UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 30, 1999
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MEDCO RESEARCH, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-13948 95-3318451
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
of incorporation)
7001 Weston Parkway, Suite 300 Cary, NC 27513
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:(919)653-7001
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<PAGE>
ITEM 5. Other Events.
On November 30, 1999, Medco Research, Inc. (the "Company"), a Delaware
corporation, entered into an Agreement and Plan of Merger (the "Merger
Agreement") with King Pharmaceuticals, Inc. ("Acquiror"), a Tennessee
corporation, and Merlin Acquisition I Corp. ("Merger Sub"), a Delaware
corporation and wholly-owned subsidiary of Acquiror.
Subject to the terms and conditions of the Merger Agreement, Merger Sub will be
merged with and into the Company (the "Merger") at the effective time of the
Merger, and the Company will become a wholly owned subsidiary of Acquiror. At
the effective time of the Merger, each outstanding share of common stock of the
Company ("Company Common Stock"), other than shares of Company Common Stock to
be canceled in accordance with the Merger Agreement, will be converted into the
right to receive a portion of a share of common stock of Acquiror ("Acquiror
Common Stock") equal to the exchange ratio, which is as follows:
(a) if the average of the reported closing per share prices
of Acquiror Common Stock on NASDAQ (or the last bid
price in the absence of a trade) during the 20
consecutive trading days ending with and including the
third trading day immediately preceding the date of the
meeting of stockholders of the Company called to vote on
the Merger (the "Average Closing Price") is greater than
$49.87, the exchange ratio shall be the quotient
obtained by dividing $34.00 by the Average Closing
Price, rounded to the nearest 1/10,000;
(b) if the Average Closing Price of Acquiror Common Stock is
(a) less than or equal to $49.87 and (b) greater than or
equal to $33.00, the exchange ratio shall be 0.6818; and
(c) if the Average Closing Price of Acquiror Common Stock is
less than $33.00, the exchange ratio shall be the
quotient obtained by dividing $22.50 by the Average
Closing Price of Acquiror Common Stock, rounded to the
nearest 1/10,000.
In addition, Acquiror will assume outstanding options exercisable for Company
Common Stock.
The Merger is intended to be a tax-free reorganization under the Internal
Revenue Code of 1986, as amended, and is intended to be accounted for as a
pooling-of-interests. The Merger is subject to approval by the stockholders of
the Company, regulatory approvals and other closing conditions.
Also on November 30, 1999, the Company entered into a Stock Option Agreement
with Acquiror (the "Stock Option Agreement") pursuant to which the Company
granted an option to Acquiror to purchase up to 2,339,692 shares of Company
Common Stock at a price of $30.00 per share upon the occurrence of certain
events related to termination of the Merger Agreement. In addition, on November
30, 1999, certain affiliates of the Company entered into voting agreements
pursuant to which such affiliates agreed to vote all shares of Company Common
Stock owned by them in favor of the Merger.
The foregoing summary of certain principal terms of the Merger Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and is
hereby incorporated by reference herein.
A copy of the press release issued by the Company on December 1, 1999 is
attached hereto as Exhibit 2.2 and is hereby incorporated by reference herein.
A registration statement on Form S-4 (the "S-4 Registration Statement") relating
to the Acquiror Common Stock to be issued in connection with the Merger and
containing the proxy statement relating to the vote of the Company's
stockholders on the Merger was filed with the Securities and Exchange Commission
("SEC") on December 10, 1999. The Acquiror Common Stock may not be offered, nor
may offers to acquire such Stock be accepted, prior to the time the S-4
Registration Statement becomes effective. This Report shall not constitute an
offer to sell or the solicitation of an offer to buy any Acquiror Common Stock
or any other security, and shall not constitute the solicitation of any vote
with respect to the Merger.
This Current Report on Form 8-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The forward-looking
statements contained herein involve risks and uncertainties, including those
relating to the possible inability to complete the Merger as scheduled, if at
all, and those associated with the ability of the Acquiror, subsequent to the
Merger, to achieve the anticipated benefits of the Merger. Actual results and
developments may differ materially from those described or incorporated by
reference in this Report. For more information about Acquiror and the Company
and risks arising when investing in Acquiror and the Company, investors are
directed to the S-4 Registration Statement and Acquiror's and the Company's most
recent report, on Form 10-K and on Form 10-Q as filed with the SEC.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated November 30,
1999, by and between King Pharmaceuticals, Inc., a
Tennessee corporation ("Acquiror"), and Medco
Research, Inc. (the "Company"), a Delaware
corporation.
2.2 Stock Option Agreement, dated November 30, 1999, by
and between Acquiror and the Company.
2.3 Press Release of the Company, issued December 1,
1999.
SIGNATURES
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 hereunto duly authorized.
MEDCO RESEARCH, INC.
By: /s/ Glenn C. Andrews
-----------------------------
Glenn C. Andrews
Executive Vice President
and Chief Financial Officer
Dated: December 14, 1999
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
KING PHARMACEUTICALS, INC.,
MEDCO RESEARCH, INC.
and
MERLIN ACQUISITION I CORP.
Dated as of November 30, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I. THE MERGER
SECTION 1.1. The Merger...................................2
SECTION 1.2. Effective Time...............................2
SECTION 1.3. Effect of the Merger.........................2
SECTION 1.4. Certificate of Incorporation; Bylaws.........2
SECTION 1.5. Directors and Officers.......................3
SECTION 1.6. Closing......................................3
SECTION 1.7. Subsequent Actions...........................3
SECTION 1.8. Tax and Accounting Treatment of the Merger...4
ARTICLE II. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. Conversion of Securities.....................4
SECTION 2.2. Exchange of Certificates.....................6
SECTION 2.3. Assumption of Obligations to Issue Stock.....9
SECTION 2.4. Transfer Books..............................10
SECTION 2.5. Certain Adjustments.........................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1. Organization and Qualification;
Subsidiaries................................11
SECTION 3.2. Certificate of Incorporation and Bylaws.....12
SECTION 3.3. Capitalization..............................12
SECTION 3.4. Authority...................................13
SECTION 3.5. No Conflict; Required Filings and Consents..14
SECTION 3.6. SEC Filings; Financial Statements...........15
SECTION 3.7. No Undisclosed Liabilities..................16
SECTION 3.8. Absence of Certain Changes or Events........16
SECTION 3.9. Absence of Litigation.......................17
SECTION 3.10. Licenses and Permits; Compliance with Laws..17
SECTION 3.11. Unlawful Payments...........................18
SECTION 3.12. Taxes.......................................18
SECTION 3.13. Intellectual Property.......................19
SECTION 3.14. Material Contracts..........................21
SECTION 3.15. Employee Benefit Plans......................22
SECTION 3.16. Properties; Assets..........................24
SECTION 3.17. Labor Relations.............................24
SECTION 3.18. Environmental Matters.......................25
SECTION 3.19. Insurance...................................26
SECTION 3.20. Board Approval; Vote Required...............27
SECTION 3.21. Opinion of Financial Advisor................27
SECTION 3.22. Brokers.....................................27
SECTION 3.23. Takeover Provisions Inapplicable............27
SECTION 3.24. Pooling; Tax Matters........................28
SECTION 3.25. Registration Statement; Proxy Statement/
Prospectus..................................28
SECTION 3.26. Rights Agreement............................29
SECTION 3.27. Regulatory Compliance.......................29
SECTION 3.28. Current Cash Reserves; Indebtedness.........33
SECTION 3.29. Transaction Expenses........................33
SECTION 3.30. Disclosure..................................33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF MERGER SUB
SECTION 4.1. Organization and Qualification..............33
SECTION 4.2. Certificate of Incorporation and Bylaws.....34
SECTION 4.3. Authority...................................34
SECTION 4.4. No Conflict; Required Filings and Consents..34
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 5.1. Organization and Qualification;
Subsidiaries................................35
SECTION 5.2. Certificate of Incorporation and Bylaws.....36
SECTION 5.3. Capitalization..............................36
SECTION 5.4. Authority...................................37
SECTION 5.5. No Conflict; Required Filings and Consents..38
SECTION 5.6. SEC Filings; Financial Statements...........39
SECTION 5.7. No Undisclosed Liabilities..................39
SECTION 5.8. Absence of Certain Changes or Events........40
SECTION 5.9. Absence of Litigation.......................40
SECTION 5.10. Licenses and Permits; Compliance with Laws..40
SECTION 5.11. Unlawful Payments...........................40
SECTION 5.12. Taxes.......................................41
SECTION 5.13. Intellectual Property.......................41
SECTION 5.14. Environmental Matters.......................41
SECTION 5.15. Brokers.....................................43
SECTION 5.16. Pooling; Tax Matters........................43
SECTION 5.17. Registration Statement; Proxy Statement/
Prospectus..................................43
SECTION 5.18. Disclosure..................................44
ARTICLE VI. COVENANTS
SECTION 6.1. Affirmative Covenants of the Company........44
SECTION 6.2. Negative Covenants of the Company...........45
ARTICLE VII. ADDITIONAL AGREEMENTS
SECTION 7.1. Access and Information......................48
SECTION 7.2. Confidentiality.............................49
SECTION 7.3. Proxy Statement/Prospectus and Registration
Statement; Company Stockholders Meeting.....49
SECTION 7.4. HSR Act Matters.............................50
SECTION 7.5. Public Announcements........................51
SECTION 7.6. Indemnification.............................51
SECTION 7.7. Further Action; Commercially Reasonable
Efforts.....................................52
SECTION 7.8. No Solicitation.............................53
SECTION 7.9. Nasdaq Listing..............................55
SECTION 7.10. Blue Sky....................................55
SECTION 7.11. Affiliates..................................56
SECTION 7.12. Event Notices...............................56
SECTION 7.13. Option Agreement............................57
SECTION 7.14. Tax Treatment...............................57
SECTION 7.15. Accountant Letters; Pooling of Interests....57
SECTION 7.16. Board of Directors of Acquiror..............58
SECTION 7.17. Rights Agreement............................58
SECTION 7.18. Exemption from Liability Under Section
16(b).......................................58
SECTION 7.19. Requisite Acquiror Approval.................59
ARTICLE VIII. CLOSING CONDITIONS
SECTION 8.1. Conditions to Obligations of Acquiror,
Merger Sub and the Company to Effect the
Merger......................................59
SECTION 8.2. Additional Conditions to Obligations of
Acquiror and Merger Sub.....................61
SECTION 8.3. Additional Conditions to Obligations of the
Company.....................................63
SECTION 8.4. Delayed Closing by the Company..............64
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination.................................64
SECTION 9.2. Effect of Termination.......................67
SECTION 9.3. Amendment...................................68
SECTION 9.4. Extension; Waiver...........................68
ARTICLE X. GENERAL PROVISIONS
SECTION 10.1 Effectiveness of Representations, Warranties
and Agreements..............................70
SECTION 10.2. Notices.....................................70
SECTION 10.3. Certain Definitions.........................71
SECTION 10.4. Headings....................................74
SECTION 10.5. Severability................................75
SECTION 10.6. Entire Agreement............................75
SECTION 10.7. Specific Performance........................75
SECTION 10.8. Assignment..................................75
SECTION 10.9. Third Party Beneficiaries...................75
SECTION 10.10. Governing Law...............................76
SECTION 10.11. Counterparts................................76
EXHIBITS
Exhibit A Company Affiliate Agreement
Exhibit B Acquiror Affiliate Agreement
SCHEDULES
Schedule 3.1 Subsidiaries and Ownership Interests of the Company
Schedule 3.3 Capitalization of the Company
Schedule 3.5 Filings and Consents
Schedule 3.8 Certain Changes or Events
Schedule 3.9 Litigation
Schedule 3.10 Licenses and Permits
Schedule 3.13 Intellectual Property
Schedule 3.14 Material Contracts
Schedule 3.15 Employee Benefit Plans
Schedule 3.15(f) Other Tax Matters
Schedule 3.19 Insurance
Schedule 3.28 Excepted Encumbrances
Schedule 3.29 Transaction Expenses
Schedule 5.1 Subsidiaries and Ownership Interests of Acquiror
Schedule 5.3 Capitalization of Acquiror
Schedule 5.5 Filings and Consents
Schedule 5.9 Litigation
Schedule 7.11 Affiliates
Schedule 10.3(l) Transaction Expenses
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into this 30th
day of November, 1999, by and among MEDCO RESEARCH, INC., a Delaware corporation
(the "Company"), KING PHARMACEUTICALS, INC., a Tennessee corporation
("Acquiror"), and MERLIN ACQUISITION I CORP., a Delaware corporation and
wholly-owned subsidiary of Acquiror ("Merger Sub").
WHEREAS, each of the Boards of Directors of the Company,
Acquiror and Merger Sub have each determined that it is advisable, and in the
best interests of, their respective stockholders that Merger Sub, a wholly-owned
subsidiary of Acquiror, be merged with and into the Company, pursuant to and
subject to the terms and conditions of this Agreement and the Delaware General
Corporation Law ("Delaware Law");
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Acquiror and
Merger Sub to enter into this Agreement, certain holders of common stock, par
value $.001 per share, of the Company ("Company Common Stock"), have entered
into an agreement with Acquiror (the "Voting Agreement") pursuant to which,
among other things, such holders have agreed to vote their shares of Company
Common Stock in favor of this Agreement, the Merger (as defined below) and the
other transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Acquiror and
Merger Sub to enter into this Agreement, the Company and Acquiror have entered
into a Stock Option Agreement (the "Option Agreement") pursuant to which the
Company has granted to Acquiror an irrevocable option to purchase from the
Company up to a number of authorized but unissued shares of Company Common Stock
representing 19.9% of the outstanding shares of Company Common Stock, upon the
terms and subject to the conditions set forth therein;
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger will qualify as a reorganization within the meaning of
Section 368(a) 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 under United States
generally accepted accounting principles ("GAAP").
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with Delaware Law, at the Effective Time (as
defined in Section 1.2) Merger Sub shall be merged with and into the Company
(the "Merger"). As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (sometimes referred to herein as the "Surviving
Corporation") and a wholly-owned subsidiary of Acquiror.
SECTION 1.2. Effective Time.
As promptly as practicable on the Closing Date (as defined in
Section 1.6), the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, as required by, and executed in accordance
with the relevant provisions of, Delaware Law and in such form as approved by
Acquiror prior to such filing (the time of the filing of the Certificate of
Merger or the time specified therein being the "Effective Time").
SECTION 1.3. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the rights, privileges, powers and franchises
of Merger Sub and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Merger Sub and the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.4 . Certificate of Incorporation; Bylaws.
At the Effective Time, (a) the certificate of incorporation of
Merger Sub, as in effect immediately prior to the Effective Time and as amended
by the Certificate of Merger, shall be the certificate of incorporation of the
Surviving Corporation, and (b) the bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation.
SECTION 1.5. Directors and Officers.
The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation; and the officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation.
SECTION 1.6. Closing.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place as promptly as practicable
after satisfaction of the latest to occur or, if permissible, waiver of the
conditions set forth in Article VIII hereof (the "Closing Date"), at the offices
of Hogan & Hartson L.L.P., 8300 Greensboro Drive, Suite 1100, McLean, Virginia
22102, unless another date or place is agreed to in writing by the parties
hereto. It is the intention of the parties that the Closing shall occur as soon
as practicable after the Company Stockholders Meeting.
SECTION 1.7. Subsequent Actions.
If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties, privileges, franchises or assets of either of its
constituent corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be and
hereby are directed and authorized to execute and deliver, in the name and on
behalf of either of such constituent corporations, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties, privileges,
franchises or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 1.8. Tax and Accounting Treatment of the Merger.
It is intended by the parties hereto that the Merger shall (a)
constitute a reorganization of Merger Sub and the Company within the meaning of
Section 368(a) of the Code, and (b) be accounted for as a pooling of interests
under GAAP. The parties hereby adopt this Agreement as a "plan of
reorganization" of Merger Sub and the Company within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any
action on the part of Acquiror, Merger Sub, the Company or the holders of any of
the securities referred to in this Section 2.1:
(a) Common Stock. Each share of Company Common Stock
(excluding any shares described in Section 2.1(b)) issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and shall
be converted into and exchanged for the right to receive a portion of a share of
common stock, no par value, of Acquiror ("Acquiror Common Stock") equal to the
Exchange Ratio (as defined below). The shares of Acquiror Common Stock issuable
to the holders of Company Common Stock pursuant hereto, together with the amount
of cash in lieu of fractional shares payable pursuant to Section 2.1(d), is
sometimes referred to herein, collectively, as the "Merger Consideration". All
such shares of Company Common Stock shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares shall thereafter represent
only the right to receive the Merger Consideration. Except as otherwise provided
herein or by applicable law, the holders of certificates previously evidencing
such shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock. Each such certificate previously evidencing such shares of
Company Common Stock shall be exchanged for the number of shares previously
evidenced by the canceled certificate upon the surrender of such certificate in
accordance with the provisions of Section 2.2 multiplied by the Exchange Ratio.
The "Exchange Ratio" shall be as follows:
(i) if the Average Closing Price (as defined below)
shall be greater than $49.87, the Exchange Ratio shall be the quotient
obtained by dividing $34.00 by the Average Closing Price, rounded to
the nearest 1/10,000;
(ii) if the Average Closing Price shall be (A) less
than or equal to $49.87 and (B) greater than or equal to $33.00, the
Exchange Ratio shall be 0.6818; and
(iii) if the Average Closing Price shall be less than
$33.00, the Exchange Ratio shall be the quotient obtained by dividing
$22.50 by the Average Closing Price, rounded to the nearest 1/10,000.
"Average Closing Price" shall mean the average of the reported
closing prices per share of Acquiror Common Stock on the National Association of
Securities Dealers Automated Quotation System/National Market System ("Nasdaq")
(or the last bid price in the absence of a trade) during the twenty (20)
consecutive trading days ending with and including the third trading day
immediately preceding the date of the Company Stockholders Meeting.
(b) Treasury Stock. All shares of capital stock of the Company
held in the treasury of the Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no amount
shall be delivered or deliverable in exchange therefor.
(c) Merger Sub Stock. Each share of common stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(d) No Fractional Shares. No certificate or scrip representing
any fractional shares of Acquiror Common Stock shall be issued pursuant to
Section 2.1(a), and other than the right to receive the cash payment pursuant to
this Section 2.1(d), any such fractional interests shall not entitle the owner
thereof to any rights as a securityholder of Acquiror. Notwithstanding any other
provision hereof, all holders of Company Common Stock otherwise entitled to
receive fractional shares of Acquiror Common Stock pursuant to Section 2.1(a)
shall be entitled to receive, in lieu thereof, cash (without interest) in an
amount equal to the product of (i) such fractional part of a share of Acquiror
Common Stock to which the holder of Company Common Stock would otherwise be
entitled under Section 2.1(a) multiplied by the closing price per share of
Acquiror Common Stock on the Closing Date. As promptly as possible after the
determination of the amount of cash to be paid to holders of fractional
interests, the Exchange Agent shall so notify Acquiror, and Acquiror shall cause
the Surviving Corporation to deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to holders of such fractional
interests subject to and in accordance with the terms hereof.
SECTION 2.2. Exchange of Certificates.
(a) Exchange Agent. As soon as reasonably practicable after
the Effective Time, Acquiror shall deposit with Union Planters Bank or an
exchange agent designated by Acquiror and reasonably acceptable to the Company
(the "Exchange Agent"), for the benefit of the former holders of shares of
Company Common Stock (excluding any shares described in Section 2.1(b)), for
issuance and payment in accordance with this Article II (i) the shares of
Acquiror Common Stock issuable pursuant to Section 2.1(a) and (ii) cash in an
amount sufficient to make payment for fractional shares under Section 2.1(d)
(such shares of Acquiror Common Stock and cash being hereinafter referred to as
the "Exchange Fund"). Acquiror shall cause the Exchange Agent, pursuant to
irrevocable instructions, to deliver Acquiror Common Stock (and cash for
fractional shares) contemplated to be paid pursuant to Sections 2.1(a) and (d)
out of the Exchange Fund. The Exchange Fund shall not be used for any purpose
other than as set forth in this Section 2.2(a).
(b) Payment Procedures. As soon as reasonably practicable
after the Effective Time, Acquiror shall cause the Exchange Agent to mail to
each record holder, as of the Effective Time, of an outstanding certificate or
certificates (each a "Certificate" and collectively, the "Certificates") that
immediately prior to the Effective Time evidenced outstanding shares of Company
Common Stock (excluding any shares described in Sections 2.1(b)): (i) a form
letter of transmittal and (ii) instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal duly executed and any
other required documents, the holder of such Certificate shall be entitled to
receive in exchange therefor the applicable amount of Merger Consideration
pursuant to Section 2.1(a) and Section 2.1(d) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(j), and
such Certificate shall forthwith be canceled. In the event of a surrender of a
Certificate representing shares of Company Common Stock which are not registered
in the transfer records of the Company under the name of the Person surrendering
such Certificate, a certificate representing the proper number of shares of
Acquiror Common Stock may be issued to a Person other than the Person in whose
name the Certificate so surrendered is registered if (x) such Certificate shall
be properly endorsed or otherwise be in proper form for transfer to the Person
surrendering such Certificate and requesting such issuance, (y) such Person
surrendering such Certificate and requesting such issuance shall pay any
transfer or other Taxes required by reason of the issuance of shares of Acquiror
Common Stock to a Person other than the registered holder of such Certificate or
shall establish to the satisfaction of Acquiror that such Taxes have been paid
or are not applicable, and (z) such Person surrendering such Certificate shall,
if required by Acquiror, have such Person's signature guaranteed by a bank,
brokerage firm or other financial intermediary that is a member of a medallion
guarantee program. Until surrendered in accordance with the provisions of this
Section 2.2, each Certificate shall represent for all purposes only the right to
receive the applicable consideration set forth in Section 2.1, without any
interest thereon.
(c) Issuances to Affiliates. Notwithstanding anything herein
to the contrary, any Certificate surrendered for exchange by any "affiliate" of
the Company (as that term is used in SEC Accounting Series Release Nos. 130 and
135 and Rule 145 of the rules and regulations of the SEC under the Securities
Act) shall not be exchanged until Acquiror shall have received a signed
agreement from such "affiliate" as provided in Section 7.11 hereof.
(d) No Further Rights in Stock. All shares of Acquiror Common
Stock issued upon the surrender for exchange of Certificates in accordance with
the terms of Sections 2.1 and 2.2 hereof (including any cash paid pursuant to
this Article II) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfer on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock represented by such
Certificates which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, any such Certificates are presented to Acquiror, the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Acquiror, on a
daily basis. Any interest and other income resulting from such investments shall
be paid to Acquiror.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock for one
hundred eighty (180) days after the Effective Time shall be delivered to
Acquiror, upon demand, and any holder of Company Common Stock that have not
theretofore complied with this Article II shall thereafter look only to the
Acquiror for the Merger Consideration to which such holder is entitled pursuant
hereto.
(g) No Liability. Neither Acquiror nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any Acquiror Common Stock or cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Withholding of Tax. Acquiror or the Exchange Agent shall
be entitled to deduct and withhold from the applicable amount of the Merger
Consideration otherwise issuable to, and any cash payment in lieu of fractional
shares otherwise payable pursuant to this Agreement to, any former holder of
Company Common Stock such amounts as Acquiror (or any Affiliate thereof) or the
Exchange Agent are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign Tax
law. To the extent that amounts are so withheld by Acquiror (or any Affiliate
thereof) or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of Company
Common Stock in respect of whom such deduction and withholding was made by
Acquiror (or any Affiliate thereof) or the Exchange Agent.
(i) Lost, Stolen or Destroyed Certificates. In the event any
Certificate evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, upon the making of an affidavit setting forth that fact by
the Person claiming such lost, stolen or destroyed Certificate and, if required
by Acquiror the posting by such Person of a bond in such reasonable amount as
Acquiror may direct as indemnity against any claim that may be made against
Acquiror, the Surviving Corporation or the Exchange Agent with respect to such
Certificate, Acquiror shall cause the Exchange Agent to pay to such Person the
applicable amount of the Merger Consideration with respect to such lost, stolen
or destroyed Certificate.
(j) Distributions With Respect to Unexchanged Company Common
Stock. No dividends or other distributions declared or made with respect to
Acquiror Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Acquiror Common Stock such holder is entitled to receive pursuant to Section 2.1
until such holder shall surrender such Certificate. Subject to applicable law
and the provisions of this Article II, following the surrender of any such
Certificate there shall be paid to the record holder of the shares of Acquiror
Common Stock issued in exchange for such Certificate, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
shares of Acquiror Common Stock.
SECTION 2.3. Assumption of Obligations to Issue Stock.
(a) Company Options. As of the Effective Time, (i) each
outstanding option to purchase or acquire shares of Company Common Stock (an
"Option") granted under the Company's 1989 Stock Option and Stock Appreciation
Rights Plan (the "Company Stock Option Plan") shall be converted into an option
to acquire Acquiror Common Stock as provided for in this Section 2.3(a), and
(ii) each such option shall become vested as provided for in the Company Stock
Option Plan and this Agreement. Following the Effective Time, each Option shall
continue to have, and shall be subject to, the terms and conditions of each
agreement pursuant to which such Option was subject as of the Effective Time
(including the terms and conditions of the Company Stock Option Plan), except
that (i) each Option shall be exercisable for that number of whole shares of
Acquiror Common Stock equal to the product of (A) the aggregate number of shares
of Company Common Stock for which such Option was exercisable at the Effective
Time multiplied by (B) the Exchange Ratio, provided, however, that no fractional
shares of Acquiror Common Stock shall be issued upon the exercise of any Option
converted pursuant to this Section 2.3(a), and the holder of an Option
exercisable for a fractional share of Acquiror Common Stock shall be entitled to
receive, upon exercise thereof, cash (without interest) in an amount equivalent
to the fair market value at the time of exercise of the fractional share of
Acquiror Common Stock to which such holder would otherwise be entitled; and (ii)
the exercise price per share of Acquiror Common Stock issuable pursuant to each
Option shall be equal to the exercise price per share of Company Common Stock
under such Option at the Effective Time divided by the Exchange Ratio, rounded
to the nearest whole cent. Except for changes to the Options, including the
acceleration thereof, provided for in the Company Stock Option Plan by reason of
the consummation of the transactions contemplated hereby, the assumption and
substitution of Options as provided herein shall not give the holders of such
Options additional benefits or additional (or accelerated) vesting rights which
they did not have as of the Effective Time, or relieve the holders of such
Options of any obligations or restrictions applicable to their Options or the
shares obtainable upon exercise of the Options. The adjustment provided for
herein with respect to any Options that are "incentive stock options" (as
defined in Section 422 of the Code) shall be effected in a manner that is
consistent with continued treatment of such Options as "incentive stock options"
under Section 424(a) of the Code. The Company Stock Option Plan shall be assumed
by Acquiror with respect to all outstanding Options granted under the Company
Stock Option Plan, and no further options to purchase or acquire shares of
Company Common stock or other awards or rights shall be granted under the
Company Stock Option Plan after the Effective Time. The duration and other terms
of the new options provided for in this Section 2.3(a) shall be the same as the
original Options except that all references to the Company shall be references
to Acquiror. Acquiror shall take all corporate action reasonably necessary to
reserve for issuance a sufficient number of shares of Acquiror Common Stock for
delivery upon the exercise of the Options.
(b) Form S-8. Acquiror shall (i) within ten (10) business days
after the Effective Time, file one or more registration statements on Form S-8
(or amend existing registration statements on Form S-8) to become effective as
soon as practicable after the Effective Time with respect to the shares of
Acquiror Common Stock subject to Options granted under the Company Stock Option
Plan (as converted pursuant to Section 2.3(a)); (ii) use commercially reasonable
efforts to maintain the effectiveness of such registration statement(s) (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such Options remain outstanding; and (iii) within ten (10)
business days after the Effective Time, prepare and submit to Nasdaq
applications covering the shares of Acquiror Common Stock subject to such
Options and use commercially reasonable efforts to cause such securities to be
approved for listing as soon as practicable after the Effective Time, subject to
official notice of issuance.
SECTION 2.4. Transfer Books.
At the Effective Time, the transfer books of the Company with
respect to all shares of capital stock and other securities of the Company shall
be closed and no further registration of transfers of such shares of capital
stock shall thereafter be made on the records of the Company. On or after the
Effective Time, if any Certificates for shares of Company Common Stock
(excluding any shares described in Section 2.1(b)) are presented to the Exchange
Agent, the Surviving Corporation or Acquiror for any reason, such Certificates
shall be canceled and exchanged as provided in this Article II, except as
otherwise provided by law.
SECTION 2.5. Certain Adjustments.
If between the date hereof and the Effective Time, the
outstanding shares of Company Common Stock or of Acquiror Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, the Exchange Ratio (and any other references herein to
a price per share of Acquiror Common Stock) shall be adjusted accordingly to
provide the same economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and
Merger Sub, subject to the exceptions set forth in the Company's disclosure
schedule (which exceptions shall specifically identify a section, subsection or
clause of a single section or subsection hereof, as applicable, to which such
exception relates, it being understood and agreed that each such exception shall
be deemed to be disclosed both under such section, subsection or clause hereof
and any other section, subsection or clause hereof to which such disclosure
reasonably relates) that:
SECTION 3.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and each Subsidiary (as defined below)
of the Company (each a "Company Subsidiary" and collectively, the "Company
Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Each of the
Company and each Company Subsidiary is duly qualified to conduct its business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures which have not had and would
not be reasonably likely to have a Material Adverse Effect on the Company. Each
of the Company and each Company Subsidiary has the requisite corporate power and
authority and any necessary governmental authority, franchise, license or permit
to own, operate, lease and otherwise to hold and operate its assets and
properties and to carry on its businesses as now being conducted, except for
such failures which have not had and would not be reasonably likely to have a
Material Adverse Effect on the Company. The Company has no Subsidiaries (as
defined below) other than those listed in Schedule 3.1, each of which is
wholly-owned by the Company, or any direct or indirect beneficial ownership of
any securities, equity or other ownership interest in any Person other than
those listed on Schedule 3.1.
(b) For purposes of this Agreement, a "Subsidiary" of any
Person means any corporation, partnership, joint venture or other legal entity
of which such Person (either alone or through or together with any other
Subsidiary of such Person) (i) owns, directly or indirectly, fifty percent (50%)
or more of the capital stock, partnership interests or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
joint venture or other legal entity; or (ii) possesses, directly or indirectly,
control over the direction of management or policies of such corporation,
partnership, joint venture or other legal entity (whether through ownership of
voting securities, by agreement or otherwise).
SECTION 3.2. Certificate of Incorporation and Bylaws.
The Company has heretofore delivered to Acquiror a complete
and correct copy of the certificate or articles of incorporation and the bylaws
of the Company and each Company Subsidiary, each as amended to the date of this
Agreement. Each such certificate or articles of incorporation and bylaws is in
full force and effect. Neither the Company nor any Company Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation or bylaws.
SECTION 3.3. Capitalization.
(a) The authorized capital stock of the Company consists of
forty million (40,000,000) shares of Company Common Stock and twenty million
(20,000,000) shares of preferred stock, par value $.001 per share, of the
Company ("Company Preferred Stock"). As of the date hereof: (i) eleven million
seven hundred fifty-seven thousand two hundred seventy (11,757,270) shares of
Company Common Stock are issued and outstanding; (ii) one million twenty-four
thousand three hundred fifty-six (1,024,356) shares of Company Common Stock have
been reserved for issuance upon the exercise of the options under the Company
Stock Option Plan; (iii) one million seventy-four thousand three hundred
(1,074,300) shares of Company Common Stock are held by the Company in the
Company's treasury and (iv) no shares of Company Preferred Stock are issued or
outstanding. Schedule 3.3 sets forth a complete and correct list, as of the date
hereof, of the number of shares of Company Common Stock subject to the Options,
including, without limitation, those subject to employee stock options or other
rights to purchase or receive Company Common Stock granted under the Company
Stock Option Plan in each case including the dates of grant and exercise prices
thereof.
(b) All outstanding shares of capital stock of the Company
are, and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except for the shares of Company Common Stock issuable pursuant to the
Option Agreement and shares of Company Common Stock issuable upon exercise of
the rights (the "Rights") distributed pursuant to the Rights Agreement dated as
of April 14, 1998, between the Company and American Stock Transfer & Trust
Company (the "Rights Agreement") to holders of Company Common Stock pursuant to
the Rights Agreement, (i) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of the
Company, (B) any securities of the Company or any Company Subsidiary convertible
into or exchangeable or exercisable for shares of capital stock or voting
securities or ownership interests of the Company or any Company Subsidiary, (C)
any warrants, calls, options or other rights to acquire from the Company or any
Company Subsidiary, and any obligation of the Company or any Company Subsidiary
to issue, any capital stock, voting securities or other ownership interests in,
or securities convertible into or exchangeable or exercisable for capital stock
or voting securities of, or other ownership interests in, the Company or any
Company Subsidiary, (ii) there are no outstanding obligations of the Company or
any Company Subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities, including, without limitation, any offer, issuance or
sale in such a manner that would constitute a public offering of securities
under the Securities Act, and (iii) except as contemplated in this Agreement,
the Company is not presently under any obligation, has not agreed or committed,
and has not granted rights, to register under the Securities Act or the Exchange
Act, or otherwise file any registration statement under any such statute
covering, any of its currently outstanding capital stock or other securities or
any of its capital stock or other securities that may be subsequently issued.
(c) Except for the Option Agreement, the option agreements
under the Company Stock Option Plan and the Rights Agreement, neither the
Company nor any Company Subsidiary is a party to any agreement restricting the
purchase or transfer of, relating to the voting of or granting any preemptive or
antidilutive rights with respect to, any securities of the Company or any of the
Company Subsidiaries that are outstanding or that may be subsequently issued
upon the conversion or exercise of any instrument or otherwise.
(d) The Company represents and warrants to Acquiror and Merger
Sub that on the Closing Date, the aggregate number of outstanding shares of
Company Common Stock on a fully diluted basis (assuming full exercise of the
Options) shall not exceed twelve million seven hundred eighty-one thousand six
hundred twenty-six (12,781,626) shares.
SECTION 3.4. Authority.
The Company has the necessary corporate power and authority to
enter into this Agreement and, subject to obtaining the requisite approval of
the Agreement by the Company's stockholders required by Delaware Law ("Company
Stockholder Approval"), to perform its obligations hereunder and to consummate
the transactions contemplated hereby. Except for Company Stockholder Approval,
the execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Acquiror and Merger Sub, constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
SECTION 3.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance by the Company of its obligations under this
Agreement will not, (i) conflict with or violate the certificate or articles of
incorporation or bylaws of the Company or any Company Subsidiary, (ii) subject
to obtaining the approvals and compliance with the requirements set forth in
Section 3.5(b), conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to the Company or any Company
Subsidiary or by which any of their respective properties or assets is bound or
affected, or (iii) except as set forth in Schedule 3.5, result in any breach of
or constitute a default (or an event which with or without notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of the Company or
any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any Company Subsidiary is a party or by which
the Company, any Company Subsidiary or any of their respective properties or
assets is bound or affected, except, in the case of clauses (ii) and (iii)
above, for any such conflicts, violations, breaches, defaults or other
alterations or occurrences that (A) would not prevent or delay consummation of
the Merger in any material respect or otherwise prevent the Company from
performing its obligations under this Agreement in any material respect, and (B)
have not had and would not be reasonably likely to have a Material Adverse
Effect on the Company.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
(each a "Governmental Entity"), by or with respect to the Company or any Company
Subsidiary, except (i) for (A) applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Securities
Act of 1933, as amended (the "Securities Act"), state securities or "blue sky"
laws ("Blue Sky Laws"), state takeover laws, the New York Stock Exchange
("NYSE") and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and the U.S. Food and Drug Administration (the "FDA"),
(B) applicable requirements, if any, of the consents, approvals, authorizations
or permits described in Schedule 3.5, and (C) filing and recordation of
appropriate merger documents as required by Delaware Law, and (ii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, (A) would not prevent or delay consummation of the
Merger in any material respect or otherwise prevent the Company from performing
its obligations under this Agreement in any material respect, or (B) have not
had and would not be reasonably likely to have a Material Adverse Effect on the
Company.
(c) Except as set forth on Schedule 3.5, the execution and
delivery of this Agreement by the Company do not, the performance of this
Agreement by the Company will not, and the consummation of the transactions
contemplated by this Agreement or the Option Agreement will not, (i) entitle any
current or former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, (ii) accelerate
the time of payment or vesting, or increase the amount of compensation, due any
such employee or officer, or (iii) except pursuant to the Company Stock Option
Plan accelerate the vesting of any stock option or of any shares of restricted
stock or other securities of the Company.
SECTION 3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, statements and
other documents required to be filed with the Securities and Exchange Commission
(the "SEC") since January 1, 1995, and has heretofore furnished to Acquiror, in
the form filed with the SEC since such date, together with any amendments
thereto, all of its (i) Annual Reports on Form 10-K, (ii) Quarterly Reports on
Form 10-Q, (iii) proxy statements relating to meetings of stockholders (whether
annual or special), (iv) reports on Form 8-K, and (v) other reports or
registration statements filed by the Company (collectively, the "Company SEC
Reports"). As of their respective filing dates, the Company SEC Reports (x)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act, as applicable, and (y) did not at the time
they were 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 therein, in the light of the circumstances under which they were
made, not misleading.
(b) The audited consolidated financial statements and
unaudited interim financial statements of the Company included in the Company
SEC Reports complied in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The financial statements, including all related notes and
schedules, contained in the Company SEC Reports (or incorporated by reference
therein) present fairly in all material respects the consolidated financial
position of the Company and the Company Subsidiaries as at the respective dates
thereof and the consolidated results of operations and cash flows of the Company
and the Company Subsidiaries for the periods indicated, in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
noted therein) and subject in the case of interim financial statements to normal
year-end adjustments.
SECTION 3.7. No Undisclosed Liabilities.
Neither the Company nor any of the Company Subsidiaries has
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, except (a) liabilities or obligations reflected in the Company SEC
Reports through the date of the filing of the Company's Quarterly Report on Form
10-Q in respect of the fiscal quarter ending September 30, 1999, (b) liabilities
or obligations incurred in the ordinary course of business consistent with past
practice since September 30, 1999 which have not had, and will not have, a
Material Adverse Effect on the Company and (c) liabilities or obligations which
have not had and are not reasonably likely to have a Material Adverse Effect on
the Company.
SECTION 3.8. Absence of Certain Changes or Events.
Since September 30, 1999, the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice, and except as set forth on Schedule 3.8, there
has not been (i) any Material Adverse Effect on the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (w) any granting by the Company or any Company
Subsidiary to any current or former director, officer or employee of the Company
or any of the Company Subsidiaries of any increase in compensation, bonus or
other benefits, except for normal increases in cash compensation and annual
stock option awards granted on November 12, 1999 (as set forth on Schedule 3.8)
in the ordinary course of business consistent with past practice, (x) any
granting by the Company or any of the Company Subsidiaries to any such current
or former director, officer or employee of any increase in severance or
termination pay, (y) any entry by the Company or any of the Company Subsidiaries
into, or any amendment of, any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director, officer or employee or (z) any amendment to, or modification
of, any Option, (v) any damage, destruction or loss, whether or not covered by
insurance, that would be reasonably likely to have a Material Adverse Effect on
the Company, (vi) any change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities or businesses, except
insofar as may have been required by a change in GAAP, or (vii) any Tax election
that would be reasonably likely to have a Material Adverse Effect on the Company
or any of its tax attributes or any settlement or compromise of any material
income tax liability.
SECTION 3.9. Absence of Litigation.
Except as set forth on Schedule 3.9 and except as set forth in
the Company's annual report on Form 10-K filed with the SEC on March 16, 1999,
there are (a) no claims, actions, suits, investigations, or proceedings pending
or, to the knowledge of the Company, threatened against the Company or any
Company Subsidiary before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, that would be
reasonably likely to have a Material Adverse Effect on the Company or that
challenge or seek to prevent, enjoin, alter or materially delay the transactions
contemplated hereby or by the Option Agreement, and (b) no judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator outstanding
against the Company or any Company Subsidiary.
SECTION 3.10. Licenses and Permits; Compliance with Laws.
Set forth on Schedule 3.10 is a true and complete list of all
permits, licenses, franchises, authorizations and approvals (none of which has
been modified or rescinded and all of which are in full force and effect) from
all Governmental Entities held by the Company and the Company Subsidiaries (the
"Company Permits"). The Company Permits constitute all permits, licenses and
approvals of all Governmental Entities which are necessary for the operation of
the businesses of the Company and the Company Subsidiaries as presently
conducted and for the Company and the Company Subsidiaries to own, lease and
operate their respective properties, except where the failure to have any such
permits, licenses or approvals would not have a Material Adverse Effect on the
Company. The Company and the Company Subsidiaries are in compliance with the
terms of the Company Permits and all applicable statutes, laws, ordinances,
rules and regulations, except where the failure so to comply would not have a
Material Adverse Effect on the Company.
SECTION 3.11. Unlawful Payments.
None of the Company, any Company Subsidiary, or any officer,
director, employee, agent or representative of the Company or any Company
Subsidiary has made, directly or indirectly, any bribe or kickback, illegal
political contribution, payment from corporate funds which was incorrectly
recorded on the books and records of the Company or any Company Subsidiary,
unlawful payment from corporate funds to governmental or municipal officials in
their individual capacities for the purpose of affecting their action or the
actions of the jurisdiction which they represent to obtain favorable treatment
in securing business or licenses or to obtain special concessions of any kind
whatsoever, or illegal payment from corporate funds to obtain or retain any
business.
SECTION 3.12. Taxes.
The Company and the Company Subsidiaries have prepared and
filed on a timely basis with all appropriate Governmental Entities all material
returns, reports, information statements and other documentation in respect of
Taxes that they are required to file, including extensions, and all such
returns, reports, information statements and other documentation are correct and
complete in all material respects. The Company and the Company Subsidiaries have
paid in full all Taxes due (other than Taxes, the failure of which to pay would
not have a Material Adverse Effect on the Company) and, in the case of material
Taxes accruing but not due, the Company has made adequate provisions in its
books and records and financial statements for such payments. The Company and
the Company Subsidiaries have withheld from payments made to its present or
former employees, contractors, officers and directors, creditor or other third
party, all amounts required by law to be withheld except where the liability for
which would not have a Material Adverse Effect on the Company, and has, where
required, remitted such amounts within the applicable periods to the appropriate
Governmental Entities. In addition, (a) there are no assessments of, or claims
against, the Company or the Company Subsidiaries with respect to Taxes, the
liability for which would have a Material Adverse Effect on the Company, that
are outstanding; (b) no Governmental Entity is conducting an examination or
audit of the Company or any Company Subsidiary in respect of Taxes and neither
the Company nor any Company Subsidiary has received notice of any such
examination or audit from any Governmental Entity; and (c) neither the Company
nor any Company Subsidiary has executed or filed any agreement extending the
period of assessment or collection of any Taxes which remain in effect.
SECTION 3.13. Intellectual Property.
(a) Schedule 3.13 sets forth a list and brief description of
all Intellectual Property owned, utilized or licensed by the Company and the
Company Subsidiaries (all of the foregoing items collectively referred to as the
"Company Intellectual Property"). Schedule 3.13 identifies the Company
Intellectual Property based on the following categories: (i) inventions, patents
and patent applications, (ii) trademarks and trade names, (iii) copyrights, (iv)
licenses and (v) other Intellectual Property. The Company has furnished Acquiror
with copies of all license agreements to which the Company or any Company
Subsidiary is a party, either as licensor or licensee, with respect to the
Company Intellectual Property. The Company and the Company Subsidiaries have
good title to or, to the knowledge of the Company after due investigation in
accordance with prudent business practices for a company engaged in a business
similar to that of the Company ("Due Investigation"), the right to use, all the
Company Intellectual Property and all inventions, processes, designs, formulae,
trade secrets and know-how necessary for the conduct of the businesses of the
Company and the Company Subsidiaries, as presently conducted or currently
proposed to be conducted, without the payment of any royalty or similar payment
except to the extent disclosed on Schedule 3.13. To the knowledge of the Company
after Due Investigation, none of the Company or any of the Company Subsidiaries
is infringing on any Intellectual Property right of others, or has knowledge of
any infringement by others of such rights of the Company or any of the Company
Subsidiaries.
(b) All licenses set forth on Schedule 3.13 are valid and
binding obligations of the Company or one or more of the Company Subsidiaries,
as the case may be, and to the knowledge of the Company, of the other parties
thereto, and enforceable against the Company or one or more of the Company
Subsidiaries, as the case may be, and to the knowledge of the Company, the other
parties thereto in accordance with their respective terms. Except as set forth
on Schedule 3.13, the Company and the Company Subsidiaries own and possess all
right, title and interest in and to, or have the right to use pursuant to a
valid license, all the Company Intellectual Property necessary for the operation
of the business of the Company and the Company Subsidiaries as presently
conducted or currently proposed to be conducted.
(c) All personnel, including employees, agents, consultants,
and contractors, who have contributed to or participated in the conception and
development of any Company Intellectual Property have executed nondisclosure
agreements and either (i) have been or are party to a written agreement with the
Company or one or more of the Company Subsidiaries that has accorded the Company
and such Company Subsidiaries full, effective, exclusive and original ownership
of all Company Intellectual Property used or required by the Company and the
Company Subsidiaries in the Company's and the Company Subsidiaries' business, or
(ii) have executed appropriate instruments of assignment in favor of the Company
or one or more of the Company Subsidiaries as assignees that have conveyed to
the Company and such Company Subsidiaries full, effective, and exclusive
ownership of all Company Intellectual Property.
(d) The Company also has delivered to Acquiror correct and
complete samples or copies of all trademarks, service marks, trade names,
copyrights, patents, registrations and, as relate to the foregoing,
applications, licenses, agreements and permissions (as amended to date) held by
the Company and the Company Subsidiaries, and have made available to Acquiror
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect to
each item of Company Intellectual Property necessary for the conduct of the
business of the Company and the Company Subsidiaries as heretofore and as
currently conducted, each as set forth on Schedule 3.13: (i) with respect to
each item of Company Intellectual Property not owned by the Company, to the
knowledge of the Company after Due Investigation, the identified owner of such
item possesses all right, title, and interest in and to the item; (ii) the item
is not subject to any outstanding judgments, decrees, injunctions or orders of
any Governmental Entity or arbitrator; (iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is pending or, to the
knowledge of the Company after Due Investigation, is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and (iv)
except as set forth on Schedule 3.13, neither the Company nor any of the Company
Subsidiaries has agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item.
(e) Except as set forth on Schedule 3.13, all of the computer
software, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied on by the Company or any Company
Subsidiary in the administration and conduct of their respective businesses (i)
will be able to process date data (including, but not limited to, calculating,
comparing, and sequencing) in a consistent manner from, into and between the
twentieth century (through 1999), the year 2000 and the twenty-first century,
including leap year calculations, and (ii) will not malfunction, cease to
function, generate incorrect data, or produce incorrect results when processing,
providing, and/or receiving (A) date-related data into and between the twentieth
and twenty-first centuries, and (B) date-related data in connection with any
valid date in the twentieth and twenty-first centuries.
SECTION 3.14. Material Contracts.
(a) Schedule 3.14 sets forth a complete and correct list, as
of the date of this Agreement, of all agreements of the following type to which
the Company or a Company Subsidiary is a party or may be bound (collectively,
the "Company Material Contracts"): (i) agreements filed as an exhibit to the
Company SEC Reports which remain in full force and effect and each agreement
that would have been required to be filed as an exhibit to the Company SEC
Reports if such agreement had been entered into as of the date of filing of any
such Company SEC Report; (ii) employment, severance, termination, consulting and
retirement agreements; (iii) loan agreements, indentures, letters of credit,
mortgages, notes and other debt instruments and guarantees of any of the
foregoing; (iv) agreements that require aggregate annual payments of more than
Fifty Thousand Dollars ($50,000)(unless such agreements are terminable without
penalty upon ninety (90) days (or less) notice); (v) agreements containing any
provisions with respect to a "change in control"; (vi) agreements with any
employee, director, officer or beneficial owner (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of five percent (5%) or more of
Company Common Stock; (vii) agreements or arrangements concerning a partnership
or joint venture; (viii) agreements or arrangements requiring confidentiality of
the Company except to the extent that such agreements or arrangements are not
material and have been in effect for at least five (5) years; (ix) agreements
and arrangements requiring noncompetition by the Company; (x) agreements
relating to the manufacturing, packaging, marketing, sale or distribution by the
Company or any Company Subsidiary of any products owned or licensed by the
Company or any Company Subsidiary; (xi) all leases (or subleases) with respect
to real property leased by the Company as lessee or sublessee ("Real Property
Leases"); and (xii) agreements for a remaining term of five (5) years or more
with any customer of the Company or any Company Subsidiary.
(b) Except as set forth in Schedule 3.14, all the Company
Material Contracts are valid and in full force and effect on the date hereof
except to the extent they have previously expired in accordance with their
terms, and neither the Company nor any Company Subsidiary has (or has any
knowledge that any party thereto has) violated any provision of, or committed or
failed to perform any act which with or without notice, lapse of time or both
would constitute a default under the provisions of, any Company Material
Contract, except for defaults which would not reasonably be expected to have a
Material Adverse Effect on the Company. True and complete copies of all Company
Material Contracts have been delivered to Acquiror.
SECTION 3.15. Employee Benefit Plans.
(a) Schedule 3.15 sets forth a list of all of the pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation or bonus plans or agreements or other
incentive plans or agreements, all other employee programs, arrangements or
agreements and all other employee benefit plans or fringe benefit plans,
including, without limitation, all "employee benefit plans" as that term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (collectively, "Benefit Plans"), currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by the
Company or any entity required to be aggregated with the Company which is a
member of the "controlled group of corporations" which includes the Company
within the meaning of Section 414(b) or (c) of the Code (each, a "Company
Commonly Controlled Entity") for the benefit of present and former employees or
directors of the Company and of each Company Subsidiary or their beneficiaries,
or providing benefits to such persons in respect of services provided to any
such entity (collectively, the "Company Benefit Plans"). Any Company Benefit
Plan which is an "employee pension benefit plan", as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "Company ERISA Plan".
(b) Each of the Company Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified and no circumstances exist
that could reasonably be expected by the Company to result in the revocation of
any such determination. Each of the Company Benefit Plans is in compliance with
the applicable terms of ERISA and the Code and any other applicable laws, rules
and regulations, the breach or violation of which could result in a Material
Adverse Effect to the Company or any Company Commonly Controlled Entity.
(c) No Company ERISA Plan which is a defined benefit pension
plan has any "unfunded current liability", as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan equals or exceeds the plan's "benefit liabilities", as that term is
defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors
that would apply if the plan terminated in accordance with all applicable legal
requirements.
(d) No Company Benefit Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan").
Neither the Company nor any Company Commonly Controlled Entity has completely or
partially withdrawn from any Multiemployer Plan. No termination liability to the
Pension Benefit Guaranty Corporation or withdrawal liability to any
Multiemployer Plan that is material in the aggregate has been or is reasonably
expected to be incurred with respect to any Multiemployer Plan by the Company or
any Company Commonly Controlled Entity.
(e) The Company has furnished to Acquiror complete copies, as
of the date hereof, of all of the Company Benefit Plans that have been reduced
to writing, together with all documents establishing or constituting any related
trust, annuity contract, insurance contract or other funding instrument, and
copies of all "employee benefit plans" as that term is defined in Section 3(3)
of ERISA, including a summary of such plans that have not been reduced to
writing. The Company has furnished to Acquiror complete copies of all existing
current plan summaries, employee booklets, personnel manuals and other material
documents or written materials concerning the Company Benefit Plans.
(f) Except as set forth in Schedule 3.15(f), no amount that
could be received by (whether in cash or property or the vesting of property),
or benefit provided to, any officer, director or employee of the Company or any
of its Affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Benefit Plan
currently in effect would be an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code). Except as set forth in Schedule
3.15(f), no such Person is entitled to receive any additional payment from the
Company, the Surviving Corporation or any other Person (a "Parachute Gross Up
Payment") in the event that the excise tax of Section 4999(a) of the Code is
imposed on such Person. Except as set forth in Schedule 3.15(f), the Board of
Directors of the Company has not granted to any officer, director or employee of
the Company or any Company Subsidiary any right to receive any Parachute Gross
Up Payment. Schedule 3.15(f) sets forth the "base amount" (as such term is
defined in Section 280G(b)(3) of the Code) for each disqualified individual
(defined as set forth above) whose Options will vest pursuant to their terms in
connection with this Agreement or the Merger.
(g) All required reports and descriptions, if any (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC 1's and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to each
Company Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of
ERISA and of Section 4980B of the Code ("COBRA"), and the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") have been met with respect
to each Company Benefit Plan.
(h) No Company Benefit Plan is an ESOP or otherwise invests in
"employer securities" (as such term is defined in Section 409(l) of the Code).
(i) The Company has made all contributions and other payments
required by and due under the terms of each Company Benefit Plan and has taken
no action (including, without limitation, actions required by law) relating to
any Company Benefit Plan that will increase Acquiror's, the Company's or any
Company Commonly Controlled Entity's obligation under any Company Benefit Plan.
(j) No Company Benefit Plan is a "qualified foreign plan" (as
such term is defined in Section 404A of the Code), and no Company Benefit Plan
is subject to the laws of any jurisdiction other than the United States of
America or one of its political subdivisions.
(k) No Company Benefit Plan promises or provides
post-retirement medical life insurance or other benefits due now or in the
future to current, former or retired employees of the Company or any Company
Common Controlled Entity other than benefits required pursuant to COBRA.
(l) No "pension plans", as such term is defined in Section
3(2) of ERISA, maintained by the Company or a Company Commonly Controlled
Entity, have been frozen or terminated in the last three (3) calendar years.
SECTION 3.16. Properties; Assets.
Neither the Company nor any of the Company Subsidiaries owns
(of record or beneficially) any real property or has any interest in any real
property other than the leasehold interests granted pursuant to the Real
Property Leases. The Company or one of the Company Subsidiaries is the lessee of
all leasehold estates granted pursuant to the Real Estate Leases and is in
possession of the properties purported to be leased thereunder, and each such
Real Property Lease is valid without default thereunder by the lessee. The
assets and properties of the Company and the Company Subsidiaries, taken as a
whole, are in good operating condition and repair (ordinary wear and tear
excepted), and constitute all of the assets and properties which are required
for the businesses and operations of the Company and the Company Subsidiaries as
presently conducted.
SECTION 3.17. Labor Relations.
Neither the Company nor any Company Subsidiary is a party to
any collective bargaining agreement or other contract or agreement with any
labor organization or other representative of any of the employees of the
Company or any Company Subsidiary. The Company and each Company Subsidiary is in
compliance in all material respects with all laws relating to the employment or
the workplace, including, without limitation, provisions relating to wages,
hours, collective bargaining, safety and health, work authorization, equal
employment opportunity, affirmative action plans, immigration and the
withholding of income taxes, unemployment compensation, worker's compensation,
employee privacy and right to know and social security contributions.
SECTION 3.18. Environmental Matters.
(a) Except for matters which would not have a Material Adverse
Effect on the Company, (i) the Company, each Company Subsidiary and, to the
knowledge of the Company, each Product Licensee is in compliance with all
applicable Environmental Laws (as defined below); (ii) none of the Company, any
Company Subsidiary or, to the knowledge of the Company, any Product Licensee has
received any written communication that alleges that the Company, any Company
Subsidiary or any Product Licensee is not in compliance with applicable
Environmental Laws; (iii) all permits and other governmental authorizations
currently held by the Company, each Company Subsidiary and, to the knowledge of
the Company, each Product Licensee pursuant to the Environmental Laws ("Company
Environmental Permits") are in full force and effect, the Company, each Company
Subsidiary and, to the knowledge of the Company, each Product Licensee is in
compliance with all of the terms of such Company Environmental Permits, and no
other permits or other governmental authorizations are required by the Company,
any Company Subsidiary or, to the knowledge of the Company, any Product
Licensee, for the conduct of their respective businesses; and (iv) the
management, handling, storage, transportation, treatment, and disposal by the
Company, each Company Subsidiary and, to the knowledge of the Company, each
Product Licensee of any Hazardous Materials (as defined below) is and has been
in compliance with all applicable Environmental Laws.
(b) There is no Company Environmental Claim (as defined below)
pending or, to the knowledge of the Company, threatened against or involving the
Company, any of the Company Subsidiaries or against any Person whose liability
for any Environmental Claim the Company or any of the Company Subsidiaries has
or may have retained or assumed either contractually or by operation of law.
(c) Except for matters which would not have a Material Adverse
Effect on the Company, to the knowledge of the Company, there are no past or
present actions or activities by the Company, any Company Subsidiary or any
other Person involving the storage, treatment, release, emission, discharge,
disposal or arrangement for disposal of any Hazardous Materials, that could
reasonably form the basis of any Company Environmental Claim against the Company
or any Company Subsidiary or against any Person whose liability for any Company
Environmental Claim the Company or any Company Subsidiary may have retained or
assumed either contractually or by operation of law.
(d) As used herein, these terms shall have the following
meanings:
(i) "Company Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or
notices of noncompliance or violation (written or oral) by any Person
or Governmental Entity alleging potential liability arising out of,
based on or resulting from the presence, or release or threatened
release into the environment of, or any exposure to, any Hazardous
Materials at any property or location owned or leased by the Company,
any Company Subsidiary or any Product Licensee or other circumstances
forming the basis of any violation or alleged violation of any
Environmental Law.
(ii) "Environmental Laws" means all applicable foreign,
federal, state and local laws (including the common law), rules,
requirements and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation,
laws and regulations relating to releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials or relating to management of asbestos in buildings.
(iii) "Hazardous Materials" means wastes, substances, or
materials (whether solids, liquids or gases) that are deemed hazardous,
toxic, pollutants, or contaminants under any Environmental Laws,
including, without limitation, substances defined as "hazardous
substances", "toxic substances", "radioactive materials, including
sources of ionizing and nonionizing radiation", "petroleum products or
wastes" or other similar designations in, or otherwise subject to
regulation under, any Environmental Law.
SECTION 3.19. Insurance.
Schedule 3.19 contains a list of all insurance policies of
director and officer liability, title, property, fire, casualty, liability,
life, workmen's compensation, libel and slander, and other forms of insurance in
force with respect to the Company and the Company Subsidiaries. All such
insurance policies: (a) insure against such risks, and are in such amounts, as
are appropriate and reasonable, in the judgment of the Company's Board of
Directors, considering the Company and the Company Subsidiaries' properties,
businesses and operations; (b) are in full force and effect; and (c) are valid,
outstanding, and enforceable. Neither the Company nor any of the Company
Subsidiaries has received or given notice of cancellation with respect to any
such insurance policies.
SECTION 3.20. Board Approval; Vote Required.
The Board of Directors of the Company has determined that the
transactions contemplated by this Agreement and the Option Agreement are
advisable and in the best interests of the Company and its stockholders and has
resolved to recommend to such stockholders that they vote in favor of this
Agreement. The affirmative vote at the Company Stockholders Meeting of the
holders of a majority of all outstanding shares of Company Common Stock to adopt
this Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger.
SECTION 3.21. Opinion of Financial Advisor.
The Board of Directors of the Company has received the written
opinion of Hambrecht & Quist LLC, the Company's financial advisor, that the
Merger Consideration to be received by the Company's stockholders pursuant to
this Agreement is fair from a financial point of view to the holders of shares
of Company Common Stock. A copy of such opinion has been delivered to Acquiror,
and such opinion has not been withdrawn or modified in any material respect.
SECTION 3.22. Brokers.
Except for Hambrecht & Quist LLC, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
and the Option Agreement based upon arrangements made by or on behalf of the
Company. Prior to the date of this Agreement, the Company has provided to
Acquiror a complete and correct copy of all agreements between the Company and
Hambrecht & Quist LLC pursuant to which such firm will be entitled to any
payment relating to the transactions contemplated by this Agreement and the
Option Agreement.
SECTION 3.23. Takeover Provisions Inapplicable.
Prior to the date of this Agreement, the Board of Directors of
the Company has taken all requisite action to cause this Agreement and the
transactions contemplated by this Agreement (including those contemplated by the
Option Agreement) to be exempt from Section 203 of the Delaware Law. No other
state takeover statute or similar statute or regulation applies to or purports
to apply to this Agreement, the Option Agreement, the Merger or the other
transactions contemplated by this Agreement or the Option Agreement.
SECTION 3.24. Pooling; Tax Matters.
Neither the Company nor any of its Affiliates has taken or
agreed to take any action or failed to take any action that would prevent the
Merger from (a) being treated for financial accounting purposes as a "pooling of
interests" in accordance with GAAP and the regulations and interpretations of
the SEC, or (b) constituting a reorganization within the meaning of Section
368(a) of the Code.
SECTION 3.25. Registration Statement; Proxy Statement/Prospectus.
The information supplied by the Company or required to be
supplied by the Company (except to the extent revised or superseded by
amendments or supplements) for inclusion in the registration statement on Form
S-4, or any amendment or supplement thereto, pursuant to which the shares of
Acquiror Common Stock to be issued in the Merger will be registered under the
Securities Act (including any amendments or supplements, the "Registration
Statement") shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by the Company or required to be supplied by the Company
(except to the extent revised or superseded by amendments or supplements) for
inclusion in the proxy statement relating to the Company Stockholders Meeting,
such proxy statement, together with the prospectus relating to the shares of
Acquiror Common Stock to be issued in the Merger, in each case as amended or
supplemented from time to time, the "Proxy Statement/Prospectus") shall not, on
the date the Proxy Statement/Prospectus is first mailed to the Company's
stockholders, at the time of the Company Stockholders Meeting and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any 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 are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies by or on behalf of the
Company for the Company Stockholders Meeting which has become false or
misleading. The Proxy Statement/Prospectus will comply in all material respects
with the provisions of the Exchange Act. Notwithstanding the foregoing, the
Company makes no representation, warranty or covenant with respect to any
information supplied or required to be supplied by Acquiror which is contained
in or omitted from any of the foregoing documents.
SECTION 3.26. Rights Agreement.
The Company has taken all actions necessary to cause the
Rights Agreement to be amended to (a) render the Rights Agreement inapplicable
to this Agreement, the Option Agreement, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement, and (b) ensure that (i)
none of Acquiror, Merger Sub or any other Acquiror Subsidiary is an Acquiring
Person (as defined in the Rights Agreement) pursuant to the Rights Agreement
solely by virtue of the execution of this Agreement and the Option Agreement or
the consummation of the Merger or the other transactions contemplated by this
Agreement and the Option Agreement and (ii) a Distribution Date, a Triggering
Event or a Share Acquisition Date (as such terms are defined in the Rights
Agreement) does not occur by reason of the execution of this Agreement and the
Option Agreement, the consummation of the Merger or the consummation of the
other transactions contemplated by this Agreement and the Option Agreement.
SECTION 3.27. Regulatory Compliance.
(a) As to each product subject to the jurisdiction of the FDA
under the Federal Food, Drug and Cosmetic Act and the regulations thereunder
("FDCA") and the Public Health Services Act ("PHSA") and the regulations
thereunder, and each product subject to the jurisdiction of the Drug Enforcement
Administration ("DEA") under the Controlled Substances Act ("CSA") and the
regulations thereunder (each such product, a "Pharmaceutical Product") that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by
the Company or any Company Subsidiary, or any Pharmaceutical Product licensed by
the Company to any licensee of the Company or any Company Subsidiary (a "Product
Licensee"), such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company, any Company
Subsidiary, and, to the knowledge of the Company after Due Investigation, each
Product Licensee in compliance with all applicable requirements under FDCA,
PHSA, CSA, and similar laws, rules and regulations relating to investigational
use, premarket clearance, licensure, or application approval, good manufacturing
practices, good laboratory practices, good clinical practices, labeling,
advertising, record keeping, filing of reports including but not limited to
adverse event reports as required by 21 C.F.R. sec. 314.80, and security, except
where the failure to be in compliance would not have a Material Adverse Effect
on the Company. None of the Company, any Company Subsidiary or, to the knowledge
of the Company after Due Investigation, any Product Licensee has received any
notice or other communication from the FDA, DEA, or any other Governmental
Entity (i) contesting the premarket clearance, licensure, registration, or
approval of, the uses of, the distribution of, the manufacturing or packaging
of, the testing of, sale of, controlled substance scheduling of, or the labeling
and promotion of any Pharmaceutical Product described in this Section 3.27 or
(ii) otherwise alleging any violation of any laws, rules or regulations by the
Company, any Company Subsidiary or any Product Licensee which would have a
Material Adverse Effect on the Company.
(b) No Pharmaceutical Products of the Company or any Company
Subsidiary or Pharmaceutical Products which are licensed by the Company to any
Product Licensee have been recalled, withdrawn, replaced, suspended or
discontinued nor have any DEA registrations been terminated by the Company, any
Company Subsidiary or any Product Licensee in the United States or outside the
United States (whether voluntarily or otherwise) since January 1, 1995. There
are no completed or pending efforts to impose a clinical hold on any clinical
investigation, proceedings seeking the recall, withdrawal, replacement,
suspension or seizure of any such Pharmaceutical Product, or proceedings seeking
the suspension or revocation of any DEA registration including an order to show
cause against the Company, any Company Subsidiary or, to the knowledge of the
Company after Due Investigation, any Product Licensee, nor have any such efforts
or proceedings been pending at any time since January 1, 1995 which would have a
Material Adverse Effect on the Company.
(c) As to each biological drug or other drug of the Company or
the Company Subsidiaries for which a biological license application
establishment license application, product license application, new drug
application, investigational new drug application, abbreviated new drug
application, registration issued by the DEA, or similar state or foreign
regulatory application has been approved, the Company, the Company Subsidiaries
and, to the knowledge of the Company after Due Investigation, the Product
Licensees are in compliance with 21 U.S.C. sec. 355, 42 U.S.C. sec. 351, and 21
U.S.C. sec. 822, and 21 C.F.R. Parts 312, 314, 601, and 1301 et seq.,
respectively, and similar laws and all terms and conditions of such
applications, except where the failure to be in compliance would not have a
Material Adverse Effect on the Company. As to each such biological drug or other
drug, the Company and any relevant Company Subsidiary and, to the knowledge of
the Company after Due Investigation, Product Licensee, and the officers,
employees or agents of the Company, such Company Subsidiary and, to the
knowledge of the Company after Due Investigation, the officers, employees or
agents of any Product Licensee have included in the application for such
biological drug or other drug, where required, the certification described in 21
U.S.C. sec. 335a(k)(1) or any similar law and the list described in 21 U.S.C.
sec. 335a(k)(2) or any similar law, and such certification and such list was in
each case true and accurate when made and remained true and accurate thereafter,
except in the case where the failure of such application to be true and accurate
would not have a Material Adverse Effect on the Company. In addition, the
Company, the Company Subsidiaries and, to the knowledge of the Company after Due
Investigation, Product Licensees are in material compliance with all applicable
registration and listing requirements set forth in 21 U.S.C. sec. 360 and 21
C.F.R. Part 207 and all similar laws.
(d) Each article of any biological drug or other drug
manufactured and/or distributed by the Company, any of the Company Subsidiaries
and, to the knowledge of the Company after Due Investigation, any Product
Licensee is not adulterated within the meaning of 21 U.S.C. sec. 351 (or similar
laws) or misbranded within the meaning of 21 U.S.C. sec. 352 (or similar laws),
and is not a product that is in violation of 21 U.S.C. sec. 355, 42 U.S.C. sec.
351 (or similar laws), except where such failure in compliance with the
foregoing would not have a Material Adverse Effect on the Company.
(e) Except with respect to Lyphomed and Lyphomed's officers,
employees and agents, none of the Company, any Company Subsidiary or, to the
knowledge of the Company after Due Investigation, any Product Licensee, or any
officer, employee or agent of either the Company, any Company Subsidiary or, to
the knowledge of the Company after Due Investigation, any Product Licensee has
made any untrue statement of a material fact or fraudulent statement to the FDA
or other Governmental Entity, failed to disclose a fact required to be disclosed
to the FDA or any other Governmental Entity, or committed an act, made a
statement, or failed to make a statement that, at the time such disclosure was
made, could reasonably be expected to provide a basis for the FDA or any other
Governmental Entity to invoke its policy respecting "Fraud, Untrue Statements of
Material Facts, Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg.
46191 (September 10, 1991) or any similar policy. Neither the Company, any
Company Subsidiary or, to the knowledge of the Company after Due Investigation,
any Product Licensee, or any officer, employee or agent of the Company, any
Company Subsidiary or, to the knowledge of the Company after Due Investigation,
any Product Licensee, 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 any similar law or
authorized by 21 U.S.C. sec. 335a(b) or any similar law.
(f) None of the Company, any Company Subsidiary or, to the
knowledge of the Company after Due Investigation, any Product Licensee has
received any written notice that the FDA or any other Governmental Entity has
commenced, or threatened to initiate, any action to withdraw its approval of,
request the recall of, or change the controlled substances schedules of any
product of the Company, any Company Subsidiary or Product Licensee, or
commenced, or threatened to initiate, any action to impose a clinical hold on
any clinical investigation by the Company, any Company Subsidiary or Product
Licensee, or any action to enjoin production at, or suspend or revoke the DEA
registration or any facility of, or enter into a Consent Decree of Permanent
Injunction with the Company, any Company Subsidiary or Product Licensee which
would have a Material Adverse Effect on the Company.
(g) The Company, each of the Company Subsidiaries and, to the
knowledge of the Company after due investigation, the Product Licensees are not
in violation of, in any material respect, and are in material compliance with,
all applicable laws, rules and regulations regarding the conduct of pre-clinical
and clinical investigations, including, but not limited to, good laboratory
practices, good clinical practices, investigational new drug requirements and
requirements regarding informed consent and Institutional Review Boards designed
to ensure the protection of the rights and welfare of human subjects, including,
but not limited to, the requirements provided in 21 C.F.R. Parts 50, 56, 58 and
312.
(h) To the extent that any biological drugs or other drug is
intended for export from the United States, each of the Company, any Company
Subsidiary and, to the knowledge of the Company after Due Investigation, each
Product Licensee is in full compliance with all of the requirements in 21 U.S.C.
sec. 381(e) or sec. 382, and the Controlled Substances Import and Export Act (21
U.S.C. sec. 951, et. seq.
(i) The Company and each of the Company Subsidiaries and, to
the knowledge of the Company after Due Investigation, Product Licensees are not
in violation of and are in material compliance with all applicable laws, rules
and regulations regarding the manufacture, analysis, distribution and
investigation of controlled substances including, but not limited to, the
requirements provided by 21 U.S.C. sec. 801, et. seq., and 21 C.F.R. sec. 1300
et. seq.
(j) The Company has provided or made available to Acquiror all
documents in its possession, the possession of the Company Subsidiaries or, to
the knowledge of the Company after Due Investigation, the possession of Product
Licensees concerning communication to or from FDA or DEA, or prepared by FDA or
DEA which bear in any material respect on compliance with FDA or DEA regulatory
requirements.
SECTION 3.28. Current Cash Reserves; Indebtedness.
As of the date of this Agreement, the aggregate amount of (i)
the Company's cash on hand, plus (ii) liquid investments of the Company with a
maturity of three years or less ((i) and (ii) "Current Cash Reserves") is at
least Sixty Four Million Dollars ($64,000,000). The Company owns all such
Current Cash Reserves free and clear of all Encumbrances, except as set forth in
Schedule 3.28. As of the date of this Agreement, the Company has no
Indebtedness.
SECTION 3.29. Transaction Expenses.
As of the date of this Agreement, the aggregate good faith
estimate of the Transaction Expenses to be incurred by the Company in connection
with the Merger are as set forth on Schedule 3.29.
SECTION 3.30. Disclosure.
No representation or warranty of the Company in this Agreement
and no statement in the Company's disclosure schedules contains any statement
which is false or misleading with respect to any material fact or omits to state
a material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not false or misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Acquiror and Merger Sub jointly and severally represent and
warrant to the Company as follows:
SECTION 4.1. Organization and Qualification.
Merger Sub is a corporation duly organized, validly existing
and in good standing under Delaware Law. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement. As of
the date of this Agreement, except for obligations or liabilities incurred in
connection with its incorporation and organization and otherwise in connection
with the transactions contemplated by this Agreement, Merger Sub has not
incurred, directly or indirectly, 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 4.2. Certificate of Incorporation and Bylaws.
Merger Sub has heretofore made available to the Company a
complete and correct copy of the certificate of incorporation and the bylaws of
Merger Sub, each as amended to date. Such certificate of incorporation and
bylaws are in full force and effect. Merger Sub is not in violation of any of
the provisions of its certificate of incorporation or bylaws.
SECTION 4.3. Authority.
Merger Sub has the necessary corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Merger Sub and the consummation by Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Merger Sub and, assuming the due authorization, execution and
delivery of this Agreement by the Company and Acquiror, constitutes a legal,
valid and binding obligation of Merger Sub, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
SECTION 4.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Merger Sub
do not, and the performance by Merger Sub of its obligations under this
Agreement will not, (i) conflict with or violate the certificate of
incorporation or bylaws of Merger Sub, (ii) subject to compliance with the
requirements set forth in Section 4.4(b) below, conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment or decree applicable
to Merger Sub or by which any of its properties or assets is bound or affected,
or (iii) except as set forth in Schedule 5.5, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the properties or assets of Merger Sub pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Merger Sub is a party or by
which Merger Sub or any of its properties or assets is bound or affected,
except, in the case of clauses (ii) and (iii) above, for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Merger Sub from performing its obligations under this
Agreement in any material respect.
(b) The execution and delivery of this Agreement by Merger Sub
does not, and the performance of this Agreement by Merger Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) applicable
requirements, if any, of the Exchange Act, Securities Act, state takeover laws,
the National Association of Securities Dealers, Inc. (the "NASD"), the HSR Act
and the FDA, (B) applicable requirements, if any, of the consents, approvals,
authorizations or permits described in Schedule 5.5, and (C) filing and
recordation of appropriate merger documents as required by Delaware Law, and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger in any material respect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company subject to the
exceptions set forth herein and in Acquiror's disclosure schedules (which
exceptions shall specifically identify a Section, Subsection or clause of a
single Section or Subsection hereof, as applicable, to which such exception
relates, it being understood and agreed that each such exception shall be deemed
to be disclosed both under such Section, Subsection or clause hereof and any
other Section, Subsection or clause hereof to which such disclosure reasonably
relates) that:
SECTION 5.1. Organization and Qualification; Subsidiaries.
Each of Acquiror and each Subsidiary of Acquiror, (each an
"Acquiror Subsidiary" and collectively, the "Acquiror Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Acquiror and each Acquiror Subsidiary
is duly qualified to conduct its business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except for such
failures which would not have a Material Adverse Effect on Acquiror. Acquiror
and each Acquiror Subsidiary has the requisite power and authority and any
necessary governmental authority, franchise, license or permit to own, operate,
lease and otherwise to hold and operate its assets and properties and to carry
on its business as now being conducted, except for such failures which would not
have a Material Adverse Effect on Acquiror. The Acquiror has no Subsidiaries
other than those listed in Schedule 5.1, each of which is wholly-owned by the
Acquiror, or any direct or indirect beneficial ownership of any securities,
equity or other ownership interest in any Person other than those listed on
Schedule 5.1.
SECTION 5.2. Certificate of Incorporation and Bylaws.
Acquiror has heretofore delivered to the Company a complete
and correct copy of the articles of incorporation and the bylaws of Acquiror,
each as amended to date. Such articles of incorporation and bylaws are in full
force and effect. Acquiror is not in violation of any of the provisions of its
articles of incorporation or bylaws.
SECTION 5.3. Capitalization.
(a) The authorized capital stock of Acquiror consists of one
hundred fifty million (150,000,000) shares of Acquiror Common Stock. As of
November 12, 1999: (i) forty-eight million two hundred thirty-four thousand two
hundred thirty-three (48,234,233) shares of Acquiror Common Stock were issued
and outstanding; (ii) four million eight hundred thousand (4,800,000) shares of
Acquiror Common Stock were reserved for issuance upon the exercise of
outstanding employee stock options or other rights to purchase or receive
Acquiror Common Stock granted under Acquiror's 1997 Incentive and Nonqualified
Stock Option Plan (the "1997 Plan"); (iii) four hundred fifty thousand (450,000)
shares of Acquiror Common Stock were reserved for issuance upon the exercise of
outstanding stock options or other rights to receive Acquiror Common Stock
granted under Acquiror's 1998 Non-employee Director Stock Option Plan (the "1998
Plan", and together with the 1997 Plan, the "Acquiror Stock Option Plans"), and
(iv) no shares of Acquiror Common Stock were held by Acquiror in Acquiror's
treasury. Schedule 5.3 sets forth a complete and correct list, as of November
24, 1999, of the number of shares of Acquiror Common Stock subject to employee
stock options or other rights to purchase or receive Acquiror Common Stock
granted under the Acquiror Stock Option Plans, the dates of grant and exercise
prices thereof.
(b) All outstanding shares of capital stock of Acquiror are,
and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in this Section 5.3 and except for changes resulting
from the issuance of shares of Acquiror Common Stock pursuant to the Acquiror
Stock Option Plans or as expressly permitted by this Agreement, (i) there are
not issued, reserved for issuance or outstanding (A) any shares of capital stock
or other voting securities of Acquiror, (B) any securities of Acquiror or any
Acquiror Subsidiary convertible into or exchangeable or exercisable for shares
of capital stock or voting securities of or ownership interests in Acquiror or
any Acquiror Subsidiary, (C) any warrants, calls, options or other rights to
acquire from Acquiror or any Acquiror Subsidiary, and any obligation of Acquiror
or any Acquiror Subsidiary to issue, any capital stock, voting securities or
other ownership interests in, or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of or other ownership
interests in, Acquiror or any Acquiror Subsidiary, (ii) there are no outstanding
obligations of Acquiror or any Acquiror Subsidiary to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities, and (iii) except as
contemplated in this Agreement, Acquiror is not presently under any obligation,
has not agreed or committed, and has not granted rights, to register under the
Securities Act or the Exchange Act, or otherwise file any registration statement
under any such statute covering, any of its currently outstanding capital stock
or other securities or any of its capital stock or other securities that may be
subsequently issued.
(c) Except as described in Schedule 5.3, as of the date
hereof, neither Acquiror nor any Acquiror Subsidiary is a party to any agreement
granting any preemptive or antidilutive rights with respect to any securities of
Acquiror or any Acquiror Subsidiary that are outstanding as of the date hereof,
or with respect to any securities of Acquiror or any Acquiror Subsidiary that
may be subsequently issued upon the conversion or exercise of any instrument
outstanding as of the date hereof. Other than Acquiror Subsidiaries, Acquiror
does not directly or indirectly beneficially own any securities or other
beneficial ownership interests in any other Person.
SECTION 5.4. Authority.
Acquiror has the necessary corporate power and authority to
enter into this Agreement and, subject to obtaining the requisite approval of
the stockholders of Acquiror of the issuance of Acquiror Common Stock pursuant
to this Agreement if the aggregate number of shares of Acquiror Common Stock to
be issued at Closing will exceed nineteen and nine-tenths percent (19.9%) of the
number of shares of Acquiror Common Stock issued and outstanding as of the
Closing Date (the "Requisite Acquiror Approval"), to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Except to the
extent Requisite Acquiror Approval may be required, the execution and delivery
of this Agreement by Acquiror and the consummation by Acquiror of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other proceedings on the part of Acquiror are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Acquiror and, assuming the due authorization, execution and delivery by the
Company and Merger Sub, constitutes a legal, valid and binding obligation of
Acquiror, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity. Acquiror, as the sole stockholder of Merger Sub, has
approved the Merger and this Agreement.
SECTION 5.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiror
do not, and the performance by Acquiror of its obligations under this Agreement
will not, (i) conflict with or violate the articles of incorporation or bylaws
of Acquiror, (ii) subject to obtaining the approvals and compliance with the
requirements set forth in Section 5.5 below, conflict with or violate any law,
statute, ordinance, rule, regulation, order, judgment or decree applicable to
Acquiror or any Acquiror Subsidiary or by which any of their respective
properties or assets are bound or affected, or (iii) except as set forth in
Schedule 5.5, result in any breach of or constitute a default (or an event which
with or without notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of Acquiror or any Acquiror Subsidiary pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Acquiror or any Acquiror
Subsidiary is a party or by which Acquiror or any of their respective properties
or assets are bound or affected, except, in the case of clauses (ii) and (iii)
above, for any such conflicts, violations, breaches, defaults or other
alterations or occurrences that would not (A) prevent or delay consummation of
the Merger in any material respect or otherwise prevent Acquiror from performing
its obligations under this Agreement in any material respect, and (B) have a
Material Adverse Effect on Acquiror.
(b) The execution and delivery of this Agreement by Acquiror
does not, and the performance of this Agreement by Acquiror will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity by or with respect to Acquiror, except
(i) for (A) applicable requirements, if any, of the Securities Act, Blue Sky
Laws, Exchange Act, state takeover laws, the Nasdaq, the NASD, the HSR Act and
the FDA, (B) applicable requirements, if any, of the consents, approvals,
authorizations or permits described in Schedule 5.5, and (C) filing and
recordation of appropriate merger documents as required by Delaware Law and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not (A) prevent or delay
consummation of the Merger in any material respect, or otherwise prevent
Acquiror from performing its obligations under this Agreement in any material
respect, and (B) have a Material Adverse Effect on Acquiror.
SECTION 5.6. SEC Filings; Financial Statements.
(a) Acquiror has filed all forms, reports, statements and
other documents required to be filed with the SEC since June 2, 1998, and has
heretofore delivered to the Company, in the form filed with the SEC since such
date, together with any amendments thereto, all of its and their (i) Annual
Reports on Form 10-K, (ii) Quarterly Reports on Form 10-Q, (iii) proxy
statements relating to meetings of stockholders (whether annual or special),
(iv) reports on Form 8-K and (v) other reports or registration statements filed
by Acquiror and such Acquiror Subsidiaries (collectively, the "Acquiror SEC
Reports"). As of their respective filing dates, the Acquiror SEC Reports (i)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act, as applicable, and (ii) did not at the time
they were 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 therein, in the light of the circumstances under which they were
made, not misleading.
(b) The audited consolidated financial statements and
unaudited interim financial statements of Acquiror included in the Acquiror SEC
Reports complied in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The financial statements, including all related notes and
schedules, contained in the Acquiror SEC Reports (or incorporated by reference
therein) present fairly in all material respects the consolidated financial
position of Acquiror and the Acquiror Subsidiaries as at the respective dates
thereof and the consolidated results of operations and cash flows of Acquiror
and the Acquiror Subsidiaries for the periods indicated, in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
noted therein) and subject in the case of interim financial statements to normal
year-end adjustments.
SECTION 5.7. No Undisclosed Liabilities.
Neither Acquiror nor any of the Acquiror Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, except (a) liabilities or obligations reflected in the Acquiror SEC
Reports through the date of the filing of Acquiror's Quarterly Report on Form
10-Q in respect of the fiscal quarter ending September 30, 1999, (b) liabilities
or obligations incurred in the ordinary course of business consistent with past
practice since September 30, 1999 which have not had, and will not have, a
Material Adverse Effect on Acquiror and (c) liabilities or obligations which
have not and will not have, a Material Adverse Effect on Acquiror.
SECTION 5.8. Absence of Certain Changes or Events.
Except as disclosed in the Acquiror SEC Reports, since
September 30, 1999 there has not been any Material Adverse Effect on Acquiror.
SECTION 5.9. Absence of Litigation.
Except as set forth in the Acquiror SEC Reports or on Schedule
5.9, as of the date hereof there are (a) no claims, actions, suits,
investigations, or proceedings pending or, to Acquiror's knowledge, threatened
against Acquiror or any Acquiror Subsidiary before any court, administrative,
governmental, arbitral, mediation or regulatory authority or body, domestic or
foreign, that would be reasonably likely to have a Material Adverse Effect on
Acquiror or that challenge or seek to prevent, enjoin, alter or materially delay
the transactions contemplated hereby or by the Option Agreement, and (b) no
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against Acquiror or any Acquiror Subsidiary that would be
reasonably likely to have a Material Adverse Effect on Acquiror.
SECTION 5.10. Licenses and Permits; Compliance with Laws.
Acquiror and the Acquiror Subsidiaries hold all permits,
licenses, franchises, authorizations and approvals from Governmental Entities
(the "Acquiror Permits") which are necessary for the operation of the businesses
of Acquiror and the Acquiror Subsidiaries as presently conducted and for
Acquiror and the Acquiror Subsidiaries to own, lease and operate their
respective properties, except where the failure to have any such permits,
licenses or approvals would not have a Material Adverse Effect on Acquiror.
Acquiror and the Acquiror Subsidiaries are in compliance with the terms of the
Acquiror Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply would not have a Material
Adverse Effect on Acquiror.
SECTION 5.11. Unlawful Payments.
None of the Acquiror, any Acquiror Subsidiary, or any officer,
director, employee, agent or representative of Acquiror or any Acquiror
Subsidiary has made, directly or indirectly, any bribe or kickback, illegal
political contribution, payment from corporate funds which was incorrectly
recorded on the books and records of Acquiror or any Acquiror Subsidiary,
unlawful payment from corporate funds to governmental or municipal officials in
their individual capacities for the purpose of affecting their action or the
actions of the jurisdiction which they represent to obtain favorable treatment
in securing business or licenses or to obtain special concessions of any kind
whatsoever, or illegal payment from corporate funds to obtain or retain any
business.
SECTION 5.12. Taxes.
Acquiror and the Acquiror Subsidiaries have prepared and filed
on a timely basis with all appropriate Governmental Entities all material
returns, reports, information statements and other documentation (including
extensions) required to be filed by Acquiror and the Acquiror Subsidiaries) in
respect of Taxes (the "Tax Returns") and all such Tax Returns are correct and
complete in all material respects. Acquiror and the Acquiror Subsidiaries have
paid in full all Taxes due (other than Taxes, the failure of which to pay have
not had and are not reasonably likely to have a Material Adverse Effect on
Acquiror) and, in the case of material Taxes accruing but not due, Acquiror has
made adequate provision in its books and records and financial statements for
such payment.
SECTION 5.13. Intellectual Property.
(a) Acquiror's disclosure in the Acquiror SEC Reports with
respect to all of the computer software, computer firmware, computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
Acquiror or any Acquiror Subsidiary in the administration and conduct of their
respective businesses does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) To Acquiror's knowledge, (i) none of Acquiror or any
Acquiror Subsidiary is infringing on any Intellectual Property right of others,
and (ii) no third party is infringing on the Intellectual Property rights of
Acquiror or any Acquiror Subsidiary, except for, in the case of (i) or (ii), any
infringement which would not have a Material Adverse Effect on Acquiror.
SECTION 5.14. Environmental Matters.
(a) Except for matters which would not have a Material Adverse
Effect on Acquiror, (i) Acquiror and each Acquiror Subsidiary is in compliance
with all applicable Environmental Laws; (ii) neither Acquiror nor any Acquiror
Subsidiary has received any written communication that alleges that Acquiror or
any Acquiror Subsidiary is not in compliance with applicable Environmental Laws;
(iii) all permits and other governmental authorizations currently held by
Acquiror and each Acquiror Subsidiary pursuant to the Environmental Laws
("Acquiror Environmental Permits") are in full force and effect, and Acquiror
and each Acquiror Subsidiary is in compliance with all of the terms of such
Acquiror Environmental Permits, and no other permits or other governmental
authorizations are required by Acquiror or any Acquiror Subsidiary for the
conduct of their respective businesses; and (iv) the management, handling,
storage, transportation, treatment, and disposal by Acquiror and each Acquiror
Subsidiary of any Hazardous Materials is and has been in compliance with all
applicable Environmental Laws.
(b) Except for matters which would not have a Material Adverse
Effect on Acquiror, there is no Acquiror Environmental Claim (as defined below)
pending or, to the knowledge of Acquiror, threatened against or involving
Acquiror or any of the Acquiror Subsidiaries or against any Person whose
liability for any Acquiror Environmental Claim Acquiror or any of the Acquiror
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) Except for matters which would not have a Material Adverse
Effect on Acquiror, to the knowledge of Acquiror, there are no past or present
actions or activities by Acquiror or any Acquiror Subsidiary or any other Person
involving the storage, treatment, release, emission, discharge, disposal or
arrangement for disposal of any Hazardous Materials, that could reasonably form
the basis of any Acquiror Environmental Claim against Acquiror or any Acquiror
Subsidiary or against any Person whose liability for any Acquiror Environmental
Claim Acquiror or any Acquiror Subsidiary may have retained or assumed either
contractually or by operation of law.
(d) As used herein, "Acquiror Environmental Claim" means any
and all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person or Governmental
Entity alleging potential liability arising out of, based on or resulting from
the presence, or release or threatened release into the environment of, or any
exposure to, any Hazardous Materials at any property or location owned or leased
by Acquiror or any Acquiror Subsidiary or other circumstances forming the basis
of any violation or alleged violation of any Environmental Law.
SECTION 5.15. Brokers.
Except for Credit Suisse First Boston, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
and the Option Agreement based upon arrangements made by or on behalf of
Acquiror.
SECTION 5.16. Pooling; Tax Matters.
Neither Acquiror nor any of its Affiliates has taken or agreed
to take any action or failed to take any action that would prevent the Merger
from (a) being treated for financial accounting purposes as a "pooling of
interests" in accordance with GAAP and the regulations and interpretations of
the SEC, or (b) from constituting a reorganization within the meaning of Section
368(a) of the Code.
SECTION 5.17. Registration Statement; Proxy Statement/Prospectus.
The information supplied by Acquiror or required to be
supplied by Acquiror (except to the extent revised or superseded by amendments
or supplements) for inclusion in the Registration Statement, or any amendment or
supplement thereto, shall not, at the time the Registration Statement (including
any amendments or supplements thereto) is declared effective by the SEC, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The information supplied by Acquiror or required to be supplied by
Acquiror (except to the extent revised or superseded by amendments or
supplements) for inclusion in the Proxy Statement/Prospectus shall not, on the
date the Proxy Statement/Prospectus is first mailed to the Company's
stockholders and at the Effective Time, contain any statement which, at such
time, is false or misleading with respect to any 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 are made, not false or misleading,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies by or on
behalf of the Company for the Company Stockholders Meeting which has become
false or misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act. Notwithstanding the
foregoing, Acquiror makes no representation, warranty or covenant with respect
to any information supplied or required to be supplied by the Company which is
contained in or omitted from any of the foregoing documents.
SECTION 5.18. Disclosure.
No representation or warranty of Acquiror in this Agreement
and no statement in Acquiror's disclosure schedules contains any statement which
is false or misleading with respect to any material fact or omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE VI
COVENANTS
SECTION 6.1. Affirmative Covenants of the Company.
The Company hereby covenants and agrees that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by Acquiror, the Company shall, and shall cause each
Company Subsidiary to: (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its commercially reasonable efforts to
preserve substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective officers and employees and
maintain its relationship with its respective customers, suppliers, licensors,
licensees, distributors and others having business dealings with them with the
intention that its goodwill and ongoing business shall be unimpaired at the
Effective Time; (c) use its commercially reasonable efforts to maintain and keep
its properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted; (d) use its commercially reasonable efforts to
keep in full force and effect insurance comparable in amount and scope of
coverage to that currently maintained; (e) prepare and file all Tax Returns
required to be filed in a timely manner, and in a manner consistent with past
practices and applicable laws and regulations; (f) timely file with the SEC all
reports required to be filed under the Exchange Act, which reports (including
the unaudited interim financial statements included in such reports) shall
comply in all material respects with the Exchange Act, the rules and regulations
promulgated thereunder and all applicable accounting requirements; (g) operate
its business in accordance with the terms of its licenses and in all material
respects with all applicable laws, rules and regulations; (h) use reasonable
efforts consistent with prudent business practices and the past practices of the
Company to cause the cash reserves calculated pursuant to Section 8.2(f)(i) to
exceed Fifty Six Million Five Hundred Thousand Dollars ($56,500,000) immediately
following the Effective Time; (i) provide Acquiror with copies of all filings
and correspondence with any Governmental Entities with respect to Company
Intellectual Property with a reasonable period for Acquiror to review and
comment on such filings or correspondence prior to the filing or sending
thereof; and (j) if requested by Acquiror, provide Acquiror with periodic
reports regarding the status of the Company Intellectual Property.
SECTION 6.2. Negative Covenants of the Company.
Except as expressly contemplated by this Agreement or
otherwise consented to in writing by Acquiror, from the date hereof until the
Closing Date, the Company shall not, and shall cause each Company Subsidiary not
to, do any of the following:
(a) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of its capital stock;
(b) (i) redeem, repurchase or otherwise reacquire any shares
of its capital stock or other securities or any securities or obligations
convertible into or exchangeable for any share of its capital stock or other
securities, or any options, warrants or conversion or other rights to acquire
any shares of its capital stock or other securities or any such securities or
obligations (except in connection with the exercise of outstanding Options in
accordance with their respective terms); (ii) effect any merger, consolidation,
restructuring, reorganization or recapitalization, or adopt a plan of complete
or partial liquidation or dissolution; or (iii) adjust, split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its capital stock or other securities;
(c) (i) issue, pledge, deliver, award, grant or sell, or
register under the Securities Act or the Exchange Act or otherwise file any
registration statement under any statute covering, or authorize or propose the
issuance, pledge, delivery, award, grant or sale of (including the grant of any
Encumbrances on) or registration of or filing of any registration statement
covering any shares of any class of its capital stock or other securities
(including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares or other securities, or any
rights, warrants or options to acquire any such shares or other securities
(except in connection with the exercise of outstanding Options); or (ii) amend
or otherwise modify the terms of any such rights, warrants or options;
(d) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of, or by
any other manner, (i) any business or any corporation, partnership, association
or other business organization or division (other than a wholly-owned Subsidiary
of the Company) thereof; (ii) make or commit to make any capital expenditures
other than capital expenditures not exceeding in the aggregate Fifty Thousand
Dollars ($50,000.00) and which are solely for equipment, furniture and fixtures
incurred in the ordinary course of business consistent with past practices; or
(iii) make or commit to make any loans, advances or capital contributions to, or
investments in, any other Person.
(e) sell, lease, exchange, mortgage, pledge, transfer or
otherwise encumber or dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise encumber or dispose of, any of its assets, except
for sales of inventory in the ordinary course of business and consistent with
past practices;
(f) (i) except as otherwise contemplated by this Agreement or
as required to comply with applicable law, (ii) adopt, enter into, terminate or
amend in any material respect (A) any Company Benefit Plan or (B) any other
agreement, plan or policy involving the Company or the Company Subsidiaries, and
one or more of its current or former directors, officers or employees; (iii)
increase in any manner the compensation, bonus or fringe or other benefits of,
or pay any bonus to, any current or former officer, director or employee (except
for normal increases of cash compensation or cash bonuses in the ordinary course
of business consistent with past practice that, in the aggregate, do not
materially increase benefits or compensation expenses of the Company or the
Company Subsidiaries); (iv) pay any benefit or amount not required under any
Company Benefit Plan or any other benefit plan or arrangement of the Company or
the Company Subsidiaries as in effect on the date of this Agreement; (v)
increase in any manner the severance or termination pay of any current or former
director, officer or employee; (vi) enter into or amend any employment, deferred
compensation, consulting, severance, termination or indemnification agreement,
arrangement or understanding with any current or former employee, officer or
director; (vii) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or Benefit Plan (including the grant of
stock options, "phantom" stock, stock appreciation rights, "phantom" stock
rights stock based or stock related awards, performance units or restricted
stock or the removal of existing restrictions in any Company Benefit Plans or
agreements or awards made thereunder); (viii) amend or modify any Option, (ix)
take any action to fund or in any other way secure the payment of compensation
or benefits under any employee plan, agreement, contract or arrangement or
Benefit Plan; (x) take any action to accelerate the vesting of payment of any
compensation or benefit under any Company Benefit Plan or (xi) materially change
any actuarial or other assumption used to calculate funding obligations with
respect to any pension plan or change the manner in which contributions to any
pension plan are made or the basis on which such contributions are determined;
(g) propose or adopt any amendments to its certificate or
articles of incorporation or its bylaws;
(h) (i) make any change in any of its methods of accounting,
or (ii) make or rescind any express or deemed election relating to Taxes, settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of the federal income tax returns for the
taxable year ended December 31, 1998, except, in the case of clause (i) or
clause (ii), as may be required by law or GAAP;
(i) incur any Indebtedness, or prepay, before the scheduled
maturity thereof, any long-term debt;
(j) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
such entity's Affiliates which involves the transfer of consideration or has a
financial impact on such entity, other than pursuant to such agreements,
arrangements, or understandings existing on the date of this Agreement;
(k) enter into any contract, agreement, commitment,
arrangement, lease (including with respect to personal property), policy or
other instrument which, had it been entered into as of the date hereof, would
have been included as a Company Material Contract;
(l) enter into any contracts, agreements, binding arrangements
or understandings relating to the distribution, sale, license, marketing or
manufacturing by third parties of the products of the Company or the Company
Subsidiaries, or products licensed by the Company or the Company Subsidiaries,
other than pursuant to any such contracts, agreements, arrangements or
understandings in place as of the date of this Agreement (that have been
disclosed in writing to Acquiror prior to the date hereof) in accordance with
their terms as of the date hereof;
(m) except for transactions in the ordinary course of
business, terminate, or amend or waive any provision of, any Company Material
Contract;
(n) (i) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction in the ordinary course of business consistent with
past practice of claims for money damages which do not exceed Fifty Thousand
Dollars ($50,000) in the aggregate or in accordance with their terms or
liabilities disclosed, reflected or reserved against in the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the Company SEC Reports; (ii) cancel any indebtedness; (iii) waive or assign
any claims or rights of material value or (iv) waive any benefits of, or agree
to modify in any respect (A) any standstill or similar agreements to which the
Company or any of the Company Subsidiaries is a party or (B) other than in the
ordinary course of business, any confidentiality or similar agreements to which
the Company or any of the Company Subsidiaries is a party;
(o) transfer or license to any Person or otherwise extend,
amend or modify any rights to the Company Intellectual Property;
(p) take any action that is intended or would reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Article VIII not being satisfied or in a violation of any provision of this
Agreement;
(q) take any action that would be reasonably likely to prevent
the Merger from being accounted for as a "pooling of interests" in accordance
with GAAP;
(r) accelerate the collection of any accounts receivable; or
(s) agree in writing or otherwise to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. Access and Information.
During the period from the date hereof to the Effective Time
(the "Interim Period"), the Company and Acquiror shall, and shall cause the
Company Subsidiaries and the Acquiror Subsidiaries, respectively, to, afford to
each other and their respective officers, employees, accountants, consultants,
legal counsel and other representatives reasonable access during normal business
hours (and at such other times as the parties may mutually agree) to the
properties, executive personnel and all information concerning the business,
properties, contracts, records and personnel of the Company and the Company
Subsidiaries or Acquiror and the Acquiror Subsidiaries, as the case may be, as
such other party may reasonably request.
SECTION 7.2. Confidentiality.
Acquiror and the Company each acknowledge and agree that: (i)
all information received by it (the "Receiving Party") from or on behalf of the
other party in connection with the transactions contemplated under this
Agreement shall be deemed received pursuant to the confidentiality agreement
previously executed between the Company and Acquiror (the "Confidentiality
Agreement"), (ii) such Receiving Party shall, and shall cause its officers,
directors, employees, Affiliates, financial advisors and agents to comply with
the provisions of the Confidentiality Agreement with respect to such
information, and (iii) the provisions of the Confidentiality Agreements are
hereby incorporated herein by reference with the same effect as if fully set
forth herein.
SECTION 7.3. Proxy Statement/Prospectus and Registration Statement;
Company Stockholders Meeting.
(a) As soon as practicable following the date of this
Agreement, the Company and Acquiror shall prepare and file with the SEC the
Proxy Statement/Prospectus, and Acquiror shall prepare and file with the SEC the
Registration Statement in which the Proxy Statement/Prospectus will be included
as a prospectus. Each of the Company and Acquiror shall use its best efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. The Company shall use its best
efforts to cause the Proxy Statement/Prospectus to be mailed to the Company's
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. Acquiror also shall take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified or filing a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of Acquiror Common Stock in the Merger, and the Company shall furnish all
information concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Registration Statement or the Proxy
Statement/Prospectus will be made by either Acquiror or the Company without the
other party's prior consent (which shall not be unreasonably withheld, delayed
or conditioned) and without providing the other party the opportunity to review
and comment thereon. Acquiror shall advise the Company, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of Acquiror 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/Prospectus or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective Time
any information relating to the Company or Acquiror, or any of their respective
Affiliates, officers or directors, should be discovered by the Company or
Acquiror which should be set forth in an amendment or supplement to any of the
Registration Statement or the Proxy Statement/Prospectus, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company and Acquiror.
(b) The Company shall, as promptly as practicable after the
Registration Statement is declared effective under the Securities Act, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") in accordance with Delaware Law and its
certificate of incorporation and bylaws for the purpose of obtaining the Company
Stockholder Approval and shall, through its Board of Directors, declare that
this Agreement is advisable and recommend to its stockholders the approval and
adoption of this Agreement, the Merger and the other transactions contemplated
hereby; provided, however, that the Board of Directors of the Company shall
submit this Agreement to the Company's stockholders, whether or not the Board of
Directors of the Company at any time subsequent to the date hereof determines
that this Agreement is no longer advisable or recommends that the stockholders
of the Company reject it. Unless the Board of Directors of the Company has
withdrawn its recommendation of this Agreement in compliance herewith, the
Company shall use reasonable efforts to solicit from stockholders of the Company
proxies in favor of the approval and adoption of this Agreement and the Merger
and to secure the vote or consent of stockholders required by Delaware Law and
its certificate of incorporation and bylaws to approve and adopt this Agreement
and the Merger.
SECTION 7.4. HSR Act Matters.
Acquiror, Merger Sub and the Company (as may be required
pursuant to the HSR Act) promptly will complete all documents required to be
filed with the Federal Trade Commission and the United States Department of
Justice in order to comply with the HSR Act and, not later than fifteen (15)
days after the date hereof, together with the Persons, if any, who are required
to join in such filings, shall file such documents with the appropriate
Governmental Entities. Acquiror, Merger Sub and the Company shall promptly
furnish all materials thereafter required by any of the Governmental Entities
having jurisdiction over such filings, and shall take all reasonable actions and
shall file and use their best efforts to have declared effective or approved all
documents and notifications with any such Governmental Entity, as may be
required under the HSR Act or other federal or state antitrust laws for the
consummation of the Merger and the other transactions contemplated hereby and by
the Option Agreement. Acquiror and the Company shall each pay one-half (1/2) of
all filing fees related to compliance with the HSR Act in connection with the
transactions contemplated hereby.
SECTION 7.5. Public Announcements.
Acquiror and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated hereunder and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement.
SECTION 7.6. Indemnification.
(a) The certificate of incorporation and bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the certificate of incorporation and bylaws of the
Company on the date of this Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six (6) years after the Effective
Time in any manner that would adversely affect the rights thereunder of persons
who at any time prior to the Effective Time were identified as prospective
indemnitees under the certificate of incorporation or bylaws of the Company in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by applicable law; provided,
however, that, notwithstanding the foregoing and the provisions regarding
indemnification set forth in the certificate of incorporation and bylaws of the
Company as of the date of this Agreement, the certificate of incorporation and
bylaws of the Surviving Corporation may contain provisions prohibiting
indemnification in respect of actions or omissions if the person that would be
entitled to such indemnification shall have been adjudged to be grossly
negligent or to have committed or engaged in willful misconduct.
(b) From and after the Effective Time, Acquiror shall cause
the Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors and employees of the Company and the Company
Subsidiaries (collectively, the "Indemnified Parties") against all losses,
expenses, claims, damages, liabilities or amounts that are paid in settlement
of, with the approval of Acquiror or otherwise in connection with, any claim,
action, suit, proceeding or investigation (a "Claim"), based in whole or in part
on the fact that such person is or was such a director, officer or employee and
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), in each case to the fullest extent permitted under Delaware Law (and
shall pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
Delaware Law, upon receipt from the Indemnified Party to whom expenses are
advanced of the undertaking to repay such advances contemplated by Section
145(e) of Delaware Law), provided, however, that no Indemnified Party shall be
entitled to any indemnification or expenses pursuant to this Section 7.6 in
respect of any Claim, issue or matter as to which such Indemnified Party shall
have been adjudged to be grossly negligent or to have committed or engaged in
willful misconduct.
(c) Any Indemnified Party wishing to claim indemnification
under this Section 7.6, promptly upon learning of any such Claim, shall notify
Acquiror and the Surviving Corporation (although the failure so to notify
Acquiror and the Surviving Corporation shall not relieve Acquiror and the
Surviving Corporation from any liability which Acquiror and the Surviving
Corporation may have under this Section 7.6, except to the extent such failure
prejudices Acquiror and the Surviving Corporation), and shall deliver to
Acquiror and the Surviving Corporation the undertaking contemplated by Section
145(e) of Delaware Law.
(d) Notwithstanding any contrary provision of this Agreement,
prior to the Effective Time, the Company may purchase insurance coverage
extending for a period of six (6) years the Company's directors' and officers'
liability insurance coverage in effect as of the date hereof (covering past or
future claims with respect to periods prior to and including the Effective
Time); provided that the aggregate premium payable for such insurance shall not
exceed 125% of the last annual premium paid for such coverage prior to the date
hereof.
SECTION 7.7. Further Action; Commercially Reasonable Efforts.
(a) Each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable under
applicable laws or otherwise to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, including, without
limitation, using all its commercially reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with the Company,
Acquiror or any Company Subsidiary or Acquiror Subsidiary as are necessary for
the transactions contemplated herein. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use all commercially reasonable efforts to take all such action.
(b) During the Interim Period, each of the parties hereto
shall promptly notify the other in writing of any pending or, to the knowledge
of such party, threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking damages in
connection with the Merger or the conversion of Company Common Stock into the
Merger Consideration pursuant to the Merger, or (ii) seeking to restrain or
prohibit the consummation of the Merger or any of the transactions contemplated
by this Agreement or the Option Agreement or otherwise limit the right of
Acquiror to own or operate all or any portion of the business or assets of the
Company.
(c) Each party hereto shall use its commercially reasonable
efforts to refrain from taking any action, or entering into any transaction,
which would cause any of its representations or warranties contained in this
Agreement to be untrue or which would result in a breach of any covenant made by
it in this Agreement.
SECTION 7.8. No Solicitation.
(a) From the date of this Agreement until the Effective Time
or the termination of this Agreement pursuant to the terms of this Agreement,
the Company shall not and shall not permit any of its Subsidiaries, Affiliates,
directors, officers, employees, agents or representatives, including, without
limitation, any investment banker, attorney or accountant of the Company or any
of its Subsidiaries (collectively, "Representatives") directly or indirectly, to
(i) initiate, solicit, encourage or otherwise facilitate (including by way of
furnishing information), any inquiries or the making of any proposal or offer
that constitutes, or may reasonably be expected to lead to, an Acquisition
Proposal (as defined below), (ii) enter into or maintain or continue discussions
or negotiate with any Person in furtherance of such inquiries or to obtain an
Acquisition Proposal, or (iii) agree to, approve, recommend, or endorse any
Acquisition Proposal, or authorize or permit any of its or their Subsidiaries or
Representatives to take any such action and, the Company shall promptly notify
Acquiror of any such inquiries and proposals received by the Company or any of
its Subsidiaries or Representatives, relating to any of such matters; provided,
however, that the foregoing shall not prohibit the Board of Directors of the
Company from (A) furnishing information to, or engaging in discussions or
negotiations with, any Person in response to an unsolicited bona fide written
Acquisition Proposal; or (B) recommending such an unsolicited bona fide written
Acquisition Proposal to the stockholders of the Company, if, and only to the
extent that, (w) the Board of Directors of the Company concludes in good faith
(after consultation with its financial advisors) that such Acquisition Proposal
would constitute a Superior Proposal (as hereinafter defined), (x) the Board of
Directors of the Company determines in good faith (after consultation with
outside legal counsel) that the failure to take such action would result in a
breach by the Board of Directors of the Company of its fiduciary duties to the
Company's stockholders under applicable law, (y) prior to furnishing such
information to, or entering into discussions or negotiations with, such Person
the Company provides prompt written notice to Acquiror to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such Person (which notice shall identify the nature and material terms of the
proposal), and (z) prior to providing any information or data to any Person in
connection with an Acquisition Proposal by any such Person, the Board of
Directors of the Company receives from such Person an executed confidentiality
agreement with provisions no less favorable to the Company than the
Confidentiality Agreement. The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions, or negotiations
with any parties regarding any Acquisition Proposal. The Company shall as
promptly as practicable provide Acquiror with a copy of any written Acquisition
Proposal received and a written statement with respect to any nonwritten
Acquisition Proposal received, which statement shall include the identity of the
Person making the Acquisition Proposal and the material terms thereof. The
Company shall inform Acquiror as promptly as practicable of any change in the
price, structure, form of consideration or material terms and conditions
regarding the Acquisition Proposal. The Company agrees to keep Acquiror fully
and timely informed of the status of any discussions, negotiations, furnishing
of non-public information, or other activities relating to an Acquisition
Proposal.
(b) For purposes of this Agreement, "Acquisition Proposal"
means an inquiry, offer or proposal regarding any of the following (other than
the transactions contemplated by this Agreement) involving the Company or its
Subsidiaries: (i) any merger, reorganization, consolidation, share exchange,
recapitalization, business combination, liquidation, dissolution, or other
similar transaction involving, or, any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of, all or any significant portion of the assets
or ten percent (10%) or more of the equity securities of, the Company or any of
its Subsidiaries, in a single transaction or series of related transactions
which could reasonably be expected to interfere with the completion of the
Merger; (ii) any tender offer or exchange offer for twenty percent (20%) or more
of the outstanding shares of capital stock of the Company or any Company
Subsidiary or the filing of a registration statement under the Securities Act in
connection therewith; or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(c) For purposes of this Agreement, "Superior Proposal" means
a bona fide Acquisition Proposal made by any Person that the Board of Directors
of the Company determines in its good faith judgment to be more favorable to the
Company's stockholders than the Merger (after consideration of, among other
things, the written opinion, with only customary qualifications, of the
Company's independent financial advisor that the value of the consideration to
the Company's stockholders provided for in such proposal exceeds the value of
the consideration to the Company's stockholders provided for in the Merger) and
for which financing, to the extent required, is then committed or which, in the
good faith judgment of the Board of Directors of the Company (based on the
advice of the Company's independent financial advisor), is reasonably capable of
being obtained by such Person.
(d) Nothing contained in this Section 7.8 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2 promulgated under the Exchange Act or from making any disclosure
to the Company's stockholders which, in the good faith judgment of the Board of
Directors of the Company based on the advice of outside counsel, is required
under applicable law; provided that in any such cases the Company does not
withdraw or modify, or propose to withdraw or modify, its position with respect
to the Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal unless the Company and its Board of Directors have complied
with all the provisions of this Section 7.8.
SECTION 7.9. Nasdaq Listing.
Acquiror shall use reasonable efforts to cause the Acquiror
Common Stock to be issued pursuant to Section 2.1(a) of this Agreement to be
approved for listing on Nasdaq, subject to official notice of issuance, prior to
the Effective Time.
SECTION 7.10. Blue Sky.
Acquiror shall use reasonable efforts to obtain prior to the
Effective Time any necessary permits and approvals under all applicable Blue Sky
Laws required to permit the distribution of the shares of Acquiror Common Stock
to be issued in accordance with the provisions of Section 2.1(a) of this
Agreement.
SECTION 7.11. Affiliates.
(a) Each of the Company and Acquiror: (i) has disclosed to the
other in Schedule 7.11 hereto all Persons who are, or may be, as of the date
hereof its "affiliates" as that term is used in SEC Accounting Series Release
Nos. 130 and 135 and Rule 145 of the rules and regulations of the SEC under the
Securities Act; and (ii) shall use all reasonable efforts to cause each Person
who is identified as an "affiliate" of it in Schedule 7.11 to deliver to the
other as promptly as practicable but in no event later than thirty-one (31) days
prior to the Closing Date, a signed agreement substantially in the form attached
hereto as Exhibit A, in the case of the Company, and Exhibit B, in the case of
Acquiror. The Company and Acquiror shall notify each other from time to time of
all other Persons who then are, or may be, such an "affiliate" and use all
reasonable efforts to cause each additional Person who is identified as an
"affiliate" to execute a signed agreement as set forth in this Section 7.11(a).
(b) Shares of Company Common Stock and shares of Acquiror
Common Stock held by the "affiliates" of the Company or Acquiror set forth in
Schedule 7.11, as the case may be, shall not be transferable during the thirty
(30) day period prior to the Effective Time, and shares of Acquiror Common Stock
issued to, or as of the Effective Time held by, such "affiliates" of the Company
and Acquiror shall not be transferable until such time as financial results
covering at least thirty (30) days of combined operations of the Company and
Acquiror have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
"affiliate" has provided the signed agreement referred to in Section 7.11(a),
except to the extent permitted by, and in accordance with, SEC Accounting Series
Release 135 and SEC Staff Accounting Bulletins 65 and 76. Any Company Common
Stock and any Acquiror Common Stock held by any such "affiliate" shall not be
transferable, regardless of whether such "affiliate" has provided the applicable
signed agreement referred to in Section 7.11(a), if such transfer, either alone
or in the aggregate with other transfers by "affiliates", would preclude the
ability of the parties to account for the transactions contemplated by this
Agreement and the Option Agreement as a "pooling of interests" in accordance
with GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations
and policies of the SEC. Acquiror shall not register the transfer of any shares
of Acquiror Common Stock unless such transfer is made in compliance with the
foregoing.
SECTION 7.12. Event Notices.
During the Interim Period, each party hereto will promptly
notify the other parties hereto of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
condition to the obligations of such party to effect the Merger and the other
transactions contemplated by this Agreement or the Option Agreement not to be
satisfied and (b) the failure of such party to comply with any covenant or
agreement to be complied with by it pursuant to this Agreement which would be
likely to result in any condition to the obligations of such party to effect the
Merger and the other transactions contemplated by this Agreement or the Option
Agreement not to be satisfied. No delivery of any notice pursuant to this
Section 7.12 will cure any breach of any representation or warranty, covenant,
condition or agreement of such party contained in this Agreement or otherwise
limit or affect the remedies available hereunder to the party receiving such
notice.
SECTION 7.13. Option Agreement.
Concurrently with the execution of this Agreement, the Company
shall deliver to Acquiror an executed Option Agreement. The Company agrees to
fully perform to the fullest extent permitted under applicable law its
obligations under the Option Agreement.
SECTION 7.14. Tax Treatment.
Each of Acquiror and the Company shall use reasonable efforts
to cause the Merger to qualify as a reorganization under the provisions of
Section 368 of the Code. The parties will characterize the Merger as such a
reorganization for purposes of all Tax Returns and other filings.
SECTION 7.15. Accountant Letters; Pooling of Interests.
(a) Acquiror shall use reasonable efforts to cause to be
delivered to the Company two letters from Acquiror's independent public
accountants, one dated approximately the date on which the Registration
Statement shall become effective and one dated the Closing Date, each addressed
to Acquiror and the Company, in form reasonably satisfactory to the Company and
customary in scope for comfort letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
(b) The Company shall use reasonable efforts to cause to be
delivered to Acquiror two letters from the Company's independent public
accountants, one dated approximately the date on which the Registration
Statement shall become effective and one dated the Closing Date, each addressed
to the Company and Acquiror, in form reasonably satisfactory to Acquiror and
customary in scope for comfort letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
(c) Each of the Company and Acquiror shall use reasonable
efforts to cause the transactions contemplated by this Agreement, including the
Merger, to be accounted for as a "pooling of interests" in accordance with GAAP,
Accounting Principles Board Opinion No. 16 and all published rules, regulations
and policies of the SEC, and each of the Company and Acquiror agrees that it
shall take no action that would cause such accounting treatment not to be
obtained.
SECTION 7.16. Board of Directors of Acquiror.
Promptly following the Effective Time, the Board of Directors
of Acquiror will take all actions necessary such that Richard C. Williams shall
be appointed to Acquiror's Board of Directors as a Vice Chairman of the Company
with a term expiring at the annual meeting of Acquiror's stockholders in 2001.
SECTION 7.17. Rights Agreement.
The Board of Directors of the Company shall take all further
action (in addition to that referred to in Section 3.26) requested in writing by
Acquiror in order to render the Rights issued pursuant to the Rights Agreement
to purchase Company Common Stock inapplicable to the Merger and the other
transactions contemplated by this Agreement and the Option Agreement and, if
requested by Acquiror, to provide that the Final Expiration Date (as defined in
the Rights Agreement) shall occur immediately prior to the Effective Time.
Except as provided above with respect to the Merger and the other transactions
contemplated by this Agreement and the Option Agreement, the Board of Directors
of the Company shall not, without the prior written consent of Acquiror, (a)
amend the Rights Agreement or (b) take any action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the Rights
or any action to facilitate an Acquisition Proposal.
SECTION 7.18. Exemption from Liability Under Section 16(b).
(a) Provided that the Company delivers to Acquiror the Section
16 Information with respect to the Company prior to the Effective Time, the
Board of Directors of Acquiror, or a committee of Non-Employee Directors thereof
(as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act),
shall adopt a resolution in advance of the Effective Time providing that the
receipt by the Company Insiders of Acquiror Common Stock in exchange for shares
of Company Common Stock, and of options to purchase Acquiror Common Stock upon
assumption and conversion by Acquiror of options to purchase Company Common
Stock, in each case pursuant to the transactions contemplated hereby and to the
extent such securities are listed in the Section 16 Information, are intended to
be exempt from liability pursuant to Rule 16b-3 under the Exchange Act.
(b) "Section 16 Information" shall mean information accurate
in all respects regarding the Company Insiders, the number of shares of Company
Common Stock or other Company equity securities deemed to be beneficially owned
by each such Company Insider and expected to be exchanged for Acquiror Common
Stock in connection with the Merger.
(c) "Company Insiders" shall mean those officers and directors
of the Company who are subject to the reporting requirements of Section 16(a) of
the Exchange Act who are listed in the Section 16 Information.
SECTION 7.19. Requisite Acquiror Approval.
If Requisite Acquiror Approval becomes necessary and Acquiror
does not exercise Acquiror's termination right pursuant to Section 9.1(l),
Acquiror shall (without waving any right to terminate this Agreement pursuant to
Section 9.1(l) or otherwise) use commercially reasonable efforts to duly call,
give notice of, convene and hold a meeting of Acquiror's stockholders in
accordance with Tennessee Business Corporation Act, the Securities Act, the
Exchange Act and Acquiror's articles of incorporation and bylaws, for the
purpose of obtaining Requisite Acquiror Approval. In connection therewith, the
Company shall use all commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper and advisable under applicable laws or otherwise, including,
without limitation, making timely filings with the SEC and other Governmental
Entities and, to the extent necessary, amending and recirculating the Proxy
Statement/Prospectus.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1. Conditions to Obligations of Acquiror, Merger Sub and the
Company to Effect the Merger.
The respective obligations of Acquiror, Merger Sub and the
Company to effect the Merger and the other transactions contemplated herein
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by applicable law:
(a) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) Effectiveness of Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities Act
prior to the mailing of the Proxy Statement/Prospectus by each of the Company
and Acquiror to their respective stockholders and no stop order suspending the
effectiveness of such registration statement shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated or, to the
knowledge of Acquiror or the Company, threatened by the SEC.
(c) No Order. No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, statute, rule, ordinance, regulation, executive order, decree,
judgment, stipulation, injunction or other order (whether temporary, preliminary
or permanent) in any case which is in effect and which prevents or prohibits
consummation of the Merger or any other transactions contemplated in this
Agreement; provided, however, that the parties shall use their reasonable
efforts to cause any such decree, judgment, injunction or order to be vacated or
lifted.
(d) Nasdaq Listing. Acquiror Common Stock issuable to the
holders of Company Common Stock pursuant to Section 2.1(a) of this Agreement
shall have been included for listing on Nasdaq upon official notice of issuance.
(e) HSR Act. Any waiting period with any extensions thereof
under the HSR Act shall have expired or been terminated.
(f) Company Pooling Letter. There shall have been delivered to
Acquiror and the Company a letter from the Company's independent accountants,
dated as of the Closing Date and addressed to Acquiror, the Company and
Acquiror's independent accountants, reasonably satisfactory in form and
substance to Acquiror and Acquiror's independent accountants, to the effect that
(i) after reasonable investigation, the Company's independent accountants are
not aware of any fact concerning the Company or any of the Company's
stockholders or "affiliates" (as defined in Section 7.11) that could preclude
Acquiror from accounting for the Merger as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC, and (ii) the Merger is
eligible to be accounted for as a "pooling of interests" in accordance with
GAAP, Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC.
(g) Acquiror Pooling Letter. There shall have been delivered
to Acquiror and the Company a letter from Acquiror's independent accountants,
dated as of the Closing Date and addressed to Acquiror, reasonably satisfactory
in form and substance to Acquiror, to the effect that (i) after reasonable
investigation, Acquiror's independent accountants are not aware of any fact
concerning Acquiror or any of Acquiror's stockholders or "affiliates" (as
defined in Section 7.11) that could preclude Acquiror from accounting for the
Merger as a "pooling of interests" in accordance with GAAP, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC, and (ii) Acquiror's independent accountants concur in
Acquiror's management conclusion that Acquiror may account for the Merger as a
"pooling of interests" in accordance with GAAP, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies of the SEC.
(h) Tax Opinion. The Company and Acquiror shall have received
a legal opinion of the Company's counsel, on or before the date the Registration
Statement shall become effective and subsequently on the Closing Date, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code (it being understood that, (A) in rendering such
opinion, the Company's legal counsel may rely upon tax representation letters
from each of Acquiror, Merger Sub and the Company, in each case, in form and
substance reasonably satisfactory to such tax counsel, and (B) if the Company's
legal counsel does not render such opinion, the condition set forth in this
Section shall nonetheless be deemed to be satisfied if Acquiror's legal counsel
renders such an opinion to Acquiror).
(i) Requisite Acquiror Approval. If Requisite Acquiror
Approval becomes necessary, the Requisite Acquiror Approval shall have been
obtained prior to the Extended Termination Date.
SECTION 8.2. Additional Conditions to Obligations of Acquiror and
Merger Sub.
The obligations of Acquiror and Merger Sub to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to the following conditions, any or all of which may be waived by
Acquiror, in whole or in part, to the extent permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of the Company made in this Agreement shall be true and correct in
all material respects when made and on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time, which
need only be true and correct in all material respects as of such date or time);
provided, however, that, notwithstanding the foregoing, the representations and
warranties of the Company set forth in Section 3.3 shall be true and correct in
all respects. Acquiror shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of the Company to that effect.
(b) Agreements and Covenants. The agreements and covenants of
the Company required to be performed on or before the Effective Time shall have
been performed in all material respects. Acquiror shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of the
Company to that effect.
(c) No Material Adverse Changes. There shall have been no
Material Adverse Effect on the Company since the date of this Agreement.
(d) No Litigation. There shall not be pending or threatened
any suit, action, proceeding or investigation: (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (ii) relating to the Merger and
seeking to obtain from Acquiror or any Acquiror Subsidiary any damages that may
be material to Acquiror, (iii) seeking to prohibit or limit in any material
respect Acquiror's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (iv) which would materially and adversely affect the right of
the Surviving Corporation to own the assets or operate the business of the
Company.
(e) Consents Under Company Agreements. The Company shall have
obtained the consent or approval of any Person whose consent or approval shall
be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby, except those which the
failure to obtain would not have a Material Adverse Effect on the Company.
(f) Minimum Closing Cash Reserves; Indebtedness. Immediately
following the Effective Time, the Company (i) shall have, after payment of all
Transaction Expenses, at least Fifty Million Dollars ($50,000,000) in the
aggregate of (A) cash on hand, plus (B) liquid investments with a maturity of
three months or less, plus (C) with respect to any marketable securities
liquidated by the Company in order to satisfy the condition set forth in clause
(i)(B), the amount by which the Company's book value of such securities
immediately prior to such liquidation exceeds the cash proceeds realized by the
Company from such liquidation; provided, that the amount added pursuant to this
clause (i)(C) shall not exceed Two Hundred Thousand Dollars ($200,000) in the
aggregate, plus (D) the outstanding royalty payments due to the Company from
Fujisawa Healthcare, Inc. ("Fujisawa") for the fiscal quarter ending December
31, 1999, to the extent not collected; provided, that if the Closing occurs
after March 31, 2000, the amount added pursuant to this clause (i)(D) shall
include the outstanding royalty payments due to the Company from Fujisawa for
the fiscal quarter ending March 31, 2000, to the extent not collected, plus (E)
the outstanding royalty payments due from Sanofi Pharma (France) ("Sanofi") to
the Company for the fiscal quarter ending December 31, 1999, to the extent not
collected; provided, that if the Closing occurs after March 3l, 2000, the amount
added pursuant to this clause (i)(E) shall include the outstanding royalty
payments due to the Company from Sanofi for the fiscal quarter ending March 31,
2000, to the extent not collected, plus (F) any amounts paid by the Company
after the date hereof and prior to the Closing which have been specifically
acknowledged in writing by Acquiror as permitted to be included for the purposes
of this Section 8.2(f) as "cash on hand" of the Company as of Closing, and (ii)
shall have no Indebtedness. Acquiror shall have received a certificate of the
Chief Financial Officer of the Company to that effect and all information
reasonably necessary for the Acquiror to determine the Company's satisfaction of
the conditions set forth in this Section 8.1(f), including any releases or
waivers Acquiror deems reasonably necessary from any Persons owed Transactions
Expenses from the Company.
(g) Release of Oral Contracts. The Company shall have obtained
executed releases in form and substance reasonably satisfactory to Acquiror of
all oral agreements set forth on Schedule 3.14.
SECTION 8.3. Additional Conditions to Obligations of the Company.
The obligations of the Company to effect the Merger and the
other transactions contemplated in this Agreement (except the transactions
contemplated in the Option Agreement) are also subject to the following
conditions any or all of which may be waived by the Company, in whole or in
part, to the extent permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub made in this Agreement shall be true and
correct in all material respects when made and on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time, which need only be true and correct in all material respects as of such
date and time. The Company shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of Acquiror to such effect.
(b) Agreements and Covenants. The agreements and covenants of
Acquiror and Merger Sub required to be performed on or before the Effective Time
shall have been performed in all material respects. The Company shall have
received a certificate of the Chief Executive Officer or Chief Financial Officer
of Acquiror to such effect.
(c) No Material Adverse Change. There shall have been no
Material Adverse Effect on Acquiror since the date of this Agreement.
SECTION 8.4. Delayed Closing by the Company.
If the Closing hereunder shall not have occurred on or prior
to February 29, 2000, and all of the conditions to Closing hereunder shall have
otherwise been satisfied during the month of March 2000 (except for the
requirement of the Company to satisfy the condition set forth in Section
8.2(f)(i) (the "Cash-on-Hand Condition")), then the Company, upon prior written
notice delivered to Acquiror at least five (5) business days before the date
which would otherwise be the Closing Date hereunder, shall have a one time right
to delay the Closing Date for a period of up to thirty-five (35) days until the
date on which the Cash-on-Hand Condition shall be satisfied (such notice from
the Company shall designate the date to which the Company delays the Closing).
Nothing in this Section 8.4 shall constitute or be deemed to constitute a waiver
of any rights or conditions set forth in this Agreement and the parties
acknowledge and agree that if the Closing is delayed as contemplated in this
Section 8.4, all of the Closing conditions set forth in this Article VIII must
be satisfied or waived as of such delayed Closing Date.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination.
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Merger by the stockholders of the Company:
(a) by mutual consent of Acquiror and the Company;
(b) by Acquiror, upon a breach of any covenant or agreement on
the part of the Company set forth in this Agreement, or if any representation or
warranty of the Company shall have become untrue, in either case such that the
conditions set forth in Section 8.2(a) or Section 8.2(b) would not be satisfied
(a "Terminating Company Breach"); provided, that, if such Terminating Company
Breach is curable by the Company through the exercise of reasonable efforts and
for so long as the Company continues to exercise such reasonable efforts,
Acquiror may not terminate this Agreement under this Section 9.1(b);
(c) by the Company, upon breach of any covenant or agreement
on the part of Acquiror set forth in this Agreement, or if any representation or
warranty of Acquiror shall have become untrue, in either case such that the
conditions set forth in Section 8.3(a) or Section 8.3(b) would not be satisfied
(a "Terminating Acquiror Breach"); provided, that, if such Terminating Acquiror
Breach is curable by Acquiror through the exercise of their reasonable efforts
and for so long as Acquiror continues to exercise such reasonable efforts, the
Company may not terminate this Agreement under this Section 9.1(c);
(d) by either Acquiror or the Company, if there shall be any
decree, permanent injunction, judgment, order or other action by any court of
competent jurisdiction or any Governmental Entity which is final and
nonappealable preventing the consummation of the Merger; provided, that the
party seeking to terminate this Agreement pursuant to this Section 9.1(d) shall
have used reasonable efforts to cause any such decree, permanent injunction,
judgment or other order to be vacated or lifted;
(e) by either Acquiror or the Company, if the Merger shall not
have been consummated on or before that date which is two hundred forty (240)
calendar days after the date hereof; provided, however, that if a request for
additional information is received from the United States Federal Trade
Commission or the Antitrust Division of the United States Department of Justice
pursuant to the HSR Act, then such date shall be extended to the 30th day
following certification by Acquiror and/or the Company, as applicable, that
Acquiror and/or the Company, as applicable, have substantially complied with
such request, but in any event not later than that date which is three hundred
(300) calendar days after the date hereof; provided, further, that if Requisite
Acquiror Approval becomes necessary, then such date shall be extended to the
earlier of (i) one hundred twenty days after the date of the Company
Stockholders Meeting or (ii) the 120th day following written notice to the
Company from Acquiror that such Requisite Acquiror Approval is required and
delivery by Acquiror to the Company of a voting agreement, in substantially the
same form as the Voting Agreement, executed by the "affiliates" (as defined in
Section 7.11) of Acquiror, pursuant to which such affiliates agree to vote in
favor of the issuance of shares of Acquiror Common Stock in connection with the
Merger (such extended date for the Requisite Acquiror Approval, the "Extended
Termination Date"); provided, further, that the right to terminate this
Agreement under this Section 9.1(e) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of the
failure of the Merger to occur on or before such date;
(f) by either Acquiror or the Company, if the requisite vote
of the stockholders of the Company in favor of this Agreement shall not have
been obtained at the Company Stockholders Meeting (including any adjournment or
postponement thereof); provided, that the right to terminate this Agreement
under this Section 9.1(f) shall not be available to the Company if the Company
has not complied with its obligations under Section 7.3(b);
(g) by Acquiror, if (i) the Board of Directors of the Company
withdraws or modifies its recommendation of this Agreement or the Merger or
shall have resolved or publicly announced or disclosed to any third party its
intention to do any of the foregoing or the Board of Directors of the Company
shall have recommended to the stockholders of the Company any Acquisition
Proposal or resolved to do so; (ii) the Board of Directors of the Company fails
to reconfirm its recommendation of this Agreement or the Merger within five (5)
Business Days of a written request by Acquiror to do so; (iii) a tender offer or
exchange offer for twenty percent (20%) or more of the outstanding shares of
Company Common Stock is commenced or a registration statement with respect
thereto shall have been filed and the Board of Directors of the Company, within
ten (10) Business Days after such tender offer or exchange offer is so commenced
or such registration statement is so filed, either fails to recommend against
acceptance of such tender or exchange offer by its stockholders or takes no
position with respect to the acceptance of such tender or exchange offer by its
stockholders, or (iv) the Company breaches in any material respect the Option
Agreement;
(h) by the Company, if the Board of Directors of the Company
shall have determined to recommend an Acquisition Proposal to its stockholders
after determining, pursuant to Section 7.8, that such Acquisition Proposal
constitutes a Superior Proposal, and the Company gives Acquiror at least three
(3) Business Days prior notice of its intention to effect such termination
pursuant to this Section 9.1(h), and the Company makes the payment required
pursuant to Section 9.5(b) of this Agreement and pays the expenses for which the
Company is responsible under Section 9.5(a) of this Agreement;
(i) by Acquiror, if any Person (other than Acquiror or any
Affiliate of Acquiror pursuant to the Option Agreement) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and the
regulations promulgated thereunder), other than a "group" comprised of some or
all of the Persons listed on the signature pages to the Voting Agreement, shall
have been formed which beneficially owns, or has the right to acquire beneficial
ownership of, twenty percent (20%) or more of the then outstanding shares of
capital stock of the Company;
(j) by Acquiror, if there shall have occurred one or more
events which shall have caused a Material Adverse Effect on the Company which
Material Adverse Effect shall have remained uncured (to the extent curable) for
a period of thirty (30) days after written notice from Acquiror of Acquiror's
intention to terminate pursuant to this Section 9.1(j);
(k) by the Company, if there shall have occurred one or more
events which shall have caused a Material Adverse Effect on Acquiror which
Material Adverse Effect shall have remained uncured (to the extent curable) for
a period of thirty (30) days after written notice from the Company of the
Company's intention to terminate pursuant to this Section 9.1(k);
(l) by Acquiror, if during a Twenty Day Period (as defined
below), the Twenty Day Average Price (as defined below) shall be less than
$30.00. For purposes of this Section 9.1(l), (i) "Twenty Day Average Price"
shall mean the average of the reported closing prices per share of Acquiror
Common Stock on the Nasdaq (or the last bid price in the absence of a trade)
during twenty (20) consecutive trading days, and (ii) "Twenty Day Period" means
any period of twenty (20) consecutive trading days for the Acquiror Common
Stock; or
(m) by Acquiror or the Company, if Requisite Acquiror Approval
becomes necessary but is not obtained at a duly called meeting of the
stockholders of Acquiror for such purpose (including any adjournment or
postponement thereof).
The right of any party hereto to terminate this Agreement
pursuant to this Section 9.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
Affiliate of such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 9.2. Effect of Termination.
Except as provided in Section 9.5 of this Agreement, in the
event of the termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void, there shall be no liability on the part
of Acquiror or the Company or any of their respective officers, directors,
stockholders or Affiliates to the other, and all rights and obligations of any
party hereto shall cease, except that nothing herein shall relieve any party
from liability for any willful breach by a party of any of its representations,
warranties, covenants or agreements in this Agreement; and provided that the
provisions of Section 7.2 and Section 9.5 of this Agreement and the Option
Agreement will remain in full force and effect and survive any termination of
this Agreement.
SECTION 9.3. Amendment.
This Agreement may be amended by the parties hereto by action
taken or authorized by their respective Boards of Directors at any time prior to
the Effective Time; provided, however, that, after approval of the Merger by the
stockholders of the Company or the stockholders of Acquiror if Requisite
Acquiror Approval becomes necessary, no amendment may be made which by law or
rule of Nasdaq requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
SECTION 9.4. Extension; Waiver.
At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto, (b) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by any other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bond thereby.
SECTION 9.5. Fees, Expenses and Other Payments.
(a) Except as otherwise set forth in this Agreement, all costs
and expenses incurred by the parties hereto shall be borne solely and entirely
by the party which has incurred such costs and expenses, whether or not the
Merger is consummated; provided, however, that Acquiror and the Company shall
share equally all costs and expenses (other than attorney's and accountants'
fees and expenses) incurred in relation to printing and filing and, as
applicable, mailing the Registration Statement and the Proxy
Statement/Prospectus and any amendments or supplements thereto and all SEC and
other regulatory filing fees incurred in connection with the Registration
Statement and the Proxy Statement/Prospectus and the fees required under the HSR
Act and applicable foreign laws, if any, incurred in connection with the
transactions contemplated under this Agreement.
(b) If this Agreement is terminated (i) by Acquiror pursuant
to Section 9.1(b), (ii) by Acquiror pursuant to Section 9.1(g), or (iii) by the
Company pursuant to Section 9.1(h), then the Company shall pay to Acquiror a
termination fee of Twelve Million Dollars ($12,000,000) in cash (the
"Termination Fee"), immediately upon such termination.
(c) If this Agreement is terminated by Acquiror pursuant to
Section 9.1(l), then the Company shall pay to Acquiror a fee equal to two (2)
times the Acquiror Transaction Expenses in addition to any amounts which may
become payable pursuant to Section 9.5(e); provided, however, that in no event
shall the fee payable pursuant to this Section 9.5(c) exceed Six Million Dollars
($6,000,000). For purposes of this Section 9.5(c), "Acquiror Transaction
Expenses" shall mean all documented costs, fees, expenses and other amounts
incurred or payable, directly or indirectly, by Acquiror or any Affiliate of
Acquiror in connection with the Merger and this Agreement, including, without
limitation, (i) all reasonable legal, accounting, brokerage and other fees,
costs and expenses incurred for the benefit of Acquiror or any Affiliate of
Acquiror and (ii) all filing, registration and other similar fees and expenses
payable paid by or on behalf of Acquiror or any Affiliate of Acquiror.
(d) If this Agreement is terminated pursuant to Section 9.1(e)
as a result of the failure of the Company to timely fulfill any obligation under
this Agreement, and if an Acquisition Proposal involving the Company is
thereafter consummated or the Company enters into a definitive agreement with
respect to an Acquisition Proposal within twelve (12) months after such
termination of this Agreement, the Company shall pay to Acquiror the Termination
Fee, at or prior to the consummation of such Acquisition Proposal, or
immediately upon the effective date of such definitive agreement, whichever is
earlier.
(e) If this Agreement is terminated (i) by either Acquiror or
the Company pursuant to Section 9.1(f) as a result of the failure to receive the
requisite vote for approval of this Agreement and the Merger by the stockholders
of the Company at the Company Stockholders Meeting or (ii) by Acquiror pursuant
to Section 9.1(l), and, in the case of clause (i) or (ii), an Acquisition
Proposal involving the Company is thereafter consummated or the Company enters
into a definitive agreement with respect to an Acquisition Proposal within
twelve (12) months after such termination of this Agreement pursuant to Section
9.1(f) or Section 9.1(l), as applicable, then the Company shall pay to Acquiror
the Termination Fee at or prior to the consummation of such Acquisition Proposal
or immediately upon the effective date of such agreement, whichever is earlier.
(f) Any payment required to be made pursuant to Section
9.5(b), Section 9.5(c), Section 9.5(d) or Section 9.5(e) of this Agreement shall
be made by wire transfer of immediately available funds to an account designated
by Acquiror.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Effectiveness of Representations, Warranties and
Agreements.
(a) Except as set forth in Section 10.1(b) of this Agreement,
the representations, warranties, covenants and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any Affiliate of
such party or any of their officers, directors, representatives or agents
whether prior to or after the execution of this Agreement.
(b) The representations and warranties in this Agreement will
terminate at the Effective Time; provided, however, that this Section 10.1(b)
shall in no way limit or terminate any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time or after
the termination of this Agreement pursuant to Article IX.
SECTION 10.2. Notices.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Acquiror:
KING PHARMACEUTICALS, INC.
501 Fifth Street
Bristol, Tennessee 37620
Telecopier No.: (423) 989-8006
Attention: Chief Executive Officer
and
Telecopier No.: (423) 989-6282
Attention: Executive Vice President and General Counsel
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
8300 Greensboro Drive
Suite 1100
McLean, Virginia 22102
Telecopier No.: (703) 610-6200
Attention: Richard T. Horan, Jr., Esq.
Thomas E. Repke, Esq.
(b) If to the Company:
MEDCO RESEARCH, INC.
7001 Weston Parkway, Suite 300
Cary, North Carolina 27513
Telecopier No.: (919) 653-7022
Attention: Richard C. Williams, Chairman
With a copy (which shall not constitute notice) to:
Hofheimer, Gartlier & Gross
530 Fifth Avenue
New York, New York 10036
Telecopier No.: (212) 661-3132
Attention: Richard G. Klein, Esq.
SECTION 10.3. Certain Definitions.
For purposes of this Agreement, the term:
(a) "Affiliate" of any Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person;
(b) "beneficial owner" (including the terms "beneficial
ownership" and "beneficially own") means with respect to any shares of capital
stock, a Person who shall be deemed to be the beneficial owner or have
beneficial ownership of such shares (i) which such Person or any of its
Affiliates or associates beneficially owns, directly or indirectly, (ii) which
such Person or any of its Affiliates or associates (as such term is defined in
Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding, (iii) which are beneficially owned, directly or indirectly, by
any other Persons with whom such Person or any of its Affiliates or associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding voting or disposing of any such shares or (iv) pursuant to Section 13(d)
of the Exchange Act and any rules or regulations promulgated thereunder;
(c) "Business Day" shall mean any day other than a day on
which banks in the State of New York are authorized or obligated to be closed;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "Encumbrance" shall mean any lien, pledge, charge,
security interest or other encumbrance of any nature;
(f) "Indebtedness" of a Person shall mean (i) indebtedness of
such Person for borrowed money whether short-term or long-term and whether
secured or unsecured, (ii) indebtedness of such Person for the deferred purchase
price of services or property, which purchase price (A) is due twelve months or
more from the date of incurrence of the obligation in respect thereof or (B)
customarily or actually is evidenced by a note or other written instrument
(including, without limitation, any such indebtedness which is non-recourse to
the credit of such Person but is secured by assets of such Person); provided,
that for purposes of this clause (ii), "Indebtedness" shall not include (x)
amounts that may become due to a clinical research organization in connection
with the ordinary course annual "true-up" process pursuant to which the
Company's actual payments for services rendered by such clinical research
organization to the Company are reconciled against the actual services rendered
or (y) milestone payments or license fees payable by the Company pursuant to the
terms of the license agreements set forth on Schedule 3.13; (iii) obligations of
such Person under capital leases, (iv) obligations of such Person arising under
acceptance facilities, (v) the undrawn face amount of, and unpaid reimbursement
obligations in respect of, all letters of credit issued for the account of such
Person, (vi) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (vii) all obligations of such Person upon
which interest charges are customarily paid, (viii) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (ix) obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock (with redeemable preferred stock being valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends), (x) all executory obligations of such Person in respect of financial
hedge contracts (including, without limitation, equity hedge contracts), (xi)
all indebtedness of the types referred to in clauses (i) through (x) above for
which such Person is obligated under a contingent obligation and (xii) renewals,
extensions, refundings, deferrals, restructurings, amendments and modifications
of any such indebtedness, obligation or guarantee;
(g) "Intellectual Property" means all (i) patents and patent
applications, (ii) trademarks, service marks, trade dress, logos, trade names,
and corporate names and registrations and applications for registration thereof,
(iii) copyrights and registrations and applications for registration thereof,
(iv) computer software, data, and documentation, (v) trade secrets and
confidential business information (including formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information, (vi) Internet domain names and applications for
domain names, (vii) other proprietary rights, and (viii) copies and tangible
embodiments thereof (in whatever form or medium);
(h) "Material Adverse Effect" shall mean, with respect to a
specified Person any change, event or effect that individually or in the
aggregate (taking into account all other such changes, events or effects) has
had, or would be reasonably likely to have, a material adverse effect on the
business, operations, earnings, condition (financial or otherwise) or prospects
of such Person and its Subsidiaries, if any, taken as a whole, except to the
extent in the case of Acquiror that any such change, event or effect is caused
by a decline in the price of a share of Acquiror Common Stock or a change in the
trading volume of Acquiror Common Stock;
(i) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
(j) "reasonable efforts" shall mean, as to a party hereto, an
undertaking by such party to perform or satisfy an obligation or duty or
otherwise act in a manner reasonably calculated to obtain the intended result by
action or expenditure not disproportionate or unduly burdensome in the
circumstances, which means, among other things, that such party shall not be
required to (i) expend funds other than for payment of the reasonable and
customary costs and expenses of employees, counsel, consultants, representatives
or agents of such party in connection with the performance or satisfaction of
such obligation or duty or other action or (ii) institute litigation or
arbitration as a part of its reasonable efforts; and
(k) "Tax" (including, with correlative meaning, the terms
"Taxes" and "Taxable") shall include, except where the context otherwise
requires, all federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, withholding, excise,
occupancy and other taxes, duties or assessments or claims of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts.
(l) "Transaction Expenses" shall mean all costs, fees,
expenses and other amounts incurred or payable (or reasonably expected to be
incurred or payable), directly or indirectly, by the Company or any Affiliate of
the Company, in connection with the Merger, including, without limitation, (i)
all reasonable legal, accounting, brokerage and other fees, costs and expenses
incurred for the benefit of the Company or any Affiliate of the Company,
including, without limitation, the fees payable to Hambrecht & Quist LLC, (ii)
all filing, registration and other similar fees and expenses paid by or on
behalf of the Company or any Affiliate of the Company, (iii) the fees and
expenses payable to Richard C. Williams or any other amounts payable upon a
"change in control" of the Company or in connection with the consummation of the
transactions contemplated herein, (iv) the adverse consequences on the Taxes
payable by the Company, the Surviving Corporation and/or the Acquiror as a
result of the payment of the amounts described in the preceding clause (iii),
(v) all amounts paid or payable in connection with the extension of the
Company's directors' and officers' liability insurance coverage pursuant to
Section 7.6(d) hereof, and (vi) fees, costs and expenses described on Schedule
10.3(l).
SECTION 10.4. Headings.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 10.5. Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy or
other judgment, decree, injunction or order, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 10.6. Entire Agreement.
This Agreement (together with the Exhibits, the Disclosure
Schedules and the other documents delivered pursuant hereto) and the Option
Agreement and the Confidentiality Agreement constitute the entire agreement of
the parties and supersede all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other Person any rights or remedies hereunder.
SECTION 10.7. Specific Performance.
The transactions contemplated by this Agreement are unique.
Accordingly, the Company acknowledges and agrees that, in addition to all other
remedies to which Acquiror or Merger Sub may be entitled, each of Acquiror and
Merger Sub shall be entitled to a decree of specific performance.
SECTION 10.8. Assignment.
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
party. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
SECTION 10.9. Third Party Beneficiaries.
Subject to Section 10.8, this Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 10.10. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
SECTION 10.11. Counterparts.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
[The remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Merger to be executed and delivered as of the date first
written above.
KING PHARMACEUTICALS, INC.
By: /s/ John M. Gregory
-----------------------------------
Name: John M. Gregory
Title: Chairman of the Board &
Chief Executive Officer
MEDCO RESEARCH, INC.
By: /s/ Richard C. Williams
-----------------------------------
Name: Richard C. Williams
Title: Chairman
MERLIN ACQUISITION I CORP.
By: /s/ John M. Gregory
-----------------------------------
Name: John M. Gregory
Title: President
<PAGE>
Index of Defined Terms
Section
-------
Acquiror........................................................ PREAMBLE
Acquiror Common Stock........................................... 2.1(a)
Acquiror Permits................................................ 5.10
Acquiror Environmental Claim.................................... 5.14(d)
Acquiror Environmental Permits.................................. 5.14(a)
Acquiror SEC Reports............................................ 5.6(a)
Acquiror Stock Option Plans..................................... 5.3(a)
Acquiror Subsidiary and Acquiror Subsidiaries................... 5.1
Acquiror Transaction Expenses................................... 9.5(e)
Acquisition Proposal............................................ 7.8(b)
Affiliate....................................................... 10.3(a)
Agreement....................................................... PREAMBLE
Average Closing Price........................................... 2.1(a)
beneficial owner, beneficial ownership or beneficially own...... 10.3(b)
Benefit Plans................................................... 3.15(a)
Blue Sky Laws................................................... 3.5(b)
Business Day.................................................... 10.3(c)
Cash-on-Hand Condition.......................................... 8.4
Certificate and Certificates.................................... 2.2(b)
Certificate of Merger........................................... 1.2
Claim........................................................... 7.6(b)
Closing......................................................... 1.6
Closing Date.................................................... 1.6
COBRA........................................................... 3.15(g)
Code............................................................ RECITALS
Company......................................................... PREAMBLE
Company Benefit Plans........................................... 3.15(a)
Company Common Stock............................................ RECITALS
Company Commonly Controlled Entity.............................. 3.15(a)
Company Environmental Claim..................................... 3.18(d)(i)
Company Environment Permits..................................... 3.18(a)
Company ERISA Plan.............................................. 3.15(a)
Company Insiders................................................ 7.18(c)
Company Intellectual Property................................... 3.13(a)
Company Material Contracts...................................... 3.14(a)
Company Permits................................................. 3.10
Company Preferred Stock......................................... 3.3(a)
Company SEC Reports............................................. 3.6(a)
Company Stock Option Plan....................................... 2.3(a)
Company Stockholder Approval.................................... 3.4
Company Stockholders Meeting.................................... 7.3(b)
Company Subsidiary and Company Subsidiaries..................... 3.1(a)
Confidentiality Agreement....................................... 7.2
control, controlled by, under common control with............... 10.3(d)
CSA............................................................. 3.27(a)
Current Cash Reserves........................................... 3.28
DEA............................................................. 3.27(a)
Delaware Law.................................................... RECITALS
Due Investigation............................................... 3.13(a)
Effective Time.................................................. 1.2
Encumbrance..................................................... 10.3(e)
Environmental Laws.............................................. 3.18(d)(ii)
ERISA........................................................... 3.15(a)
Exchange Act.................................................... 3.5(b)
Exchange Agent.................................................. 2.2(a)
Exchange Fund................................................... 2.2(a)
Exchange Ratio.................................................. 2.1(a)
Extended Termination Date....................................... 8.2(f)
FDA............................................................. 3.5(b)
FDCA............................................................ 3.27(a)
Fujisawa........................................................ 8.2(f)
GAAP............................................................ RECITALS
Governmental Entity............................................. 3.5(b)
Hazardous Materials............................................. 3.18(d)(iii)
HIPAA........................................................... 3.15(g)
HSR Act......................................................... 3.5(b)
Indebtedness.................................................... 10.3(f)
Indemnified Parties............................................. 7.6(b)
Intellectual Property........................................... 10.3(g)
Interim Period.................................................. 7.1
Material Adverse Effect......................................... 10.3(h)
Merger.......................................................... 1.1
Merger Consideration............................................ 2.1(a)
Merger Sub...................................................... PREAMBLE
Multiemployer Plan.............................................. 3.15(d)
Nasdaq.......................................................... 2.1(a)
NASD............................................................ 4.4(b)
NYSE............................................................ 3.5(b)
Option.......................................................... 2.3(a)
Option Agreement................................................ RECITALS
Parachute Gross Up Payment...................................... 3.15(f)
Person.......................................................... 10.3(i)
Pharmaceutical Product.......................................... 3.27(a)
PHSA............................................................ 3.27(a)
Product Licensee................................................ 3.27(a)
Proxy Statement/Prospectus...................................... 3.25
Real Property Leases............................................ 3.14(a)
reasonable efforts.............................................. 10.3(j)
Receiving Party................................................. 7.2
Registration Statement.......................................... 3.25
Representatives................................................. 7.8(a)
Requisite Acquiror Approval..................................... 5.4
Rights.......................................................... 3.3
Rights Agreement................................................ 3.3
Sanofi.......................................................... 8.2(f)
SEC............................................................. 3.6(a)
Section 16 Information.......................................... 7.18(b)
Securities Act.................................................. 3.5(b)
Subsidiary...................................................... 3.1(b)
Superior Proposal............................................... 7.8(c)
Surviving Corporation........................................... 1.1
Tax, Taxable and Taxes.......................................... 10.3(k)
Tax Returns..................................................... 5.12
Terminating Acquiror Breach..................................... 9.1(c)
Terminating Company Breach...................................... 9.1(b)
Termination Fee................................................. 9.5(b)
Transaction Expenses............................................ 10.3(l)
Twenty Day Average Price........................................ 9.1(l)
Twenty Day Period............................................... 9.1(l)
Voting Agreement................................................ RECITALS
1997 Plan....................................................... 5.3(a)
1998 Plan....................................................... 5.3(a)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated as of November 30,
1999, between MEDCO RESEARCH, INC., a Delaware corporation (the "Company"), and
KING PHARMACEUTICALS, INC., a Tennessee corporation ("Grantee").
WHEREAS, the Company, Grantee and Merlin Acquisition I Corp., a
Delaware corporation and a newly-formed, wholly-owned, direct subsidiary of
Grantee ("Merger Sub"), have contemporaneously with the execution of this
Agreement entered into an Agreement and Plan of Merger dated as of the date
hereof (the "Merger Agreement") which provides, among other things, that Merger
Sub shall be merged with and into the Company pursuant to the terms and
conditions thereof; and
WHEREAS, as an essential condition and inducement to Grantee's entering
into the Merger Agreement and in consideration therefor, the Company has agreed
to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and in the Merger Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereby agree as follows:
1. Grant of Option.
The Company hereby grants to Grantee an irrevocable option
(the "Option") to purchase up to Two Million Three Hundred Thirty-nine Thousand
Six Hundred Ninety-two (2,339,692) validly issued, fully paid and non-assessable
shares of Company Common Stock (such shares, as adjusted pursuant to Section 7
of this Agreement, the "Option Shares"), together with the associated rights
(the "Rights") under the Rights Agreement, dated as of April 14, 1998, between
the Company and American Stock Transfer & Trust Company, as Rights Agent
(references to the Option Shares shall be deemed to include the associated
Rights), at a purchase price of Thirty Dollars ($30.00) per share (such price,
as adjusted pursuant to Section 7 of this Agreement, the "Option Price");
provided, however, that in no event shall the number of Option Shares for which
this Option is exercisable exceed nineteen and nine-tenths percent (19.9%) of
the number of shares of Company Common Stock issued and outstanding (before
giving effect to the exercise of the Option) at the time this Option is
exercised.
2. Certain Terms of the Option.
(a) Exercise of Option. Grantee may exercise the Option, in
whole or part, and from time to time, if, but only if, a Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Option
Termination Event (as hereinafter defined); provided that Grantee shall have
sent the written notice of such exercise (as provided in Section 2(e) hereof) on
or prior to the last date of the eighteen (18) month period following such
Triggering Event (the "Option Expiration Date"). The right to exercise the
Option shall terminate upon the first to occur of the Option Expiration Date or
an Option Termination Event.
(b) Triggering Events. The term "Triggering Event" shall mean
the occurrence of the date, upon or after termination of the Merger Agreement,
on which Grantee's right, pursuant to Section 9.5(b), Section 9.5(d) or Section
9.5(e) of the Merger Agreement, to receive the Termination Fee first arises.
(c) Option Termination Events. The term "Option Termination
Event" shall mean the earlier to occur of (i) the Effective Time; (ii) the
termination of the Merger Agreement pursuant to Section 9.1(l) of the Merger
Agreement; or (iii) the termination of the Merger Agreement other than under
circumstances which constitute (or may constitute in the event of a termination
of the Merger Agreement pursuant to Section 9.1(e) or Section 9.1(f) of the
Merger Agreement) a Triggering Event under this Agreement.
(d) Notice of Triggering Event. The Company shall notify
Grantee in writing as promptly as practicable following the Company becoming
aware of the occurrence of any Triggering Event, it being understood that the
giving of such notice by the Company shall not be a condition to the right of
Grantee to exercise the Option or for a Triggering Event to have occurred.
(e) Notice of Exercise; Closing. In the event that Grantee is
entitled to and desires to exercise the Option (in whole or in part), Grantee
shall send to the Company a written notice (such notice being herein referred to
as an "Exercise Notice" and the date of issuance of an Exercise Notice being
herein referred to as the "Notice Date") specifying (i) the total number of
shares (or other Option Securities (as hereinafter defined)) Grantee will
purchase pursuant to such exercise and (ii) a place and date not earlier than
three (3) Business Days nor later than sixty (60) Business Days after the Notice
Date for the closing of such purchase (the "Option Closing Date"); provided,
that if the closing of the purchase and sale pursuant to the Option (the "Option
Closing") cannot be consummated by reason of any applicable Order, the period of
time that otherwise would run pursuant to this sentence shall run instead from
the date on which such restriction on consummation has expired or been
terminated; provided, further, without limiting the foregoing, that if, in the
reasonable opinion of Grantee, prior notification to or approval of any
Governmental Entity is required in connection with such purchase, the Company or
Grantee, as the case may be, shall promptly file the required notice or
application for approval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods shall have passed.
(f) Payment of Purchase Price. Subject to Section 2(k), at any
Option Closing, Grantee shall pay to the Company the aggregate Option Price for
the number of Option Shares and Option Securities to be issued at such Option
Closing, in immediately available funds by wire transfer to a bank account
designated by the Company; provided that failure or refusal of the Company to
designate such a bank account shall not preclude Grantee from exercising the
Option.
(g) Issuance of Company Common Stock. Subject to Section 2(k),
at any Option Closing, simultaneously with the delivery of immediately available
funds as provided in Section 2(f) hereof, the Company shall deliver to Grantee a
certificate or certificates representing the number of shares of Company Common
Stock (or other Option Securities) purchased by Grantee at such Option Closing
and, if the Option should be exercised in part only, a new Option evidencing the
rights of Grantee thereof to purchase the balance of the Option Shares (or other
Option Securities) purchasable hereunder. If at the time of issuance of any
Option Shares pursuant to an exercise of all or part of the Option hereunder,
the Company shall have issued any rights or other securities which are attached
to or otherwise associated with Company Common Stock, then each Option Share
issued pursuant to such exercise shall also represent such rights or other
securities with terms substantially the same as and at least as favorable to
Grantee as are provided under any shareholder rights agreement or similar
agreement of the Company then in effect.
(h) Legend. Certificates for Company Common Stock (or other
Option Securities) delivered at an Option Closing hereunder may be endorsed with
a restrictive legend that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESALE RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED."
It is understood and agreed that the reference to the resale restrictions of the
Securities Act in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Grantee shall have delivered to the
Company a copy of a letter from the staff of the SEC, or an opinion of counsel
reasonably satisfactory to the Company, to the effect that such legend is not
required for purposes of the Securities Act.
(i) Record Grantee; Expenses. Upon the delivery by Grantee to
the Company of the Exercise Notice and the tender of the applicable Option Price
in immediately available funds, Grantee shall be deemed to be the holder of
record of the shares of Company Common Stock (or other Option Securities)
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Company Common Stock (or other Option Securities) shall not then be actually
delivered to Grantee or that the Company shall have failed or refused to
designate the bank account described in Section 2(f). The Company shall pay all
expenses that may be payable in connection with the preparation, issuance and
delivery of stock certificates under this Section 2 in the name of Grantee.
Grantee shall pay all expenses that may be payable in connection with the
issuance and delivery of stock certificates or a substitute option agreement in
the name of any assignee, transferee or designee of Grantee.
(j) Consents. The obligation of the Company to issue Option
Shares (or other Option Securities) to Grantee hereunder is subject to the
conditions that (i) any waiting period under the HSR Act applicable to the
issuance of the Option Shares (or other Option Securities) hereunder shall have
expired or been terminated; (ii) all material consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
Governmental Entity, if any, required in connection with the issuance of the
Option Shares (or other Option Securities) hereunder shall have been obtained or
made, as the case may be; and (iii) no preliminary or permanent injunction or
other Order prohibiting or otherwise restraining such issuance shall be in
effect. It is understood and agreed that at any time during which the Option is
exercisable, the parties will use their respective best efforts to satisfy all
such conditions to closing, so that an Option Closing may take place as promptly
as practicable.
(k) Cancellation Amount. If at any time while this Option is
exercisable under Section 2(a), any Person or group (other than Grantee or its
Affiliates) (i) shall have made a bona fide proposal with respect to (A) a
tender offer or exchange offer for fifty percent (50%) or more of the then
outstanding shares of Company Common Stock (a "Share Proposal"), (B) a merger,
consolidation or other business combination with the Company (a "Merger
Proposal") or (C) any acquisition of a material portion of the assets of the
Company (an "Asset Proposal"), or (ii) shall have acquired fifty percent (50%)
or more of the then outstanding shares of Company Common Stock (a "Share
Acquisition"), then Grantee, in lieu of exercising the Option, shall have the
right at any time thereafter (for so long as the Option is exercisable under
Section 2(a)) to request in writing (a "Cancellation Notice") that the Company
pay, and promptly (but in any event not more than five (5) Business Days) after
the giving by Grantee of such Cancellation Notice, the Company shall pay to
Grantee, in cancellation of the Option, an amount in cash equal to the
Cancellation Amount (as defined below). Notwithstanding anything to the contrary
in this Agreement, in the event of any closing involving the payment of a
Cancellation Amount, Grantee shall deliver to the Company for cancellation the
Option, and the Company shall make payment to Grantee of the Cancellation Amount
by wire transfer of immediately available funds pursuant to Grantee's
instructions.
As used herein, the "Cancellation Amount" shall mean an amount
equal to:
(i) the excess over the Option Price of the greater
of (A) the last sale price of a share of Company Common Stock as
reported on the New York Stock Exchange on the last trading day prior
to the date of the Cancellation Notice, or (B)(x) the highest price per
share of Company Common Stock offered or proposed to be paid or paid by
any such Person or group pursuant to or in connection with a Share
Proposal, a Share Acquisition or a Merger Proposal or (y) the aggregate
consideration offered to be paid or paid in any transaction or proposed
transaction in connection with an Asset Proposal, divided by the number
of shares of Company Common Stock then outstanding, multiplied by (ii)
the number of Option Shares then covered by the Option. If all or a
portion of the price per share of Company Common Stock offered, paid or
payable or the aggregate consideration offered, paid or payable for the
assets of the Company, each as contemplated by this Section 2(k),
consists of non-cash consideration, such price or aggregate
consideration shall be the cash consideration, if any, plus the fair
market value of the non-cash consideration as determined by the mutual
agreement of the investment bankers of the Company and the investment
bankers of Grantee (or, if such investment bankers cannot agree within
ten (10) Business Days of such question being submitted for such
determination, then promptly by an independent investment banker chosen
by Grantee's investment bankers and reasonably acceptable to the
Company's investment bankers).
3. Evaluation of Investments. Grantee, by reason of its
knowledge and experience in financial and business matters, believes itself
capable of evaluating the merits and risks of an investment in the Option and
the securities to be purchased/sold pursuant to this Agreement (collectively,
the "Option Securities").
4. Investment Intent. Grantee represents and warrants that
Grantee is entering into this Agreement and is acquiring and/or will acquire the
Option Securities for Grantee's own account and not with a view to resale or
distribution of all or any part of the Option Securities in violation of
applicable law.
5. Reservation of Shares. The Company agrees (a) that the Company shall
at all times maintain, free from preemptive rights, sufficient authorized but
unissued shares of Company Common Stock (and other Option Securities) issuable
pursuant to this Agreement so that the Option may be exercised without
additional authorization of Company Common Stock (or such other Option
Securities) after giving effect to all other options, warrants, convertible
securities and other rights to purchase Company Common Stock (or such other
Option Securities); (b) that the Company shall not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants to be observed or performed hereunder by the Company;
and (c) promptly to take all action as may from time to time be required in
order to permit Grantee to exercise the Option and the Company to duly and
effectively issue shares of Company Common Stock (or other Option Securities)
pursuant hereto.
6. Division of Option; Lost Options. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of Grantee,
upon presentation and surrender of this Agreement at the principal office of the
Company, for other agreements providing for Options of different denominations
entitling the holder(s) thereof to purchase, on the same terms and subject to
the same conditions as are set forth herein, in the aggregate the same number of
shares of Company Common Stock purchasable hereunder. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date.
7. Adjustment Upon Changes in Capitalization. The number of shares of
Company Common Stock purchasable upon the exercise of the Option shall be
subject to adjustment from time to time as provided in this Section 7.
(a) Transaction Adjustment. In the event of any change in
Company Common Stock by reason of stock dividends, splits, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other similar transactions, then the Option Shares that are then purchasable
upon exercise of the Option shall be appropriately adjusted so that Grantee
shall receive upon exercise of the Option and payment of the aggregate Option
Price hereunder the number and class of shares or other securities or property
(including cash) that Grantee would have owned or been entitled to receive after
the happening of any of the events described in this Section 7(a) if the Option
had been exercised immediately prior to such event, or the record date therefor,
as applicable.
(b) Option Price Adjustment. Whenever the number of shares of
Company Common Stock subject to this Option are adjusted pursuant to Section
7(a), the Option Price shall be appropriately adjusted, if applicable, by
multiplying the Option Price by a fraction, the numerator of which shall be
equal to the aggregate number of shares of Company Common Stock purchasable
under the Option prior to the adjustment and the denominator of which shall be
equal to the aggregate number of shares of Company Common Stock purchasable
under the Option immediately after the adjustment.
8. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in
no event shall the Total Profit (as hereinafter defined) exceed in the aggregate
Seventeen Million Dollars ($17,000,000) (such amount, the "Maximum Profit") and,
if Grantee's Total Profit shall exceed such Maximum Profit, Grantee, at its sole
discretion, shall either (i) reduce the number of shares of Company Common Stock
subject to this Option, (ii) deliver to the Company for cancellation Option
Shares (or other securities into which such Option Shares are converted or
exchanged) previously purchased by Grantee, (iii) pay cash to the Company or
(iv) any combination thereof, so that Grantee's actually realized Total Profit
shall not exceed the Maximum Profit after taking into account the foregoing
actions.
(b) As used herein, the term "Total Profit" shall mean: (i)
the aggregate amount of (A) any excess of (x) the net cash proceeds actually
received by Grantee from the sale of Option Shares (or securities into which
such shares are converted or exchanged) to any unaffiliated third party, over
(y) the aggregate Option Price for such Option Shares (or other securities),
plus (B) the amount of the Cancellation Amount actually received by Grantee
pursuant to Section 2(k) hereof, plus (C) any Termination Fee actually received
by Grantee pursuant to the terms of the Merger Agreement, minus (ii) the sum of
amounts of any cash previously paid to the Company pursuant to this Section 8
plus the value of the Option Shares (or other securities) previously delivered
to the Company for cancellation pursuant to this Section 8.
(c) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall affect the ability of Grantee to receive, nor
relieve the Company's obligation to pay, any Termination Fee provided for in
Sections 9.5(b), 9.5(d) or 9.5(e) of the Merger Agreement; provided that if and
to the extent that the Total Profit received by Grantee would exceed the Maximum
Profit following receipt of such payment, Grantee shall be obligated to promptly
comply with the terms of Section 8(a).
9. Registration Rights.
(a) The Company shall, if requested by Grantee at any time and
from time to time within two (2) years after a Triggering Event, as promptly as
possible (but in no event later than thirty (30) days after receipt of such
request) prepare and file up to three (3) registration statements under the
Securities Act to the extent necessary in order to permit the sale or other
disposition of any or all shares of securities that have been acquired by or are
issuable to Grantee upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by Grantee, including a "shelf"
registration statement under Rule 415 under the Securities Act or any successor
provision, and the Company will use its best efforts to qualify such shares or
other securities under any applicable state securities laws. The Company shall
use best efforts to cause each such registration statement to become effective,
to obtain all consents or waivers of other parties which are required therefor,
and to keep such registration statement effective for a period of at least one
hundred eighty (180) calendar days after the date such registration statement
first becomes effective (or such shorter period as may be necessary to effect
such sale or other disposition).
(b) The obligations of the Company hereunder to file a
registration statement and to maintain its effectiveness may be suspended for
one or more periods of time not exceeding sixty (60) calendar days in the
aggregate if the Board of Directors of the Company shall have determined in good
faith after having consulted with outside counsel that the filing of such
registration or the maintenance of its effectiveness would require premature
disclosure of material nonpublic information that would materially and adversely
affect the Company or the Company is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement.
(c) In addition to such demand registrations, if the Company
proposes to effect a registration of Company Common Stock (other than a
registration statement on Form S-4 or S-8 or any successor thereto) for the
Company's own account or for the account of any other stockholder of the
Company, the Company shall give prompt written notice to all holders of Options
or Option Shares of the Company's intention to do so and shall use best efforts
to include therein all Option Shares requested by Grantee to be so included. No
registration effected under this Section 9(c) shall relieve the Company of its
obligations to effect demand registrations under Section 9(a) hereof.
(d) Registrations effected under this Section 9 shall be
effected at the Company's expense, including the fees and expenses of counsel to
the holder of Options or Option Shares, but excluding underwriting discounts and
commissions to brokers or dealers. In connection with each registration under
this Section 9, the Company shall indemnify and hold each holder of Options or
Option Shares participating in such offering (a "Holder"), its underwriters and
each of their respective affiliates harmless against any and all losses, claims,
damages, liabilities and expenses (including, without limitation, investigation
expenses and fees and disbursements of counsel and accountants), joint or
several, to which such Holder, its underwriters and each of their respective
Affiliates may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement (including
any prospectus therein), or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, other than such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) which arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in written
information furnished by a Holder to the Company expressly for use in such
registration statement.
(e) In connection with any registration statement pursuant to
this Section 9, each Holder agrees to furnish the Company with such information
concerning itself and the proposed sale or distribution as shall reasonably be
required in order to ensure compliance with the requirements of the Securities
Act. In addition, each Holder shall indemnify and hold the Company, its
underwriters and each of their respective Affiliates harmless against any and
all losses, claims, damages, liabilities and expenses (including without
limitation investigation expenses and fees and disbursements of counsel and
accountants), joint or several, to which the Company, its underwriters and each
of their respective Affiliates may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in written information
furnished by such Holder to the Company expressly for use in such registration
statement. In no event shall the liability of any Holder or any Affiliate
thereof under this Section 9 be greater in amount than the dollar amount of the
proceeds (net of payment of all expenses) received by such Holder upon the sale
of the Option Shares giving rise to such indemnification obligation.
(f) Upon the issuance of Option Shares hereunder, the Company
shall promptly list such Option Shares with the New York Stock Exchange or on
such national or other exchange on which the shares of Company Common Stock are
at the time principally listed.
10. Extension of Time for Regulatory Approvals. The periods related to
exercise of the Option and the other rights of Grantee hereunder shall be
extended (a) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the expiration of all statutory waiting periods
and (b) to the extent necessary to avoid liability under Section 10(b) of the
Exchange Act by reason of such exercise.
11. Representations and Warranties of the Company. The Company hereby
represents and warrants to Grantee as follows:
(a) Authority. The Company has the necessary corporate power
and authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Grantee, constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
(b) Corporate Action. The Company has taken all necessary
corporate action to authorize and reserve and to permit the Company to issue,
and at all times from the date hereof through the termination of this Agreement
in accordance with its terms will have reserved for issuance upon the exercise
of the Option, that number of shares of Company Common Stock equal to the
maximum number of shares of Company Common Stock at any time and from time to
time issuable hereunder, and all such shares of Company Common Stock, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
non-assessable, and will be delivered free and clear of all Encumbrances and not
subject to any preemptive rights.
(c) No Conflict. The execution and delivery of this Agreement
by the Company do not, and the performance by the Company of its obligations
under this Agreement will not (i) conflict with or violate the certificate or
articles of incorporation, bylaws or partnership agreement of the Company or any
Company Subsidiary, (ii) conflict with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree applicable to the Company or any
Company Subsidiary or by which any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with or without notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of the Company or any Company Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any Company
Subsidiary is a party or by which the Company, any Company Subsidiary or any of
their respective properties or assets is bound or affected, except, in the case
of clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not have a Material
Adverse Effect on the Company.
(d) Anti-Takeover Statutes. The provisions of Section 203 of
the General Corporation Law of the State of Delaware will not, prior to the
termination of this Agreement, apply to this Agreement or the transactions
contemplated hereby and thereby. The Company has taken, and will in the future
take, all steps necessary to irrevocably exempt the transactions contemplated by
this Agreement from any other applicable state takeover law and from any
applicable charter provision containing change of control or anti-takeover
provisions.
(e) Additional Representations and Warranties. The
representations and warranties contained in Section 3.1 of the Merger Agreement
and, to the extent they relate to this Agreement, the representations and
warranties in Section 3.3, Section 3.20, and Section 3.26 of the Merger
Agreement, are incorporated by reference herein.
12. Assignment. The Company may not assign any of the Company's rights
or obligations under this Agreement or the Option created hereunder to any other
Person, without the express written consent of Grantee.
13. Application for Regulatory Approval. Each of Grantee and the
Company will use its reasonable efforts to make all filings with, and to obtain
consents of, all third parties and Governmental Entities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Company Common Stock
issuable hereunder on the New York Stock Exchange upon official notice of
issuance.
14. Specific Performance. The Company acknowledges and agrees that
damages would be an inadequate remedy for a breach of this Agreement by the
Company and that the obligations of the Company shall be enforceable by Grantee
through injunctive or other equitable relief.
15. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
16. Notices. All notices, claims, demands and other communications
hereunder shall be deemed to have been duly given or made when delivered in
person, by registered or certified mail (postage prepaid, return receipt
requested), by overnight courier or by facsimile at the respective addresses of
the parties set forth in the Merger Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
18. Counterparts. This Agreement may be executed and delivered in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
19. Definitions. Capitalized terms used and not defined herein shall
have the meanings set forth in the Merger Agreement.
20. Expenses. Except as otherwise expressly provided herein or in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. Entire Agreement. This Agreement, the Merger Agreement, the
Confidentiality Agreement and any documents and instruments referred to herein
and therein constitute the entire agreement of the parties with respect to the
transactions contemplated hereunder and supersede all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein. Any provision of this Agreement
may be waived only in writing at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
22. Further Assurances. In the event of any exercise of the Option by
Grantee, the Company and Grantee shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary to
the fullest extent permitted by law in order to consummate the transactions
provided for by such exercise. Nothing contained in this Agreement shall be
deemed to authorize the Company or Grantee to breach any provision of the Merger
Agreement.
[The remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Stock Option Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
MEDCO RESEARCH, INC.
By: /s/ Richard C. Williams
-------------------------------
Name: Richard C. Williams
Title: Chairman
KING PHARMACEUTICALS, INC.
By: /s/ John M. Gregory
-------------------------------
Name: John M. Gregory
Title: Chairman of the Board &
Chief Executive Officer
FOR IMMEDIATE RELEASE
Contacts:
Glenn C. Andrews
Executive Vice President or
Mike Freeman
Director, Corporate Communications
Medco Research, Inc.
(919) 653-7001
MEDCO RESEARCH TO BE ACQUIRED BY
KING PHARMACEUTICALS
RESEARCH TRIANGLE PARK, NC, December 1, 1999 - Medco Research, Inc. (NYSE:MRE)
today announced that its Board of Directors has approved the acquisition of
Medco Research by King Pharmaceuticals, Inc. (NASDAQ:KING). King will acquire
Medco Research in an all-stock, tax-free pooling of interests transaction. The
transaction is subject to the approval of Medco Research's shareholders.
The equity value of the transaction is approximately $350 million, or $31.45 per
Medco Research share, based on King's November 30, 1999 closing stock price of
$46.13 per share and Medco Research's 11.0 million fully diluted shares. Under
the terms of the agreement, which has been approved by the boards of directors
of both companies, holders of Medco Research common stock will be entitled to
receive a certain number of shares of King common stock in exchange for shares
of Medco Research common stock. The terms of the agreement fix the common stock
exchange ratio at 0.6818 shares of King common stock for each share of Medco
Research common stock, provided that the average closing price of King common
stock during the twenty (20) consecutive trading days ending on the third day
preceding Medco Research's shareholder meeting is between $33.00 and $49.87 per
share. If the average closing price of King common stock is above $49.87 per
share, King will deliver the number of shares of King common stock to provide a
purchase price of $34.00 per share of Medco Research common stock. If the
average closing price of King common stock is below $33.00 per share, King will
deliver the number of shares of King common stock to provide a purchase price of
$22.50 per share of Medco Research common stock. King may elect not to proceed
with the transaction if the average closing price of King common stock falls
below $30.00 per share. The agreement includes certain provisions that would
enable King to acquire up to 19.9% of Medco Research's common stock and receive
certain termination fees in the event the transaction is not consummated.
King Pharmaceuticals, headquartered in Bristol, Tennessee, manufactures,
markets, sells, and distributes primarily branded prescription pharmaceutical
products. The Company has built a successful business by capitalizing on
opportunities to acquire branded pharmaceutical products and subsequently
increasing their sales by focused promotion and marketing, the development of
product line extensions, and product life cycle management. Since its
incorporation in 1993, King has acquired more than 35 products which it markets
by means of a national sales force of over 250 sales representatives. Recognized
brand name prescription products owned by the Company include Altace(R),
Lorabid(R), Neosporin(R), Cortisporin(R), Pitocin(R), and Fluogen(R).
The combining of the two companies provides for the acceleration of Medco
Research's stated strategy of forward integrating its business in order to
improve margins and realize a greater return on investment. King provides the
marketing and sales organization necessary to capitalize on the commercial
potential of the Company's portfolio of adenosine receptor-based technologies.
Medco Research provides King with a research and development organization and a
technology platform that will serve as an in-house pipeline of new products and
as a complement to the company's ongoing product acquisition activities.
Based upon an assessment of a number of factors as part of the transition of the
Company from a stand alone entity to its new role as the development arm of a
fully integrated pharmaceutical company, research and development resources of
the combined companies will be directed toward expediting the development of
MRE0470 and a number of lead preclinical programs from among the Company's
pipeline of over 150 unique, proprietary adenosine-receptor analogs. Plans are
underway to outlicense Pallacor(TM), the Company's formulation of intravenous
adenosine for use in combination with thrombolysis or angioplasty in the
treatment of acute myocardial infarction, for commercialization.
Commenting on the merger agreement, Richard C. Williams, Chairman of Board of
Medco Research, stated, " We are indeed pleased to have entered into an
agreement with King Pharmaceuticals. It is not only an excellent business
combination from a strategic standpoint, but a superb integration of two
organizations with similar corporate cultures. In our dealings with the
management of King, I am pleased with their high regard for the value of people,
business philosophy and high level of integrity. Medco Research's employees and
all other assets will integrate into the King operation. This proposed merger
will be beneficial to all parties in that it provides the opportunity for the
combined entity to be a more fully integrated pharmaceutical company - a goal of
both of us. The therapeutic consistency of the two companies - King's
cardiovascular commercial presence and Medco Research's cardiovascular
development capability - provides a formidable core business for the combined
entity. Medco Research's portfolio, earnings level, cash and cash flow will help
strengthen the market value and financial prospects of the combined entity. I
believe that King can build on the strengths of Medco Research and fulfill our
joint mission of being a leader in commercialization of products leading to
superior growth in shareholder value."
Glenn C. Andrews, Executive Vice President, Finance and Administration and Chief
Financial Officer, Medco Research, stated "The merger of these two successful
companies is a textbook example of synergy. The compatibility of Medco
Research's personnel and product development expertise with King's forward
integrated operations effectively minimizes the redundancy and maximizes the
economic efficiencies of this strategic integration. The combined company, with
a market capitalization well in excess of $2 billion, should be very successful
in attracting and securing strong institutional and retail ownership. We look
forward to King realizing the commercial potential of the Company's portfolio of
adenosine receptor-based technologies in the coming years."
Hambrecht & Quist LLC acted as financial advisor to the Company on the
transaction.
A conference call regarding the acquisition is scheduled for 11:00 a.m.,
Wednesday, December 1, 1999. Interested parties may listen to the call by
dialing 1-888 715-0381 (U.S.) or 973 633-1010 (outside U.S.) A replay of the
call will be available for two weeks following the call by dialing 1-888
459-5780 (U.S.) or 402 220-1159 (outside U.S.)
Statements contained in this release which are not historical facts are or may
constitute forward looking statements under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although the Company believes
the expectations reflected in such forward looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. Forward-looking statements involve known and unknown risks that could
cause the Company's actual results to differ materially from expected results.
Factors that could cause actual results to differ materially include, among
others, assimilation and other risks related to mergers; the high cost and
uncertainty of the research, clinical trials and other development activities
involving pharmaceutical products; the Company's ability to fund its activities
internally or through additional financing, if necessary; the unpredictability
of the duration and results of the U.S. FDA's review of New Drug Applications
and Investigational New Drug Applications and/or the review of other regulatory
agencies worldwide; the possible impairment of, or inability to obtain,
intellectual property rights and the cost of obtaining such rights from third
parties; intense competition; the uncertainty of obtaining, and the Company's
dependence on third parties to manufacture and sell its products; results of
pending or future litigation and other risk factors detailed from time to time
in the Company's SEC filings. The Company does not undertake to publicly update
or revise any of its forward looking statements even if experience or future
changes show that the indicated results or events will not be realized.
####
Available on our homepage at http://www.medcores.com
