EXHIBIT 10.19(a)
AGREEMENT AND PLAN OF MERGER
This Merger Agreement is entered into as of August 3, 2000, among
Wakefield Pharmaceuticals, Inc. a Delaware corporation (the "Company"), the
individuals or entities listed on Schedule A hereto solely for the purpose of
agreeing to be bound by Section 2.5(e) and Section 6.2 through Section 6.6
hereof (individually a "Principal Stockholder" and collectively the "Principal
Stockholders"), WPI Merger Corporation, a Delaware corporation ("Merger Sub")
and IVAX Corporation, a Florida corporation ("Parent").
Preliminary Statements
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company and the sole stockholder of Merger Sub have each approved the
business combination described herein in which the Company will become a
subsidiary of Parent as a result of a merger of Merger Sub with and into the
Company upon the terms and subject to the conditions hereinafter set forth (the
"Merger"), pursuant to which each outstanding share of Common Stock, par value
$.001 ("Company Common Stock"), of the Company will be converted into the right
to receive shares of Common Stock, par value $.10 per share ("Parent Common
Stock"), of Parent upon the terms and conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, each Principal Stockholder of the
Company has entered into a Voting Agreement dated as of the date hereof (the
"Voting Agreement") pursuant to which such Principal Stockholders have agreed,
inter alia, to vote all their shares of Company Common Stock in favor of the
Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms when used in this Agreement shall have the meanings indicated below:
"Affiliate" of a specified Person means a Person who (at the time when
the determination is to be made) directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
the specified Person. As used in the foregoing sentence, the term "control"
(including, with correlative meaning, the terms "controlling," "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause
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the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Merger Agreement together with all exhibits and
schedules referred to herein.
"AMEX" means the American Stock Exchange.
"Average Closing Price" means the average closing price of Parent
Common Stock on the AMEX as reported by The Wall Street Journal on the fifth,
fourth and third trading days prior to the Effective Time.
"Environmental Laws" means any federal or state statute, law,
ordinance, regulation, rule, code or order and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fair Market Value" means the closing price for a share of Parent
Common Stock on the AMEX on the first business day immediately following the
Effective Time.
"Guaranty" means, as to any Person, any contract, agreement or
understanding of such Person pursuant to which such Person guarantees the
indebtedness, liabilities or obligations of others, directly or indirectly, in
any manner, including agreements to purchase such indebtedness, liabilities or
obligations, or to supply funds to or in any manner invest in others, or to
otherwise assure the holder of such indebtedness, liabilities or obligations
against loss.
"Hazardous Materials" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated by phenyls or (b) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"Intellectual Property" means any or all of the following owned, used
or controlled by the Company: (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith; (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith; (d) all trade secrets and
confidential business information (including databases, ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (e) all computer programs and software
(including data and source and object codes and related documentation); (f) all
other property rights and all licenses and
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sublicenses granted by or to the Company that relate to any of the foregoing;
and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"knowledge" means, with respect to any representation or warranty or
other statement in this Agreement qualified by the knowledge of the Company
shall mean the actual knowledge of the Company's Chief Executive Officer,
Executive Director of Sales and Marketing, Director of Pharmaceutical
Operations, Director of Trade Relations, Secretary and Chief Financial Officer
or knowledge which any of such Persons should have based on a reasonable
investigation as to the matters that are the subject of such representation,
warranty or other statement.
"Law" means any federal or state law, statute, ordinance, rule,
regulation, order, writ, judgment or decree.
"Liens" means any liens, claims, charges, rights, pledges, security
interests, mortgages, options, title defects or other encumbrances, restrictions
or limitations of any nature whatsoever.
"Material Adverse Effect" means any change in or effect on the business
of the Company that is, or could reasonably be expected to be, materially
adverse to the business, assets (including intangible assets), liabilities
(contingent or otherwise), condition (financial or otherwise), prospects or
results of operations of the Company.
"Permitted Liens" means (a) Liens for taxes, assessments or other
governmental charges or levies not yet due for which adequate reserves have been
accrued; (b) statutory Liens of landlord and Liens of carriers, warehousement,
mechanics, materialmen and other Liens imposed by law created in the ordinary
course of business for amounts not yet due; (c) Liens (other than any Lien
imposed by ERISA) incurred or deposits made in the ordinary course of business
in connection with worker's compensation, unemployment insurance or other types
or social security; (d) minor defects of title, easements, rights-of-way,
restrictions and other similar charges or encumbrances not materially detracting
from the value or utility of the real property or interfering with the ordinary
conduct of any of the Company's business or any such real property; and (e)
those Liens listed on Schedule 4.3.
"Person" means any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or government, or any agency or political subdivision of any government,
or any other entity.
"Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Stockholder Representative" means Frank Byington.
"Subsidiary" of any Person means any Person, whether or not
capitalized, in which such Person owns, directly or indirectly, an equity
interest of 50% or more, or any Person which may be controlled, directly or
indirectly, by such Person, whether through the ownership of voting securities,
by contract, or otherwise.
"Tax" means any federal, state, or local income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise,
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natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock,
social security, unemployment, disability, payroll, license, employee or other
withholding, or other tax or governmental charge, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts in
respect of the foregoing; the foregoing shall include any transferee or
secondary liability for a Tax and any liability assumed by agreement or arising
as a result of being (or ceasing to be) a member of any affiliated group (or
being included, or required to be included, in any tax return relating thereto).
ARTICLE 2
THE MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement
and in accordance with Delaware General Corporation Law of the State of
Delaware, as amended (the "DGCL") at the Effective Time (as defined below), the
Merger Sub will be merged with and into the Company (the "Merger") pursuant to
the terms and conditions set forth herein, with the Company being the surviving
corporation in the Merger (the "Surviving Corporation") and becoming a
wholly-owned subsidiary of Parent, and the separate existence of the Merger Sub
ceasing.
2.2 Stockholders Meeting; Closing. In accordance with Section 5.2 of
this Agreement, as soon as practicable following the date of this Agreement, the
Company shall hold a stockholders meeting (the "Stockholders Meeting") at which
the Company shall submit this Agreement and the Merger to the holders of the
Company Common Stock for approval and adoption. Subject to the Merger receiving
all requisite stockholder approvals and subject to the other provisions of this
Agreement, the consummation of the Merger (the "Closing") shall take place on
the next business day (or such later date as the parties hereto may agree)
following the later of (i) the Stockholders Meeting or (ii) the satisfaction or
waiver of the conditions set forth in Article 8 hereof, at 9:00 A.M. at the
offices of Akerman, Senterfitt & Eidson, P.A. at One Southeast 3rd Avenue,
Miami, Florida, or at such other time or place as the parties agree upon. At the
Closing, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Delaware Certificate of Merger") with the Secretary
of State of the State of Delaware in such form as required by, and executed in
accordance with the relevant provisions of the DGCL (the date and time of such
filings, or such other date or time agreed upon by Parent and the Company and
set forth therein, the "Effective Time").
2.3 Certificate of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation and the By-Laws of the Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the By-Laws of the Surviving Corporation thereafter, unless
and until amended in accordance with their terms and as provided by law.
2.4 Directors and Officers. At the Effective Time, the directors and
officers of Merger Sub at such time shall be the directors and officers of the
Surviving Corporation, each to hold a directorship or office in accordance with
the Certificate of Incorporation and By-laws of the Surviving Corporation, until
their respective successors are duly elected and qualified.
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2.5 Exchange Ratio; Conversion of Securities.
(a) At the Effective Time, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, shall be
converted into, and become exchangeable for, the right to receive an amount of
shares of Parent Common Stock equal to the result of nine hundred thousand
(900,000) (the "Merger Shares") divided by the total of (i) the number of shares
of Company Common Stock outstanding at the Effective Time and (ii) the number of
shares of Company Common Stock options or warrants to purchase Company Common
Stock (the "Company Derivative Securities") that have not been exercised
immediately prior to the Effective Time (the "Exchange Ratio"); provided,
however, that if the Average Closing Price is less than or equal to $40.00 but
greater than $37.00 (adjusted for any stock splits, stock dividends or
recapitalizations subsequent to the date hereof), then the aggregate amount of
Merger Shares will be increased by fifty thousand (50,000) shares of Parent
Common Stock and the Exchange Ratio will be calculated using 950,000 Merger
Shares; and provided further that if the Average Closing Price is less than or
equal to $37.00 (adjusted for any stock splits, stock dividends or
recapitalizations subsequent to the date hereof), then the aggregate amount of
Merger Shares will be increased by an additional fifty thousand (50,000) shares
of Parent Common Stock and the Exchange Ratio will be calculated using 1,000,000
Merger Shares.
(b) At the Effective Time, each share of Merger Sub common stock,
par value $.01 per share ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action by the holder thereof, be converted into one validly issued,
fully paid and nonassessable common share, $.001 par value, of the Surviving
Corporation ("Surviving Corporation Common Stock").
(c) If any holder of Common Stock shall be determined not to be an
accredited investor (as defined in Rule 501 of the Securities Act; hereafter
"Accredited Investor"), as determined by Parent in its sole discretion, then, at
the sole option of Parent, each share of Company Common Stock owned by such
stockholder shall only represent the right to receive an amount in cash (without
interest), rounded to the nearest cent, equal to the Fair Market Value of the
shares of Parent Common Stock that would otherwise have been issuable to such
stockholder pursuant to Section 2.5(a) above.
(d) No certificates evidencing fractional shares of Parent Common
Stock shall be issued in exchange for certificates representing shares of
Company Common Stock ("Certificates"), and such fractional share interests shall
not entitle the owner thereof to any rights of a stockholder of Parent. In lieu
of any such fractional shares, each record holder of a Certificate previously
evidencing Company Common Stock, upon surrender of such Certificate for exchange
pursuant to this Section 2.5, shall be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (a) the Fair
Market Value of Parent Common Stock by (b) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Company Common Stock held of record by such holder at the Effective Time).
(e) At the Closing, the Parent shall deliver fourteen percent
(14%) of the shares of Parent Common Stock to be delivered to each of the
Principal Stockholders (but in no event less than eight and one-half percent
(8.5%) of the total Merger Shares) pursuant to Section 2.5(a) to
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SunTrust Bank, as escrow agent ("Escrow Agent") to be held in escrow pursuant to
the Escrow Agreement attached as Exhibit 2.5(e).
2.6 Options. At the Effective Time, each Company Derivative Security
that is outstanding and unexercised immediately prior thereto, shall be assumed
by Parent and converted into an option or warrant to purchase shares of Parent
Common Stock on the same terms and conditions as are in effect for the Company
Derivative Security immediately prior to the Effective Time as adjusted as set
forth below. Each Company Derivative Security that is converted shall be
converted into an option or warrant to purchase such number of shares of Parent
Common Stock at such exercise price as is determined as provided below (and
otherwise having the same duration and other terms as the original option or
warrant):
(a) the number of shares of Parent Common Stock to be subject to
the new option or warrant shall be equal to the product of (i) the number of
shares of Company Common Stock subject to the Company Derivative Security, and
(ii) the Exchange Ratio, the product being rounded, if necessary, up or down, to
the nearest whole share; and
(b) the exercise price per share of Parent Common Stock under the
new option or warrant shall be equal to (i) the exercise price per share of
Company Common Stock under the Company Derivative Security divided by (ii) the
Exchange Ratio, rounded, if necessary, up or down, to the nearest cent.
The adjustments provided herein with respect to any Company Derivative
Securities that are "incentive stock options" (as defined in Section 422 of the
Code) shall be effected in a manner consistent with Section 424(a) of the Code.
Prior to the Effective Time, the Board of Directors of the Company shall take
such action as may be required under the governing option plans and agreements
to effectuate the foregoing.
Prior to the Effective Time, Parent shall reserve for issuance
the number of shares of Parent Common Stock necessary to satisfy Parent's
obligations under this Section 2.6.
2.7 No Dissenter or Appraisal Rights. Pursuant to Section 262 of the
DGCL, the holders of shares of Company Common Stock shall not have any appraisal
rights with respect to this Agreement or the Merger.
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2.8 Exchange Of Certificates.
(a) Exchange Agent. Parent shall deposit, or shall cause to be
deposited, with Chase Mellon, the Parent's transfer agent, or such other bank or
trust company as may be designated by Parent (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, at the Effective
Time, (i) certificates evidencing the shares of Parent Common Stock issuable
pursuant to Section 2.5 in exchange for outstanding shares of Company Common
Stock and (ii) cash in an amount sufficient (x) to make any cash payment in lieu
of fractional shares of Parent Common Stock pursuant to Section 2.5(d) and (y)
to make any cash payment determined by Parent pursuant to Section 2.5(c) (such
certificates for shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, and cash being hereafter collectively
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Parent Common Stock contemplated to be
issued pursuant to Section 2.5 out of the Exchange Fund to holders of shares of
Company Common Stock. Except as contemplated by Section 2.8(d) hereof, the
Exchange Fund shall not be used for any other purpose. Any interest, dividends
or other income earned on the investment of cash or other property held in the
Exchange Fund shall be for the account of Parent.
(b) Exchange Procedures. Parent shall instruct the Exchange Agent
to mail, as soon as is reasonably possible after the Effective Time, to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (the
"Certificates") (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions to effect the surrender of the Certificates in exchange
for the certificates evidencing shares of Parent Common Stock and cash (if any).
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefore (A) certificates
evidencing that number of whole shares of Parent Common Stock that such holder
has the right to receive in accordance with the Exchange Ratio in respect of the
shares of Company Common Stock formerly evidenced by such Certificate or cash
which Parent determines is payable pursuant to Section 2.5(c), (B) any dividends
or other distributions to which such holder is entitled pursuant to Section
2.8(c), and (C) cash in lieu of fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.5(d) (the shares of Parent
Common Stock, and the cash described in clauses (A), (B) and (C) being,
collectively, the "Merger Consideration"), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
of Company Common Stock that is not registered in the transfer records of the
Company, Merger Consideration may be issued and paid in accordance with this
Article II to a transferee if the Certificate evidencing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid or by the transferee requesting
such payment paying to the Exchange Agent any such transfer tax. Until
surrendered as contemplated by this Section 2.8, each Certificate
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shall be deemed at any time after the Effective Time to evidence only the right
to receive upon such surrender the Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Parent 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 Parent Common Stock represented thereby, until the
holder of such Certificate shall surrender such Certificate. Upon such
surrender, there shall be paid to the person or entity (hereinafter, any person
or entity being referred to as a "Person") in whose name the certificates
representing the shares of Parent Common Stock into which such Certificates were
converted and registered, all dividends and other distributions payable in
respect of such Parent Common Stock on a date after, and in respect of a record
date after, the Effective Time.
(d) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the Merger Consideration to
which they are entitled pursuant to this Article II.
(e) No Liability. Neither Parent nor the Company shall be liable
to any holder of shares of Company Common Stock for any such shares of Parent
Common Stock (or dividends or distributions with respect thereto) from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Rights. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as Parent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
(g) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, any cash and any unpaid dividends
and distributions on shares of Parent Common Stock deliverable in respect
thereof, pursuant to this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
In order to induce the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, each of Parent and Merger Sub,
jointly and severally, make the representations and warranties set forth below
to the Company.
3.1 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. The Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each of Parent and Merger Sub has all
requisite right, power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
3.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by Parent and Merger Sub, and constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable in accordance
with its terms, except to the extent that its enforcement is limited by
bankruptcy, insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights generally and by general principles of
equity.
3.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by each of Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby: (a) do not and
will not violate or conflict with any provision of Law or any provision of
Parent's Articles of Incorporation, the Merger Sub's Certificate of
Incorporation or the Bylaws of either Parent or Merger Sub; and (b) do not and
will not, with or without the passage of time or the giving of notice, result in
the breach of, or constitute a default, cause the acceleration of performance,
or require any consent under, or result in the creation of any Lien upon any
property or assets of either Parent or Merger Sub pursuant to any instrument or
agreement to which either Parent or Merger Sub is a party or by which either
Parent or Merger Sub or their respective properties may be bound or affected,
other than instruments or agreements as to which consent shall have been
obtained at or prior to the Effective Time.
3.4 Registration Statement. Parent Common Stock issued hereunder will
be issued pursuant to Parent's Registration Statement on Form S-4, Reg. No.
33-60847 (the "Registration Statement"). Prior to the Stockholders Meeting,
Parent will have delivered to each of the Company's stockholders a copy of the
prospectus, dated January 19, 2000, included in the Registration Statement, and
will have made available to each of the Company's stockholders a true and
complete copy of all documents incorporated by reference therein. As of the
respective dates they were filed with the Commission, none of such documents
(including the Registration Statement) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Parent has filed, and
will timely file, all requisite amendments to the Registration Statement which
may be required through the
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Effective Time and will promptly provide each of the Company's stockholders with
a copy of any such amendments.
3.5 Validity of Merger Shares; Listing. When issued and delivered in
accordance with this Agreement, the Merger Shares shall be duly and validly
authorized, issued and outstanding, fully paid and non-assessable, shall not
have been issued in violation of the preemptive rights of any Person, and shall
be registered under the Securities Act and listed for trading on the AMEX.
3.6 Brokers. Parent has not employed any financial advisor, broker or
finder and has not incurred and will not incur any broker's, finder's,
investment banking or similar fees, commissions or expenses, in connection with
the transactions contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Merger Sub to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company makes the
representations and warranties set forth below to Parent and Merger Sub.
4.1 Organization. The Company has been duly organized and is validly
existing and in good standing under the laws of the State of Delaware. The
Company is duly qualified or licensed to do business, and is in good standing,
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary except where the failure to so qualify could not reasonably
be expected to result in a Material Adverse Effect. The Company has all
requisite right, power and authority to (a) own or lease and operate its
properties, (b) conduct its business as presently conducted and (c) engage in
and consummate the transactions contemplated hereby.
4.2 Authorization; Enforceability. The Company has the capacity to
execute, deliver and perform this Agreement. This Agreement and all other
documents to be executed and delivered by the Company pursuant to this Agreement
have been and will be duly executed and delivered and constitute or, upon
execution, will constitute, the legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms.
4.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby: (a) do not and will not violate or conflict
with any provision of Law or any provision of the Company's Certificate of
Incorporation or Bylaws; and (b) do not and will not, with or without the
passage of time or the giving of notice, result in the breach of, or constitute
a default, cause the acceleration of performance or require any consent under,
or result in the creation of any Lien upon any property or assets of the Company
pursuant to any material instrument or material agreement to which the Company
is a party or by which the Company or its properties may be bound or affected,
other than instruments or agreements as to which consent shall have been
obtained at or prior to the Effective Time, each of which instruments or
agreements is listed on Schedule 4.3 hereto.
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4.4 Consent of Governmental Authorities. Except for the filing of the
Certificate of Merger with the Secretary of State of Delaware, no consent,
approval or authorization of, or registration, qualification or filing with any
federal, state or local governmental or regulatory authority, or any other
Person, is required to be made by the Company in connection with the execution,
delivery or performance of this Agreement by the Company or the consummation of
the transactions contemplated hereby.
4.5 Brokers. Except as set forth on Schedule 4.5, the Company has not
employed any financial advisor, broker or finder. Except as set forth on
Schedule 4.5, the Company has not incurred, and will not incur any broker's,
finder's, investment banking or similar fees, commissions or expenses in
connection with the transactions contemplated by this Agreement.
4.6 Organizational Documents and Corporate Records. A true and complete
copy of (a) the Certificate of Incorporation of the Company, as amended, (b) the
Bylaws, and (c) the minute books of the Company have been previously delivered
to Parent. Such minute books contain complete and accurate records in all
material respects of all meetings and other corporate actions of the board of
directors, committees of the board of directors, incorporators and shareholders
of the Company from the date of its incorporation to the date hereof. All
matters requiring the authorization or approval of the board of directors, a
committee of the board of directors, the incorporators, or the shareholders of
the Company have been duly and validly authorized and approved by them except
where such approval could not reasonably be expected to result in a Material
Adverse Effect.
4.7 Capitalization. As of the date hereof, the authorized share capital
of the Company consists solely of 5,000,000 shares of Company Common Stock; of
which 2,455,150 are issued and outstanding and 395,850 have been reserved for
issuance under outstanding Company Derivative Securities. All of the issued and
outstanding shares of capital stock (a) have been duly authorized, are validly
issued and are fully paid and nonassessable, (b) were issued in compliance with
applicable state and federal securities laws, and (c) were not issued in
violation of any preemptive rights, rights of first refusal or similar rights.
Except as described on Schedule 4.7, there are no outstanding or authorized
rights, options, warrants, convertible securities, subscription rights,
conversion rights, exchange rights or other agreements or commitments of any
kind that could require the Company to issue or sell any share of Company Common
Stock (or securities convertible into or exchangeable for share of Company
Common Stock). There are no outstanding stock appreciation, phantom stock,
profit participation or other similar rights with respect to the Company. Except
for the Voting Agreement, there are no proxies, voting rights or other
agreements or understandings with respect to the voting or transfer of the
Company Common Stock. There are no outstanding obligations of the Company to
redeem or otherwise acquire any of the Company Common Stock. There are no
outstanding contractual obligations of the Company to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in any
Person. Schedule 4.7 lists (i) the names of the holders of all outstanding
Company Common Stock along with their respective shareholdings and (ii) the
names of the holders of all outstanding Company Derivative Securities, with the
respective amounts of shares, exercise prices, vesting dates and expiration
dates.
4.8 Subsidiaries. The Company does not have any Subsidiaries or any
direct or indirect equity interests by stock ownership or otherwise in any
Person nor is the Company engaged
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in a partnership, joint venture or other similar arrangement (whether written or
oral) with any Person.
4.9 Financial Statements. The Company has previously delivered to
Parent a true and complete copy of the balance sheet of the Company for the
fiscal years ended on September 30, 1999 and 1998, and the statement of
operations for the fiscal years ended on September 30, 1999 and 1998, including
any related notes and the consolidated supplement, certified by the Company's
independent certified public accountants pursuant to their audit of the
financial records of the Company, and the balance sheet of the Company as of May
31, 2000 (the "May 31 Balance Sheet"), and the income statement of the Company
for the period ending on that date, certified by the Company's chief financial
officer (collectively, the "Financial Statements"). The Financial Statements:
(a) have been prepared in accordance with the books of account and records of
the Company; (b) fairly present, in all material respects the financial
condition of the Company and the results of its operations at the dates and for
the periods specified in those statements; and (c) have been prepared in
accordance with generally accepted accounting principles, consistently applied
with prior periods, except, with respect to the May 31 Balance Sheet, (i) as set
forth on Schedule 4.9 and (ii) for the absence of footnotes and year end audit
adjustments, neither of which would have a Material Adverse Effect.
4.10 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 4.10, other than as disclosed on the May 31 Balance Sheet, the Company
does not have (a) any liabilities, commitments or obligations of any nature
whatsoever, whether accrued, absolute, contingent or otherwise (other than
nonmaterial liabilities, commitments or obligations incurred since May 31, 2000
in the ordinary course of business consistent with past practices to Persons
other than any Affiliates), including but not limited to any liabilities or
obligations to employees for accrued vacation or severance pay or (b) any
unrealized or anticipated losses from any commitments of the Company. There is
no basis for assertion against the Company of any such liability, commitment,
obligation or loss.
4.11 Compliance with Laws. The Company is in compliance with all Laws
and other legal requirements applicable to it or its properties, including
without limitation those relating to (a) the development, testing, manufacture,
packaging, labeling, distribution and marketing of products or the provision of
services and (b) employment, safety and health. The Company has not received
notification from any governmental or regulatory authority asserting that it is
not in compliance with or has violated any of the Laws which such governmental
or regulatory authority enforces, or threatening to revoke any authorization,
consent, approval, franchise, license, or permit, and the Company has no
knowledge of any fact or circumstance that might give rise to such a
notification. The Company is not subject to any agreement or consent decree with
any governmental or regulatory authority arising out of previously asserted
violations.
4.12 Legal Proceedings. Except as set forth in Schedule 4.12, (a) the
Company is not a party to any pending or to its knowledge threatened, legal,
administrative or other proceeding, arbitration or investigation and (b) to the
Company's knowledge no Person who is or was a director or officer of the Company
is a party to any pending or threatened, legal, administrative or other
proceeding, arbitration or investigation in their capacity as directors or
officers of the Company. The Company is not subject to any order, writ,
injunction, decree or other judgment of any court or governmental or regulatory
authority.
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4.13 Absence of Material Adverse Effects. Except as disclosed in
Schedule 4.13, since May 31, 2000, the Company has conducted its businesses only
in the ordinary and usual course and in a manner consistent with past practices
and, since such date: (a) there has been no Material Adverse Effect; and (b)
except as set forth in Schedule 4.13, the Company has not engaged or agreed to
engage in any of the actions described in Section 5.1(i)-(xx).
4.14 Properties.
(a) Except as set forth on Schedule 4.14(a), the Company has good
and valid title to all assets reflected on the May 31 Balance Sheet (except
assets sold or otherwise disposed of since May 31, 2000 in the ordinary course
of business to Persons other than any Affiliates of the Company), free and clear
of all Liens other than Permitted Liens which, except for the Security Deed
described on Schedule 4.3, are not material in the aggregate.
(b) Except as set forth in Schedule 4.14(b), all of the buildings,
structures, appurtenances, leasehold improvements, equipment, machinery, rolling
stock and other material tangible properties of the Company are: (i) in
reasonable operating condition and repair, ordinary wear and tear excepted, (ii)
not in need of substantial maintenance or repairs (except for ordinary or
routine maintenance or repairs that are not material in nature or costs), (iii)
adequate and sufficient for the continuing conduct of the business of the
Company as now conducted, and (iv) free of structural or non-structural defects
to the buildings on such properties and to the Company's knowledge all of the
utilities serving such buildings are in good working order.
(c) Except as set forth in Schedule 4.14(c), the Company owns or
possesses adequate licenses or other legal rights to use the Intellectual
Property. The Intellectual Property is owned or possessed free and clear of all
Liens, except for Permitted Liens and except for such Liens which would not,
individually or in the aggregate, impair the use or market value of the
Intellectual Property. No claims have been made or to the Company's knowledge
threatened (i) asserting the invalidity, abuse, misuse, or unenforceability, or
seeking the cancellation, of any of the Intellectual Property of the Company, or
(ii) asserting that the Company's ownership or use of the Intellectual Property
infringes or violates the rights of any other Person, and the Company has no
knowledge of any facts or circumstances that might give rise to any such claim.
The conduct of the business of the Company as currently conducted did not, does
not and will not infringe in any way any Intellectual Property of any third
party. To the knowledge of the Company there are no infringements of any
Intellectual Property owned by or licensed by or to the Company. Except as set
forth in Schedule 4.14 no payments are required for the continued use of the
Intellectual Party.
4.15 Governmental Authorizations. The Company has all authorizations,
consents, approvals, franchises, licenses and permits required under applicable
Law for the ownership of the Company's properties and operation of its business
as presently operated (the "Permits"). No suspension or cancellation of any of
the Permits is pending or to the Company's knowledge threatened. The Company is
not in conflict with, or in default or violation of any Permits.
4.16 Employment Matters.
(a) Employment Agreements. Except as set forth on Schedule
4.16(a), there are no employment, consulting, severance or indemnification
arrangements, arrangements which contain
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change of control provisions, agreements, or understandings between the Company
and any officer, director, consultant or employee. Schedule 4.16(a) contains the
names, job descriptions and annual salary rates and other compensation of all
officers, directors and consultants of the Company (including compensation paid
or payable by the Company under the Plans (as hereafter defined)), and a list of
all employee policies (written or otherwise), employee manuals and other written
statements of rules or policies concerning employment, including working
conditions, vacation and sick leave, a complete copy of each of which (or a
description, if unwritten) has been delivered to Parent.
(b) Employment Laws. The Company has complied in all material
respects with all applicable employment Laws, including payroll and related
obligations, benefits, the Civil Rights Act of 1964, the Fair Labor Standards
Act and the Americans with Disabilities Act, as amended.
(c) Employee Benefit Plans. The Company does not and has never
maintained and has no liability with respect to, any employee pension benefit
plan as defined in Section 3(2)(A) of ERISA, nor, except as described in
Schedule 4.16(c), any other deferred compensation, stock option, stock purchase,
bonus or incentive plan, program, agreement or arrangement, whether funded or
unfunded, sponsored, maintained or contributed to or required to be contributed
to by the Company or by any trade or business that together with the Company
would be deemed a "single employer" within the meaning of Section 4001 of ERISA
("ERISA Affiliate") Except as set forth on Schedule 4.16(a), the consummation of
the transaction contemplated by this Agreement will not entitle any individual
to severance pay and will not accelerate the time of payment or vesting, or
increase the amount of compensation due to any individual.
(d) Schedule 4.16(d) contains a list setting forth each employee
welfare benefit plan as defined in Section 3(1) of ERISA ("Welfare Plan").
Except as may be required by applicable law, the Company is not obligated under
any Welfare Plan to provide medical or death benefits with respect to any
employee or former employee of the Company or its predecessors after termination
of employment. The Company has complied in all material respects with the notice
and continuation coverage requirements of Section 4980B of the Code and the
regulations thereunder with respect to each Welfare Plan that is a group health
plan within the meaning of Section 5000(b)(1) of the Code. There are no
reserves, assets, surplus or prepaid premiums under any Welfare Plan.
Without limiting the generality of Section 4.11, each Plan has been
administered in all material respects in accordance with its terms and
applicable Law. Except as set forth in Schedule 4.16(c), with respect to the
Plans, (i) no event has occurred, and there exists no condition, facts or
circumstances, that could give rise to any liability of the Company under the
terms of such Plans or any applicable Law; (ii) the Company has paid or accrued
in accordance with normal accounting practices all amounts required under
applicable Law and any Plan to be paid as a contribution to each Plan through
the date hereof; (iii) the Company has set aside adequate reserves to meet
contributions which are not yet due under any Plan; (iv) the fair market value
of the assets of each funded Plan, the liability of each insurer for any Plan
funded through insurance or the book reserve established for any Plan, together
with accrued contributions, is sufficient to procure or provide for the accrued
benefit obligations, as of the Effective Time, with respect to all current and
former participants in such Plan according to the actuarial assumptions and
valuations most recently used to determine employee contributions to such Plan,
and no transaction contemplated by this
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Agreement shall cause such assets or insurance obligations to be less than such
benefit obligations; and (v) each Plan required to be registered has been
registered and has been maintained in good standing with applicable regulatory
authorities.
On or after the date hereof, no Plan has been, or will be, (i)
terminated, (ii) amended in any manner which would directly or indirectly
increase the benefits accrued, or which may be accrued, by any participant
thereunder or (iii) amended in any manner which would increase the cost to the
Company or Parent of maintaining such Plan.
4.17 Company Agreements. Schedule 4.17 sets forth a list (all such
contracts, agreements, arrangements or commitments as are required to be set
forth on Schedule 4.17 being referred to herein collectively as the "Company
Contracts") of all written and oral agreements, arrangements or commitments to
which the Company is a party or by which any of their assets is bound or
affected, described below:
(a) each contract or agreement under which the Company has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
indebtedness of more than $50,000 in principal amount or under which the Company
has imposed (or may impose) a Lien on any of its respective assets, whether
tangible or intangible, securing indebtedness in excess of $50,000;
(b) each contract or agreement which involves an aggregate payment or
commitment per contract or agreement on the part of the Company of more than
$50,000 per year;
(c) each contract or agreement which involves or contributes to the
Company aggregate annual remuneration which exceeds 5% of the Company's annual
net revenues for the twelve months ended September 30, 1999;
(d) all leases and subleases from any third person to the Company in
each case requiring annual lease payments in excess of $10,000;
(e) each contract or agreement to which the Company or any of its
Affiliates is a party limiting, in any respect, the right of the Company or any
of its Affiliates (i) to engage in, or to compete with any person in, any
business, including each contract or agreement containing exclusivity provisions
restricting the geographical area in which, or the method by which, any business
may be conducted by the Company or any of its Affiliates or (ii) to solicit any
customer or client;
(f) fire, casualty, liability, title, worker's compensation and all
other insurance policies and binders maintained by the Company;
(g) all collective bargaining or other labor union contracts or
agreements to which the Company is a party or applicable to persons employed by
the Company;
(h) all licenses, licensing agreements and other agreements providing
in whole or part for the use of any Intellectual Property of the Company; and
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(i) all other contracts or agreements which individually or in the
aggregate are material to the Company or the conduct of its business, other than
those which are terminable upon no more than 30 days notice by the Company
without penalty or other adverse consequence.
Schedule 4.17 further identifies each of the Company Contracts
which contain anti-assignment, change of control or notice of assignment
provisions. The Company Contracts are each in full force and effect and are the
valid and legally binding obligations of the Company which is a party thereto
and to the Company's knowledge are valid and binding obligations of the other
parties thereto. The Company is not in default under its Certificate of
Incorporation or other organizational documents in any respect or in material
default under any Company Contract to which it is a party, and no event has
occurred which with the giving of notice or lapse of time or both would
constitute such a default.
4.18 Significant Customers. Except as set forth on Schedule 4.18 since
September 30, 1999, no Significant Customer (as defined below) of the Company
has (a) canceled, suspended or otherwise terminated its relationship with the
Company, (b) advised the Company of its intention to cancel, suspend or
terminate its relationship or to decrease its purchases from the Company or to
adversely change the terms upon which it purchases products from the Company, or
(c) to the Company's actual knowledge without any inquiry, could reasonably be
expected to cancel, suspend or terminate its relationship or to decrease its
purchases from the Company as a result of the consummation of the transactions
contemplated hereby. Except as indicated on Schedule 4.18, all supplies and
services necessary for the conduct of the Company's business as presently
conducted and as proposed to be conducted are readily obtainable from alternate
sources on comparable terms and conditions as those presently available to the
Company. Except as disclosed in Schedule 4.18, at no time during the last two
years prior to the date hereof have the sales, manufacturing or other business
operations of the Company been materially adversely affected by shortages or
availability of products or raw materials necessary to sell or manufacture the
products presently sold by the Company. For purposes of this Section 4.18
"Significant Customers" shall mean any of the fifteen largest customers (each
such customer referred to as a "Significant Customer") (measured by dollar
volume) of the Company, during each of (i) the fiscal year ended September 30,
1999 and (ii) the eight months ended May 31, 2000.
4.19 Tax Matters. All Tax returns and other similar documents required
to be filed with respect to the Company have been timely filed with the
appropriate governmental authorities in all jurisdictions in which such returns
and documents are required to be filed, all of the foregoing as filed are true,
correct and complete in all respects and reflect accurately all liabilities for
Taxes of the Company for the periods to which such returns and documents relate,
and all amounts shown as owing thereon have been paid. All Taxes, if any,
collectible or payable by the Company or relating to or chargeable against any
of their assets, revenues or income through May 31, 2000 were fully collected
and paid by such date or provided for by adequate reserves in the May 31 Balance
Sheet and all similar items due through the Effective Time will have been fully
paid by that date or provided for by adequate reserves. No claims or
deficiencies have been asserted against the Company with respect to any Taxes
which have not been paid or otherwise satisfied or for which accruals or
reserves have not been made on the May 31 Balance Sheet, and, to the knowledge
of the Company, there exists no reasonable basis for the making of any such
claims. The Company has not waived any restrictions on assessment or collection
of Taxes or consented to the extension of any statute of limitations relating to
taxation.
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4.20 Related Parties. Except as set forth on Schedule 4.20, no current
officer or member of the Board of Directors of the Company (a) owns, directly or
indirectly, any interest in, or is a director, officer, employee, consultant or
agent of, any Person which is a competitor of the Company; (b) owns, directly or
indirectly, in whole or in part, any property, asset or right, real, personal or
mixed, tangible or intangible of the Company; or (c) has an interest in or is,
directly or indirectly, a party to any Company Contract, except for employment,
consulting or other personal service agreements which are listed on Schedule
4.16(a) hereto.
4.21 Insurance. Set forth on Schedule 4.21 is a list of all insurance
policies providing insurance coverage of any nature to the Company. Company has
previously delivered to Parent a true and complete copy of all of such insurance
policies as amended. Such policies are sufficient for the compliance by Company
with all requirements of Law and all Company Contracts. All of such policies are
in full force and effect and are valid and enforceable in accordance with their
terms, and the Company has complied in all material respects with all material
terms and conditions of such policies, including the payment of premium
payments. None of the insurance carriers has indicated to the Company in writing
an intention to cancel any such policy. The Company has no claim pending against
any of the insurance carriers under any of such policies and there has been no
actual or to the Company's knowledge alleged occurrence of any kind which may
give rise to any such claim.
4.22 Labor Relations. There is no strike or dispute pending or to the
Company's knowledge threatened involving any employees of the Company. None of
the employees of the Company is a member of any labor union (except as set forth
in Schedule 4.22(a)), and the Company is not a party to, otherwise bound by, or
to the Company's knowledge threatened with any labor or collective bargaining
agreement (except as set forth in Schedule 4.22(b)). None of the employees of
the Company are known to be engaged in organizing any labor union or other
employee group that is seeking recognition as a bargaining unit. Without
limiting the generality of Section 4.11, (a) no unfair labor practice complaints
are pending or to the Company's knowledge threatened against the Company, and
(b) no Person has made any claim, and there is no basis for any claim, against
the Company under any statute, regulation or ordinance relating to employees or
employment practices, including without limitation those relating to age, sex
and racial discrimination, conditions of employment, and wages and hours.
4.23 Absence of Certain Business Practices. Neither the Company, nor to
the knowledge of the Company, nor any of the Principal Stockholders, current
directors or officers of the Company (individually, an "Additional Party" and
collectively, the "Additional Parties"), agents of the Company nor any
Additional Party, nor any other Person acting on behalf of or associated with
the Company, acting alone or together, has: (a) received, directly or
indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer,
supplier, employee or agent of any customer or supplier, official or employee of
any government (domestic or foreign) or other Person; or (b) directly or
indirectly, given or agreed to give any money, gift or similar benefit to any
customer, supplier, employee or agent of any customer or supplier, official or
employee of any government (domestic or foreign), or any political party or
candidate for office (domestic or foreign) or other Person who was, is or may be
in a position to help or hinder the business of the Company (or assist the
Company in connection with any actual or proposed transaction) which:
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(i) may subject the Company to any damage or penalty in
any civil, criminal or governmental litigation or
proceeding in any jurisdiction;
(ii) if not received or given in the past, may have had a
Material Adverse Effect in years 1997, 1998 and/or
1999;
(iii) if not continued in the future, may have a Material
Adverse Effect or subject the Company to suit or
penalty in any private or governmental litigation or
proceeding which could reasonably be expected to have
a Material Adverse Effect.
The Company's existing accounting controls and procedures are
sufficient to cause it to comply with the Foreign Corrupt Practices Act of 1977,
as amended, of the United States.
4.24 Pharmaceutical Products.
(a) Schedule 4.24(a) lists each product manufactured, licensed,
distributed or sold by the Company (collectively, the "Products"). The Company
does not manufacture any Product.
(b) Schedule 4.24(b) lists all product registrations which are pending
or maintained by the Company, and with respect to pending product registrations,
the phase of clinical development of the Products which are the subject thereof.
A true and complete copy of each such product registration has been previously
delivered to Parent.
(c) The Company has no actual knowledge, without conducting any
inquiry, of any set of facts: (i) which could furnish a basis for the recall,
withdrawal or suspension of any product registration, product license,
manufacturing license, wholesale dealers license, export license or other
license, approval or consent of any domestic or foreign governmental or
regulatory authority with respect to the Company or any of the Products; (ii)
which could furnish a basis for the recall, withdrawal or suspension of any
Product from the market, the termination or suspension of any clinical testing
of any Product, or the change in marketing classification of any Product; or
(iii) which could have a Material Adverse Effect on the continued operation of
any facility of the Company .
(d) Except as set forth in Schedule 4.24(d), to the Company's knowledge
all Products which have been sold through the Company have been merchantable and
free from defects in material or workmanship for the term of any applicable
warranties and under the conditions of any express or implied specifications and
warranties arising under Law and as set forth in the specific order. Except as
disclosed in Schedule 4.24(d) hereto, during the last two years, the Company has
not received any claims based on alleged failure to meet the specifications or
breach of product warranty arising from any applicable manufacture or sale of
any Products.
4.25 Compliance with Environmental Laws. Except as set forth in
Schedule 4.25, the Company is in compliance in all material respects with all
applicable Environmental Laws. Except as indicated in Schedule 4.25, (a) there
have been no governmental claims, citations, notices of violation, judgments,
decrees or orders issued against the Company for impairment or damage, injury or
adverse effect to the environment or public health and there have been no
private complaints with respect to any such matters; (b) there is no condition
relating to any properties of
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the Company that would require any type of remediation, clean-up, response or
other action under applicable Environmental Laws; and (c) the Company has
complied in all material respects with Environmental Laws in the generation,
treatment, storage and disposal of toxic and hazardous substances, as defined
under any applicable Environmental Laws.
4.26 Inventories. The inventories of the Company shown on the balance
sheets included in the Financial Statements and the inventories of the Company
as of the Effective Time are stated and will be stated at not more than the
lower of cost (on a first-in first-out basis) or market, are fit for their
particular use, do not and will not include any items below standard quality,
defective, damaged or spoiled, obsolete or of a quality or quantity not usable
or salable in the ordinary course of the business of the Company as currently
conducted or any items whose expiration date has passed or will pass within six
months of the date hereof (which, with respect to items which do not have an
expiration date, shall in any event not include quantities of items not usable
or salable within twelve months from the date hereof), the value of which has
not been fully written down or reserved against in the Financial Statements. The
Company has and will continue to have adequate quantities and types of inventory
to enable it to conduct its business consistent with past practices and
anticipated operations. Schedule 4.26 sets forth any items of inventory having
an aggregate value as of May 31, 2000 in excess of $10,000.
4.27 Accounts and Notes Receivable. The Company has delivered to Parent
a true and complete aged list of unpaid accounts and notes receivable owing to
the Company as of May 31, 2000. All of such accounts and notes receivable
constitute only bona fide, valid and binding claims arising in the ordinary
course of the Company's business, subject to no valid defenses, counterclaims or
setoffs. All of such accounts and notes receivable are good and collectible
receivables and will be collected in accordance with past practice and the terms
of such receivables (and in no event later than six months following the
Effective Time) without setoff or counterclaims, subject to the allowance for
doubtful accounts, if any, set forth on the May 31 Balance Sheet.
4.28 Conduct of Business. Except as disclosed on Schedule 4.28 hereto,
since May 31, 2000, the Company has conducted its businesses in the ordinary and
usual course, consistent with past practices and there has not occurred any
material adverse change in its condition (financial or otherwise), results of
operations, properties, assets, liabilities, business or prospects. Without
limiting the generality of the foregoing, except as disclosed on Schedule 4.28,
since September 30, 1999, the Company has not:
(a) declared or paid any dividends or other distribution (whether in
cash, stock or other property) with respect to the Company Common Stock, or
otherwise transferred or agreed to transfer any assets to any of its
stockholders or Affiliates;
(b) suffered any damage, destruction or loss, whether or not covered by
insurance, which has had or could have a material adverse effect on any of its
properties, assets, business or prospects;
(c) voluntarily or involuntarily sold, transferred, surrendered,
abandoned or disposed of any of its assets or property rights (tangible or
intangible), other than inventory and minor amounts
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of personal property, in the ordinary course of business consistent with past
practices at a price equal to the greater of fair market value or book value;
(d) disclosed any proprietary or confidential information to any third
party, except to Parent;
(e) granted or made any mortgage or pledge or subjected itself or any
of its properties or assets to any Liens of any kind, except Permitted Liens;
(f) created, incurred or assumed any liability or indebtedness for
borrowed money or entered into any capitalized lease obligations;
(g) made or committed to make any capital expenditures;
(h) applied any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of the stockholders or any Affiliates thereof
or to the prepayment of any such amounts;
(i) written off the value of any inventory or any accounts receivable
or increased the reserves for obsolete, damaged, spoiled or otherwise not usable
inventory or doubtful or uncollectible receivables;
(j) granted any increase in the compensation payable or to become
payable to directors, officers or employees (including, without limitation, any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment or otherwise), other than inflationary or merit increases to officers
and employees in the ordinary course of business and consistent with past
practices;
(k) altered the manner of keeping its books, accounts or records, or
changed in any manner the accounting practices therein reflected;
(l) accelerated or delayed collection of notes or accounts receivable
in advance of or beyond their regular dates or the dates when the same could
have been collected in the ordinary course of business consistent with past
practices;
(m) allowed its levels of inventory to vary in any material respect
from the levels customarily maintained; or
(n) experienced any other event or condition of any character which has
had or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
4.29 List of Accounts. Set forth on Schedule 4.29 is: (a) the name and
address of each bank or other institution in which the Company maintains an
account (cash, securities or other) or safe deposit box; (b) the name and phone
number of and Company's contact person at such bank or institution; (c) the
account number of the relevant account and a description of the type of account;
and (d) the persons authorized to transact business in such accounts.
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4.30 Ownership by Principal Stockholders. The Principal Stockholders
own an amount of Company Common Stock such that their votes in favor of the
Merger shall be sufficient to effectuate the Merger without any additional votes
from any other Company stockholders.
4.31 Disclosure. No representation or warranty of the Company contained
in this Agreement, and no statement, notice, certificate or other document
furnished by or on behalf of the Company to Parent, Merger Sub or their agents
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omission of
a material fact necessary in order to make the statements contained herein or
therein not misleading.
4.32 Assets and Rights. The assets and rights owned by the Company
constitute all assets and rights required to operate the business of the Company
as previously conducted.
4.33 Proxy Statement. The Company Proxy Statement (as defined in
Section 5.2) when mailed and upon the vote of the stockholders (a) will 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 contained
therein, in light of the circumstances under which they were made, not
misleading; provided, however the foregoing representation does not include or
relate to any information relating directly to, or provided by, Parent or Merger
Sub in writing, specifically for inclusion in the Company Proxy Statement and
(b) will be distributed to the Company's stockholders in accordance with the
Company's Certificate of Incorporation and Bylaws, the DGCL and any federal or
state laws.
4.34 Size of a Person. Within the meaning of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and both as of the time of
entering into this Agreement and as of the Effective Time, (a), the ultimate
parent entity of the Company; (i) is not engaged in manufacturing; and (ii) has
less than Ten Million Dollars ($10,000,000.00) in total assets and less than One
Hundred Million Dollars ($100,000,000.00) in annual net sales; and (b) no Person
or Persons have the right by contract to appoint fifty percent (50%) or more of
the members of the board of directors of the Company.
ARTICLE 5
COVENANTS
During the period from the date of this Agreement to the Effective
Time, the Company and Parent, as applicable, agree to perform the covenants set
forth below.
5.1 Interim Operations of the Company. Except to the extent Parent
specifically gives its prior written consent (which may be withheld in its sole
discretion), the Company shall, operate its business only in the ordinary and
usual course consistent with past practices and (a) use its commercially
reasonable best efforts to preserve intact its business organization and the
goodwill of its customers, suppliers and others having business relations with
it, (b) use its commercially reasonable best efforts to keep available to Parent
the services of its present officers, employees and agents, (c) promptly furnish
to Parent a copy of any correspondence received from or delivered to any
governmental authority or any stock exchange, (d) continue and maintain the
approval process in the ordinary course of registrations with respect to
Products being developed,
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manufactured or sold by the Company, (e) maintain and keep its properties and
assets in good repair and condition, (f) continuously maintain insurance
coverage substantially equivalent to the insurance coverage in existence on the
date hereof and (g) use its good faith efforts to prevent any non-Accredited
Investor from exercising any options or warrants of the Company prior to the
Effective Time. Additionally, during the period from the date of this Agreement
to the Effective Time, except with the prior consent of Parent or as
contemplated by any other provision of this Agreement, the Company shall not,
directly or indirectly, (i) amend or otherwise change its Certificate of
Incorporation or equivalent organizational documents; (ii) except for the
issuance of securities in satisfaction of the brokerage commission payable by
the Company to Corporate Development Specialists, Inc. (which is an Accredited
Investor), issue, sell or authorize for issuance or sale, shares of any class of
its securities (including, but not limited to, by way of stock split or
dividend) or any subscriptions, options, warrants, rights or convertible
securities, or enter into any agreements or commitments of any character
obligating it to issue or sell any such securities; (iii) redeem, purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock or
any option, warrant or other right to purchase or acquire any such shares; (iv)
recommend to its shareholders that the stockholders declare or pay any dividend
or other distribution (whether in cash, stock or other property) with respect to
its capital stock; (v) sell, transfer, surrender, abandon or dispose of any of
its assets or property rights (tangible or intangible), other than in the
ordinary course of business consistent with past practices; (vi) grant or make
any Lien or subject itself or any of its properties or assets to any Lien of any
kind other than Permitted Liens; (vii) create, incur or assume any liability or
indebtedness, except in the ordinary course of business consistent with past
practices, but in no event in an aggregate amount exceeding $50,000 more than is
shown on the May 31, 2000 Balance Sheet; (viii) make or commit to make any
capital expenditures in excess of $50,000 in the aggregate; (ix) become subject
to any Guaranty; (x) apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any Principal Stockholder or any Affiliate
thereof or to the prepayment of any such amounts or engage in any transactions
with any Affiliate; (xi) increase the compensation payable or to become payable
to directors, officers or employees (including, without limitation, any such
increase pursuant to any Plan or otherwise), other than increases in the
ordinary course of business and consistent with past practice in salaries or
wages of employees of the Company who are not officers of the Company or grant
any rights to severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the
Company, or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee, except to the extent required by applicable
Law or the terms of any existing collective bargaining agreement; (xii) enter
into any agreement which would be a Company Contract, or amend or terminate any
existing Company Contract except for Company Contracts which terminate by their
terms; (xiii) acquire (including, without limitation, by merger, consolidation
or acquisition of stock or assets) any interest in any corporation, partnership,
other business organization, Person or any division thereof or any assets, other
than acquisitions of assets in the ordinary course of business consistent with
past practice; (xiv) alter the manner of keeping its books, accounts or records,
or change in any manner the accounting practices therein reflected; (xv) enter
into any commitment or transaction other than in the ordinary course of business
consistent with past practices; (xvi) waive, release, assign, settle or
compromise any claims or litigation; (xvii) make any Tax election or settle or
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compromise any federal, state or local or federal income Tax liability; (xviii)
take or omit to take any action which would render any of the Company's
representations or warranties untrue or misleading, or which would be a breach
of any of the Company's covenants; (xix) take any action which could have a
Material Adverse Effect; or (xx) agree, whether in writing or otherwise, to do
any of the foregoing.
5.2 Stockholder Vote. As promptly as practicable after the date hereof,
the Company shall take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and Bylaws to call, give notice of, convene and
hold the Stockholders Meeting as promptly as practicable (unless such date shall
be delayed due to circumstances reasonably beyond the control of the parties) to
consider and vote upon the approval and adoption of this Agreement and the
transactions contemplated hereby and for such other purposes as may be necessary
or desirable (the "Company Proxy Statement"). The Company shall deliver to its
stockholders along with the Company Proxy Statement, the prospectus contained in
the Registration Statement and all Parent reports filed with the SEC since
January 1, 2000. Prior to delivery of the Company Proxy Statements to the
stockholders, the Company shall provide a copy of the Company Proxy Statement to
Parent for review and approval. The Board of Directors of the Company has
approved the transactions contemplated hereby and shall solicit and secure from
the stockholders of the Company such approval and adoption of this Agreement
necessary to consummate the transactions contemplated hereby.
5.3 Access. The Company shall afford to Parent and its agents and
representatives access to the properties, books, records and other information
of the Company, provided that such access shall be granted upon reasonable
notice and at reasonable times during normal business hours in such a manner as
to not unreasonably interfere with normal business operations, and will use
their best efforts to cause the personnel of the Company to assist Parent in its
investigation of the Company. The Company shall furnish promptly to Parent all
other information and documents concerning its business, assets, liabilities,
properties and personnel as Parent may from time to time reasonably request.
5.4 Confidentiality. Except as otherwise required by law or in the
performance of obligations under this Agreement, any non-public information
received by a party or its advisors from the other party shall be kept
confidential and shall not be used or disclosed for any purpose other than in
furtherance of the transactions contemplated by this Agreement. The obligation
of confidentiality shall not extend to information which (a) is or becomes
generally available to the public other than as a result of a disclosure by a
party in violation of this Agreement, (b) was in the possession of a party prior
to its receipt from the other party, or (c) becomes available to a party on a
nonconfidential basis from a source other than a party to this Agreement,
provided such source is not in violation of a confidentiality agreement with the
party providing such information. Upon termination of this Agreement, each party
shall, upon request, promptly return or destroy any confidential information
received from the other party. The covenants of the parties contained in this
Section 5.4 shall survive any termination of this Agreement but shall terminate
at the Closing, if it occurs, with respect to information concerning the
Company. The provisions of this Section 5.4 shall supercede and replace any
prior confidential disclosure agreements between or among the parties with
respect to information that is disclosed after the date of this Agreement, as
stated in the opening paragraph hereof.
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5.5 Consent of Governmental Authorities and Others. Each of Parent on
the one hand and the Company on the other, agree to file, submit or request (or
cause to be filed, submitted or requested) promptly after the date of this
Agreement and to prosecute diligently any and all (a) applications or notices
required to be filed or submitted to any governmental or regulatory authorities,
as specified in Section 4.4, and (b) in the case of the Company, requests for
consents and approvals of Persons required to be obtained, including the
approval of the Company's Stockholders as specified in Section 5.2, in
connection with the transactions contemplated by this Agreement; provided,
however that neither Company nor Parent shall be required to pay any material
amounts to any third party to obtain any such consent. Each of Parent and the
Company shall promptly make available to the other such information as each of
them may reasonably request relative to its business, assets and property as may
be required by each of them to prepare and file or submit such applications and
notices and any additional information requested by any governmental authority,
and shall update by amendment or supplement any such information given in
writing. Each of Parent and the Company represent and warrant to the other that
such information, as amended or supplemented, shall be true and not misleading.
5.6 Good Faith Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties shall use its good faith efforts to take or
cause to be taken as promptly as practicable all reasonable actions that are
within his or its power to cause to be fulfilled those conditions precedent to
his or its obligations or the obligations of the other parties to consummate the
transactions contemplated by this Agreement that are dependent upon his or its
actions.
5.7 Acquisition Proposals. Except for the transactions contemplated by
this Agreement, unless and until this Agreement is terminated, the Company shall
not (nor will they permit any of the their respective officers, directors,
agents or Affiliates to), directly or indirectly, solicit, encourage, initiate
or participate in negotiations or discussions with respect to any offer or
proposal to acquire any substantial portion of the business and properties or
capital stock of the Company, whether by merger, purchase of assets or otherwise
(an "Acquisition Proposal") or (ii) disclose any information not customarily
disclosed to any Person concerning the business or properties of the Company,
afford to any Person (other than Parent and its designees) access to the
properties, books or records of the Company or otherwise assist or encourage any
Person in connection with any of the foregoing. In the event that the Company
shall receive any Acquisition Proposal, the Company shall promptly inform Parent
of all terms of such Acquisition Proposal.
5.8 Further Assurances. The parties shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, the provisions of this Agreement, including
all such instruments of transfer as may be necessary or desirable to transfer
ownership of the Securities and to consummate the transactions contemplated by
this Agreement.
5.9 Publicity. The parties agree to cooperate in issuing any press
release or other public announcement concerning this Agreement or the
transactions contemplated hereby. Nothing contained herein shall prevent any
party from at any time furnishing any information to any governmental authority
which it is by law or otherwise so obligated to disclose or from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations under applicable Law or the rules of AMEX.
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5.10 Termination of Employee Benefit Plans. Prior to the Effective
Time, the Company covenants that it will terminate (the "Termination") by
appropriate corporate resolutions all employee benefit plans sponsored by the
Company that are intended to be tax-qualified under Section 401(a) of the
Internal Revenue Code and shall promptly provide copies of such resolutions with
respect to the Termination to Parent. The Company hereby agrees to take or cause
to be taken all action necessary to complete the Termination in an expeditious
and timely manner so that neither Parent nor any of its Affiliates is deemed the
successor sponsor of any plan subject to the Termination.
5.11 Employment Agreements. Prior to the Effective Time, the Company
shall cause employment agreements (effective at the Effective Time) to be
executed by and between the Company and each of Frank Byington, Ronald Scroggins
and David Bailey in a form and on terms acceptable to Parent (the "Employment
Agreements").
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Investigation; Notices. The representations, warranties and
covenants set forth in this Agreement shall not be affected or diminished in any
way by any investigation (or failure to investigate) at any time by or on behalf
of the party for whose benefit such representations, warranties and covenants
were made. All statements contained herein or in any schedule, certificate,
exhibit, list or other document delivered pursuant hereto shall be deemed to be
representations and warranties for purposes of this Agreement.
6.2 Survival of Representations, Warranties and Agreements; No
Recourse. No agreements in this Merger Agreement shall survive the Merger,
except that (a) the agreements contained in Article II shall survive the Merger
indefinitely, (b) the obligations to indemnify contained in Sections 6.3 and 6.4
hereof shall survive the Closing and the consummation of the transactions
contemplated by this Merger Agreement, and (c) the representations and
warranties made in Articles III and IV of this Merger Agreement or made pursuant
hereto shall survive the Closing for a period of eighteen (18) months after the
Effective Time. Except as specifically set forth in Section 6.4, in no event
shall Parent or Merger Sub, itself and as successor to Company, or its
Affiliates or successors or assigns, have any recourse against the present or
former directors, officers, employees or stockholders of Company or any of its
Affiliates with respect to any representation, warranty or agreement made by
Company in this Merger Agreement and Parent and Merger Sub, itself and as
successor to Company, expressly agree that no claim, action or remedy shall be
brought or maintained by Parent or Merger Sub, itself and as successor to
Company, or its Affiliates or successors or assigns against the present or
former directors, officers, employees or stockholders of Company or any of its
Affiliates with respect to any representation, warranty or agreement made by
Company in this Merger Agreement. Except as specifically set forth in Section
6.3, in no event shall Principal Stockholders and the Company's directors,
officers and employees, have any recourse against the present or former
directors, officers, employees or stockholders of Parent or Merger Sub or any of
their Affiliates with respect to any representation, warranty or agreement made
by Parent or Merger Sub in this Merger Agreement and Principal Stockholders
expressly agree that no claim, action or remedy shall be brought or maintained
by Principal Stockholders against Parent or Merger Sub or any of its Affiliates
with respect to any representation, warranty or agreement made by Parent or
Merger Sub in this Merger Agreement.
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6.3 Indemnification by Parent and Surviving Corporation.
(a) Parent and Surviving Corporation shall jointly and severally,
indemnify and hold Principal Stockholders and Company's directors, officers and
employees (collectively, the "Company Indemnified Parties") harmless from and
against, and agree promptly to defend each of the Company Indemnified Parties
from and reimburse each of the Company Indemnified Parties for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including reasonable attorney fees and other legal costs and expenses)
(singularly, a "Company Loss" or, collectively, the "Company Losses") that any
of the Company Indemnified Parties may at any time suffer or incur, or become
subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Merger Sub in or pursuant hereto, or in any
instrument, certificate or affidavit delivered by Parent or Merger Sub at the
Closing in accordance with the provisions hereof;
(ii) any failure by Parent or Merger Sub to carry out, perform,
satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent or Merger Sub pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or
in any way related to, any of the matters referred to in this Section 6.3(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent and Surviving Corporation shall not have any liability under Section
6.3(a) above (i) unless the aggregate of all Company Losses for which Parent and
Surviving Corporation would be liable with respect to Section 6.3(a)(i) or
6.3(a)(iii) (to the extent related to Section 6.3(a)(i)) above but for this
sentence exceeds, on a cumulative basis, an amount equal to $250,000, and then
only to the extent of such excess, (ii) unless the Stockholder Representative
has asserted a claim in good faith with respect to the matters set forth in
Section 6.3(a) within eighteen (18) months of the Effective Time, and (iii) for
amount in the aggregate exceeding (i) fourteen percent (14%) of the Merger
Shares to be delivered to the Principal Stockholders (but in no event less than
eight and one-half (8.5%) of the total Merger Shares) multiplied by (ii) the
Average Closing Price.
6.4 Indemnification by Principal Stockholders.
(a) Principal Stockholders shall indemnify and hold Parent,
Surviving Corporation and their respective stockholders, directors, officers and
employees (collectively, the "Parent Indemnified Parties") harmless from and
against, and agree to defend promptly each of the Parent Indemnified Parties
from and reimburse each of the Parent Indemnified Parties for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including reasonable attorneys' fees and other legal costs and expenses
and increases in insurance premiums directly resulting from recoveries under any
insurance policies, with respect to the subject matter of the indemnification
claim) (singularly, a "Parent Loss" or, collectively the "Parent Losses") that
any of the Parent Indemnified Parties may at any time suffer or incur, or become
subject to, as a result of or in connection with:
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(i) any breach or inaccuracy of any of the representations and
warranties made by Company or the Principal Stockholders in or pursuant hereto,
or in any instrument, certificate or affidavit delivered by any of the same at
the Closing in accordance with the provisions hereof;
(ii) any failure by Company or the Principal Stockholders to
carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Company pursuant hereto;
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 6.4(a).
(b) Notwithstanding the above, the Principal Stockholders shall not
have any liability under Section 6.4(a) above (i) unless the aggregate of all
Parent Losses for which the Principal Stockholders would be liable with respect
to Section 6.4(a)(i) or 6.4(a)(iii) (to the extent related to Section 6.4(a)(i))
above but for this sentence exceeds, on a cumulative basis, an amount equal to
$250,000, and then only to the extent of such excess, and (ii) unless Parent has
asserted a claim in good faith with respect to the matters set forth in Section
6.4(a) within eighteen (18) months of the Effective Time.
6.5 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 6.3 or
6.4, as the case may be (the "Indemnified Party"), shall notify the party liable
for such indemnification (the "Indemnifying Party") in writing of any claim or
demand (a "Claim") that the Indemnified Party has determined has given or could
give rise to a right of indemnification hereunder. Subject to the Indemnifying
Party's right to defend in good faith third party claims as hereinafter
provided, the Indemnifying Party shall satisfy its obligations under Section 6.3
of 6.4 within 30 days after the receipt of written notice thereof from the
Indemnified Party.
(b) If the Indemnified Party shall notify the Indemnifying Party
of and Claim pursuant to Section 6.5(a) hereof, and if such Claim relates to a
Claim which is not a Claim for equitable relief asserted by a third party
against Indemnified Party that the Indemnifying Party acknowledges is a Claim
for which it must indemnify or hold harmless the Indemnified Party and can
demonstrate the financial wherewithal to pay such Claim under Section 6.3 or
6.4, as the case may be, then the Indemnifying Party shall have the right, at
its sole cost and expense, to employ counsel reasonably acceptable to the
Indemnified Party to defend any such Claim asserted against the Indemnified
Party. Notwithstanding anything to the contrary in the preceding sentence, if
the Indemnified Party (i) reasonably believes that it has legal defenses
available to it which differ from or are additional to those available to the
Indemnifying Party and (ii) promptly notifies the Indemnifying Party, in
writing, of the nature of such defenses, then the Indemnified Party shall be
entitled to choose, at the sole cost and expense of the Indemnifying Party,
counsel to defend such Claim and retain control over such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any Claim, at its own expense (except to
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the extent provided in the preceding sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the preceding
sentence). The Indemnifying Party shall notify the Indemnified Party in writing,
as promptly as possible (but in any case before the due date for the answer or
response to a Claim) after receipt of the notice of Claim given by the
Indemnified Party to the Indemnifying Party under Section 6.5(a), of its
election to defend in good faith any such third party Claim. For so long as the
Indemnifying Party is defending in good faith any such Claim asserted by a third
party against the Indemnified Party, the Indemnified Party shall not settle or
compromise such Claim without the prior written consent of the Indemnifying
Party. The Indemnified Party shall cooperate with the Indemnifying Party in
connection with any such defense and shall make available to the Indemnifying
Party or its agents all records and other materials in the Indemnified Party's
possession reasonably required by the Indemnifying Party for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of the relevant
Claim, or (ii) as required by law, rule or regulation or court order. Whether or
not the Indemnifying Party elects to defend any such Claim, the Indemnified
Party shall have no obligation to do so. Within 15 days after a final
determination (including a settlement) has been reached with respect to any
Claim contested pursuant to this Section 6.5(b), the Indemnifying Party shall
satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 15-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Party is or
could have been a party, or indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement (A) includes an unconditional written
release of such Indemnified Party, in form and substance reasonably satisfactory
to such Indemnified Party, from all liability on claims that are the subject
matter of such proceeding, and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of such
Indemnified Party.
6.6 Certain Limitations of Liability.
(a) Anything to the contrary herein notwithstanding, an Indemnified
Party's recovery from an Indemnifying Party under the indemnification provisions
of this Agreement shall in no event include any special, indirect, or
consequential damages whatsoever.
(b) No Parent Loss shall be asserted by Parent with respect to any
matter which is covered by insurance proceeds to the extent of such insurance
proceeds.
(c) The indemnification provisions of this Article VI are the sole
and exclusive post-Closing remedy of Parent (or Surviving Corporation) and
Principal Stockholders for a breach of nonperformance of any representations,
warranties or covenants contained in this Agreement or in any certificate
delivered pursuant hereto. The Escrow Agreement, dated as of the date hereof,
among the Parent, SunTrust Bank and the Principal Stockholders ("Escrow
Agreement") shall be the sole source of recovery for any Parent Indemnified
Party with respect to this Agreement and the payment thereof shall be governed
by the terms and provisions of the Escrow Agreement.
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6.7 Restrictions on Resale by Affiliates. Although the Merger Shares
have been registered with the Securities and Exchange Commission ("SEC") under
the Securities Act on a Registration Statement on Form S-4, the Company
understands and acknowledges that any sale, transfer or disposition by any
Affiliate of the Company (as that term is defined in Rule 144 of the Securities
Act) of any Merger Stock may, under current law, be made only (i) in accordance
with the provisions of paragraph (d) of Rule 145 under the Securities Act, (ii)
pursuant to an effective registration statement under the Securities Act or
(iii) upon receipt by Parent of an opinion of counsel reasonably acceptable to
Parent, or a "no-action" letter obtained by it from the SEC, to the effect that
such sale, transfer or disposition is otherwise exempt from registration under
the Securities Act. Schedule 6.7 sets forth a list of names and addresses of
those Persons who may be deemed affiliates of the Company within the meaning of
Rule 145 under the Securities Act, including the Principal Stockholders and all
officers and directors of the Company. The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes of
reviewing the accuracy and completeness of such list. There shall be added to
such list the names and addresses of any other Person who becomes an Affiliate
of the Company at any time after the date hereof up to and including the time of
the Stockholders Meeting or who Parent identifies (by written notice to the
Company) as being a Person who may be deemed to be an Affiliate of the Company.
The Company shall deliver or cause to be delivered to Parent, concurrent
herewith, from each of the Affiliates identified on Schedule 6.7 (as the same
may be supplemented as aforesaid), which shall contain a covenant that such
Affiliate will not sell or otherwise dispose of any shares of Parent Common
Stock issued to it in the Merger, except in accordance with clauses (i), (ii) or
(iii) above and acknowledges that any Parent Common Stock issued to an Affiliate
of Parent will have a legend evidencing such restriction and that Parent can
take any and all action necessary, including issuing a stop-order with the
transfer agent, to ensure compliance with such transfer restriction.
ARTICLE 7
CONDITIONS PRECEDENT; TERMINATION
7.1 Conditions Precedent to the Obligations of Parent. The obligations
of Parent to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions.
(a) Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement and in any certificate or
other document delivered pursuant to this Agreement shall be true and correct in
all material respects as of the Effective Time with the same force and effect as
though made on and as of such date.
(b) Covenants Performed. The covenants of the Company contained in
this Agreement to be performed or complied with on or prior to the Effective
Time shall have been duly performed or complied with.
(c) No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect.
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(d) Consents. The Company shall have obtained those consents and
approvals listed on Schedule 7.1(d), each of which shall have been obtained
without the imposition of any material adverse terms or condition.
(e) Opinions of Counsel. Parent shall have received from Greenberg,
Traurig, LLP, legal counsel, to the Company and the Principal Stockholders,
opinion letters, dated the Effective Time, in form and substance reasonably
satisfactory to Parent, with respect to the matters set forth in Exhibit 7.1(e)
to this Agreement.
(f) Accredited Investor Representation Letters. Parent shall have
received representation letters from each of the Company's stockholders, in the
form of Exhibit 7.1(f) hereto, representing that such stockholder is an
Accredited Investor and making certain other investor representations.
(g) Stock Certificates. The Company shall have delivered
certificates representing at least ninety percent (90%) of all of the issued and
outstanding shares of Company Common Stock as of the Closing.
(h) Company's Certificate. The Company shall have delivered to
Parent a certificate executed by its President and Chief Executive Officer,
dated the Effective Time, certifying in such detail as Parent may reasonably
request, that the conditions specified in Sections 7.1(a), (b) and (c) above
have been fulfilled and as to such other matters as Parent may reasonably
request.
(i) Governmental Consents. All consents and approvals required by
governmental authorities for the consummation of the transactions contemplated
by this Agreement shall have been obtained. All of such consents and approvals
shall have been obtained without the imposition of any conditions which would
materially adversely affect Parent or its ability to operate the Company after
the Effective Time.
(j) No Litigation. No litigation, arbitration or other proceeding
shall be pending or threatened by or before any court, arbitration panel or
governmental authority; no law or regulation shall have been enacted after the
date of this Agreement; and no judicial or administrative decision shall have
been rendered; in each case, which enjoins, prohibits or materially restricts,
or seeks to enjoin, prohibit or materially restrict, the consummation of the
transactions contemplated by this Agreement or seeks to or would materially
adversely affect Parent or its ability to operate the Company after the
Effective Time.
(k) Employment Agreements. The Company shall have entered into the
Employment Agreements with Frank Byington, David Bailey and Ron Scroggins.
(l) Noncompetition and Confidentiality Agreement. Parent shall have
entered into noncompetition and confidentiality agreement in the form attached
as Exhibit 7.1(l) with Frank Byington.
(m) General Release. The Company shall have delivered to Parent a
general release in the form attached as Exhibit 7.1(m) executed by Frank
Byington.
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(n) Rule 145 Letters. The Company shall have received letters from
those Persons listed on Schedule 6.7 with respect to the matters set forth in
Section 6.7.
(o) Corporate Action. The Company shall have delivered to Parent
(i) copies of the certificates of incorporation and bylaws of the Company, (ii)
copies of resolutions of the Company's Board of Directors approving and adopting
this Agreement and the transactions contemplated hereby, certified on behalf of
the Company by its corporate secretary, and (iii) a certificate of good standing
from the Secretary of State of the State of Delaware for the Company (dated as
of a date not more than 10 days prior to the Effective Time).
7.2 Conditions Precedent to the Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions.
(a) Representations and Warranties True. The representations and
warranties of Parent contained in this Agreement or in any certificate or other
document delivered pursuant to this Agreement shall be true and correct in all
material respects as of the Effective Time with the same force and effect as
though made on and as of such date.
(b) Covenants Performed. The covenants of Parent contained in this
Agreement to be performed or complied with on or prior to the Effective Time
shall have been duly performed or complied with.
(c) Parent's Certificate. Parent shall have delivered to the
Stockholder Representative a certificate executed by its President or a Vice
President, dated the Effective Time, certifying in such detail as the
Stockholder Representative may reasonably request, that the conditions specified
in Sections 7.2(a) and (b) above have been fulfilled.
(d) No Litigation. No litigation, arbitration or other proceeding
shall be pending or threatened by or before any court, arbitration panel or
governmental authority; no law or regulation shall have been enacted after the
date of this Agreement; and no judicial or administrative decision shall have
been rendered; in each case, which enjoins, prohibits or materially restricts
the consummation of the transactions contemplated by this Agreement.
(e) Cash to Non-Accredited Investors. The cash to be delivered to
non-Accredited Investors pursuant to Section 2.5(c) shall not exceed nineteen
percent (19%) of the fair market value of the Merger Shares at the Effective
Time.
ARTICLE 8
MISCELLANEOUS
8.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated prior to the Closing:
(a) at any time by mutual consent of the parties;
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(b) by the Parent if the Closing has not occurred on or prior to
August 21, 2000 or by either party if the Closing has not
occurred on or prior to August 31, 2000 (as applicable, the
"Termination Date"), provided the failure of the Closing to
occur by such date is not the result of the failure of the
party seeking to terminate this Agreement to perform or
fulfill any of its obligations hereunder;
(c) by Parent if the Company's Stockholders fail to approve the
Transaction.
(d) by Parent at any time in its sole discretion if any of the
representations or warranties of the Company in this Agreement
are not in all material respects true, accurate and complete
or if the Company breaches in any material respect any
covenant contained in this Agreement, provided that such
misrepresentation or breach is not cured within ten business
days after notice thereof, but in any event prior to the
Termination Date;
(e) by the Company if the Average Closing Price of Parent Common
Stock is less than $34.00 (adjusted for any stock splits,
stock dividends or recapitalizations subsequent to the date
hereof); or
(f) by the Company at any time in its sole discretion if any of
the representations or warranties of Parent in this Agreement
are not in all material respects true, accurate and complete
or if Parent breaches in any material respect any covenant
contained in this Agreement, provided that such
misrepresentation or breach is not cured within ten business
days after notice thereof, but in any event prior to the
Termination Date.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, written notice thereof shall promptly be given by the party
electing such termination to the other party and, subject to the expiration of
the cure periods provided in Sections 8.1(d) and (f) above, if any, this
Agreement shall terminate without further actions by the parties and no party
shall have any further obligations under this Agreement; provided that any
termination of this Agreement pursuant to this Section shall not relieve any
party from any liability for the breach of any representation, warranty or
covenant contained in this Agreement or be deemed to constitute a waiver of any
remedy available for such breach.
8.3 Liquidated Damages. If this Agreement is terminated by either
Parent or Company, pursuant to Section 8.1(d) or (f) hereof, due to a material
breach by the other party of any of its obligations, representations or
warranties under this Agreement, the breaching party agrees to pay the other
party a termination fee equal to $1,200,000. The parties agree that the
foregoing damages shall constitute liquidated damages and not a penalty. Receipt
of the foregoing damages shall constitute the sole and exclusive remedy of the
terminating party, at law or in equity, and shall terminate each party's rights
under this Agreement. Each of the parties hereto acknowledges and agrees that
this Section 8.3 has been agreed upon, after negotiation, as reasonable under
the circumstances and that the foregoing damages constitute a reasonable
estimate of the damages of the parties.
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ARTICLE 9
MISCELLANEOUS
9.1 Notices. Any notice or other communication under this Agreement
shall be in writing and shall be delivered personally or sent by certified mail,
return receipt requested, postage prepaid, or sent by facsimile or prepaid
overnight courier to the parties at the addresses set forth below their names on
the signature pages of this Agreement (or at such other addresses as shall be
specified by the parties by like notice). Such notices, demands, claims and
other communications shall be deemed given when actually received or (a) in the
case of delivery by overnight service with guaranteed next day delivery, the
next day or the day designated for delivery, (b) in the case of facsimile, the
date upon which the transmitting party received confirmation of receipt by
facsimile, telephone or otherwise. A copy of any notices delivered to Parent
shall also be sent to IVAX Corporation, 4400 Biscayne Boulevard, Miami, Florida
33137, Attn: General Counsel. A copy of any notices delivered to Company shall
also be sent to James S. Altenbach, Greenberg Traurig, LLP, 3060 Peachtree Road,
Suite 1100, Atlanta, Georgia 30305.
9.2 Entire Agreement. This Agreement contains every obligation and
understanding between the parties relating to the subject matter hereof, merges
all prior discussions, negotiations and agreements, if any, between them, and
none of the parties shall be bound by any representations, warranties,
covenants, or other understandings, other than as expressly provided or referred
to herein or therein.
9.3 Assignment. This Agreement may not be assigned by any party without
the written consent of the other party; provided that Merger Sub may assign this
Agreement to any direct wholly owned Delaware Subsidiary of Parent, whether such
Subsidiary currently exists or is formed in the future. Subject to the preceding
sentence, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, heirs, personal representatives,
legal representatives, and permitted assigns.
9.4 Waiver and Amendment. Any representation, warranty, covenant, term
or condition of this Agreement which may legally be waived, may be waived, or
the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereof may
be amended by the parties hereto at any time. Any such waiver, extension or
amendment shall be evidenced by an instrument in writing executed on behalf of
the appropriate party by a person who, to the extent applicable, has been
authorized by its Board of Directors to execute waivers, extensions or
amendments on its behalf. No waiver by any party hereto, whether express or
implied, of its rights under any provision of this Agreement shall constitute a
waiver of such party's rights under such provisions at any other time or a
waiver of such party's rights under any other provision of this Agreement. No
failure by any party hereto to take any action against any breach of this
Agreement or default by another party shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action
against such breach or default or any subsequent breach or default by such other
party.
9.5 No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
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9.6 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.
9.7 Expenses. Each party agrees to pay, without right of reimbursement
from the other party, the costs (hereafter referred to as "Costs") incurred by
it incident to the performance of its obligations under this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, costs incident to the preparation of this Agreement, and the fees
and disbursements of counsel, accountants and consultants employed by such party
in connection herewith. The Principal Stockholders (and not the Company) shall
be liable for any Costs incurred by them in connection with this Agreement or
the transactions contemplated hereby. In no event shall the Costs incurred by
the Company exceed $125,000 (excluding the mailing costs relating to the Company
Proxy Statement).
9.8 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.10 Litigation; Prevailing Party. In the event of any litigation with
regard to this Agreement, the prevailing party shall be entitled to receive from
the non-prevailing party and the non-prevailing party shall pay upon demand all
reasonable fees and expenses of counsel for the prevailing party.
9.11 Injunctive Relief. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including, without limitation, injunctive relief, specific performance or
other equitable remedies in addition to all other remedies provided hereunder or
available to the parties hereto at law or in equity.
9.12 Governing Law. This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of Florida
without reference to the choice of law principles thereof.
9.13 Jurisdiction and Venue. This Agreement shall be subject to the
exclusive jurisdiction of the courts of Miami-Dade County, Florida. The parties
to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of Florida by
virtue of a failure to perform an act required to be performed in the State of
Florida and irrevocably, unconditionally and expressly agree to submit to the
jurisdiction of the courts of the State of Florida for the purpose of resolving
any disputes among the parties relating to this Agreement or the transactions
contemplated hereby. The parties irrevocably waive, to the fullest extent
permitted by law, any objection or immunities to jurisdiction which they may now
or hereafter have (including sovereign immunity, immunity to pre-judgment
attachment, post-judgment attachment and execution) to the laying of venue of
any suit, action or proceeding arising
34
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out of or relating to this Agreement or the transactions contemplated hereby, or
any judgment entered by any court in respect hereof brought in the State of
Florida, and further irrevocably waive any claim that any suit, action or
proceeding brought in Miami-Dade County, Florida has been brought in an
inconvenient forum.
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
PARENT:
IVAX Corporation
By: /s/ Neil Flanzraich
------------------------------
Neil Flanzraich
Vice Chairman and President
4400 Biscayne Boulevard
Miami, Florida 33137
USA
Facsimile: (305) 575-6016
MERGER SUB:
WPI MERGER CORPORATION
By: /s/ Neil Flanzraich
------------------------------
Neil Flanzraich
Title: President
COMPANY:
WAKEFIELD PHARMACEUTICALS, INC.
By: /s/ Frank Byington
------------------------------
Name: Frank Byington
Title: President
310 Maxwell Road
Suite 100
Alpharetta, Georgia 30004
Facsimile:
PRINCIPAL STOCKHOLDERS:
/s/ Frank E. Byington
---------------------------------
Frank E. Byington
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/s/ John N. Kapoor, M.D.
---------------------------------
John N. Kapoor, M.D.
/s/ Marilyn M. Johnson
---------------------------------
Marilyn M. Johnson
/s/ Craig Laman
---------------------------------
Craig Laman
/s/ Raymond Schettino, M.D.
---------------------------------
Raymond Schettino, M.D.
/s/ Roy S. Schottenfeld, M.D.
---------------------------------
Roy S. Schottenfeld, M.D.
/s/ Dennis Spangler, M.D.
---------------------------------
Dennis Spangler, M.D.
/s/ Michael R. Stresser
---------------------------------
Michael R. Stresser
/s/ R. Faser Triplett, M.D.
---------------------------------
R. Faser Triplett, M.D.
OMC Profit Sharing Trust
By: /s/ R. Faser Triplett, M.D.
---------------------------------
R. Faser Triplett, M.D., Trustee
/s/ Don Mitchell, M.D.
---------------------------------
Don Mitchell, M.D., Trustee
Triplett Investment, LLC, a Mississippi
limited liability company
By: /s/ Rodney Faser Triplett, Jr.
---------------------------------
Rodney Faser Triplett, Jr.,
Manager/Member
/s/ Lloyd C. Davis, M.D.
---------------------------------
Lloyd C. Davis, M.D.
37
