of this Agreement; and (y) the option price per share
of Watson Common Stock shall be an amount equal to the option price
per share of CIRCA Common Stock subject to such CIRCA Option in
effect immediately prior to the Effective Time divided by the
Exchange Ratio (the option price per share, as so determined, being
rounded upward to the nearest full cent). The date of grant of
each Watson Option shall be the date on which the corresponding
4
CIRCA Option was granted. No payment shall be made for fractional
interests. From and after the date of this Agreement, except as
provided in Section 5.2(vi) of this Agreement, no additional
options shall be granted by CIRCA or its Subsidiaries under the
CIRCA Stock Option Plans or otherwise. Watson shall take all
corporate actions necessary to reserve for issuance such number of
shares of Watson Common Stock as will be necessary to satisfy
exercises in full of all CIRCA Options after the Effective Time.
(b) All shares of restricted CIRCA Common Stock issued as
described in a schedule to the CIRCA Disclosure Letter shall, upon
their conversion to Watson Common Stock pursuant to Section 1.4(a),
be subject to the same terms and conditions (including, without
limitation, vesting) to which such shares are currently subject,
provided that all references to CIRCA in any agreement relating to
such stock shall be deemed references to Watson.
Section 1.6 Exchange of Certificates Representing CIRCA
Common Stock.
(a) As of the Effective Time, Watson shall deposit, or shall
cause to be deposited, with an exchange agent selected by Watson,
which shall be Watson's Transfer Agent or such other party
reasonably satisfactory to CIRCA (the "Exchange Agent"), for the
benefit of the holders of shares of CIRCA Common Stock, for
exchange in accordance with this Section 1.6, certificates
representing the shares of Watson Common Stock (such certificates
for shares of Watson Common Stock, together with any dividends or
distributions with respect thereto (relating to record dates for
such dividends or distributions after the Effective Time), being
hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.4 and paid pursuant to this Section 1.6 in
exchange for outstanding shares of CIRCA Common Stock. The
Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Watson Common Stock contemplated to be issued pursuant hereto
out of the Exchange Fund. Except as contemplated by Section 1.6(e)
hereof, the Exchange Fund shall not be used for any other purpose.
(b) Promptly after the Effective Time, Watson shall cause the
Exchange Agent to mail to each holder of record of shares of CIRCA
Common Stock immediately prior to the Effective Time (i) a letter
of transmittal which shall specify that delivery shall be effected,
and risk of loss and title to such shares of CIRCA Common Stock
shall pass, only upon delivery of the Certificates representing
such shares to the Exchange Agent and which shall be in customary
form, and (ii) instructions for use in effecting the surrender of
such Certificates in exchange for certificates representing shares
of Watson Common Stock and cash in lieu of fractional shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder
of the Certificate shall be entitled to receive in exchange
5
therefor (i) a certificate representing that number of whole shares
of Watson Common Stock which such holder has the right to receive
in respect of the shares of CIRCA Common Stock formerly represented
by such Certificate (after taking into account all shares of CIRCA
Common Stock then held by such holder); and (ii) a check
representing the amount of cash in lieu of fractional shares, if
any, and unpaid dividends and distributions after giving effect to
any required withholding tax, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant
to the provisions of this Section 1.6, and the shares represented
by the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to
holders of shares of CIRCA Common Stock. In the event of a
transfer of ownership of CIRCA Common Stock which is not registered
in the transfer records of CIRCA, a certificate representing the
proper number of shares of Watson Common Stock, together with a
check for the cash to be paid in lieu of fractional shares, if any,
and unpaid dividends and distributions, if any, may be issued to
such a transferee if the Certificate representing such CIRCA Common
Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding anything to the contrary contained
herein, no dividends or other distributions declared after the
Effective Time on Watson Common Stock shall be paid with respect to
any shares of CIRCA Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein.
Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Watson Common Stock
issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore payable with
respect to such whole shares of Watson Common Stock and not paid,
less the amount of any withholding taxes which may be required
thereon; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent
to surrender payable with respect to such whole shares of Watson
Common Stock, less the amount of any withholding taxes which may be
required thereon.
(d) At or after the Effective Time, there shall be no
transfers on the stock transfer books of CIRCA of the shares of
CIRCA Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and
exchanged for certificates for shares of Watson Common Stock and
cash in lieu of fractional shares, if any, deliverable in respect
thereof pursuant to this Agreement in accordance with the
6
procedures set forth in this Section 1.6. Certificates surrendered
for exchange by any person constituting an "affiliate" of CIRCA for
purposes of Rule 145(c) under the Securities Act of 1933, as
amended (the "Securities Act"), shall not be exchanged until Watson
has received a written agreement from such person as provided in
Section 5.9.
(e) (i) No fractional shares of Watson Common Stock
shall be issued pursuant hereto. In lieu of the issuance of any
fractional share of Watson Common Stock pursuant to Section 1.4(b),
cash adjustments will be paid as set forth herein.
(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (x) the
number of full shares of Watson Common Stock delivered to the
Exchange Agent by Watson pursuant to Section 1.6(a) over (y) the
aggregate number of full shares of Watson Common Stock to be
distributed to holders of CIRCA Common Stock pursuant to Section
1.6(b) (such excess being herein called the "Excess Shares"). As
soon after the Effective Time as practicable, the Exchange Agent,
as agent for such holders of CIRCA Common Stock, shall sell the
Excess Shares at then prevailing prices on the NASDAQ, all in the
manner provided in paragraph (iii) of this Section.
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NASDAQ through one or more member firms of
the National Association of Securities Dealers, Inc. (the "NASD")
and shall be executed in round lots to the extent practicable.
Until the net proceeds of such sale or sales have been distributed
to such holders of CIRCA Common Stock, the Exchange Agent will hold
such proceeds in trust for such holders of CIRCA Common Stock (the
"Trust"). Watson shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs of the Exchange Agent
incurred in connection with such sale of Excess Shares. In
addition, Watson shall pay the Exchange Agent's compensation and
expenses in connection with such sales. The Exchange Agent shall
determine the portion of the Trust to which each holder of CIRCA
Common Stock shall be entitled, if any, by multiplying the amount
of the aggregate net proceeds comprising the Trust by a fraction
the numerator of which is the amount of the fractional share
interest to which such holder of CIRCA Common Stock is entitled
(after taking into account all shares of CIRCA Common Stock then
held by such holder) and the denominator of which is the aggregate
amount of fractional share interests to which all holders of
Certificates representing CIRCA Common Stock are entitled.
(iv) As soon as practicable after the determination of
the amount of cash, if any, to be paid to holders of CIRCA Common
Stock with respect to any fractional share interests, the Exchange
Agent shall promptly pay such amounts to such holders of CIRCA
Common Stock subject to and in accordance with the terms of Section
1.6(f).
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(f) Any portion of the Exchange Fund (including the proceeds
of any investments thereof and any shares of Watson Common Stock)
that remains unclaimed by the former stockholders of CIRCA one year
after the Effective Time shall be delivered to Watson. Any former
stockholders of CIRCA who have not theretofore complied with this
Section 1.6 shall thereafter look only to Watson for payment of
their shares of Watson Common Stock, cash in lieu of fractional
shares and unpaid dividends and distributions on the Watson Common
Stock deliverable in respect of each share of CIRCA Common Stock
such stockholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon.
(g) None of Watson, Merger Sub, CIRCA, the Surviving
Corporation, the Exchange Agent or any other person shall be liable
to any former holder of shares of CIRCA Common Stock for any amount
properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed
Certificate, the shares of Watson Common Stock and cash in lieu of
fractional shares, and unpaid dividends and distributions on shares
of Watson Common Stock as provided in this Section 1.6, deliverable
in respect thereof pursuant to this Agreement.
(i) All shares of Watson Common Stock issued upon conversion
of the shares of CIRCA Common Stock in accordance with the terms
hereof (including any cash paid pursuant hereto) shall be deemed to
have been issued in full satisfaction of all rights pertaining to
such shares of CIRCA Common Stock.
Section 1.7 Adjustment of Exchange Ratio. In the event that,
subsequent to the date of this Agreement but prior to the Effective
Time, the outstanding shares of Watson Common Stock or CIRCA Common
Stock, respectively, shall have been changed into a different
number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification,
split, combination, exchange, recapitalization or other similar
transaction, the Exchange Ratio shall be appropriately adjusted.
Section 1.8 Dissenting Shares. Notwithstanding anything to
the contrary contained in this Agreement, in the event appraisal
rights are available to CIRCA's stockholders pursuant to applicable
law, any shares of CIRCA Common Stock held by a person who objects
to the Merger and who complies with all of the provisions of
applicable law concerning the rights of such person to dissent from
8
the Merger and to require appraisal of such person's shares of
CIRCA Common Stock ("CIRCA Dissenting Shares") shall not be
converted into shares of Watson Common Stock pursuant to Section
1.4 of this Agreement but shall become the right to receive such
consideration as may be determined to be due to the holder of such
CIRCA Dissenting Shares pursuant to applicable law; provided
however, that any CIRCA Dissenting Shares held by a person at the
Effective Time who shall, after the Effective Time, withdraw the
demand for appraisal or lose the right to appraisal, in either case
pursuant to applicable law, shall be deemed to have converted, as
of the Effective Time, his or her shares of CIRCA Common Stock into
shares of Watson Common Stock pursuant to Section 1.4 of this
Agreement.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation of the Surviving
Corporation. The certificate of incorporation of the Surviving
Corporation immediately after the Effective Time shall be in a form
to be agreed to by Watson and CIRCA prior to the Effective Time.
Section 2.2 By-Laws of the Surviving Corporation. The By-
Laws of the Surviving Corporation immediately after the Effective
Time shall be in a form to be agreed to by Watson and CIRCA prior
to the Effective Time.
Section 2.3 Directors of the Surviving Corporation. The
directors of the Surviving Corporation immediately after the
Effective Time shall consist of the persons set forth in the Watson
Disclosure Letter, to hold office until their successors are duly
appointed or elected in accordance with applicable law.
Section 2.4 Officers of the Surviving Corporation. The
officers of the Surviving Corporation immediately after the
Effective Time shall consist of the persons set forth in the Watson
Disclosure Letter, who shall hold the offices listed opposite their
respective names until their successors are duly appointed or
elected in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WATSON AND MERGER SUB
Except as set forth in the disclosure letter delivered by
Watson to CIRCA (the "Watson Disclosure Letter"), Watson and Merger
Sub represent and warrant to CIRCA (with such representations and
warranties with respect to non-wholly owned Subsidiaries being made
9
as to the knowledge of Watson's executive officers (which shall
include knowledge of documents in such persons' possession) as of
the date hereof and at the Effective Time) as follows:
Section 3.1 Existence, Good Standing, Corporate Authority.
Watson and each of its Subsidiaries are corporations or
partnerships duly organized, validly existing and in good standing
under the laws of their respective jurisdiction of incorporation.
Each of Watson and each of its Subsidiaries is duly licensed or
qualified to do business as a foreign corporation or partnership
and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or
leased by it or in which the transaction of its respective business
makes such qualification necessary, except where the failure to be
so qualified or to be in good standing would not have a material
adverse effect on the business, results of operations or financial
condition of Watson and its Subsidiaries taken as a whole (a
"Watson Material Adverse Effect"). Watson and each of its
Subsidiaries have all requisite corporate power and authority to
own, operate and lease their respective properties. The copies of
Watson's and each of its Subsidiaries' Certificates of
Incorporation and Bylaws previously delivered or made available to
CIRCA are true and correct.
Section 3.2 Authorization, Validity and Effect of Agreements.
Each of Watson and Merger Sub has the requisite corporate power and
authority to execute and deliver this Agreement and all agreements
and documents to be executed and delivered in connection herewith.
Subject only to the approval and adoption of this Agreement and the
transactions contemplated hereby by the holders of a majority of
the outstanding shares of Watson Common Stock, the execution and
delivery of this Agreement (and the agreements contemplated hereby)
and the consummation by Watson and Merger Sub of the transactions
contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements
and documents to be executed and delivered in connection herewith
(when executed and delivered pursuant hereto for value received)
will constitute, the valid and legally binding obligations of
Watson and Merger Sub, enforceable against Watson and Merger Sub in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
Section 3.3 Compliance with Laws--General.
(a) Watson and each of its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of any court,
arbitral, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency ("Governmental
Entities") necessary for the lawful conduct of their respective
businesses (the "Permits"), except for immaterial failures that
have no impact on operations.
10
(b) Watson and each of its Subsidiaries are in substantial
compliance with the terms of its Permits, except for immaterial
failures to comply that have no impact on operations.
(c) Watson and each of its Subsidiaries are in substantial
compliance with all laws, ordinances or regulations of all
Governmental Entities, including, but not limited to, those related
to occupational health and safety, controlled substances or
employment and employment practices, except for immaterial failures
to comply that have no impact on operations.
(d) As of the date of this Agreement, no investigation,
review, inquiry or proceeding by any Governmental Entity with
respect to Watson or any of its Subsidiaries is pending or, to the
best knowledge of the executive officers of Watson, threatened.
(e) Neither Watson nor any of its Subsidiaries currently is
subject to any agreement, contract or decree with any Governmental
Entities arising out of any current or previously existing
violations.
Section 3.4 Compliance with Laws--FDA/DEA.
(a) As to each drug of Watson or any Watson Subsidiary for
which an abbreviated application has been approved by the Food and
Drug Administration (the "FDA"), which drugs are described in the
Watson Disclosure Letter, Watson and its Subsidiaries are in
substantial compliance with 21 U.S.C. Sec. 355 or 357, 21 C.F.R.
Parts 314 or 430 et. seq., respectively, and all terms and
conditions of the abbreviated application.
(b) As to each biologic product of Watson or any Watson
Subsidiary for which an establishment license application ("ELA")
and/or product license application ("PLA") has been filed, which
products are described in the Watson Disclosure Letter, Watson and
its Subsidiaries are in substantial compliance with 42 U.S.C. Sec.
262, 21 C.F.R. Part 601 et. seq., and all terms and conditions of
the ELA and/or PLA.
(c) Watson and its subsidiaries are in substantial compliance
with all applicable registration and listing requirements set forth
in 21 U.S.C. Sec. 360 and 21 C.F.R. Part 207. To the extent required,
Watson and its Subsidiaries have obtained licenses from the U.S.
Drug Enforcement Administration (the "DEA") and are in substantial
compliance with all such licenses and all applicable regulations
promulgated by the DEA.
(d) Since May 1, 1993, all manufacturing operations of Watson
and its Subsidiaries have been conducted in substantial compliance
with the good manufacturing practice regulations set forth in 21
C.F.R. Parts 210 and 211.
11
(e) Neither Watson nor any officer, employee, or agent of
Watson or any of its Subsidiaries has made an untrue statement of
a material fact or fraudulent statement to the FDA or the DEA,
failed to disclose a material fact required to be disclosed to the
FDA or the DEA, or committed an act, made a statement, or failed to
make a statement, in any case, that could reasonably be expected to
provide a basis for the FDA to invoke (after the date hereof) its
policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg 46191
(September 10, 1991) and the FDA has not taken any such action
since May 1, 1993.
(f) Watson has made available to CIRCA copies of any and all
reports of inspection observations, establishment inspection
reports, warning letters and any other documents received from the
FDA or the DEA within the last three years that indicate or suggest
lack of compliance with the FDA or the DEA regulatory requirements
by Watson or any of its Subsidiaries.
(g) Since May 1, 1993, neither Watson nor any of its
Subsidiaries has received any written notice that the FDA or the
DEA has commenced, or threatened to initiate, any action to
withdraw its approval or request the recall of any product of
Watson or any of its Subsidiaries, or commenced or threatened to
initiate, any action to enjoin production at any facility of Watson
or any of its Subsidiaries.
(h) As to each article of drug, cosmetics and vitamin
manufactured and/or distributed by Watson or any of its
Subsidiaries, which products are described in the Watson Disclosure
Letter, such article is not adulterated or misbranded within the
meaning of the FDCA, 21 U.S.C. Sec. 301c et. seq.
(i) As to each drug referred to in (a), Watson and its
officers, employees, agents, Subsidiaries and affiliates have
included in the application for such drug, where required, the
certification described in 21 U.S.C. Sec. 335a(k)(l) and the list
described in 21 U.S.C. Sec. 335a(k)(2), and such certification and
such list was in each case true and accurate when made and remained
true and accurate thereafter.
(j) Since May 1, 1993, neither Watson, nor its officers,
employees, agents, Subsidiaries, or affiliates, has been convicted
of any crime or engaged in any conduct for which debarment is
mandated by 21 U.S.C. Sec. 335a(a) or authorized by 21 U.S.C. Sec.
335a(b).
(k) As to each abbreviated application submitted to, but not
approved by, the FDA, and not withdrawn by Watson or any of its
Subsidiaries as of the date of this Agreement, Watson and its
Subsidiaries have complied in all material respects with the
requirements of 21 U.S.C. Sec. 355 and 357 and 21 C.F.R. Parts 312,
12
314 and 430 et. seq. and has provided, or will provide, all
additional information and taken, or will take, all additional
action requested by the FDA in connection with the abbreviated
application.
Section 3.5 Capitalization. The authorized capital stock of
Watson consists of 50,000,000 shares of Watson Common Stock and
2,500,000 shares of preferred stock, no par value per share (the
"Watson Preferred Stock"). As of March 24, 1995, there were
17,270,786 shares of Watson Common Stock and no shares of Watson
Preferred Stock, issued and outstanding. Since such date, no
additional shares of capital stock of Watson have been issued,
except pursuant to the exercise of options outstanding under
Watson's stock option and employee stock purchase plans (the
"Watson Stock Option Plans"). Watson has no outstanding bonds,
debentures, notes or other obligations the holders of which have
the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of
Watson on any matter. All issued and outstanding shares of Watson
Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as
contemplated by this Agreement and except pursuant to the Watson
Stock Option Plans, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which
obligate Watson or any of its Subsidiaries to issue, transfer,
redeem or sell any shares of capital stock of Watson or any of its
Subsidiaries.
Section 3.6 Subsidiaries.
(a) Watson owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests
having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to
such Watson Subsidiary) of each of Watson's Subsidiaries indicated
on the Watson Disclosure Letter as being owned by Watson. Each of
the outstanding shares of capital stock owned by Watson of each of
Watson's Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned, directly or indirectly, by
Watson free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law
which are not material. The executive officers of Watson have no
knowledge of any matter which will materially effect the revenue
stream that Watson currently receives from its Subsidiaries. The
following information for each Subsidiary of Watson is listed in
the Watson Disclosure Letter, if applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) the location of
its chief executive office; (iii) a summary of its lines of
business and products; (iv) its authorized capital stock or share
capital; and (v) the number of issued and outstanding shares of
capital stock or share capital.
13
(b) The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, par value $.01 per share, all of
which shares are issued and outstanding and owned by Watson free
and clear of all liens, pledges, security interests, claims or
other encumbrances other than liens imposed by local law which are
not material. All such shares of Merger Sub are duly authorized,
validly issued, fully paid, and nonassessable. Notwithstanding
anything to the contrary contained herein, Watson may, in its sole
discretion, increase the number of shares of authorized Common
Stock of Merger Sub and the number of shares of Common Stock of
Merger Sub issued and outstanding owned by Watson. Merger Sub has
not engaged in any activities other than in connection with the
transactions contemplated by this Agreement.
(c) Merger Sub was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement.
(d) As of the Effective Time, all of the outstanding capital
stock of Merger Sub will be owned directly by Watson. There are no
options, warrants or other rights (including registration rights),
agreements, arrangements or commitments to which Merger Sub is a
party of any character relating to the issued or unissued capital
stock of, or other equity interests in, Merger Sub or obligating
Merger Sub to grant, issue or sell any shares of the capital stock
of, or other equity interests in, Merger Sub, by sale, lease,
license or otherwise, other than in connection with Watson's
acquisition of stock of Merger Sub. There are no obligations,
contingent or otherwise, of Merger Sub to repurchase, redeem or
otherwise acquire any shares of the capital stock of Merger Sub.
(e) Except for obligations or liabilities incurred in
connection with its incorporation or organization and the
transactions contemplated by this Agreement, Merger Sub has not and
will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or engaged
in any business activities of any type or kind whatsoever or
entered into any agreements or arrangements with any person.
Section 3.7 Other Interests. Except for interests in the
Watson Subsidiaries and the interests disclosed on the Watson
Disclosure Letter, neither Watson nor any Watson Subsidiary owns
directly or indirectly any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business,
trust or entity (other than investments in short-term investment
securities and corporate, marketable securities, partnership,
development, cooperative marketing and similar undertakings and
arrangements entered into in the ordinary course of business and
other investments the aggregate market value of which is less than
$250,000). The executive officers of Watson have no knowledge of
any matter which will materially effect the revenue stream that
Watson currently receives from the interests listed on the Watson
Disclosure Letter.
14
Section 3.8 No Violation. Neither the execution and delivery
by Watson and Merger Sub of this Agreement, nor the consummation by
Watson and Merger Sub of the transactions contemplated hereby in
accordance with the terms hereof, will (a) conflict with or result
in a breach of any provisions of the Certificate of Incorporation
or Bylaws of Watson or any of its Subsidiaries; (b) result in a
breach or violation of, a default under, or the triggering of any
payment or other material obligations pursuant to, or accelerate
vesting under, any of the Watson Stock Option Plans, or any grant
or award made under any of the foregoing; (c) violate, conflict
with, result in a breach of any provision of, constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination, or in a
right of termination or cancellation of, accelerate the performance
required by, result in the triggering of any payment or other
material obligations pursuant to, result in the creation of any
lien, security interest, charge or encumbrance upon any of the
material properties of Watson or its Subsidiaries under, or result
in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which Watson or any of its Subsidiaries
is a party, or by which Watson or any of its Subsidiaries or any of
their respective properties is bound or affected, except for any of
the foregoing matters which would not have a Watson Material
Adverse Effect; (d) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgement,
injunction, order or decree binding upon or applicable to Watson or
any of its Subsidiaries which would have a Watson Material Adverse
Effect; or (e) other than the filings provided for in Section 1.3,
filings under applicable federal, state and local regulatory
filings, filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), the Exchange Act, the
Securities Act, the American Stock Exchange, the NASD, or
applicable state securities and "Blue Sky" laws or filings in
connection with the maintenance of qualification to do business in
other jurisdictions (collectively, the "Regulatory Filings"),
require any material consent, approval or authorization of, or
declaration, of or registration with, any domestic governmental or
regulatory authority, the failure to obtain or make which would
have a Watson Material Adverse Effect.
Section 3.9 Conduct of Business. The business of Watson and
each of its Subsidiaries is not being conducted in default or
violation of any term, condition or provision of (a) its respective
Certificate of Incorporation or By-Laws or similar organizational
documents; (b) any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument or agreement of any kind to
which Watson or any of its Subsidiaries is now a party or by which
Watson or any of its Subsidiaries or any of their respective
properties or assets may be bound; or (c) any federal, state, local
15
or foreign statute, law, ordinance, rule, regulation or approval
applicable to Watson or any of its Subsidiaries, except, with
respect to the foregoing clauses (b) and (c), defaults or
violations that would not have a Watson Material Adverse Effect.
Section 3.10 SEC Documents. Watson has delivered or made
available to CIRCA each registration statement, report, proxy
statement or information statement (as defined in Regulation 14C
under the Exchange Act) prepared by it since January 1, 1993, which
reports constitute (as of the date hereof) all of the documents
required to be filed by Watson with the Securities and Exchange
Commission ("SEC") since such date, each in the form (including
exhibits and any amendments thereto) filed with the SEC
(collectively, the "Watson Reports"). As of their respective
dates, the Watson Reports and any Watson Reports filed after the
date hereof and prior to the Effective Time (a) complied or will
comply on or before the Effective Date as to form in all material
respects with the applicable requirements of the Securities Act,
the Exchange Act, and the rules and regulations thereunder; and (b)
did not or will not when filed contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of Watson
included in or incorporated by reference into the Watson Reports
(including the related notes and schedules) fairly present or will
fairly present (when filed) the consolidated financial position of
Watson and the Watson Subsidiaries as of its date, and each of the
consolidated statements of income, retained earnings and cash flows
of Watson included in or incorporated by reference into the Watson
Reports (including any related notes and schedules) fairly present
or will fairly present (when filed) the results of operations,
retained earnings or cash flows, as the case may be, of Watson and
the Watson Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in
each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except
as may be noted therein. Neither Watson nor any of the Watson
Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance
sheet of Watson or in the notes thereto, prepared in accordance
with generally accepted accounting principles consistently applied,
except liabilities arising in the ordinary course of business since
December 31, 1994 and liabilities reflected in the consolidated
balance sheet of Watson and its Subsidiaries at December 31, 1994
(and the notes thereto).
Section 3.11 Disclosure Documents. The Joint Proxy Statement
Prospectus to be delivered to the stockholders of each of Watson
and CIRCA in connection with the approval of the transactions
16
contemplated by this Agreement, or any amendment or supplement
thereto (the "Proxy Statement"), at the time of mailing thereof and
at the time of the respective meetings of stockholders of CIRCA and
Watson, or, in the case of the Form S-4 (as defined in Section 5.7
of this Agreement) and each amendment or supplement thereto, at the
time it is filed or becomes effective when filed with the SEC, will
not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the
foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact
was made by Watson in reliance upon and in conformity with written
information concerning CIRCA furnished in writing to Watson by
CIRCA specifically for use in the Proxy Statement.
Section 3.12 Litigation. Except as set forth in the Watson
Disclosure Letter, there are no actions, suits or proceedings
pending against Watson or the Watson Subsidiaries or, to the
knowledge of the executive officers of Watson, threatened against
Watson or the Watson Subsidiaries, at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality, none of which, individually or in the aggregate,
if decided adversely to Watson or such Watson Subsidiaries is
reasonably likely to have a Watson Material Adverse Effect.
Section 3.13 Products Liability. There is no notice or claim
involving any product manufactured, produced, distributed or sold
by or on behalf of Watson or any of its Subsidiaries resulting from
an alleged defect in design, manufacture, materials or workmanship,
or any alleged failure to warn, or from any breach of implied
warranties or representations, which is likely to have a Watson
Material Adverse Effect.
Section 3.14 Absence of Certain Changes. Since December 31,
1994, Watson has conducted its business only in the ordinary course
of such business, and there has not been (a) any Watson Material
Adverse Effect; (b) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital
stock; or (c) any material change in its accounting principles,
practices or methods, except any such change after the date of this
Agreement required by generally accepted accounting principles.
Section 3.15 Trademarks and Patents.
(a) A list of all of Watson's and its Subsidiaries' material
computer software, software programs, patents, patent applications,
trademarks, trademark applications, trade secrets, formulations,
service marks, trade names, copyrights, inventions, drawings,
designs, customer lists, proprietary know-how or information or
other rights with respect thereto (collectively, the "Proprietary
Rights") are listed in the Watson Disclosure Letter.
17
(b) Watson owns or possesses adequate licenses or other
rights to use any and all of its Proprietary Rights used in or
required for its business as currently conducted free and clear of
any liens, claims or encumbrances, except where the failure to
possess such Proprietary Rights would not have a Watson Material
Adverse Effect.
(c) To the knowledge of Watson's executive officers, there
are no claims, disputes, actions, proceedings, suits or appeals
pending or threatened against Watson or any of its Subsidiaries
relating to any of its Proprietary Rights which, if adversely
determined to Watson or any of its Subsidiaries, could reasonably
be expected to result in a loss of any of its Proprietary Rights or
any other loss that could reasonably be expected to have a Watson
Material Adverse Effect.
(d) To the knowledge of the executive officers of Watson,
none of its or its Subsidiaries' Proprietary Rights infringes on
the proprietary rights of any third party nor is the Proprietary
Rights of any third party infringing on the Proprietary Rights of
Watson or its Subsidiaries, where such infringement could
reasonably be expected to result in a loss of any of Watson's or
its Subsidiaries' Proprietary Rights or any other loss that could
reasonably be expected to have a Watson Material Adverse Effect.
(e) Each of Watson and its Subsidiaries has not disclosed any
of its material trade secrets to any Person without obtaining an
agreement obligating the recipient to maintain the confidentiality
thereof and Watson and its Subsidiaries have taken reasonable
security measures to protect the confidentiality and value of its
trade secrets.
(f) Each of Watson and its Subsidiaries has not disposed of
or granted any license to use any of its Proprietary Rights, nor
has either Watson or any of its Subsidiaries granted any options to
purchase or obtain a license to, or any other lien, claim or
encumbrance on, any of its Proprietary Rights.
Section 3.16 Properties. Watson and its Subsidiaries have
good and valid title (good and insurable title in the case of owned
real property) to all of their assets and properties reflected on
the consolidated balance sheet of Watson and its Subsidiaries at
December 31, 1994 included in the Form 10-K of Watson for the year
ended December 31, 1994 or thereafter acquired, free and clear of
any lien, claim or other encumbrance, except for assets and
properties disposed of, or subject to purchase or sales orders, in
the ordinary course of business since such date. Watson has not
received notice that any of its assets or properties is in
violation in any material respect of any existing law or any
building, zoning, health, safety or other ordinance, code or
regulation, except for violations that would not have a Watson
Material Adverse Effect. The plant, facilities and equipment of
18
Watson and its Subsidiaries necessary to the operations of their
businesses are in operating condition and repair sufficient for the
operation of the business as presently conducted. All material
leases of real or personal property to which Watson or any of its
Subsidiaries is a party are valid and subsisting leases, and,
except as terminated in the ordinary course of business, upon
consummation of the transactions contemplated hereby, shall
continue to entitle Watson or such Subsidiary to the use and
possession of the real or personal property purported to be covered
thereby for the terms specified in such leases and for the purposes
for which such real or personal property is now used.
Section 3.17 Material Contracts. Neither Watson nor any of
its Subsidiaries is a party to or bound by, and neither they nor
their properties are subject to (a) any loan agreements, guaranties
or other evidence of indebtedness having in each case a total
liability in excess of $250,000; (b) any distributorship, non-
employee commission or marketing agent, representative or franchise
agreement providing for the marketing and/or sale of the products
or services of Watson or any of its Subsidiaries; (c) any agreement
relating to the ownership or control of any interest in a
partnership, corporation, limited liability company, joint venture
or other entity or similar arrangement; (d) any employment
contracts or consulting arrangements entered into by Watson or its
Subsidiaries or agreements or arrangements with respect to
severance or similar matters; (e) any agreement or arrangement
restricting in any manner (i) Watson's or any of its Subsidiaries'
right to compete with any other person or entity; (ii) Watson's or
any of its Subsidiaries' right to sell to or purchase from any
other person or entity; (iii) the right of any other party to
compete with Watson or any of its Subsidiaries; or (iv) the ability
of such person or entity to employ any of Watson's or its
Subsidiaries' employees; (f) any secrecy or confidentiality
agreement; (g) any contract, agreement or arrangement containing
change of control provisions; (h) any agreement or arrangement
between Watson or any of its Subsidiaries and any of its officers,
directors or other Affiliates (as defined in Section 5.9); (i) any
contract, agreement or arrangement requiring a payment in excess of
$250,000 in any twelve month period; or (j) any contract, agreement
or arrangement required to be disclosed in a Form 10-K or 10-Q
under the Exchange Act which is not disclosed in the Watson Reports
(collectively, the "Watson Contracts"). All the Watson Contracts
are valid, subsisting, in full force and effect, and binding upon
Watson or its Subsidiaries in accordance with their terms, and, to
the best knowledge of the executive officers of Watson, binding
upon the other parties thereto in accordance with their terms.
Watson is not (with or without notice or lapse of time or both) in
default under any Watson Contract nor, to the best knowledge of the
executive officers of Watson, is any other party to any such
contract or other agreement (with or without notice or lapse of
time or both) in default thereunder, except for any defaults that
would not have a Watson Material Adverse Effect. The executive
19
officers of Watson are not aware of any matter that would
materially effect the revenue stream, if any, that Watson currently
receives under any Watson Contract.
Section 3.18 Taxes. Watson and each of its Subsidiaries (a)
have timely filed all material federal, state and foreign tax
returns required to be filed by any of them for tax years ended
prior to the date of this Agreement or requests for extensions have
been timely filed and any such request shall have been granted and
not expired, and all such returns are complete and accurate in all
material respects; (b) have paid or accrued all taxes shown to be
due and payable on such returns; (c) have properly accrued all such
taxes for such periods subsequent to the periods covered by such
returns; and (d) have "open" years for federal income tax returns
only as set forth in the Watson Disclosure Letter.
Section 3.19 Employee Benefit Plans. All employee benefit
plans and other benefit arrangements covering employees of Watson
and the Watson Subsidiaries (the "Watson Benefit Plans") and all
employee agreements providing compensation, severance or other
benefits to any employee or former employee of Watson or any of the
Watson Subsidiaries are set forth in the Watson Disclosure Letter.
True and complete copies of all Watson Benefit Plans, including any
related trust or funding vehicles, policies or contracts, have been
made available to CIRCA. To the extent applicable, the Watson
Benefit Plans comply, in all material respects, with the
requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the Code, and any Watson Benefit
Plan intended to be qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service (the "IRS") to be
so qualified and has been timely amended and filed with the IRS
with respect to changes required by the Tax Reform Act of 1986 and
subsequent legislation. Neither Watson nor any ERISA Affiliate of
Watson (during the period of its affiliated status and prior
thereto, to its knowledge) maintains, contributes to or has in the
past maintained or contributed to any benefit plan which is covered
by Title IV of ERISA or Section 412 of the Code. Watson or any
Watson Benefit Plan have not incurred any liability or penalty
under, and the executive officers of Watson do not know of any
instance that Watson or any Watson Benefit Plan may incur any
liability or penalty under, Section 4975 of the Code or Section
502(i) of ERISA. Each Watson Benefit Plan has been maintained and
administered in all material respects in compliance with its terms
and with ERISA and the Code to the extent applicable thereto. To
the knowledge of the executive officers of Watson, there are no
pending or anticipated material claims against or otherwise
involving any of the Watson Benefit Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the
ordinary course of Watson Benefit Plan activities) has been brought
against or with respect to any such Watson Benefit Plan, except for
any of the foregoing which would not have a Watson Material Adverse
Effect. All contributions required to be made as of the date
20
hereof to the Watson Benefit Plans have been made or provided for.
Since September 25, 1980, neither Watson nor any ERISA Affiliate of
Watson (during the period of its affiliated status and prior
thereto, to its knowledge) has contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA). Watson does not maintain or
contribute to any plan or arrangement which provides or has any
liability to provide life insurance or medical or other employee
welfare benefits to any employee or former employee upon his
retirement or termination of employment, and Watson has never
represented, promised or contracted (whether in oral or written
form) to any employee or former employee that such benefits would
be provided. The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any benefit plan, policy, arrangement or agreement or
any trust or loan that will or may result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee. No
Watson Benefit Plan which is an "employee pension plan" within the
meaning of Section 3(3) of ERISA has been completely or partially
terminated. None of the Watson Benefit Plans has any material
unfunded liabilities which are not reflected in the Watson Reports.
For purposes of this Agreement "ERISA Affiliate" means any
business or entity which is a member of the same "controlled group
of corporations," under "common control" or an "affiliated service
group" with an entity within the meanings of Sections 414(b), (c)
or (m) of the Code, or required to be aggregated with the entity
under Section 414(o) of the Code, or is under "common control" with
the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing
Sections.
Section 3.20 Labor Matters. Neither Watson nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a
labor union or labor organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the
knowledge of the executive officers of Watson, threatened against
Watson or its Subsidiaries relating to their business, except for
any such proceeding which would not have a Watson Material Adverse
Effect. To the knowledge of the executive officers of Watson,
there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened
involving employees of Watson or any of its Subsidiaries. There is
no labor strike, dispute, slowdown or work stoppage pending or
threatened against Watson or any of its Subsidiaries nor have they
experienced any of the same during the last three years. All
employees of Watson or any of its Subsidiaries are employed at
will. A list of Watson's employees who earned in excess of
21
$100,000 during calendar year 1994 or who Watson reasonably expects
will earn in excess of such amount during calendar year 1995,
together with such employee's current job title and salary history
during the last three years, is described in the Watson Disclosure
Letter.
Section 3.21. Environmental Matters. There are no
Environmental Liabilities of Watson that, individually or in the
aggregate, have had or would reasonably be expected to have a
Watson Material Adverse Effect. As used in this Agreement,
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions, whether now or hereafter
in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment, including
without limitation, ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" with respect to any Person means any
and all liabilities of or relating to such Person or any of its
Subsidiaries (including any entity which is, in whole or in part,
a predecessor of such Person or any of its Subsidiaries), whether
vested or unvested, contingent or fixed, actual or potential, known
or unknown, which (a) arise under or relate to matters covered by
Environmental Laws; and (b) relate to actions occurring or
conditions existing on or prior to the Closing Date. "Hazardous
Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-
products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing
characteristics, including, without limitation, any substance
regulated under Environmental Laws.
Section 3.22. Absence of Indemnifiable Claims, etc. There
are no losses, claims, damages, costs, expenses, liabilities or
judgements which would entitle any director, officer or employee of
Watson or any of its Subsidiaries to indemnification by Watson
under applicable law, the articles of incorporation or by-laws of
Watson or any of its Subsidiaries or any insurance policy
maintained by Watson or any of its Subsidiaries.
Section 3.23 No Brokers. Watson has not entered into any
contract, arrangement or understanding with any person or firm
which may result in the obligation of CIRCA or Watson to pay any
finder's fee, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated
22
hereby, except that Watson has retained DLJ as its financial
advisor, the arrangements with which have been disclosed in writing
to CIRCA prior to the date hereof. Other than the foregoing
arrangements, Watson is not aware of any claim for payment of any
finder's fees, brokerage or agent's commission or other like
payments in connection with the negotiations leading to this
Agreement or the consummation of the transaction contemplated
hereby.
Section 3.24 Opinion of Financial Advisor. Watson has
received the opinion of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), to the effect that, as of the date hereof, the
number of shares of Watson Common Stock to be issued by Watson in
the Merger in exchange for each share of CIRCA Common Stock is fair
to Watson's stockholders from a financial point of view.
Section 3.25 CIRCA Stock Ownership. Neither Watson nor any
of its Subsidiaries owns any shares of CIRCA Common Stock or other
securities convertible into shares of CIRCA Common Stock.
Section 3.26 Watson Common Stock. The issuance and delivery
by Watson of shares of Watson Common Stock in connection with the
Merger and this Agreement have been duly and validly authorized by
all necessary corporate action on the part of Watson. The shares
of Watson Common Stock to be issued in connection with the Merger
and this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and
nonassessable and not subject to preemptive rights of any sort and
will, when issued, be registered under the Securities Act, the
Exchange Act and registered or exempt from registration under
applicable "blue sky laws".
Section 3.27 Convertible Securities. Watson has no
outstanding options, warrants or other securities exercisable for,
or convertible into, shares of Watson Common Stock, the terms of
which would require any anti-dilution adjustments by reason of the
consummation of the transactions contemplated hereby.
Section 3.28 Pooling of Interests, Tax Reorganization. To
the knowledge of the executive officers of Watson, neither Watson
nor any of its Affiliates has taken or failed to take any action
which would prevent the accounting for the Merger as a pooling of
interests in accordance with Accounting Principles Board Opinion
No. 16, the interpretative releases issued pursuant thereto, and
the pronouncements of the SEC. Neither Watson nor any of its
Affiliates has taken or failed to take any action which would
prevent the Merger from constituting a reorganization within the
meaning of section 368(a) of the Code.
Section 3.29 Takeover Statutes. No "fair price",
"moratorium", "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal
23
laws in the United States (each a "Takeover Statute"), applicable
to Watson or any of its Subsidiaries is applicable to the Merger or
the other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CIRCA
Except as set forth in the disclosure letter delivered by
CIRCA to Watson (the "CIRCA Disclosure Letter"), CIRCA represents
and warrants to Watson (with such representations and warranties
with respect to non-wholly owned Subsidiaries being made as to the
knowledge of CIRCA's executive officers (which shall include
knowledge of documents in such persons' possession) as of the date
hereof and at the Effective Time) as follows:
Section 4.1 Existence, Good Standing, Corporate Authority.
CIRCA and each of its Subsidiaries are corporations or partnerships
duly organized, validly existing and in good standing under the
laws of their respective jurisdiction of incorporation. Each of
CIRCA and each of its Subsidiaries is duly licensed or qualified to
do business as a foreign corporation or partnership and is in good
standing under the laws of any other state of the United States in
which the character of the properties owned or leased by it or in
which the transaction of its respective business makes such
qualification necessary, except where the failure to be so
qualified or to be in good standing would not have a material
adverse effect on the business, results of operations or financial
condition of CIRCA and its Subsidiaries taken as a whole (a "CIRCA
Material Adverse Effect"). CIRCA and each of its Subsidiaries have
all requisite corporate power and authority to own, operate and
lease their respective properties. The copies of CIRCA's and each
of its Subsidiaries' Certificates of Incorporation and Bylaws
previously delivered or made available to Watson are true and
correct.
Section 4.2 Authorization, Validity and Effect of Agreements.
CIRCA has the requisite corporate power and authority to execute
and deliver this Agreement and all agreements and documents to be
executed and delivered in connection herewith. Subject only to the
approval and adoption of this Agreement and the transactions
contemplated hereby by the holders of two-thirds of the outstanding
shares of CIRCA Common Stock, the execution and delivery of this
Agreement (and the agreements contemplated hereby) and the
consummation by CIRCA of the transactions contemplated hereby has
been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents to be
executed and delivered in connection herewith (when executed and
delivered pursuant hereto for value received) will constitute, the
valid and legally binding obligations of CIRCA, enforceable against
CIRCA in accordance with their respective terms, subject to
24
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
Section 4.3 Compliance with Laws--General.
(a) CIRCA and each of its Subsidiaries hold all Permits of
all Governmental Entities necessary for the lawful conduct of their
respective businesses, except for immaterial failures that have no
impact on operations.
(b) CIRCA and each of its Subsidiaries are in substantial
compliance with the terms of the Permits, except for immaterial
failures to comply that have no impact on operations.
(c) CIRCA and each of its Subsidiaries are in substantial
compliance with all laws, ordinances or regulations of all
Governmental Entities, including, but not limited to, those related
to occupational health and safety, controlled substances or
employment and employment practices, except for immaterial failures
to comply that have no impact on operations.
(d) As of the date of this Agreement, no investigation,
review, inquiry or proceeding by any Governmental Entity with
respect to CIRCA or any of its Subsidiaries is pending or, to the
best knowledge of the executive officers of CIRCA, threatened.
(e) Neither CIRCA nor any of its Subsidiaries currently is
subject to any agreement, contract or decree with any Governmental
Entities arising out of any current or previously existing
violations.
Section 4.4 Compliance with Laws--FDA/DEA.
(a) As to each drug of CIRCA or any CIRCA Subsidiary for
which an abbreviated application has been approved by the FDA,
which drugs are described in the CIRCA Disclosure Letter, CIRCA and
its Subsidiaries are in substantial compliance with 21 U.S.C. Sec.
355 or 357, 21 C.F.R. Parts 314 or 430 et. seq., respectively, and
all terms and conditions of the abbreviated application.
(b) As to each biologic product of CIRCA or any CIRCA
Subsidiary for which an ELA and/or PLA has been filed, which
products are described in the CIRCA Disclosure Letter, CIRCA and
its Subsidiaries are in substantial compliance with 42 U.S.C. Sec.
262, 21 C.F.R. Part 601 et. seq., and all terms and conditions of
the ELA and/or PLA.
(c) CIRCA and its Subsidiaries are in substantial compliance
with all applicable registration and listing requirements set forth
in 21 U.S.C. Sec. 360 and 21 C.F.R. Part 207. To the extent required,
25
CIRCA and its Subsidiaries have obtained licenses from the DEA and
are in substantial compliance with all such licenses and all
applicable regulations promulgated by the DEA.
(d) Since May 1, 1993, all manufacturing operations of CIRCA
and its Subsidiaries have been conducted in substantial compliance
with the good manufacturing practice regulations set forth in 21
C.F.R. Parts 210 and 211.
(e) Neither CIRCA nor any officer, employee, or agent of
CIRCA or any of its Subsidiaries has made an untrue statement of a
material fact or fraudulent statement to the FDA or the DEA, failed
to disclose a material fact required to be disclosed to the FDA or
the DEA, or committed an act, made a statement, or failed to make
a statement, in any case, that could reasonably be expected to
provide a basis for the FDA to invoke (after the date hereof) its
policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg 46191
(September 10, 1991) and the FDA has not taken any such action
since May 1, 1993.
(f) CIRCA has made available to Watson copies of any and all
reports of inspection observations, establishment inspection
reports, warning letters and any other documents received from the
FDA or the DEA within the last three years that indicate or suggest
lack of compliance with the FDA or the DEA regulatory requirements
by CIRCA or any of its Subsidiaries.
(g) Since May 1, 1993, neither CIRCA nor any of its
Subsidiaries has received any written notice that the FDA or the
DEA has commenced, or threatened to initiate, any action to
withdraw its approval or request the recall of any product of CIRCA
or any of its Subsidiaries, or commenced or threatened to initiate,
any action to enjoin production at any facility of CIRCA or any of
its Subsidiaries.
(h) As to each article of drug, cosmetics and vitamin
manufactured and/or distributed by CIRCA or any of its
Subsidiaries, which products are described in the CIRCA Disclosure
Letter, such article is not adulterated or misbranded within the
meaning of the FDCA, 21 U.S.C. Sec. 301c et. seq.
(i) As to each drug referred to in (a), CIRCA and its
officers, employees, agents, Subsidiaries and affiliates have
included in the application for such drug, where required, the
certification described in 21 U.S.C. Sec. 335a(k)(l) and the list
described in 21 U.S.C. Sec. 335a(k)(2), and such certification and
such list was in each case true and accurate when made and remained
true and accurate thereafter.
(j) Since May 1, 1993, neither CIRCA, nor its officers,
employees, agents, Subsidiaries, or affiliates, has been convicted
of any crime or engaged in any conduct for which debarment is
26
mandated by 21 U.S.C. Sec. 335a(a) or authorized by 21 U.S.C.
Sec. 335a(b).
(k) As to each abbreviated application submitted to, but not
approved by, the FDA, and not withdrawn by CIRCA or any of its
Subsidiaries as of the date of this Agreement, CIRCA and its
Subsidiaries have complied in all material respects with the
requirements of 21 U.S.C. Sec. 355 and 357 and 21 C.F.R. Parts 312,
314 and 430 et. seq. and has provided, or will provide, all
additional information and taken, or will take, all additional
action requested by the FDA in connection with the abbreviated
application.
Section 4.5 Capitalization. The authorized capital stock of
CIRCA consists of 70,000,000 shares of CIRCA Common Stock and
10,000,000 shares of CIRCA Preferred Stock. As of March 23, 1995,
there were (a) 21,745,912 shares of CIRCA Common Stock issued and
outstanding; (b) no shares of CIRCA Preferred Stock issued and
outstanding; and (c) 909,750 shares of CIRCA Common Stock reserved
for issuance upon the exercise of all outstanding CIRCA Options.
The CIRCA Disclosure Letter identifies, as of the date thereof, the
option holder, the number of shares subject to each option, the
exercise price, the vesting schedule and the expiration date of
each outstanding CIRCA Option. Since March 23, 1995, no
additional shares of capital stock of CIRCA have been issued,
except pursuant to the exercise of options outstanding under the
CIRCA Stock Option Plans or the exercise of warrants to purchase
shares of CIRCA Common Stock outstanding on March 23, 1995. CIRCA
has no outstanding bonds, debentures, notes or other obligations
the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to
vote) with the stockholders of CIRCA on any matter. All issued and
outstanding shares of CIRCA Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive
rights. Except as otherwise disclosed in the CIRCA Disclosure
Letter and other than pursuant to the rights agreement described in
Section 5.13 hereof, there are not at the date of this Agreement
any existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which
obligate CIRCA or any of its Subsidiaries to issue, transfer,
redeem or sell any shares of capital stock of CIRCA or any of its
Subsidiaries.
Section 4.6 Subsidiaries. CIRCA owns directly or indirectly
each of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with
respect to such CIRCA Subsidiary) of each of CIRCA's Subsidiaries
indicated in the CIRCA Disclosure Letter as being owned by CIRCA.
Each of the outstanding shares of capital stock owned by CIRCA of
each of CIRCA's Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indirectly,
27
by CIRCA free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law
which are not material. The executive officers of CIRCA have no
knowledge of any matter which will materially effect the revenue
stream that CIRCA currently receives from its Subsidiaries. The
following information for each Subsidiary of CIRCA is listed in the
CIRCA Disclosure Letter, if applicable: (a) its name and
jurisdiction of incorporation or organization; (b) the location of
its chief executive office; (c) a summary of its lines of business
and products; (d) its authorized capital stock or share capital;
and (e) the number of issued and outstanding shares of capital
stock or share capital.
Section 4.7 Other Interests. Except for interests in the
CIRCA Subsidiaries and the interests disclosed on the CIRCA
Disclosure Letter, neither CIRCA nor any CIRCA Subsidiary owns
directly or indirectly any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business,
trust or entity (other than investments in short-term investment
securities and corporate, marketable securities, partnership,
development, cooperative marketing and similar undertakings and
arrangements entered into in the ordinary course of business and
other investments the aggregate market value of which is less than
$250,000). The executive officers of CIRCA have no knowledge of
any matter which will materially effect the revenue stream that
CIRCA currently receives from the interests listed on the CIRCA
Disclosure Letter.
Section 4.8 No Violation. Neither the execution and delivery
by CIRCA of this Agreement, nor the consummation by CIRCA of the
transactions contemplated hereby in accordance with the terms
hereof, will (a) conflict with or result in a breach of any
provisions of the Certificate of Incorporation or Bylaws of CIRCA
or any of its Subsidiaries; (b) result in a breach or violation of,
a default under, or the triggering of any payment or other material
obligations pursuant to, or accelerate vesting under, any of the
CIRCA Stock Option Plans, or any grant or award made under any of
the foregoing; (c) violate, conflict with, result in a breach of
any provision of, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under,
result in the termination, or in a right of termination or
cancellation of, accelerate the performance required by, result in
the triggering of any payment or other material obligations
pursuant to, result in the creation of any lien, security interest,
charge or encumbrance upon any of the material properties of CIRCA
or its Subsidiaries under, or result in being declared void,
voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust or any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation
to which CIRCA or any of its Subsidiaries is a party, or by which
CIRCA or any of its Subsidiaries or any of their respective
28
properties is bound or affected, except for any of the foregoing
matters which would not have a CIRCA Material Adverse Effect; (d)
contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgement, injunction, order or
decree binding upon or applicable to CIRCA or any of its
Subsidiaries which would have a CIRCA Material Adverse Effect; or
(e) other than the Regulatory Filings, require any material
consent, approval or authorization of, or declaration, of or
registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have a CIRCA
Material Adverse Effect.
Section 4.9 Conduct of Business. The business of CIRCA and
each of its Subsidiaries is not being conducted in default or
violation of any term, condition or provision of (a) its respective
Certificate of Incorporation or By-Laws or similar organizational
documents; (b) any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument or agreement of any kind to
which CIRCA or any of its Subsidiaries is now a party or by which
CIRCA or any of its Subsidiaries or any of their respective
properties or assets may be bound; or (c) any federal, state, local
or foreign statute, law, ordinance, rule, regulation or approval
applicable to CIRCA or any of its Subsidiaries, except, with
respect to the foregoing clauses (b) and (c), defaults or
violations that would not have a CIRCA Material Adverse Effect.
Section 4.10 SEC Documents. CIRCA has delivered or made
available to Watson each registration statement, report, proxy
statement or information statement (as defined in Regulation 14C
under the Exchange Act) prepared by it since January 1, 1993, which
reports constitute (as of the date hereof) all of the documents
required to be filed by CIRCA with the SEC since such date, each in
the form (including exhibits and any amendments thereto) filed with
the SEC (collectively, the "CIRCA Reports"). As of their
respective dates, the CIRCA Reports, as amended and supplemented,
and any CIRCA Reports filed after the date hereof and prior to the
Effective Time, (a) complied or will comply on or before the
Effective Date as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act,
and the rules and regulations thereunder; and (b) did not or will
not when filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each of
the consolidated balance sheets of CIRCA included in or
incorporated by reference into the CIRCA Reports (including the
related notes and schedules) fairly present or will fairly present
(when filed) the consolidated financial position of CIRCA and the
CIRCA Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows of CIRCA
included in or incorporated by reference into the CIRCA Reports
(including any related notes and schedules) fairly present or will
29
fairly present (when filed) the results of operations, retained
earnings or cash flows, as the case may be, of CIRCA and the CIRCA
Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments
which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be
noted therein. Neither CIRCA nor any of the CIRCA Subsidiaries has
any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of CIRCA or
in the notes thereto, prepared in accordance with generally
accepted accounting principles consistently applied, except
liabilities arising in the ordinary course of business since
December 31, 1994 and liabilities reflected in the consolidated
balance sheet of CIRCA and the CIRCA Subsidiaries at December 31,
1994 (and the notes thereto).
Section 4.11 Information Supplied. The information supplied
or to be supplied in writing by CIRCA, or any of its officers,
directors, representatives, agents or employees, specifically for
inclusion or incorporation by reference in (a) the Proxy Statement
will not, at the time the Proxy Statement is first mailed to the
stockholders of CIRCA and Watson, at the time such stockholders
vote on adoption of this Agreement, contain any untrue statement of
a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading and (b)
the Form S-4, together with all amendments and supplements thereto,
will not, at the time the Form S-4 is filed or becomes effective
under the Securities Act and at the Effective Time, contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
Section 4.12 Litigation. Except as set forth in the CIRCA
Disclosure Letter, there are no actions, suits or proceedings
pending against CIRCA or the CIRCA Subsidiaries or, to the
knowledge of the executive officers of CIRCA, threatened against
CIRCA or the CIRCA Subsidiaries, at law or in equity, or before or
by any federal or state commission, board, bureau, agency or
instrumentality, none of which, individually or in the aggregate,
if decided adversely to CIRCA or such CIRCA Subsidiaries is
reasonably likely to have a CIRCA Material Adverse Effect.
Section 4.13 Products Liability. There is no notice or claim
involving any product manufactured, produced, distributed or sold
by or on behalf of CIRCA or any of its Subsidiaries resulting from
an alleged defect in design, manufacture, materials or workmanship,
or any alleged failure to warn, or from any breach of implied
30
warranties or representations, which is likely to have a CIRCA
Material Adverse Effect.
Section 4.14 Absence of Certain Changes. Since December 31,
1994, CIRCA has conducted its business only in the ordinary course
of such business, and there has not been (a) any CIRCA Material
Adverse Effect; (b) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital
stock; or (c) any material change in its accounting principles,
practices or methods, except any such change after the date of this
Agreement required by generally accepted accounting principles.
Section 4.15 Trademarks and Patents.
(a) A list of all of CIRCA's and its Subsidiaries'
Proprietary Rights are listed in the CIRCA Disclosure Letter.
(b) CIRCA owns or possesses adequate licenses or other rights
to use any and all of its Proprietary Rights used in or required
for its business as currently conducted free and clear of any
liens, claims or encumbrances, except where the failure to possess
such Proprietary Rights would not have a CIRCA Material Adverse
Effect.
(c) To the knowledge of the executive officers of CIRCA,
there are no claims, disputes, actions, proceedings, suits or
appeals pending or threatened against CIRCA or any of its
Subsidiaries relating to any of its Proprietary Rights which, if
adversely determined to CIRCA or any of its Subsidiaries, could
reasonably be expected to result in a loss, of any of its
Proprietary Rights or any other loss that could reasonably be
expected to have a CIRCA Material Adverse Effect.
(d) To the knowledge of the executive officers of CIRCA, none
of its or its Subsidiaries' Proprietary Rights infringes on the
proprietary rights of any third party nor is the Proprietary Rights
of any third party infringing on the Proprietary Rights of CIRCA or
its Subsidiaries, where such infringement could reasonably be
expected to result in a loss of any of CIRCA's or its Subsidiaries'
Proprietary Rights or any other loss that could reasonably be
expected to have a CIRCA Material Adverse Effect.
(e) Each of CIRCA and its Subsidiaries has not disclosed any
of its material trade secrets to any Person without obtaining an
agreement obligating the recipient to maintain the confidentiality
thereof and CIRCA and its Subsidiaries have taken reasonable
security measures to protect the confidentiality and value of its
trade secrets.
(f) Each of CIRCA and its Subsidiaries has not disposed of
or granted any license to use any of its Proprietary Rights, nor
31
has either CIRCA or any of its Subsidiaries granted any options to
purchase or obtain a license to, or any other lien, claim or
encumbrance on, any of its Proprietary Rights.
Section 4.16 Properties. CIRCA and its Subsidiaries have
good and valid title (good and insurable title in the case of owned
real property) to all of their assets and properties reflected on
the consolidated balance sheet of CIRCA and its Subsidiaries at
December 31, 1994 included in the Form 10-K of CIRCA for the year
ended December 31, 1994 or thereafter acquired, free and clear of
any lien, claim or other encumbrance, except for assets and
properties disposed of, or subject to purchase or sales orders, in
the ordinary course of business since such date. CIRCA has not
received notice that any of its assets or properties is in
violation in any material respect of any existing law or any
building, zoning, health, safety or other ordinance, code or
regulation, except for violations that would not have a CIRCA
Material Adverse Effect. The plant, facilities and equipment of
CIRCA and its Subsidiaries necessary to the operations of their
businesses are in operating condition and repair sufficient for the
operation of the business as presently conducted. All material
leases of real or personal property to which CIRCA or any of its
Subsidiaries is a party are valid and subsisting leases, and,
except as terminated in the ordinary course of business, upon
consummation of the transactions contemplated hereby, shall
continue to entitle CIRCA or such Subsidiary to the use and
possession of the real or personal property purported to be covered
thereby for the terms specified in such leases and for the purposes
for which such real or personal property is now used.
Section 4.17 Material Contracts. Neither CIRCA nor any of
its Subsidiaries is a party to or bound by, and neither they nor
their properties are subject to (a) any loan agreements, guaranties
or other evidence of indebtedness having in each case a total
liability in excess of $250,000; (b) any distributorship, non-
employee commission or marketing agent, representative or franchise
agreement providing for the marketing and/or sale of the products
or services of CIRCA or any of its Subsidiaries; (c) any agreement
relating to the ownership or control of any interest in a
partnership, corporation, limited liability company, joint venture
or other entity or similar arrangement; (d) any employment
contracts or consulting arrangements entered into by CIRCA or its
Subsidiaries or agreements or arrangements with respect to
severance or similar matters; (e) any agreement or arrangement
restricting in any manner (i) CIRCA's or any of its Subsidiaries'
right to compete with any other person or entity; (ii) CIRCA's or
any of its Subsidiaries' right to sell to or purchase from any
other person or entity; (iii) the right of any other party to
compete with CIRCA or any of its Subsidiaries; or (iv) the ability
of such person or entity to employ any of CIRCA's or its
Subsidiaries' employees; (f) any secrecy or confidentiality
agreement; (g) any contract, agreement or arrangement containing
32
change of control provisions; (h) any agreement or arrangement
between CIRCA or any of its Subsidiaries and any of its officers,
directors or other Affiliates; (i) any contract, agreement or
arrangement requiring a payment in excess of $250,000 in any twelve
month period; or (j) any contract, agreement or arrangement
required to be disclosed in a Form 10-K or 10-Q under the Exchange
Act which is not disclosed in the CIRCA Reports (collectively, the
"CIRCA Contracts"). All the CIRCA Contracts are valid, subsisting,
in full force and effect, and binding upon CIRCA or its
Subsidiaries in accordance with their terms, and, to the best
knowledge of the executive officers of CIRCA, binding upon the
other parties thereto in accordance with their terms. CIRCA is not
(with or without notice or lapse of time or both) in default under
any CIRCA Contract nor, to the best knowledge of the executive
officers of CIRCA, is any other party to any such contract or other
agreement (with or without notice or lapse of time or both) in
default thereunder, except for any defaults that would not have a
CIRCA Material Adverse Effect. The executive officers of CIRCA are
not aware of any matter that would materially effect the revenue
stream, if any, that CIRCA currently receives under any CIRCA
Contract.
Section 4.18 Taxes. CIRCA and each of its Subsidiaries (a)
have timely filed all material federal, state and foreign tax
returns required to be filed by any of them for tax years ended
prior to the date of this Agreement or requests for extensions have
been timely filed and any such request shall have been granted and
not expired, and all such returns are complete and accurate in all
material respects; (b) have paid or accrued all taxes shown to be
due and payable on such returns; (c) have properly accrued all such
taxes for such periods subsequent to the periods covered by such
returns; and (d) have "open" years for federal income tax returns
only as set forth in the CIRCA Disclosure Letter.
Section 4.19 Employee Benefit Plans. All employee benefit
plans and other benefit arrangements covering employees of CIRCA
and the CIRCA Subsidiaries (the "CIRCA Benefit Plans") and all
employee agreements providing compensation, severance or other
benefits to any employee or former employee of CIRCA or any of the
CIRCA Subsidiaries are set forth in the CIRCA Disclosure Letter.
True and complete copies of all CIRCA Benefit Plans, including any
related trust or funding vehicles, policies or contracts, have been
made available to Watson. To the extent applicable, the CIRCA
Benefit Plans comply, in all material respects, with the
requirements of ERISA and the Code, and any CIRCA Benefit Plan
intended to be qualified under Section 401(a) of the Code has been
determined by the IRS to be so qualified and has been timely
amended and filed with the IRS with respect to changes required by
the Tax Reform Act of 1986 and subsequent legislation. Neither
CIRCA nor any ERISA Affiliate of CIRCA (during the period of its
affiliated status and prior thereto, to its knowledge) maintains,
contributes to or has in the past maintained or contributed to any
33
benefit plan which is covered by Title IV of ERISA or Section 412
of the Code. CIRCA or any CIRCA Benefit Plan have not incurred any
liability or penalty under, and the executive officers of CIRCA do
not know of any instance that CIRCA or any CIRCA Benefit Plan may
incur any liability or penalty under, Section 4975 of the Code or
Section 502(i) of ERISA. Each CIRCA Benefit Plan has been
maintained and administered in all material respects in compliance
with its terms and with ERISA and the Code to the extent applicable
thereto. To the knowledge of the executive officers of CIRCA,
there are no pending or anticipated material claims against or
otherwise involving any of the CIRCA Benefit Plans and no suit,
action or other litigation (excluding claims for benefits incurred
in the ordinary course of CIRCA Benefit Plan activities) has been
brought against or with respect to any such CIRCA Benefit Plan,
except for any of the foregoing which would not have a CIRCA
Material Adverse Effect. All contributions required to be made as
of the date hereof to the CIRCA Benefit Plans have been made or
provided for. Since September 25, 1980, neither CIRCA nor any
ERISA Affiliate of CIRCA (during the period of its affiliated
status and prior thereto, to its knowledge) has contributed to, or
been required to contribute to, any "multiemployer plan" (as
defined in Sections 3(37) and 4001(a)(3) of ERISA). CIRCA does not
maintain or contribute to any plan or arrangement which provides or
has any liability to provide life insurance or medical or other
employee welfare benefits to any employee or former employee upon
his retirement or termination of employment, and CIRCA has never
represented, promised or contracted (whether in oral or written
form) to any employee or former employee that such benefits would
be provided. The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any benefit plan, policy, arrangement or agreement or
any trust or loan that will or may result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee. No CIRCA
Benefit Plan which is an "employee pension plan" within the meaning
of Section 3(3) of ERISA has been completely or partially
terminated. None of the CIRCA Benefit Plans has any material
unfunded liabilities which are not reflected in the CIRCA Reports.
Section 4.20 Labor Matters. Neither CIRCA nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a
labor union or labor organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the
knowledge of the executive officers of CIRCA, threatened against
CIRCA or its Subsidiaries relating to their business, except for
any such proceeding which would not have a CIRCA Material Adverse
Effect. To the knowledge of the executive officers of CIRCA, there
are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened
34
involving employees of CIRCA or any of its Subsidiaries. There is
no labor strike, dispute, slowdown or work stoppage pending or
threatened against CIRCA or any of its Subsidiaries nor have they
experienced any of the same during the last three years. All
employees of CIRCA or any of its Subsidiaries are employed at will.
A list of CIRCA's employees who earned in excess of $100,000 during
calendar year 1994 or who CIRCA reasonably expects will earn in
excess of such amount during calendar year 1995, together with such
employee's current job title and salary history during the last
three years, is described in the CIRCA Disclosure Letter.
Section 4.21 Environmental Matters. There are no
Environmental Liabilities of CIRCA that, individually or in the
aggregate, have had or would reasonably be expected to have a CIRCA
Material Adverse Effect.
Section 4.22 Takeover Statutes. No Takeover Statute
applicable to CIRCA or any of its Subsidiaries is applicable to the
Merger or the other transactions contemplated hereby.
Section 4.23 Absence of Indemnifiable Claims, etc. There are
no losses, claims, damages, costs, expenses, liabilities or
judgements which would entitle any director, officer or employee of
CIRCA or any of its Subsidiaries to indemnification by CIRCA under
applicable law, the articles of incorporation or by-laws of CIRCA
or any of its Subsidiaries or any insurance policy maintained by
CIRCA or any of its Subsidiaries.
Section 4.24 No Brokers. CIRCA has not entered into any
contract, arrangement or understanding with any person or firm
which may result in the obligation of CIRCA or Watson to pay any
finder's fee, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated
hereby, except that CIRCA has retained Bear Stearns & Co. Inc.
("Bear Stearns") and Wertheim Schroder & Co. Incorporated
("Wertheim Schroder") as its financial advisors, the arrangements
with which have been disclosed in writing to Watson prior to the
date hereof. Other than the foregoing arrangements, CIRCA is not
aware of any claim for payment of any finder's fees, brokerage or
agent's commission or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transaction contemplated hereby.
Section 4.25 Opinion of Financial Advisors. CIRCA has
received the opinions of Bear Stearns and Wertheim Schroder to the
effect that, as of the date hereof, the Merger or the Exchange
Ratio, as the case may be, is fair to the holders of CIRCA Common
Stock from a financial point of view.
35
Section 4.26 Watson Stock Ownership. Neither CIRCA nor any
of its Subsidiaries owns any shares of Watson Common Stock or other
securities convertible into Watson Common Stock.
Section 4.27 Pooling of Interests, Tax Reorganization. To
the knowledge of the executive officers of CIRCA, neither CIRCA nor
any of its Affiliates has taken or failed to take any action which
would prevent the accounting for the Merger as a pooling of
interests in accordance with Accounting Principles Board Opinion
No. 16, the interpretative releases issued pursuant thereto, and
the pronouncements of the SEC. Neither CIRCA nor any of its
Affiliates has not taken or failed to take any action which would
prevent the Merger from constituting a reorganization within the
meaning of section 368(a) of the Code.
ARTICLE V
COVENANTS
Section 5.1 Alternative Proposals. Prior to the Effective
Time, Watson and CIRCA each agree (a) that neither it nor any of
its Subsidiaries shall, and it shall direct and cause its officers,
directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, Watson or CIRCA,
as the case may be, or any of its respective Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Alternative
Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with,
any person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an
Alternative Proposal; (b) that it will immediately cease and cause
to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to
any of the foregoing, and it will take the necessary steps to
inform the individuals or entities referred to above of the
obligations undertaken in this Section 5.1; and (c) that it will
notify the other immediately if any such inquiries or proposals are
received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued
with, it; provided, however, that nothing contained in this Section
5.1 shall prohibit the Board of Directors of CIRCA or Watson, as
the case may be, from (A) furnishing information to or entering
into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal to acquire CIRCA or Watson,
36
as the case may be, pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of assets, business
combination or other similar transaction, if, and only to the
extent that, (i) the Board of Directors of CIRCA or Watson, as the
case may be, determines in good faith that such action is required
for the Board of Directors to comply with its fiduciary duties to
stockholders imposed by law; (ii) prior to furnishing such
information to, or entering into discussions or negotiations with,
such person or entity, CIRCA or Watson, as the case may be,
provides written notice to the other to the effect that it is
furnishing information to, or entering into discussions or
negotiations with, such person or entity; and (iii) subject to any
confidentiality agreement with such person or entity (which CIRCA
or Watson, as the case may be, determined in good faith was
required to be executed in order for its Board of Directors to
comply with its fiduciary duties to stockholders imposed by law),
CIRCA or Watson, as the case may be, keeps the other informed of
the status of any such discussions or negotiations; and (B) to the
extent applicable, complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Alternative Proposal. Nothing in
this Section 5.1 shall (x) permit CIRCA or Watson to terminate this
Agreement (except as specifically provided in Article 7 hereof);
(y) permit CIRCA to enter into any agreement with respect to an
Alternative Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, CIRCA shall not
enter into any agreement with any person that provides for, or in
any way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)); or (z) affect any
other obligation of CIRCA or Watson under this Agreement.
Section 5.2 Interim Operations. Prior to the Effective Time,
except as set forth in the their respective Disclosure Letters or
as contemplated by any other provision of this Agreement, unless
the other party has consented in writing thereto, each of CIRCA and
Watson:
(i) Shall, and shall cause each of its Subsidiaries to,
conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) Shall use its reasonable efforts, and shall cause
each of its Subsidiaries to use its reasonable efforts, to preserve
intact their business organizations and goodwill, keep available
the services of their respective officers and employees and
maintain satisfactory relationships with those persons having
business relationships with them;
(iii) Shall not amend its Certificate of Incorporation or
Bylaws or comparable governing instruments, except as provided in
Section 5.3;
37
(iv) Shall promptly notify the other of any material
emergency or other material change in its condition (financial or
otherwise), business, properties, assets, liabilities, prospects or
the normal course of its business or of its properties, any
material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the
same may be contemplated), or the breach of any representation or
warranty contained herein;
(v) Shall promptly deliver to the other true and correct
copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement;
(vi) Shall not (A) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this
Agreement, issue any shares of its capital stock, effect any stock
split or otherwise change its capitalization as it existed on the
date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to
acquire any shares of its capital stock, other than employee stock
options, stock benefits and stock purchases under any stock option,
stock benefit or stock purchase plan existing on the date hereof,
provided that the aggregate amount of employee stock options
granted pursuant to such employee stock option plans shall not
exceed 150,000 in the aggregate; (C) increase any compensation or
enter into or amend any employment agreement with any of its
present or future officers, directors or employees, except for
normal increases consistent with past practice and the payment of
cash bonuses to officers pursuant to and consistent with existing
plans or programs; (D) grant any severance or termination package
to any employee or consultant other than consistent with past
practice; or (E) adopt any new employee benefit plan (including any
stock option, stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect, except for
changes which are less favorable to participants in such plans;
(vii) Shall not (A) declare, set aside or pay any dividend
or make any other distribution or payment with respect to any
shares of its capital stock or other ownership interests; or (B)
directly or indirectly, redeem, purchase or otherwise acquire any
shares of its capital stock of its capital stock of any capital
stock of its Subsidiaries, or make any commitment for any such
action;
(viii) Shall not, and shall cause its Subsidiaries to not,
enter into any material transaction, or agree to enter into any
material transaction, outside the ordinary course of business,
including, without limitation, any transaction involving a merger,
consolidation, joint venture, partial or complete liquidation or
dissolution, reorganization, recapitalization, restructuring or a
38
purchase, sale, lease or other disposition of a substantial portion
of assets or capital stock;
(ix) Shall not, and shall cause its Subsidiaries to not,
incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of others other than in the
ordinary course of its business consistent with past practices, but
in no event in an amount exceeding $100,000 individually or
$500,000 in the aggregate (other than normal expenditures for the
purchase of raw materials or other supplies);
(x) Shall not, and shall cause its Subsidiaries to not,
make any loans, advances or capital contributions to, or
investments in, any other Person, except in the ordinary course of
business consistent with past practices;
(xi) Shall not, and shall cause its Subsidiaries to not,
make or commit to made any capital expenditures in excess of
$100,000 individually or $500,000 in the aggregate other than
expenditures included in any such entity's current capital
expenditure budget disclosed to the other party hereto or
consistent with past practice;
(xii) Shall not, and shall cause its Subsidiaries to not,
apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly
or indirectly to or for the benefit of any affiliate of such party
or any of its Subsidiaries or enter into any transaction with any
affiliate of such party or any of its Subsidiaries;
(xiii) Shall not, and shall cause its Subsidiaries to not,
alter the manner of keeping its books, accounts or record, or
change in any manner the accounting practices therein reflected;
(xiv) Shall not, and shall cause its Subsidiaries to not,
grant or make any mortgage or pledge or subject itself or any of
its material properties or assets to any lien, charge or
encumbrance of any kind, except lines for taxes not currently due;
and
(xv) Shall maintain, and shall cause its Subsidiaries to
maintain, insurance on its tangible assets and its businesses in
such amounts and against such risks and losses as are currently in
effect.
Section 5.3 Meetings of Stockholders. Each of Watson and
CIRCA will take all action necessary in accordance with applicable
law and their respective Certificates of Incorporation and Bylaws
to convene a meeting of their respective stockholders as promptly
as practicable to consider and vote upon (a) in the case of Watson,
(i) the approval of the Merger, this Agreement and the transactions
39
contemplated hereby (to the extent required by applicable law) and
the issuance of the shares of Watson Common Stock pursuant to the
Merger contemplated hereby; and (ii) the approval of an amendment
to Watson's Certificate of Incorporation to (A) increase the
maximum number of authorized shares of Watson Common Stock and (B)
create three classes of directors consisting of three persons in
each class; and (b) in the case of CIRCA, the approval of the
Merger, this Agreement and the transactions contemplated hereby.
Each such meeting shall be held on the same day. The Board of
Directors of each of Watson and CIRCA shall recommend such approval
and Watson and CIRCA shall each take all lawful action to solicit
such approval, including, without limitation, timely mailing the
Proxy Statement to their respective stockholders; provided,
however, that such recommendation or solicitation is subject to any
action (including any withdrawal or change of its recommendation)
taken by, or upon authority of, the Board of Directors of Watson or
CIRCA, as the case may be, in the exercise of its good faith
judgment as to its fiduciary duties to its stockholders imposed by
law. It shall be a condition to the mailing of the Proxy Statement
that (x) Watson shall have received a "comfort" letter from Coopers
& Lybrand, independent public accountants for CIRCA, dated the date
of the Proxy Statement, with respect to the financial statements of
CIRCA included in the Proxy Statement, substantially in the form
described in Section 6.3(e) and CIRCA shall use its reasonable best
efforts to obtain such letter; and (y) CIRCA shall have received a
"comfort" letter from Price Waterhouse, independent public
accountants for Watson, dated the date of the Proxy Statement, with
respect to the financial statements of Watson included in the Proxy
Statement, substantially in the form described in Section 6.2(e)
and Watson shall use its reasonable best efforts to obtain such
letter.
Section 5\C Filings; Other Action.
(a) Subject to the terms and conditions herein provided,
CIRCA and Watson shall: (a) promptly make their respective filings
and thereafter make any other required submissions under the HSR
Act with respect to the Merger; (b) use all reasonable efforts to
cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be
obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and
foreign jurisdictions in connection with the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby; and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or
authorizations; and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done,
all other things necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement.
If, at any time after the Effective Time, any further reasonable
40
action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Watson and CIRCA
shall take all such necessary action.
(b) (i) CIRCA and Watson shall give any notices to third
parties, and use all reasonable efforts to obtain any third party
consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement or (B) disclosed or
required to be disclosed in the Watson Disclosure Letter or the
CIRCA Disclosure Letter, as the case may be.
(ii) In the event that either party shall fail to obtain
any third party consent described in subsection (b)(i) above, such
party shall use all reasonable efforts, and shall take any such
actions reasonably requested by the other party hereto, to minimize
any adverse effect upon CIRCA and Watson, their respective
Subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time,
from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time,
Watson and CIRCA shall each promptly notify the other in writing of
any pending or, to its knowledge, threatened action, proceeding or
investigation by any governmental entity or any other person (i)
challenging or seeking material damages in connection with the
Merger or (ii) seeking to restrain or prohibit the consummation of
the Merger, which in either case is reasonably likely to have a
Watson Material Adverse Effect or a CIRCA Material Adverse Effect.
(d) From and after the date of this Agreement until the
Effective Time, each party hereto shall promptly notify the other
of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause
any condition to the obligations of any party to effect the Merger
and the other transactions contemplated by this Agreement not to be
satisfied, or (ii) the failure of Watson or CIRCA, as the case may
be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it pursuant to this Agreement
which would be likely to result in any condition to the obligations
of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; provided,
however, that the delivery of any notice pursuant hereto shall not
cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Agreement or
otherwise limit or affect the remedies available hereunder to the
party receiving such notice.
Section 5.5 Inspection of Records. From the date hereof to
the Effective Time, each of CIRCA and Watson shall (a) allow all
designated officers, attorneys, accountants and other
representatives of the other reasonable access at all reasonable
times to the offices, records and files, correspondence, audits and
41
properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining
to the business and affairs, of CIRCA and Watson and their
respective Subsidiaries, as the case may be; (b) furnish to the
other, the other's counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and
other information as such persons may reasonably request; and
(c) instruct the employees, counsel and financial advisors of CIRCA
or Watson, as the case may be, to cooperate with the other in the
other's investigation of the business of it and its Subsidiaries.
All information disclosed by a party hereto to the other party
hereto and their respective representatives shall be subject to the
terms of that certain Non-Disclosure Agreement (the
"Confidentiality Agreement") dated as of February 16, 1995 between
Watson and CIRCA. Notwithstanding the foregoing, Watson shall not
have access to the proprietary scientific data of the Subsidiary of
CIRCA listed in Section 5.5 of the CIRCA Disclosure Letter.
Section 5.6 Publicity. Neither party hereto shall make any
press release or public announcement with respect to this
Agreement, the Merger or the transaction contemplated hereby
without the prior written consent of the other party hereto (which
consent shall not be unreasonably withheld); provided, however,
that each party hereto may make any disclosure or announcement
which such party, in the opinion of its legal counsel, is obligated
to make pursuant to applicable law or regulation of any national
securities exchange, in which case, the party desiring to make the
disclosure shall consult with the other party hereto prior to
making such disclosure or announcement.
Section 5.7 Registration Statement. Watson and CIRCA shall
cooperate and promptly prepare and Watson shall file with the SEC
as soon as practicable a Registration Statement on Form S-4 (the
"Form S-4") under the Securities Act, with respect to the Watson
Common Stock issuable in the Merger, a portion of which
Registration Statement shall also serve as the Proxy Statement.
The respective parties will cause the Proxy Statement and the Form
S-4 to comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations promulgated thereunder. Watson shall use
all reasonable efforts, and CIRCA will cooperate with Watson, to
have the Form S-4 declared effective by the SEC as promptly as
practicable. Watson shall use its best efforts to obtain, prior to
the effective date of the Form S-4, all necessary state securities
law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement and will pay all
expenses incident thereto. No amendment or supplement to the Proxy
Statement will be made by Watson or CIRCA without the approval of
the other party. Watson will advise CIRCA, promptly after it
receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of
42
the Watson Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional
information.
Section 5.8 Further Action. Each party hereto shall, subject
to the fulfillment at or before the Effective Time of each of the
conditions of performance set forth herein or the waiver thereof,
perform such further acts and execute such documents as may be
reasonably required to effect the Merger.
Section 5.9 Affiliate Letters. At least 30 days prior to
the Closing Date, CIRCA shall deliver to Watson a list of names and
addresses of those persons who were, in CIRCA's reasonable
judgment, at the record date for its stockholders' meeting to
approve the Merger, "affiliates" (each such person, an "Affiliate")
of CIRCA within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. CIRCA shall
provide Watson such information and documents as Watson shall
reasonably request for purposes of reviewing such list. CIRCA
shall deliver or cause to be delivered to Watson, prior to the
Closing Date, from each of the Affiliates of CIRCA identified in
the foregoing list, an Affiliate Letter in the form attached hereto
as Exhibit A. Watson shall be entitled to place legends as
specified in such Affiliate Letters on the certificates evidencing
any Watson Common Stock to be received by such Affiliates pursuant
to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Watson Common
Stock, consistent with the terms of such Affiliate Letters.
Section 5.10 Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses except as expressly
provided herein and except that (a) the filing fee in connection
with the HSR Act filing; (b) the filing fee in connection with the
filing of the Form S-4 or Proxy Statement with the SEC; (c) the
filing fees in connection with "blue sky" compliance; and (d) the
expenses incurred in connection with preparing, printing and
mailing the Form S-4 and the Proxy Statement, shall be shared
equally by CIRCA and Watson.
Section 5.11 Insurance; Indemnity. (a) From the Effective
Time through the six year anniversary of the Effective Time, Watson
shall indemnify, defend and hold harmless, to the fullest extent
permitted under applicable law, each person who is now, or has been
at any time prior to the date hereof, an officer, director,
employee, trustee or agent of CIRCA (or any Subsidiary or division
thereof), including, without limitation, each person controlling
any of the foregoing persons (individually, an "Indemnified Party"
and collectively, the "Indemnified Parties"), against all losses,
43
claims, damages, liabilities, costs or expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any claim, action, suit, proceeding
or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such,
whether commenced, asserted or claimed before or after the
Effective Time and including, without limitation, liabilities
arising under the Securities Act, the Exchange Act and state
corporation laws in connection with the Merger. In the event of
any such claim, action, suit, proceeding or investigation (an
"Action"), (i) Watson shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Party, which counsel shall be
reasonably acceptable to Watson, in advance of the final
disposition of any such Action to the full extent permitted by
applicable law; provided, however, that Watson shall have no
obligation under this clause (i) unless Watson has received an
undertaking from the Indemnified Party to promptly return any
amounts paid by Watson or its Subsidiaries in the event that it
shall ultimately have been determined by a court of competent
jurisdiction not subject to further appeal that the Indemnified
Party is not entitled to be indemnified under applicable law; and
(ii) Watson and the Surviving Corporation will cooperate in the
defense of any such matter; provided, however, that Watson shall
not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld) and
provided, further, that Watson shall not be obligated pursuant to
this Section to pay the fees and disbursements of more than one
counsel for all Indemnified Parties in any single Action except to
the extent that, in the opinion of counsel for the Indemnified
Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such action. All rights to
indemnification in respect of any Action made or asserted prior to
the sixth anniversary of the Effective Time shall continue until
final disposition of such Action.
(b) Watson shall cause the Surviving Corporation to keep in
effect provisions in its Certificate of Incorporation and Bylaws
providing for exculpation of director and officer liability and its
indemnification of the Indemnified Parties to the fullest extent
permitted under applicable law, which provisions shall not be
amended except as required by applicable law or except to make
changes permitted by law that would enlarge the Indemnified
Parties' right of indemnification.
(c) Without in any way limiting any of Watson's other
obligations under this Section 5.11 or any other rights to
indemnity available, Watson shall use its best efforts to cause to
be maintained in effect for not less than two years after the
Effective Time, the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by
CIRCA with respect to matters occurring prior to the Effective
Time; provided, however, that (i) Watson may substitute therefor
44
policies of substantially the same coverage containing terms and
conditions which are substantially the same for the Indemnified
Parties to the extent reasonably available and (ii) Watson shall
not be required to pay an annual premium for such insurance in
excess of 150% of the last annual premium paid prior to the date
hereof, but in such case shall purchase as much coverage as
possible for such amount.
Section 5.12 Restructuring of Merger. Upon the mutual
agreement of Watson and CIRCA, the Merger shall be restructured in
the form of a forward subsidiary merger of CIRCA into Merger Sub,
with Merger Sub being the surviving corporation, or as a merger of
CIRCA into Watson, with Watson being the surviving corporation. In
such event, this Agreement shall be deemed appropriately modified
to reflect such form of merger and CIRCA and Watson may each update
their respective Disclosure Letters to reflect any breach of a
representation or warranty resulting from such restructuring.
Section 5.13 Rights Agreement. CIRCA shall take all
necessary action prior to the Effective Time to cause the dilution
provisions of that certain Stockholder Protection Rights Agreement
dated as of November 1, 1991, between CIRCA and American Stock
Transfer & Trust Company, as Rights Agent, to be inapplicable to
the Merger, without any payment to holders of rights issued
pursuant to such Rights Agreement.
Section 5.14 Governance. (a) Watson shall take such action
as may be necessary (including, to the extent necessary, obtaining
resignations of its directors) so that the persons listed on
Schedule 5.14 of the Watson Disclosure Letter constitute the entire
board of directors of Watson at the Effective Time, with terms
expiring as stated on such Schedule. If, prior to the Effective
Time, any of such persons shall decline or be unable to serve, a
replacement shall be designated in accordance with such Schedule.
(b) Dr. Allen Chao shall continue to be Chief Executive
Officer of Watson at the Effective Time and Dr. Alec Keith shall
continue to be Chairman of Watson at the Effective Time. The Board
of Directors of Watson shall take all necessary action to cause Dr.
Mel Sharoky to be elected as President of Watson at the Effective
Time.
Section 5.15 Pooling; Reorganization. From and after the
date hereof and until the Effective Time, neither Watson nor CIRCA
nor any of their respective Subsidiaries or other affiliates shall
(a) knowingly take any action, or knowingly fail to take any
action, that would jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes; (b) knowingly take
any action, or knowingly fail to take any action, that would
jeopardize qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code; or (c) enter into any
contract, agreement, commitment or arrangement with respect to
45
either of the foregoing. Following the Effective Time, Watson
shall use its best efforts to conduct its business in a manner that
would not jeopardize the characterization of the Merger as a
"pooling of interests" for accounting purposes and as a
reorganization within the meaning of Section 368(a) of the Code.
Section 5.16 Employee Benefit Plans. As soon as practicable
after the Closing Date but in no event later than January 1, 1996,
Watson shall provide benefits to employees of CIRCA and its
Subsidiaries which are substantially similar to the benefits
provided to similarly situated employees of Watson and its
Subsidiaries. The date(s) on which employees of CIRCA and its
Subsidiaries are provided benefits pursuant to the preceding
sentence shall be referred to as the "Benefit Plan Transition
Dates." Subject to the requirements of applicable law, after the
Closing Date, Watson shall cause the Surviving Corporation to
maintain the CIRCA Benefit Plans in substantially the same form as
in effect on the date of this Agreement until the applicable
Benefit Plan Transition Date. Subject to the requirements of
applicable law, after the Effective Time, Watson shall provide
benefits to employees of CIRCA and its Subsidiaries which are
substantially similar to the benefits provided to similarly
situated employees of Watson and its Subsidiaries. With respect to
the Watson Benefit Plans, Watson shall grant all employees of CIRCA
and its Subsidiaries who become participants in such plans after
the applicable Benefit Plan Transition Date credit for all services
with CIRCA and its Subsidiaries and their respective predecessors
prior to the applicable Benefit Plan Transition Date for all
purposes for which such service was recognized by CIRCA. To the
extent the Watson Benefit Plans provide medical or dental welfare
benefits after the applicable Benefit Plan Transition Date, Watson
shall cause all pre-existing condition exclusions and actively at
work requirements to be waived and Watson shall provide that any
expenses incurred on or before the applicable Benefit Plan
Transition Date shall be taken into account under the Watson
Benefit Plans for purposes of satisfying the applicable deductible,
coinsurance and maximum out-of-pocket provisions for such employees
and their covered dependents. On and after the Closing Date,
Watson shall cause the medical or dental welfare benefit plans
covering employees of CIRCA and its Subsidiaries to provide
continuation coverage (within the meaning of Section 4980B of the
Code) to employees of CIRCA and its Subsidiaries who terminated
employment prior to Closing and their dependents.
Section 5.17 NASD Listing. Watson shall use all reasonable
efforts to cause the shares of Watson Common Stock to be issued in
the Merger to be approved for listing on the NASDAQ prior to the
Effective Time. Watson shall not take any action which would
result in the failure to maintain the trading of Watson Common
Stock on the NASDAQ.
46
Section 5.18 Assumption of Agreements, etc. Watson shall
execute such instruments as may be required to assume the
obligations of CIRCA pursuant to the agreements listed in Schedule
5.18 of the CIRCA Disclosure Schedule and to effectuate the
issuance of options and other arrangements as set forth on such
Schedule, which instruments shall be in form and substance
reasonably satisfactory to CIRCA.
Section 5.19 Cause. For purposes of this Article V, the term
"cause its Subsidiaries" with respect to any non-wholly owned
Subsidiary shall mean that to the extent that CIRCA or Watson (as
the case may be) or any of its officers, directors or representa-
tives are requested to or otherwise propose to consent to or
approve any action proposed to be taken by such Subsidiary, whether
in their individual capacity or in any other capacity, that neither
CIRCA or Watson (as the case may be) nor its officers, directors or
representatives shall give such consent or approval, or vote in
favor of such action, without the approval of the other party
hereto.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the
Merger shall be subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
(a) This Agreement and the transactions contemplated hereby
shall have been approved in the manner required by applicable law
or by the applicable regulations of any stock exchange or other
regulatory body, as the case may be, by the holders of the issued
and outstanding shares of capital stock of CIRCA and Watson,
respectively.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the
consummation of the Merger shall have been issued and remain in
effect or materially changes the terms or conditions of this
Agreement. In the event any such order or injunction shall have
been issued, each party agrees to use its reasonable efforts to
have any such injunction lifted.
(d) The Form S-4 shall have been declared effective by the
SEC and shall be effective at the Effective Time, and no stop order
suspending the effectiveness of the Form S-4 shall have been
issued, no action, suit, proceeding or investigation by the SEC to
47
suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities laws
relating to the issuance or trading of the Watson Common Stock to
be issued to CIRCA stockholders in connection with the Merger shall
have been received.
(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board
or other regulatory body required in connection with the execution,
delivery and performance of this Agreement shall have been obtained
or made, except for filings in connection with the Merger and any
other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not
have a Watson Material Adverse Effect or a CIRCA Material Adverse
Effect, as the case may be, following the Effective Time.
(f) Watson and CIRCA shall each have received from Price
Waterhouse an opinion that the Merger will be treated as a "pooling
of interests" under applicable accounting standards.
(g) The Watson Common Stock to be issued to CIRCA
stockholders in connection with the Merger shall have been
authorized for trading on the NASDAQ, subject only to official
notice of issuance.
(h) In the event dissenters' rights are available to CIRCA
stockholders, the holders of not more than ten percent (10%) of the
outstanding CIRCA Common Stock shall have perfected dissenters'
rights under applicable law.
Section 6.2 Conditions to Obligation of CIRCA to Effect the
Merger. The obligation of CIRCA to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) Watson shall have performed, in all material respects,
all of its agreements contained herein that are required to be
performed by Watson on or prior to the Closing Date, and CIRCA
shall have received a certificate of the President or a Vice
President of Watson, dated the Closing Date, certifying to such
effect.
(b) The representations and warranties of Watson and Merger
Sub contained in this Agreement and in any document delivered in
connection herewith shall be true and correct as of the Closing,
except where the failure to be so true and correct would not have
a Watson Material Adverse Effect, and CIRCA shall have received a
certificate of the President or a Vice President of Watson, dated
the Closing Date, certifying to such effect.
48
(c) CIRCA shall have received from Watson certified copies
of the resolutions of Watson's and Merger Sub's Boards of Directors
approving and adopting this Agreement and the transactions
contemplated hereby.
(d) CIRCA shall have received the opinion of Schulte Roth &
Zabel special counsel to CIRCA, dated the Closing Date, to the
effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code, and that CIRCA and Watson will each be a party to that
reorganization within the meaning of Section 368(b) of the Code.
(e) CIRCA shall have received a "comfort" letter from Coopers
& Lybrand, of the kind contemplated by the Statement of Auditing
Standards with respect to Letters to Underwriters promulgated by
the American Institute of Certified Public Accountants (the "AICPA
Statement"), dated the Closing Date, in form and substance
reasonably satisfactory to CIRCA, in connection with the procedures
undertaken by them with respect to the financial statements of
Watson and its Subsidiaries contained in the Form S-4 and the other
matters contemplated by the AICPA Statement and customarily
included in comfort letters relating to transactions similar to the
Merger.
(f) CIRCA shall have received the updated opinions of Bear
Stearns and Wertheim Schroder dated the date of the Proxy
Statement, to the effect that the Merger or the Exchange Ratio, as
the case may be, is fair to CIRCA's shareholders from a financial
point of view.
Section 6.3 Conditions to Obligation of Watson and Merger Sub
to Effect the Merger. The obligations of Watson and Merger Sub to
effect the Merger shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) CIRCA shall have performed, in all material respects, all
of its agreements contained herein that are required to be
performed by CIRCA on or prior to the Closing Date, and Watson
shall have received a certificate of the President or a Vice
President of CIRCA, dated the Closing Date, certifying to such
effect.
(b) The representations and warranties of CIRCA contained in
this Agreement and in any document delivered in connection herewith
shall be true and correct as of the Closing, except where the
failure to be so true and correct would not have a CIRCA Material
Adverse Effect, and Watson shall have received a certificate of the
President or a Vice President of CIRCA, dated the Closing Date,
certifying to such effect.
49
(c) Watson shall have received from CIRCA certified copies
of the resolutions of CIRCA's Board of Directors approving and
adopting this Agreement and the transactions contemplated hereby.
(d) Watson shall have received the opinion of D'Ancona &
Pflaum, special counsel to Watson, dated the Closing Date, to the
effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code, and that CIRCA and Watson will each be a party to that
reorganization within the meaning of Section 368(b) of the Code.
(e) Watson shall have received a "comfort" letter from Price
Waterhouse, of the kind contemplated by the AICPA Statement, dated
the Closing Date, in form and substance reasonably satisfactory to
Watson, in connection with the procedures undertaken by them with
respect to the financial statements and other financial information
of CIRCA and its Subsidiaries contained in the Form S-4 and the
other matters contemplated by the AICPA Statement and customarily
included in comfort letters relating to transactions similar to the
Merger.
(f) Watson shall have received the updated opinion of DLJ,
dated the date of the Proxy Statement, to the effect that the
number of shares of Watson Common Stock to be issued by Watson in
the Merger in exchange for each share of CIRCA Common Stock is fair
to Watson's stockholders from a financial point of view.
ARTICLE VII
TERMINATION
Section 7.1 Termination by Mutual Consent. This Agreement
may be terminated and the Merger may be abandoned at any time prior
to the Effective Time, before or after the approval of this
Agreement by the stockholders of CIRCA and/or Watson, by the mutual
consent of Watson and CIRCA.
Section 7.2 Termination by Either Watson or CIRCA. This
Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of either Watson or CIRCA if (a)
the Merger shall not have been consummated by December 1, 1995;
provided, however, that the right to terminate this Agreement under
this Section 7.2(a) will not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or
before such date; (b) the approval of CIRCA's stockholders required
by Section 6.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof; provided, however,
that CIRCA shall not have the right to terminate this Agreement
under this Section 7.2(b) if CIRCA caused (directly or indirectly)
or aided in the failure to obtain such approval; (c) the approval
50
of Watson's stockholders required by Section 6.1(a) shall not have
been obtained at a meeting duly convened therefor or at any
adjournment thereof; provided, however, that Watson shall not have
the right to terminate this Agreement under this Section 7.2(c) if
Watson caused (directly or indirectly) or aided in the failure to
obtain such approval; or (d) a court of competent jurisdiction or
a governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other
action either (i) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement; or
(ii) compelling Watson, Merger Sub or the Surviving Corporation to
dispose of or hold separate all or a material portion of the
respective businesses or assets of Watson and CIRCA, and such
order, decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (d) shall have used all
reasonable efforts to remove such injunction, order or decree.
Section 7.3 Termination by CIRCA. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after the adoption and approval by the
stockholders of CIRCA referred to in Section 6.1(a), by action of
the Board of Directors of CIRCA, if (a) CIRCA receives an
Alternative Proposal and the Board of Directors of CIRCA determines
in good faith and pursuant to the exercise of its fiduciary duties
to its stockholders, to accept such Alternative Proposal, and the
Board of Directors of CIRCA recommends or resolves to accept or
recommend to CIRCA's stockholders such Alternative Proposal; (b)
the Board of Directors of CIRCA determines in good faith and
pursuant to the exercise of its fiduciary duties, to withdraw its
recommendation of this Agreement and/or the Merger; (c) the Board
of Directors of Watson shall have (i) recommended an Alternative
Proposal to Watson stockholders or (ii) withdrawn or modified in a
manner materially adverse to CIRCA, its approval or recommendation
of this Agreement and/or the Merger (other than upon the happening
of an event described in Sections 7.4(d) or 7.4(e)); (d) there has
been a breach by Watson or Merger Sub of any representation or
warranty contained in this Agreement which would have a Watson
Material Adverse Effect; (e) there has been a material breach of
any of the material covenants or agreements set forth in this
Agreement on the part of Watson, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such
breach is given by CIRCA to Watson; (f) any person, after the date
hereof, shall become the beneficial owner (directly or indirectly)
of twenty percent (20%) of more of the outstanding shares of Watson
Common Stock or any person (other than CIRCA or its Subsidiaries)
shall have commenced a bona fide tender offer or exchange to
acquire at least twenty percent (20%) of the then outstanding
shares of Watson Common Stock or (g) on the Determination Date the
Average Closing Price is less than $25.00 and on or before the
Response Date, Watson does not deliver to CIRCA the Adjustment
Notice. For purposes of this paragraph, "Determination Date" shall
51
mean the thirteenth business day prior to the stockholders'
meetings described in Section 5.3; "Response Date" shall mean the
second business day after the Determination Date; and "Adjustment
Notice" shall mean written notice delivered by Watson to CIRCA on
or prior to the Response Date stating that Watson has elected to
adjust the Exchange Ratio such that stockholders of CIRCA will
receive, for each share of CIRCA Common Stock held immediately
prior to the Effective Time, that number of shares of Watson Common
Stock with an aggregate value (based on the Average Closing Price)
of $21.50.
If Watson timely delivers to CIRCA the Adjustment Notice,
as promptly as practical, and in no event later than the tenth
business day prior to the stockholders' meetings described in
Section 5.3, in compliance with applicable law: (i) CIRCA and
Watson agree to mail to their respective stockholders notice of the
adjusted Exchange Ratio (the "Stockholder Notice") and (ii) Watson
agrees to amend the Form S-4 to include the Stockholder Notice. In
the event CIRCA or Watson is required by applicable law to postpone
its stockholders' meeting in connection with this Section, CIRCA or
Watson, as the case may be, shall postpone such meeting for the
minimum period required under applicable law. The calculation of
all dollar amounts and other figures pursuant to this Section shall
be appropriately adjusted in the event that after the date of this
Agreement and prior to the date of any such calculation, the
outstanding shares of CIRCA Common Stock or Watson Common Stock
shall have been changed into a different number of shares or a
different class by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange
of shares.
Section 7.4 Termination by Watson. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after the approval by the stockholders of
Watson referred to in Section 6.1(a), by action of the Board of
Directors of Watson, if (a) Watson receives an Alternative Proposal
and the Board of Directors of Watson determines in good faith and
pursuant to the exercise of its fiduciary duties to its
stockholders, to accept such Alternative Proposal, and the Board of
Directors of Watson recommends or resolves to accept or recommend
to Watson's stockholders such Alternative Proposal; (b) the Board
of Directors of Watson determines in good faith and pursuant to the
exercise of its fiduciary duties, to withdraw its recommendation of
this Agreement and/or the Merger; (c) the Board of Directors of
CIRCA shall have (i) recommended an Alternative Proposal to CIRCA
stockholders or (ii) withdrawn or modified in a manner materially
adverse to Watson, its approval or recommendation of this Agreement
or the Merger (other than upon the happening of an event described
in Sections 7.3(d) or 7.3(e)); (d) there has been a breach by CIRCA
of any representation or warranty contained in this Agreement which
would have a CIRCA Material Adverse Effect; (e) there has been a
material breach of any of the material covenants or agreements set
52
forth in this Agreement on the part of CIRCA, which breach is not
curable or, if curable, is not cured within 30 days after written
notice of such breach is given by Watson to CIRCA; or (f) any
person, after the date hereof, shall become the beneficial owner
(directly or indirectly) of twenty percent (20%) of more of the
outstanding shares of CIRCA Common Stock or any Person (other than
Watson or its Subsidiaries) shall have commenced a bona fide tender
offer or exchange to acquire at least twenty percent (20%) of the
then outstanding shares of CIRCA Common Stock.
Section 7.5 Effect of Termination and Abandonment.
(a) In the event that this Agreement is terminated by CIRCA
pursuant to Section 7.3(a) or 7.3(b) (other than upon the happening
of an event described in Sections 7.3(d) or 7.3(e)) or by Watson
pursuant to Section 7.4(c), then CIRCA shall promptly pay Watson a
fee in an amount equal to the sum of (x) $15,000,000; plus (y) all
actual out-of-pocket costs and expenses of Watson and Merger Sub
incurred in connection with this Agreement and the consummation and
negotiation of the transactions contemplated hereby, including,
without limitation, legal, professional and service fees and
expenses, which amount shall be payable by wire transfer of same
day funds. CIRCA acknowledges that the agreements contained in
this Section 7.5(a) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements,
Watson and Merger Sub would not enter into this Agreement.
Accordingly, if CIRCA fails to promptly pay the amount due pursuant
to this Section 7.5(a), and, in order to obtain such payment,
Watson or Merger Sub commences a suit which results in a final,
non-appealable judgment against CIRCA for the fee set forth in this
Section 7.5(a), CIRCA shall pay to Watson its costs and expenses
(including attorneys' fees) incurred by Watson in connection with
such suit, together with interest on the amount of the fee at the
rate of 12% per annum.
(b) In the event that this Agreement is terminated by Watson
pursuant to Section 7.4(a) or 7.4(b) (other than upon the happening
of an event described in Sections 7.4(d) or 7.4(e)) or by CIRCA
pursuant to Section 7.3(c) (subject to the proviso to this
sentence), then Watson shall promptly pay CIRCA a fee in an amount
equal to the sum of (x) $15,000,000; plus (y) all actual out-of-
pocket costs and expenses of CIRCA incurred in connection with this
Agreement and the consummation and negotiation of the transactions
contemplated hereby, including, without limitation, legal,
professional and service fees and expenses, which amount shall be
payable by wire transfer of same day funds; provided, however, that
no payments shall be made pursuant to this Section 7.5(b) in the
case of a termination by CIRCA with respect to an Alternative
Proposal of Watson, the consummation of which is not conditioned on
the termination of this Agreement (an "Available Transaction").
Watson acknowledges that the agreements contained in this Section
7.5(b) are an integral part of the transactions contemplated by
53
this Agreement, and that, without these agreements, CIRCA would not
enter into this Agreement. Accordingly, if Watson fails to
promptly pay the amount due pursuant to this Section 7.5(b), and,
in order to obtain such payment, CIRCA commences a suit which
results in a final, non-appealable judgment against Watson for the
fee set forth in this Section 7.5(b), Watson shall pay to CIRCA its
costs and expenses (including attorneys' fees) incurred by CIRCA in
connection with such suit, together with interest on the amount of
the fee at the rate of 12% per annum.
(c) If this Agreement is (i) terminated by CIRCA pursuant to
Sections 7.3(d) or 7.3(e); or (ii) by Watson pursuant to Sections,
7.4(d) or 7.4(e), the non-terminating party shall reimburse the
terminating party for all actual out-of-pocket costs and expenses
incurred by such terminating party in connection with this
Agreement and the consummation and negotiation of the transactions
contemplated hereby, including, without limitation, legal,
professional and service fees and expenses, which amount shall be
payable by wire transfer of same day funds.
(d) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 7, all
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 7.5 and the
provisions of Sections 5.6, 5.10, 8.3, 8.4, 8.6, 8.8, 8.9, 8.12 and
8.13, which obligations shall survive the termination of this
Agreement.
Section 7.6 Extension; Waiver. At any time prior to the
Effective Time, any party hereto, by action taken by its Board of
Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the
other parties hereto; (b) waive any inaccuracies in the
representations and warranties made to such party contained herein
or in any document delivered pursuant hereto; and (c) waive
compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement
shall be deemed to the extent expressly provided herein to be
conditions to the Merger and, shall not survive the Merger,
provided, however, that the agreements contained in Sections 1.4,
54
1.5, 1.6, 1.7, 1.8, 5.11, 5.14, 5.15, 5.16, 5.17 and 5.18 and this
Article 8 and the agreements delivered pursuant to this Agreement
shall survive the Merger.
Section 8.2 Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by facsimile
transmission and by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested
and first-class postage prepaid), addressed as follows:
If to Watson or Merger Sub: If to CIRCA:
Watson Pharmaceuticals, Inc. CIRCA Pharmaceuticals, Inc.
311 Bonnie Circle 33 Ralph Avenue
Corona, California 91720 Copiague, New York 11726
Fax: (909) 270-1096 Fax: (516) 789-3331
Attn: Dr. Allen Chao Attn: Dr. Melvin Sharoky
With copies to: With copies to:
D'Ancona & Pflaum Schulte Roth Zabel
30 North LaSalle, Suite 2900 900 Third Avenue
Chicago, Illinois 60602 New York, NY 10022
Fax: (312) 580-0923 Fax (212) 593-5955
Attn: Michel J. Feldman Attn: Marc Weingarten
or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally delivered
or mailed.
Section 8.3 Assignment, Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective permitted successors and
assigns. Notwithstanding anything contained in this Agreement to
the contrary, except for the provisions of Sections 1.4, 1.5, 1.6,
1.7, 1.8, 2.3, 2.4, 5.11, 5.14, 5.16 and 5.18, nothing in this
Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
Section 8.4 Entire Agreement. This Agreement, the Exhibit,
the CIRCA Disclosure Letter, the Watson Disclosure Letter, the
Confidentiality Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and
55
supersede all prior agreements and understandings among the parties
with respect thereto. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto
unless made in writing and signed by all parties hereto.
Section 8.5 Amendment. This Agreement may be amended by the
parties hereto, by action taken by their respective Boards of
Directors, at any time before or after approval of matters
presented in connection with the Merger by the stockholders of
CIRCA and Watson, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 8.6 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without regard to its rules of conflict of laws.
Section 8.7 Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
Section 8.8 Headings. Headings of the Articles and Sections
of this Agreement are for the convenience of the parties only and
shall be given no substantive or interpretive effect whatsoever.
Section 8.9 Interpretation. In this Agreement, unless the
context otherwise requires, words describing the singular number
shall include the plural and vice versa, and words denoting any
gender shall include all genders and words denoting natural persons
shall include corporations and partnerships and vice versa.
Section 8.10 Waivers. Except as provided in this Agreement,
no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder.
Section 8.11 Incorporation of Exhibits. The CIRCA Disclosure
Letter, the Watson Disclosure Letter and all Exhibits attached
hereto and referred to herein are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
Section 8.12 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
56
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement
or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is
enforceable.
Section 8.13 Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of
the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and
57
to enforce specifically the terms and provisions hereof, this being
in addition to any other remedy to which they are entitled at law
or in equity.
IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf on the day
and year first written above.
WATSON PHARMACEUTICALS, INC.
ATTEST:
By: /s/ Michel J. Feldman By: /s/ Allen Chao, M.D.
Michel J. Feldman, Assistant Title: President
Secretary
GUM ACQUISITION CORP.
ATTEST:
By: /s/ Michel J. Feldman By: /s/ Allen Chao, M.D.
Michel J. Feldman, Assistant Title: President
Secretary
CIRCA PHARMACEUTICALS, INC.
ATTEST:
By: /s/ Gwen Gerrick By: /s/ Melvin Sharoky, M.D.
Gwen Gerrick, Secretary Title: President
58
Exhibit 10.2
CIRCA PHARMACEUTICALS TO MERGE WITH WATSON PHARMACEUTICALS
CORONA, Calif., March 30/PRNewswire/ -- Watson
Pharmaceuticals Inc. (Nasdaq: WATS) and Circa Pharmaceuticals
Inc. (AMEX: RXC) today announced that they have entered into a
definitive merger agreement under which Circa will merge with a
wholly owned subsidiary of Watson through an exchange of 0.86
shares of Watson for each share of Circa. Watson Pharmaceuticals
will become the parent company of Circa following the merger.
The merger is expected to be accretive to Watson's 1995 per share
earnings.
Allen Chao, Ph.D., president and chief executive officer of
Watson Pharmaceuticals stated, "Watson has a balanced strategy of
focusing on the development, production and marketing of off-
patent pharmaceutical products and proprietary drugs. This
merger with Circa is an important step in furthering this
strategy and positions the company for continued strong growth.
"The merged companies will provide a revenue stream and
product pipeline including niche off-patent pharmaceutical
products, proprietary products, OTC products, income for the 50
percent ownership of Somerset Pharmaceuticals and royalty income
from Dilacor XR. Our revenue stream and product pipeline
immediately will become more diversified and proprietary,"
continued Dr. Chao.
"Dr. Sharoky, with his experience in new drug development,
will enhance the company's capabilities in expediting our
development programs for proprietary products. We also gain
critical mass through a combined cash balance of approximately
$100 million and a virtually debt free balance sheet," concluded
Dr. Chao.
Melvin Sharoky, M.D., chief executive officer of Circa,
added, "Our combination with Watson allows Circa's shareholders
to immediately benefit from Watson's established presence in off-
patent pharmaceuticals. The two companies complement each other
technologically in the area of drug delivery systems with
Watson's polymer-based drug delivery technology and Circa's gum
technology."
In 1994, Watson generated $87.1 million in revenue and $18.7
million in net income, or $1.05 per share. Circa's 1994 earnings
were $17.3 million, or $0.79 per share. Currently, Watson
manufactures a total of 62 dosage strengths representing 20
ethical drugs. Additionally, Watson has a total of seven
Abbreviated New Drug Applications (ANDAs) pending at the Food and
Drug Administration (FDA).
Circa has a 50 percent interest in Somerset Pharmaceuticals
which markets Eldepryl(R), used in the treatment of Parkinson's
disease. Eldepryl(R) sales were $125 million in 1994. The
Somerset pipeline includes an Eldepryl(R) transdermal patch in
development for several neurological indications, as well as
ipriflavone which is indicated for the treatment of osteoporosis.
Circa receives a 20 percent royalty on the sales of Dilacor(TM)
XR, marketed by Rhone-Poulenc Rorer Inc. for hypertension and
angina. Dilacor(TM) XR sales were $128 million in 1994. The
company's 20 percent royalty for 1995 and 1996 increases to 22
percent in 1997 through the year 2000. In addition, Circa has
focused on sustained release and gum delivery systems, as well as
proprietary product development.
Under the proposed agreement, following the merger the
Watson Pharmaceuticals board will be comprised of nine members
including five current Watson board members, three current Circa
board members and one member to be selected by Circa and approved
by Watson. Dr. Sharoky will become the president of Watson, with
responsibility for research and development, business development
and the acquisition of new products. Dr. Chao will remain chief
executive officer.
The boards of directors of both companies have approved the
transaction. The proposed transaction is subject to shareholder
approval of both companies and may be terminated under certain
circumstances including the trading of Watson common stock below
an average price of $25 per share for the 20 business days ending
prior to the 13th business day before the Shareholders' meetings,
subject to Watson's right to increase the exchange ration. The
merger is expected to be tax-free and will be accounted for as a
pooling of interests. Circa has 21.7 million shares outstanding
and Watson has 17.8 million shares outstanding.
Circa Pharmaceuticals Inc., headquartered in Copiague, N.Y.,
manufactures and sells solid dosage prescription and over-the
counter pharmaceuticals.
Watson Pharmaceuticals Inc., headquartered in Corona, is
engaged in the manufacture and sale of off-patent medications and
the development of advanced drug delivery systems.
CONTACT: Doug Sherk, Suzanne Craig, or Lisa Laukkanen, 415-
296-7383, or Jill Ruja or Dave Faupel, 212-850-5600, all of
Morgen-Walke Associates; or Gwen Gerrick, director of Investor
Relations of Circa Pharmaceuticals, 516-842-8383.
