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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 10, 1997
ZILA, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-17521 86-0619668
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5227 North 7th Street Phoenix, Arizona 85014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 266-6700
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On November 10, 1997 (the "Closing Date"), Zila, Inc. (the
"Company") acquired by merger (the "Merger") Oxycal Laboratories, Incorporated
("Oxycal") pursuant to the terms of the Acquisition Agreement and Plan of Merger
dated October 28, 1997, by and among the Company, Oxycal and Zila Acquisition
Corp. ("Acquisition Corp."). Under the terms of the Merger, Oxycal was merged
into Zila Acquisition Corp., a wholly owned subsidiary of Zila, with Oxycal
being the surviving corporation. After the Closing Date, all the issued and
outstanding shares of Acquisition Corp. were converted into the common stock of
Oxycal, the separate existence of Acquisition Corp. ceased, and Oxycal continued
its corporate existence under the laws of the State of Arizona as a wholly owned
subsidiary of Zila. Under the terms of the Merger, each outstanding share of
Oxycal common stock was converted into the right to receive per share cash
consideration of $10.1795. The total cash consideration equaled twenty eight
million dollars ($28,000,000) (the "Merger Consideration") which was reached by
arms-length negotiations between the Company and Oxycal.
The Company raised the funds to consummate the Merger in a
private placement of 30,000 shares of the Company's Series A Convertible
Preferred Stock (the "Series A Preferred Stock") and warrants to purchase
360,000 shares of the Company's Common Stock (the "Warrants") for $30,000,000
(the "Preferred Stock Proceeds"). The shares of Series A Preferred Stock, the
Warrants and the Preferred Stock Proceeds were deposited into escrow and were
released from escrow upon the consummation of the Merger. The difference between
the Preferred Stock Proceeds and the Merger Consideration will be used by the
Company for working capital and to pay the fees and expenses associated with the
sale of the Series A Preferred Stock.
Oxycal is the owner of all of the issued and outstanding shares
of capital stock of Oxycal Export, Inc., a United States Virgin Islands
corporation, and Inter-Cal Corporation, Inc. an Arizona corporation. Oxycal
develops, manufactures and markets a patented and enhanced form of vitamin C
under the trademark name Ester-C(R). Products manufactured with Ester-C mineral
ascorbate are sold throughout the United States and in 41 countries worldwide.
Oxycal also holds important technology patents the Company believes have
potential applications in the pharmaceutical industry. The Company currently
intends to operate Oxycal in a manner similar to the Oxycal operations prior to
the Merger.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business to Be Acquired
It is impractical to provide the required financial information for
the acquired business at this time. The Company is compiling the
information necessary for preparing the financial statements and the
pro forma financial information. The required financial statements
will be filed as soon as practicable but in no event later
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than sixty days after the date on which this report on Form 8-K is
required to be filed.
(b) Pro Forma Financial Information
See (a) above.
(c) Exhibits
<TABLE>
Exhibit No. Description
----------- -----------
<S> <C>
2 Articles of Merger and Plan of Merger
10 Acquisition Agreement and Plan of Merger
dated as of October 28, 1997, by and among
Zila, Inc., Oxycal Laboratories, Incorporated
and Zila Acquisition Corp.
99 Press Release dated as of November 10, 1997
</TABLE>
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ZILA, INC.
Date: November 21, 1997 By /s/ Joseph Hines
-----------------------------------
Joseph Hines
President
4
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EXHIBIT "2"
ARTICLES OF AMENDMENT AND MERGER
OF
ZILA ACQUISITION CORP.
INTO
OXYCAL LABORATORIES, INCORPORATED
These Articles Of Amendment And Merger are entered into between ZILA
ACQUISITION CORP., an Arizona corporation (herein the "Merging Company"), and
OXYCAL LABORATORIES, INCORPORATED, an Arizona corporation (herein the "Surviving
Corporation"). The Merging Company and the Surviving Corporation shall
hereinafter be referred to collectively as the "Entities" and separately as an
"Entity."
These Articles Of Amendment And Merger are delivered to the Arizona
Corporation Commission for filing pursuant to Section 10-1105 of the Arizona
Revised Statutes by the undersigned corporations.
FIRST: The names, addresses and states of incorporation of the merging
corporations are as follows:
Name and Address State of Incorporation
---------------- ----------------------
Zila Acquisition Corp. Arizona
5227 North 7th Street
Phoenix, Arizona 85014
Oxycal Laboratories, Incorporated Arizona
533 Madison Avenue
Prescott, Arizona 86301
SECOND: The name and address of the Statutory Agent of the Surviving
Corporation is Joseph Hines, 5227 North 7th Street, Phoenix, Arizona 85014.
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THIRD: Upon completion of the merger described herein, the Amended and
Restated Articles of Incorporation attached hereto as Exhibit I shall become the
Amended and Restated Articles of Incorporation of the Surviving Corporation.
FOURTH: The Plan of Merger attached hereto as Exhibit "A" was approved
by the shareholders of the undersigned corporations in the manner prescribed by
the Arizona Revised Statutes.
FIFTH: As to each such corporation, the number of shares of stock
issued and outstanding are as follows:
Number of Shares of Issued
Name of Corporation and Outstanding Common Stock
------------------- ----------------------------
Zila Acquisition Corp. 100 shares $.01 par
value common stock
Oxycal Laboratories, Incorporated 1,825,802.90 shares no par
value common stock
Neither corporation has a class of stock authorized other than common stock.
SIXTH: As to each such corporation, the number of shares voted for or
against such Plan of Merger, respectively, are as follows:
Name of Corporation Voted For Voted Against
------------------- --------- -------------
Zila Acquisition Corp. 100 0
Oxycal Laboratories, Incorporated 1,825,802.90 0
The number of votes cast for the Plan of Merger by Merging Corporation and the
Surviving Corporation were sufficient for approval by that voting group.
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IN WITNESS WHEREOF, Zila Acquisition Corp. and Oxycal Laboratories,
Incorporated have caused these Articles Of Amendment And Merger to be executed
by their respective duly authorized officers on this 10th day of November, 1997.
MERGING COMPANY:
ZILA ACQUISITION CORP., an Arizona corporation
By /s/ Joseph Hines
-------------------------------------------------
Joseph Hines, President
SURVIVING CORPORATION:
OXYCAL LABORATORIES, INCORPORATED,
an Arizona corporation
By /s/ Nancy J. Chandler
-------------------------------------------------
Nancy J. Chandler, Vice President of Operations
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EXHIBIT "A"
PLAN OF MERGER
THIS PLAN OF MERGER (the "Plan") is entered into as of the 28th day of
October, 1997, by and between ZILA ACQUISITION CORP., an Arizona corporation
("Subsidiary"), and OXYCAL LABORATORIES, INCORPORATED, an Arizona corporation
("Oxycal"), both such corporations being hereinafter sometimes referred to as
the "Constituent Corporations," and Oxycal being hereinafter sometimes referred
to as the "Surviving Corporation."
RECITALS
A. Subsidiary was incorporated on October 21, 1997, under the laws of the
State of Arizona. On the date hereof, its single authorized class of capital
stock consists of one hundred (100) shares of $.01 par value common stock
("Subsidiary Common"), of which one hundred (100) shares are outstanding on the
date hereof. Subsidiary is a wholly-owned subsidiary of Zila, Inc., a Delaware
corporation ("Zila").
B. Oxycal was incorporated on December 18, 1981, under the laws of the
State of Arizona (under the name Willow Creek Enterprises, Inc.). On the date
hereof, Oxycal's authorized capital stock consists of twenty million
(20,000,000) shares of no par common stock ("Oxycal Common"), of which
1,825,802.90 shares are outstanding on the date hereof.
C. Prior to the filing of this Plan of Merger with the Arizona Corporation
Commission, Subsidiary, Oxycal and Zila intend to execute a mutually agreeable
Acquisition Agreement and Plan of Merger (the "Acquisition Agreement"), which
sets forth the terms and conditions of the Plan of Merger. The respective Board
of Directors of Subsidiary and Oxycal have authorized the execution of the
Acquisition Agreement and have adopted resolutions authorizing the proposed
merger of Oxycal into the Subsidiary, with Oxycal to be the surviving
corporation, upon the terms and conditions set forth in the Acquisition
Agreement and this Plan of Merger. The Board of Directors of the Subsidiary and
Oxycal, respectively, have directed that this Plan of Merger be submitted to the
shareholders of each corporation for consideration and action.
AGREEMENT
NOW, THEREFORE, Subsidiary and Oxycal hereby agree to merge on the terms
and conditions hereinafter provided:
1. Following the execution of the definitive Acquisition Agreement, Oxycal
shall merge with and into Subsidiary and Oxycal shall continue as the Surviving
Corporation. Upon the merger of Oxycal into Subsidiary (the "Merger") at the
Effective Time (as defined in Paragraph 8 below), the separate existence of
Subsidiary shall cease. The corporate identity, existence, purposes, rights,
<PAGE> 5
privileges, powers, franchises, and immunities of Oxycal shall continue
unaffected and unimpaired by the Merger, and the corporate identity, existence,
purposes, rights, privileges, powers, franchises, and immunities of Subsidiary
shall be merged into Oxycal and Oxycal shall be fully vested therewith.
2. At the Effective Time, the Articles of Incorporation and By-Laws of
Subsidiary, as in effect immediately prior to the Effective Time, shall become
the Articles of Incorporation and By-Laws of the Surviving Corporation;
provided, however, that Article I of said Articles of Incorporation shall, as of
the Effective Time, be amended and restated in its entirety to read as follows:
The name of the Corporation is OXYCAL LABORATORIES, INCORPORATED.
The amended and restated Articles of Incorporation of the Surviving Corporation
that shall be in effect upon the Merger are attached hereto as Exhibit 1.
3. a. Oxycal shall, without other transfer, succeed to and possess all
the rights, privileges, powers, franchises, and immunities, both of a public and
private nature, and shall be subject to all the restrictions, disabilities,
debts, liabilities (including taxes) and duties of each of the Constituent
Corporations.
b. The rights, privileges, powers, franchises, and immunities of
each of the Constituent Corporations and all property, real, personal and mixed,
of, and all debts due or belonging to, either of the Constituent Corporations on
any account shall be vested in the Surviving Corporation. Without limiting the
generality of the foregoing, the Surviving Corporation shall assume liability
for income and other taxes of the Subsidiary which have or may become due for or
in respect of the income, operations or franchises of the Subsidiary for any
period ended prior to the Effective Time or by virtue of the Merger and shall
assume the responsibility of filing all tax returns required to be filed by or
on behalf of the Subsidiary.
c. Title to any real estate and to any other property vested by deed
or otherwise in either of the Constituent Corporations shall not revert or be in
any way impaired by reason of the Merger or the statutes providing therefor;
provided, however, that all rights of creditors and all liens upon the property
of either of the Constituent Corporations shall be preserved unimpaired, and all
debts, liabilities, and duties of each of the Constituent Corporations shall
henceforth attach to Oxycal and may be enforced against it to the same extent as
if they had been incurred or contracted by Oxycal. After the Effective Time, the
Surviving Corporation and the former directors and officers of the Subsidiary
shall each execute or cause to be executed such further assignments, assurances
or other documents as may be necessary or desirable to confirm title to their
respective properties, assets, and rights in Oxycal or to otherwise carry out
the purposes of this Plan, and their respective directors and officers shall and
will do all such acts and things to accomplish those purposes which Oxycal may
reasonably request.
4. a. At the Effective Time, each share of Oxycal Common issued and
outstanding
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immediately prior to the Effective Time shall, without any action on the part of
the holder thereof or by any party, cease to be an issued and existing share
and, subject to the rights any holder may have under Section 10-1301 et seq. of
the General Corporation Law of the State of Arizona, shall become and be
converted into a right to receive the Per Share Cash Consideration, as defined
in the Acquisition Agreement. The Cash Consideration (as defined in the
Acquisition Agreement) shall equal $28,000,000, less the adjustments made
pursuant to Section 7.1 of the Acquisition Agreement.
b. At or following the Effective Time, certificates representing all
of the Oxycal Common (the "Certificates") shall be surrendered to the exchange
agent, appointed by Zila (the "Exchange Agent"), for cancellation in the Merger.
Upon surrender to the Exchange Agent of the Certificates, the Exchange Agent,
subject to the conditions described below, will pay to the holder of the
Certificates cash in the amount equal to the number of shares represented by the
Certificates multiplied by the Per Share Cash Consideration.
5. At the Effective Time, each share of Subsidiary Common issued and
outstanding immediately prior to the Effective Time shall remain an issued and
existing share, but shall be converted into, without further action by any
party, an issued and outstanding share of Oxycal Common.
6. At the Effective Time, the directors of Subsidiary shall become the
directors of the Surviving Corporation and all such directors shall hold office
until their respective successors are duly elected and qualified in the manner
provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law. At the Effective Time, the current
directors of Oxycal shall be deemed to have resigned.
7. The officers of Subsidiary at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation, all such
officers to hold office until their respective successors are duly elected and
qualified in the manner provided in the Articles of Incorporation and By-Laws of
the Surviving Corporation, or as otherwise provided by law.
8. In accordance with the terms and conditions of the Acquisition
Agreement, each of the Constituent Corporations shall take, or cause to be
taken, all actions, or do or cause to be done all things, necessary, proper or
advisable under the laws of the State of Arizona to make the Merger effective,
subject, however, to the appropriate vote or consent of the stockholders of each
of the Constituent Corporations in accordance with the General Corporation Law
of the State of Arizona. The Merger shall be effected by, and shall be given
effect upon, the filing of Articles of Merger with the Corporation Commission of
the State of Arizona, in accordance with the applicable provisions of the
General Corporation Law of the State of Arizona. The date and time of such
filing is referred to in this Plan as the "Effective Time."
9. When the Merger becomes effective, the holders of Certificates of
Oxycal Common outstanding on the Effective Time shall cease to have any rights
with respect to such stock and their sole right shall be the right to receive
the Per Share Cash Consideration multiplied by the number
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of shares represented by the Certificates, as provided for in Section 4 above in
exchange for such Certificates.
10. This Plan of Merger, and the consummation of the transactions
contemplated hereby, is subject to and conditioned upon Zila, Oxycal, and
Subsidiary executing and delivering the definitive Acquisition Agreement.
11. The Plan may be terminated and abandoned by mutual consent of Oxycal
and Subsidiary at any time prior to the Effective Time, or by the Board of
Directors of either of the Constituent Corporations if the Acquisition Agreement
shall have been terminated as therein provided, notwithstanding approval of the
Plan by the stockholders of either or both of the Constituent Corporations. This
Plan shall terminate if a definitive Acquisition Agreement is not executed by
Zila, Subsidiary, and Oxycal on or before November 13, 1997.
12. This Plan may be amended by the Boards of Directors of the Constituent
Corporations at any time prior to the filing hereof with the Corporation
Commission of the State of Arizona, provided that an amendment made following
approval of the Plan by the stockholders of either of the Constituent
Corporations shall not (i) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporations, (ii) alter or change any term of the Articles of
Incorporation of the Subsidiary or Oxycal to be effected by the Merger, or (iii)
alter or change any of the terms and conditions of the Plan if such alteration
or change would adversely affect the holders of any class or series of stock of
such Constituent Corporations.
13. In the event of any discrepancy between the Acquisition Agreement and
this Plan with respect to any matter, the Acquisition Agreement shall control.
14. This Plan may be executed in any number of counterparts and each such
counterpart hereof shall be deemed to be an original instrument but all of such
counterparts together shall constitute but one agreement.
4
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IN WITNESS WHEREOF, pursuant to authority duly given by its Board of
Directors, each of the Constituent Corporations has caused this Plan of Merger
to be executed and attested by its authorized officers as of the date and year
first above written.
ZILA ACQUISITION CORP., an Arizona
corporation
By: /s/ Joseph Hines
-----------------------------------
Its: President
----------------------------------
OXYCAL LABORATORIES,
INCORPORATED, an Arizona corporation
By: /s/ Nancy J. Chandler
-----------------------------------
Nancy J. Chandler
Its Vice President of Operations
The undersigned, Zila, Inc., a Delaware corporation, hereby agrees to take
any and all action on its part required to be taken in order to permit the
accomplishment of the terms and conditions set forth in the above Plan, subject
to the execution and delivery of a definitive Acquisition Agreement.
ZILA, INC., a Delaware corporation
By: /s/ Joseph Hines
-----------------------------------
Its: President
----------------------------------
5
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EXHIBIT "10"
ACQUISITION AGREEMENT AND PLAN OF MERGER
This Acquisition Agreement and Plan of Merger (this "Agreement") is
made and entered into as of October 28, 1997, by and among ZILA, INC., a
Delaware corporation ("Parent"), ZILA ACQUISITION CORP., an Arizona corporation
and wholly-owned subsidiary of Parent ("Acquisition Corp."), and OXYCAL
LABORATORIES, INCORPORATED, an Arizona corporation ("Oxycal").
RECITALS:
A. Oxycal is the owner of all of the issued and outstanding shares of
capital stock of Oxycal Export, Inc., a United States Virgin Islands corporation
("Export"), and Inter-Cal Corporation, Inc., an Arizona corporation (
"Inter-Cal"). Oxycal, Export, and Inter-Cal develop, manufacture and market a
patented form of vitamin C under the registered trademark "Ester-C," which is
distributed and sold in bulk to manufacturers and private labeling companies for
distribution or use in their own formulations.
B. Oxycal has 1,825,802.90 shares of capital stock issued and
outstanding as of the date of this Agreement and 830,601.83 shares of its common
capital stock subject to stock options that are or will become exercisable on or
prior to the Closing Date as defined below. Any issued and outstanding shares of
Oxycal's stock, regardless of class, including any issued and outstanding
options or warrants to purchase stock of Oxycal, shall hereinafter be called the
"Oxycal Shares." The stock records of Oxycal reflect that each of the
shareholders of Oxycal (the "Oxycal Shareholders") owns the number of Oxycal
Shares set forth opposite his or her name on the attached Schedule 2.4.1.
C. Parent is the owner of all the issued and outstanding shares of
capital stock of Acquisition Corp.
D. The Board of Directors of Oxycal, Parent and Acquisition Corp. deem
it advisable and in the best interests of their respective shareholders that
Acquisition Corp. acquire Oxycal by merging Oxycal into Acquisition Corp. and
converting the issued and outstanding shares of Oxycal into the right to receive
cash (the "Merger"), as hereinafter provided.
E. The parties desire to enter into this Agreement to set forth the
terms and conditions of the Merger and the representations, warranties and
covenants made by the parties to induce the execution and delivery of this
Agreement and the consummation of the Merger.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE 1. PLAN OF MERGER
Parent, Acquisition Corp. and Oxycal hereby adopt the following Plan of
Merger (the "Plan of Merger").
1.1 Surviving Corporation. In accordance with the provisions of this
Agreement and at the Effective Time (as such term is defined in Section 1.9),
Oxycal shall be merged with and into Acquisition Corp., with Oxycal being the
surviving corporation in the Merger (sometimes called the "Surviving
Corporation"). At the Effective Time, (i) each Oxycal Share shall cease to be
issued and outstanding and shall be converted into a right to receive the Per
Share Cash Consideration, as defined in Section 1.2 below; (ii) the issued and
outstanding shares of Acquisition Corp. shall be converted into the voting,
common stock of Oxycal; (iii) the separate existence of Acquisition Corp. shall
cease and Oxycal, as the Surviving Corporation, shall continue its corporate
existence under the laws of the State of Arizona as a separate wholly-owned
subsidiary of Parent; and (iv) Oxycal, as the Surviving Corporation, as of the
Effective Time, shall succeed to all the rights, and possess all of the rights,
privileges, immunities, powers and purposes, and shall assume and be liable for,
all of the liabilities, obligations and penalties of Acquisition Corp.
1.2 Merger Consideration.
(a) Consideration. The consideration payable to the Oxycal
Shareholders pursuant to the Merger ("Merger Consideration") shall consist in
the aggregate solely of the Cash Consideration. At the Effective Time, each
issued and outstanding Oxycal Share shall, without any action on the part of the
holder thereof, cease to be an issued and existing share, but shall become and
be converted into a right to receive the Per Share Cash Consideration, as such
term is defined below, deliverable to the holder thereof, without interest
thereon upon the surrender of the certificate(s) formerly representing such
outstanding Oxycal Shares.
(b) Cash Consideration. The "Cash Consideration" shall equal
Twenty Eight Million Dollars ($28,000,000), less the adjustment made pursuant to
Section 7.1 of this Agreement. The Per Share Cash Consideration shall equal the
Cash Consideration, less the Financial Advisor Fee paid by Parent pursuant to
Section 1.3(a) of this Agreement, divided by the total number of Oxycal Shares
issued and outstanding as of the Effective Time.
1.3 Delivery of Merger Consideration.
(a) Exchange Agent. Pursuant to the Exchange Agent Agreement
(the "Exchange Agent Agreement") attached hereto as Exhibit A, Bank One,
Arizona, NA shall act as exchange agent in connection with the Merger (the
"Exchange Agent"). Upon the execution of this Agreement Zila shall deposit
$1,000,000 (the "Initial Deposit") with the Exchange Agent pursuant to and in
accordance with the terms of the Exchange Agent Agreement. At the Effective
Time, Parent shall
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provide the Exchange Agent with the Cash Consideration, less the Initial
Deposit. The Initial Deposit shall be considered part of the Cash Consideration
for purposes of this Agreement. At the Closing, the Exchange Agent will pay to
the Financial Advisor the Financial Advisor Fee from the Cash Consideration,
concurrently with distributing to each former Oxycal Shareholder the Per Share
Consideration multiplied by the number of Oxycal Shares referenced by the stock
certificate representing the Oxycal Shares (the "Certificates") delivered to the
Exchange Agent with an executed Letter of Transmittal and Release (in the form
of Exhibit B attached hereto) by each former Oxycal Shareholder (each of the
Oxycal Shareholders owning the number of Oxycal Shares set forth opposite his or
her name on Schedule 2.4.1), reduced by any Withholding Amount applicable to the
Oxycal Shareholder .
(b) Surrender of Certificates and Delivery of Cash
Consideration. At or following the Closing (as such term is defined in Section
1.10), the Certificates shall be surrendered to the Exchange Agent for
cancellation in the Merger. Upon surrender to the Exchange Agent of a
Certificate and executed Letter of Transmittal and Release, the Exchange Agent
will pay the holder of such Certificate a cash amount equal to the number of
whole and fractional Oxycal Shares represented by such Certificate multiplied by
the Per Share Cash Consideration, reduced by any Withholding Amount applicable
to the Oxycal Shareholder. After the Effective Time and until surrendered for
payment, each outstanding Certificate which, prior to the Effective Time,
represented Oxycal Shares shall be converted to and shall represent only the
right to receive cash in an amount equal to the sum of the Per Share Cash
Consideration multiplied by the number of shares represented by such
Certificate, without interest; provided that, in any matters relating to such
Certificates, Parent and the Surviving Corporation may rely conclusively upon
the stock records maintained by Oxycal as of the Effective Time. If any
Certificate shall have been lost, stolen or destroyed, by the making of an
affidavit that such Certificate was lost, stolen or destroyed, and providing an
agreement of indemnification to the Surviving Corporation and the Exchange Agent
("Affidavit and Indemnification Agreement"), the Exchange Agent and the
Surviving Corporation will issue in exchange for such Affidavit and
Indemnification Agreement the Per Share Cash Consideration attributable to the
Oxycal Shares represented by such lost, stolen or destroyed Certificate, except
that when authorizing such issuance of the payment in exchange therefor, the
Exchange Agent, in its discretion and as a condition precedent to the issuance
thereof, may require that the owner of such lost, stolen or destroyed
Certificate give the Exchange Agent and the Surviving Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Exchange Agent or the Surviving Corporation with respect to the Certificate
alleged to have been lost, stolen or destroyed. The Exchange Agent may require
that any Oxycal Shareholder which is a trust execute and deliver to the Exchange
Agent a certificate evidencing the existence of the trust and the authority of
the trustee.
(c) Escheat Laws. Notwithstanding any provision of this
Article 1 to the contrary, neither Parent nor the Surviving Corporation shall be
liable to any holder of Certificates formerly representing Oxycal Shares for any
property delivered or amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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<PAGE> 4
(d) Interpleader. In the event any dispute exists with respect
to the entitlement of any Oxycal Shareholder or other person to receive all or
part of the Per Share Cash Consideration, Parent or the Exchange Agent may,
without incurring any liability to any such Oxycal Shareholder or other person,
cause such consideration to be deposited with either the Superior Court of the
State of Arizona, in and for Maricopa County, or the United States District
Court sitting in Phoenix or Prescott, Arizona, pursuant an interpleader action
to resolve the rights of the parties claiming an interest in any such
consideration. Neither Oxycal nor Parent shall be liable for interest on any
monies interpled pursuant to this paragraph and Parent and Oxycal shall be
entitled to deduct from the amounts interpled reasonable attorneys' fees and all
costs associated with any such interpleader action. Prior to the Effective Time,
Oxycal shall provide Parent with a list of Oxycal Shareholders of whom it is
aware that any issue concerning ownership of Oxycal Shares may exist.
1.4 Certificate of Incorporation. The Articles of Incorporation of
Acquisition Corp. as in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended as provided by law.
1.5 By-Laws. The By-Laws of Acquisition Corp. as in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until amended
as provided by law.
1.6 Directors. The directors of Acquisition Corp. at the Effective Time
shall be the directors of the Surviving Corporation, all such directors to hold
office until their respective successors are duly elected and qualified in the
manner provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law. The present directors of Oxycal
shall resign as of the Effective Time.
1.7 Officers. The officers of Acquisition Corp. at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation, all such officers to hold office until their respective successors
are duly elected and qualified in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
1.8 Articles of Merger. To effectuate the Merger, Acquisition Corp. and
Oxycal will execute and file with the Arizona Corporation Commission and such
other governmental agencies as may be required by law, the Articles of Merger
and a Plan of Merger in substantially the form set forth in Exhibit C.
1.9 Effective Time. The Merger shall be effective (the "Effective
Time") when both (i) the Oxycal Shareholders approve the transactions
contemplated by this Agreement in accordance with the applicable provisions of
the Arizona Business Corporation Act, and (ii) the Articles of Merger and Plan
of Merger are filed with the Arizona Corporation Commission. The Effective Time
shall not be later than the Closing Date (as defined in Section 1.10).
1.10 Closing. The closing ("Closing") shall occur at the offices of
Streich Lang P.A., Two North Central Avenue, Phoenix, Arizona 85004, on or
before the later of (i) November 13, 1997, (ii) any extended Closing Date
provided in Section 9.2, or (iii) at such other time as Parent and
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Oxycal may mutually agree in writing (the "Closing Date"). The parties will
proceed diligently and use their respective best efforts, exercised in good
faith, to effect the Closing on or before the Closing Date.
1.11 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition Corp. or Oxycal acquired or to be acquired by reason
of, or as a result of, the Merger, or otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
are authorized to execute and deliver, in the name and on behalf of Acquisition
Corp. or Oxycal, as the case may be, all such deeds, bills of sale, assignments
and assurances and to do, in the name and on behalf of Acquisition Corp. or
Oxycal, all such other acts and things necessary or desirable to vest, perfect
or confirm any and all right, title or interest in, to or under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
purposes of this Agreement.
1.12 Adjustment Events. Oxycal has agreed not to alter its capital
structure or that of its Subsidiaries or to issue additional stock, stock
options or warrants, or to allow its Subsidiaries to take any such action, or to
take any other action that would alter their respective capital structure, other
than to issue additional common stock upon the exercise of the stock options
pursuant to Section 1.14.
1.13 Dissenting Shares. If any holder of Oxycal Shares has perfected
his dissenters rights under A.R.S. Section 10-1301, et seq., such shares (the
"Dissenting Shares") shall not be converted into the right to receive the Per
Share Cash Consideration, as provided in this Article 1, but the holder of any
Dissenting Shares shall be entitled to receive only such consideration to which
he is entitled under A.R.S. Section 10-1301, et seq. If at any time after the
Effective Time the holder of Dissenting Shares withdraws any demand for, or
otherwise ceases for any reason to be entitled to appraisal rights for such
Dissenting Shares under A.R.S. Section 10-1301, et seq., each of such Dissenting
Shares shall at that time be converted into, and to have become exchangeable
for, as of the Effective Time, the right to receive the Per Share Cash
Consideration provided in this Article, without any interest thereon. The
Surviving Corporation shall be entitled to direct all negotiations and
proceedings with respect to any Dissenting Shares. Unless otherwise consented to
by Parent in writing, Oxycal shall not make at any time any payment, settle or
offer to settle any demands or claims of the holders of Dissenting Shares.
1.14 Treatment of Stock Options. Each stock option to purchase Oxycal
Stock shall be exercised prior to the Effective Time and, if not exercised,
shall be automatically terminated as of the Effective Time. To exercise any such
option, the optionee shall be obligated to pay the full amount of the exercise
price to Oxycal prior to the Effective Time, which payment may be contingent
upon the Merger taking place. Except as set forth on Schedule 2.4.1, no Oxycal
option holder shall be entitled to reimbursement for all or any part of the
option price relating to such option.
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ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF OXYCAL
As of the date of this Agreement and as of the Closing Date, Oxycal
represents and warrants to, and covenants with Parent and Acquisition Corp. as
follows:
2.1 Organization, Powers and Qualification. Oxycal is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Arizona and has all necessary corporate power to own its properties and
assets and to carry on its business as now conducted. Oxycal is duly qualified
to conduct its business and is in good standing in each jurisdiction in which
the nature of the business transacted by Oxycal requires such qualification. A
listing of all jurisdictions in which Oxycal is qualified to do business is set
forth in Schedule 2.1.
2.2 Capitalization. On the date hereof Oxycal has authorized, issued
and outstanding capital stock as follows:
<TABLE>
<CAPTION>
CLASS OF STOCK AUTHORIZED ISSUED OUTSTANDING TREASURY
-------------- ---------- ------ ----------- --------
<S> <C> <C> <C> <C>
Common............. 20,000,000 1,825,802.90 1,825,802.90 -0-
Preferred............. -0- -0- -0- -0-
</TABLE>
All of the issued and outstanding Oxycal Shares are duly and validly authorized
and issued, fully paid and nonassessable and none of the Oxycal Shares has
preemptive rights. As reflected on Schedule 2.4.1, 830,601.83 shares of Oxycal
common stock are reserved for issuance upon the exercise of outstanding stock
options for 830,601.83 shares of Oxycal common stock, 740,029.83 shares issuable
under Oxycal's stock option plan (the "Stock Option Plan") and 90,572 shares
issuable outside of the Stock Option Plan. All options issued for Oxycal common
stock are validly issued and outstanding and have been issued pursuant to, and
comply with, all laws and documents applicable to the issuance of such options.
At the Effective Time, any issued and outstanding option for Oxycal common stock
shall have been exercised or terminated. At the Effective Time, all of Oxycal's
issued and outstanding shares of capital stock will have been either outstanding
on the date of this Agreement or issued upon exercise of stock options presently
outstanding under the Stock Option Plan. Other than as set forth above, there
are no (nor will there be at the Effective Time) outstanding or existing
subscriptions, options, warrants, convertible securities, preemptive rights or
other agreements, commitments or obligations relating to the issuance of
additional shares of any class of capital stock or other equity securities of
Oxycal.
2.3 Subsidiaries. Set forth in Schedule 2.3.1 (the "Subsidiary List")
is a list of all entities and business enterprises (including, without
limitation, corporations, partnerships, limited liability companies, and joint
ventures, but excluding inactive corporations and ventures listed on the Venture
List) in which Oxycal has a direct or indirect equity or ownership interest
which represents 10% or more of the aggregate equity or ownership interest in
such entity (each a "Subsidiary" and
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<PAGE> 7
collectively, the "Subsidiaries"). The Subsidiary List shows for each of the
Subsidiaries: its date and jurisdiction of incorporation or organization; the
current officers and directors; each other jurisdiction in which it is qualified
or licensed to do business; its authorized, issued and outstanding capital
stock, other equity securities and other ownership interests; and the record
owners thereof, and the percentages owned by each. Each of the Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all necessary
corporate power to own its properties and assets and to carry on its business as
now conducted. Each of the Subsidiaries is duly qualified to conduct its
business and is in good standing in each jurisdiction in which the nature of the
business transacted by it requires such qualification. Other than as set forth
on the Subsidiary List, all of the issued and outstanding shares of capital
stock, other equity securities and other ownership interests of the Subsidiaries
are duly and validly authorized and issued, are fully paid and nonassessable
and, together with all outstanding subscriptions, options, warrants, convertible
securities, preemptive rights and other agreements, commitments and obligations
relating to the issuance of additional shares of capital stock, other equity
securities or other ownership interests of any of the Subsidiaries, are owned by
Oxycal or another Subsidiary, free and clear of all liens, security interests,
charges, claims and encumbrances. Other than as set forth on the Subsidiary
List, there are no shares of any class of capital stock, other equity securities
or other ownership interests of any of the Subsidiaries outstanding and there
are no outstanding or existing subscriptions, options, warrants, convertible
securities, preemptive rights or other agreements, commitments or obligations
relating to the issuance of additional shares of any class of capital stock,
other equity securities or other ownership interests of any of the Subsidiaries.
The Subsidiary List also contains a list of any of Oxycal's inactive subsidiary
corporations, including the jurisdiction of incorporation and the name of each.
Set forth in Schedule 2.3.2 (the "Venture List") is a list of all joint
ventures, partnerships, limited liability companies or arrangements (the
"Ventures") in which Oxycal or any Subsidiary has a direct or indirect equity or
ownership interest of 10% or more of the aggregate equity or ownership
interests. The Venture List shows with respect to each of the Ventures: the date
and jurisdiction of its formation and each jurisdiction in which it is qualified
or licensed to do business. Oxycal shall make available to Parent all
information concerning any Venture shown on the Venture List which Parent may
request. Each of the Ventures has all necessary power to own its properties and
assets and to carry on its business as now conducted. Each of the Ventures is
duly qualified to conduct its business and is in good standing in each
jurisdiction in which the nature of the business transacted by it requires such
qualification. Oxycal or any Subsidiary's equity ownership interest in each
Venture is owned free and clear of all liens, security interests, charges,
claims and encumbrances.
2.4 Oxycal Shareholders.
Set forth in Schedule 2.4.1 hereto is a list of the names and
addresses of each Oxycal Shareholder of record, together with the mailing
address of each such Shareholder. The information set forth in Schedule 2.4.1
conforms to Oxycal's stock records and to the best of Oxycal's knowledge, after
due investigation, is correct and accurate in all respects. Oxycal is not aware
of any other party, other than the Oxycal Shareholders listed on Schedule 2.4.1
and the Financial Advisor, who is entitled to receive any portion of the Merger
Consolidation.
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<PAGE> 8
2.5 Financial Statements. Oxycal has delivered to Parent its audited,
consolidated balance sheets and related consolidated statements of income,
stockholders' equity, and cash flows for Oxycal and its Subsidiaries for the
periods ended June 30, 1995, 1996 and 1997, and its unaudited consolidated
balance sheets, statements of income, changes in stockholders' equity and cash
flows for Oxycal and its Subsidiaries for the three month period ended September
30, 1997 (the "Interim Financial Statements") (collectively, the "Financial
Statements"). The Financial Statements for the periods ended June 30, 1995, 1996
and 1997, have been examined by Deloitte & Touche LLP ("Deloitte Touche"),
independent certified public accountants, whose report thereon is included with
such financial statements; all the Financial Statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis (except for changes, if any, required by generally accepted accounting
principles and disclosed therein), and the statements of income present fairly
the results of operations for the respective periods covered and the balance
sheets present fairly the consolidated financial condition of Oxycal and its
Subsidiaries as of their respective dates (subject, in the case of the Interim
Financial Statements, to the absence of footnotes and to normal year-end
adjustments, which, in the aggregate, are not material to the Interim Financial
Statements taken as a whole). At the dates of such consolidated Financial
Statements, there were no material liabilities of Oxycal or any of the
Subsidiaries (actual, contingent or accrued) which, in accordance with generally
accepted accounting principles applied on a consistent basis, should have been
shown or reflected in such Financial Statements or the notes thereto, but which
are not so shown or reflected. Set forth in Schedule 2.5 is a summary of all
inventory and backlog orders of Oxycal and its Subsidiaries as of September 30,
1997, and a schedule of inventory at September 30, 1997. Except as set forth in
Schedule 2.12 and the proceeding described in Section 3.9, neither Oxycal nor
any of its Subsidiaries have, as of the date of this Agreement or at the Closing
Date, any liabilities or obligations, either absolute, accrued, contingent or
otherwise that have not been reflected in the Financial Statements delivered to
Parent.
2.6 Taxes. Except as set forth in Schedule 2.6:
(a) The Company and the Subsidiaries have timely filed all
returns that are required to be filed by them with respect to any taxes, and all
such returns have been accurately and completely prepared in compliance with all
applicable legal requirements and are true, correct, and complete in all
material respects; all taxes due and payable by the Company and the Subsidiaries
have been paid, the Company's and the Subsidiaries' provisions for taxes on the
Interim Financial Statements are sufficient for all accrued and unpaid taxes as
of the date of such balance sheet; the Company and the Subsidiaries have paid
all taxes due and payable by them or which they are obligated to withhold from
amounts owing to any employee, consultant, creditor, or third party; neither the
Company nor any Subsidiary has waived any statute of limitations in respect of
taxes relating to any of their businesses or agreed to any extension of time
with respect to a tax assessment or deficiency relating to any of their
businesses; the assessments of any additional taxes relating to their businesses
for periods for which returns have been filed is not expected, and no audit of
the Company or any Subsidiary is ongoing, threatened, or anticipated; and there
are no unresolved questions or claims concerning the tax liability of the
Company or any Subsidiary.
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<PAGE> 9
(b) All material elections with respect to taxes of the
Company and any Subsidiary are set forth in Schedule 2.6; neither the Company
nor any Subsidiary (i) has consented at any time under Section 341(f) of the
Code to have the provisions of Section 341(f) apply to any disposition of assets
of the Company or any Subsidiary, (ii) has agreed, or is required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise that will affect the liability of the Company or any
Subsidiary for taxes, (iii) has made an election, or is required, to treat any
asset of the Company or any Subsidiary as owned by another person pursuant to
provisions of Section 168(f) of the Code or as tax-exempt bond financed property
or tax-exempt use property within the meaning of Section 168 of the Code, or
(iv) has made any of the foregoing elections or consents or is required to apply
any of the foregoing rules under any comparable state, county, local, or foreign
tax provision.
2.7 Material Contracts. All material executory contracts, indentures,
commitments, and other material agreements to which Oxycal or any of the
Subsidiaries is a party or to which Oxycal or any of the Subsidiaries or any of
their properties are subject (collectively, the "Material Contracts") were
entered into, and are, in the ordinary course of business, except those which
appear on Schedule 2.7 (the "Contract List") and which have been furnished to
Parent. True copies of the agreements appearing on the Contract List, including
all amendments and supplements thereto, have been delivered to Parent. Except as
disclosed on the Contract List, all the Material Contracts are valid, binding,
and subsisting, Oxycal and each of the Subsidiaries has duly performed in all
material respects all its obligations thereunder to the extent that such
obligations to perform have accrued and no breach or default thereunder by
Oxycal or any of the Subsidiaries or any other party thereto has occurred which
will impair the ability of Oxycal or any of the Subsidiaries to enforce any
material rights thereunder. No provision of any contract prohibits the
consummation of the transactions contemplated by this Agreement and the
consummation of the Merger will not result in default under or a termination of
any Material Contract. Except for those breaches or defaults specifically noted
in Schedule 2.7, neither Oxycal nor any of its Subsidiaries is in breach of or
default under any Material Contract. Except as specifically disclosed in the
Contract List, Oxycal has not entered into any exclusive dealing agreement with
any customer, distributor, supplier or other person which is not terminable at
will or which bars Oxycal, its Subsidiaries or its distributors from
distributing Oxycal's or any Subsidiary's products in a particular geographic
area.
2.8 Marketable Title to Assets. Oxycal and each of the Subsidiaries has
good and marketable title to its real and personal property, including
leaseholds, and all of its other assets and properties, all as reflected in the
Current Financial Statements, except for (i) taxes not yet due or which are
being contested in good faith and for which adequate reserves have been
established and which have been disclosed to Parent, and (ii) assets and
properties disposed of since June 30, 1997, in the ordinary course of business,
and (iii) any matters reflected in Schedule 2.8. Oxycal and each of the
Subsidiaries has title or other rights to its assets sufficient in all material
respects for the conduct of its business as presently conducted.
2.9 No Adverse Change in Condition. There has been no material adverse
change in the financial condition, business, properties, assets, or
capitalization of Oxycal and its Subsidiaries, taken as a whole, since June 30,
1997.
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<PAGE> 10
2.10 No Loss or Damage to Property. There has been no loss, damage or
destruction (whether or not covered by insurance) affecting any of the
properties or business of Oxycal or any of the Subsidiaries since June 30, 1997,
or which, alone or in the aggregate, may involve a loss of more than $50,000 in
excess of applicable insurance coverage.
2.11 Binding Approval. Subject only to approval of the Merger by the
Oxycal Shareholders, the execution and delivery of this Agreement by Oxycal have
been duly and validly authorized by all necessary corporate action on the part
of Oxycal. This Agreement constitutes the legal, valid and binding obligation of
Oxycal, enforceable against Oxycal in accordance with its terms. The execution
of this Agreement and the Articles of Merger and Plan of Merger by Oxycal, and
the consummation of the transactions contemplated thereby, will not violate the
provisions of, or constitute a breach or default under, any of the Certificates
or Articles of Incorporation, By-Laws or other charter documents of Oxycal or
any of the Subsidiaries or any Material Contract.
2.12 Litigation. Except as specifically disclosed in Schedule 2.12,
there is no action, suit, administrative proceeding, hearing, investigation,
arbitration, mediation or other proceeding, (whether at law, in equity or
otherwise) pending or threatened, against Oxycal or its Subsidiaries. Except as
specifically disclosed in Schedule 2.12, there are no existing facts or
conditions that are not disclosed in Schedule 2.12 or, as to environmental
matters, Schedule 2.29, which might give rise to any charge, claim, litigation,
proceeding, or investigation by any third party. Oxycal does not know of and is
not aware of any facts or conditions that are not disclosed in Schedule 2.12 or,
as to environmental matters, in Schedule 2.29 which might give rise to any claim
against Oxycal, any Subsidiary or their assets. There is no litigation, action,
suit, investigation, proceeding or investigation pending or threatened, before
any court, agency or other governmental body against Oxycal or any Subsidiary
which seeks to enjoin or prohibit or otherwise challenge the transactions
contemplated by this Agreement.
2.13 Minute Books. The minute books of Oxycal and each of the
Subsidiaries accurately reflect all material actions taken to this date by the
respective stockholders, boards of directors and committees of such corporations
and contain true and complete copies of their respective Certificates or
Articles of Incorporation, By-Laws and other charter documents, and all
amendments thereto. The Articles of Incorporation and Bylaws of Oxycal and each
of its Subsidiaries have been maintained, amended and restated in accordance
with all laws applicable to such matters and are presently in full force and
effect.
2.14 Corporate Records. Oxycal and each of the Subsidiaries have
records which accurately and validly reflect, in all material respects, its
transactions and accounting controls sufficient to insure that such transactions
are (i) in all material respects, executed in accordance with its management's
general or specific authorization, and (ii) recorded in conformity with
generally accepted accounting principles consistently applied. Such records, to
the extent they contain important information pertaining to Oxycal or any of the
Subsidiaries which is not easily and readily available elsewhere, have been
duplicated, and such duplicates are stored safely and securely pursuant to
procedures and techniques reasonably adequate for companies of the sizes of
Oxycal and
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<PAGE> 11
the Subsidiaries and in the respective businesses in which Oxycal and the
Subsidiaries are engaged; and the data processing equipment, data transmission
equipment, related peripheral equipment and software used by Oxycal and the
Subsidiaries in the operations of their respective businesses (including any
disaster recovery facility) to generate and retrieve such records are adequate
for companies of the sizes of Oxycal and the Subsidiaries and in the respective
businesses in which Oxycal and the Subsidiaries are engaged.
2.15 Government and Other Consents. No consent, authorization or
approval of, exemption by, or filing with any governmental, public or
self-regulatory body or authority or any other third party is required in
connection with Oxycal's execution, delivery and performance of this Agreement,
any of the instruments or agreements referred to herein or the consummation by
Oxycal of the transactions herein contemplated, except (i) the approval of
Oxycal's Shareholders, and (ii) filing Articles of Merger with the Arizona
Corporation Commission.
2.16 Franchises, Permits, Licenses, Compliance with Applicable Laws and
Court Orders. The franchises, permits, licenses, authorizations, variances,
orders and approvals of governmental or administrative authorities, domestic or
foreign, listed on Schedule 2.16.1 are the only ones necessary for Oxycal and
each of its Subsidiaries to own, lease or operate its properties for the conduct
of its business as presently conducted, including, without limitation, all Food
and Drug Administration rules and regulations (individually a "Permit" and,
collectively, the "Permits"). Except for those Permits listed in Schedule
2.16.2, all such Permits are in full force and effect, and there is no
condition, nor has any event occurred, which constitutes or with the giving of
notice, or passage of time, or both, would constitute, a violation of the terms
of any Permit, and no suspension or cancellation of any Permit is pending or
threatened. Neither the execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement would constitute a violation of the
terms of any such Permit or grounds for the termination of any such Permit.
Schedule 2.16.1 contains a list of all such material Permits and any outstanding
permit applications to which either Oxycal or its Subsidiaries is a party, which
relate to the business of Oxycal or its Subsidiaries or any properties owned,
leased or operated by any of them. No application for a Permit filed by or on
behalf of Oxycal or its Subsidiaries, or in connection with a facility operated
by any of them, within the last five (5) years has been denied. Except for those
items of non-compliance set forth in Schedule 2.16.3, Oxycal and each of its
Subsidiaries has, in the operation of its business, duly complied and conducted
its business in accordance with all applicable laws, rules, regulations, Permits
and orders of federal, state, local and foreign governments (including, without
limitation, any labeling laws and any rules and regulations published by the
Food and Drug Administration, including as set forth in 21 C.F.R., Part 101, and
the requirements of 21 U.S.C. Section 343(r)(6)). Except for those defaults and
matters specifically noted in Schedule 2.16.2, Oxycal and its Subsidiaries are
not in default with respect to any order, judgment, writ, injunction, decree,
award, Permit, rule or regulation of any court, governmental or regulatory body
or arbitrator which applies to, affects or limits the operations or business of
Oxycal or its Subsidiaries or the use of the assets of Oxycal or its
Subsidiaries.
2.17 Indebtedness. Except as set forth in the Financial Statements,
neither Oxycal nor any Subsidiary has any obligation for money borrowed and has
not guaranteed or acted as a surety for
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<PAGE> 12
any obligation of another. Except for those consents and approvals specifically
noted on Schedule 2.17, no consent or approval to the transactions contemplated
by this Agreement is required by any lender, creditor, or beneficiary of a
guaranty, or, if such consent or approval is required, then the same has been
obtained in writing, or waived.
2.18 Accounts Receivable. Except as specifically noted in Schedule
2.18, no amount included in the accounts receivable of Oxycal or its
Subsidiaries as of September 30, 1997, has been released or settled for an
amount less than the value at which it was included in the Interim Financial
Statements as of that date. There are no facts or circumstances (other than
general economic conditions) which would result in any material increase in the
uncollectability of such accounts receivable over historical collection rates.
Schedule 2.18 sets forth a list of all accounts receivable of Oxycal and its
Subsidiaries as of the close of business on September 30, 1997.
2.19 Supplies. As of the Closing Date, the supplies and inventory of
Oxycal and each Subsidiary consist of a quality and quantity of materials
necessary to conduct its business as presently conducted, and such materials are
usable, salable and merchantable in the ordinary course of the business and
conform to all applicable health, safety and quality requirements and are not
subject to any governmental regulations or orders limiting the use or sale of
such materials, except such governmental regulations or orders with which Oxycal
and/or its Subsidiaries are in compliance in all material respects, except for
those matters of non-compliance specifically disclosed in Schedule 2.19. The
inventory reflected on Schedule 2.5 is based upon quantities determined by
physical counts or measurements taken on the date thereof, and is valued at the
lower of cost (as determined on a first in, first out basis) or market.
2.20 No Prebillings. Except as set forth in Schedule 2.20, neither
Oxycal nor any of its Subsidiaries has prebilled or received payment for
prebills, and Oxycal and its Subsidiaries will not prebill or receive payment,
from any of its accounts for goods to be delivered or for services to be
rendered or for expenses to be incurred subsequent to the Closing Date.
2.21 Facilities.
(a) General. Schedule 2.21 sets forth a list of all of the
real property and all of the buildings, warehouses and storage facilities owned,
leased or operated by Oxycal and its Subsidiaries, indicating where such
property or facility is located and whether such property is owned or leased.
The leases and other agreements or instruments under which Oxycal or its
Subsidiaries hold, lease, or is entitled to the use of any real property or
facilities are in full force and effect, and all rentals, royalties or other
payments due and payable thereunder have been paid and no event has occurred
that with the giving of notice or the passage of time, or both, would constitute
a default or breach of any agreement or lease applicable to any facilities used
by Oxycal or its Subsidiaries. Except for those items of non-compliance
specifically disclosed in Schedule 2.21, the current use by Oxycal or its
Subsidiaries of the real property complies in all material respects with all
applicable zoning laws, building and use restrictions, and any lease or any
other applicable restrictions. Except as specifically disclosed in Schedule
2.21, neither Oxycal nor any of its Subsidiaries has received notice of
violation of any applicable law, ordinance, regulation, order,
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<PAGE> 13
Permit, lease, or requirement relating to its operations on any property which
it owns, leases or transacts business.
(b) Plant and Equipment. Oxycal and its Subsidiaries have
properly maintained in good and workable condition all plant and equipment
necessary to carry on its business as presently conducted, ordinary wear and
tear excepted. Schedule 2.21(b) sets forth all real property ever owned or
leased by Oxycal or any Subsidiary or their respective predecessor. The
manufacturing plant, equipment and facilities of Oxycal and its Subsidiaries
have been operated in accordance with generally accepted business practices for
plants, facilities and equipment of that type, and such plant, facilities and
equipment have not been subject to waste or deterioration, ordinary wear and
tear excepted.
2.22 Insurance. All properties and assets of Oxycal and its
Subsidiaries are covered by fire, casualty, product liability, and other
insurance policies issued by reputable companies as are customarily obtained to
cover comparable properties of comparable companies in similar businesses, and
such policies, in amount, scope and coverage are adequate, in light of existing
conditions, to insure Oxycal and its Subsidiaries against any material loss. All
the insurance policies and coverages described in Schedule 2.22 are in full
force and effect and all premiums due as of the date of this Agreement and the
Closing Date have been paid in full. Schedule 2.22 sets forth a list of the
policies of insurance and fidelity or surety bonds carried by Oxycal and its
Subsidiaries, including, but not limited to, fire, liability, workers'
compensation, officers' life, and directors' and officers' liability insurance
policies. Oxycal and its Subsidiaries shall use appropriate and reasonable
efforts to assist and cooperate with Parent if Parent wishes to continue such
insurance, subject to the consent of the insurance companies involved and
Parent's assumption of all insurance premiums due after the Closing Date.
Neither Oxycal nor any of its Subsidiaries have failed to give any notice or
present any material claim under any insurance policy covering Oxycal or its
Subsidiaries, or its business or properties, in a timely fashion and all
insurance premiums due and payable with respect to the policies set forth on
Schedule 2.22 have been paid. There are no outstanding written requirements or
written recommendations by any insurer that issued a policy to Oxycal or the
Subsidiaries, by any Board of Underwriters or other body exercising similar
functions, or by any governmental authority requiring or recommending any
repairs or other work to be done on or with respect to any of the properties and
assets of Oxycal or the Subsidiaries or requiring or recommending any equipment
or facilities to be installed on or in connection with any of the properties.
The unemployment insurance ratings and contributions of Oxycal and the
Subsidiaries are also set forth on Schedule 2.22.
2.23 Employees. Schedule 2.23 sets forth a list of the names,
employment status, location of employment, and rates of compensation (including
salaries, wages, commissions and bonuses) of all employees and all independent
contractors of Oxycal and the Subsidiaries, each separately identified. Except
as specifically disclosed in Schedule 2.23, neither Oxycal nor any of its
Subsidiaries have any written or oral contract of employment with any of its
respective employees, none is a party to or subject to any collective bargaining
agreement with Oxycal or its Subsidiaries, and none has been a party or subject
to any collective bargaining agreement with Oxycal or its Subsidiaries during
the last five (5) years. Oxycal has provided, as part of Schedule 2.23, copies
of all agreements with any independent contractors. All such contracts are
terminable at will by Oxycal
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<PAGE> 14
or, with respect to independent contractors, upon 90 days written notice.
Neither Oxycal nor any Subsidiary is a party to any pending or threatened labor
dispute and none has been the subject of any attempt to unionize its employees.
Except for the non-compliance specifically disclosed in Schedule 2.23, Oxycal
and each Subsidiary has complied in all material respects with all applicable
federal, state and local laws, ordinances, rules and regulations and
requirements relating to the employment of labor, including, but not limited to,
laws governing wages and hours, collective bargaining, payment of Social
Security, unemployment and withholding taxes, and equal employment opportunity,
advancement of minorities and women, or discrimination based on age or
disability. Neither Oxycal nor any Subsidiary is liable for any wage or any tax
arrearages or any penalties or assessments for failure to pay timely taxes or
wages or to comply with any employment related laws. Except as set forth on
Schedule 2.23, at the Closing Date, the employees of Oxycal and each Subsidiary
will be terminable at will. Neither Oxycal nor any Subsidiary has received
notice from any employee listed on Schedule 2.23 that such employee is
terminating or intends to terminate employment with Oxycal or any Subsidiary.
Neither Oxycal nor any of its Subsidiaries has received notice that any employee
who is a key employee or critical to any operations of Oxycal or its
Subsidiaries is terminating or intends to terminate his or her employment.
Except as specifically disclosed on Schedule 2.23, neither Oxycal nor its
Subsidiaries have received written notice of any employee complaints or
grievances or any alleged violations of any labor, wage or employment laws,
including the Age Discrimination in Employment Act, Occupational Health and
Safety Act, Title VII of the Civil Rights Act, Fair Labor Standards Act, Arizona
Civil Rights Act, Americans With Disabilities Act, and Family Medical Leave Act,
as each is amended, from time to time.
2.24 Proprietary Rights.
Schedule 2.24 sets forth a true, correct and complete list of
all patents and applications for patents, trademarks, trade names, service
marks, copyrights and applications therefor, owned by Oxycal and its
Subsidiaries or in which any of them has any rights or licenses. Oxycal and its
Subsidiaries have provided Parent with copies of all agreements with each
officer, employee or consultant (including work-for-hire arrangements) providing
Oxycal and its Subsidiaries with secrets and inventions developed or used by any
of them in the conduct of its business. All of such agreements so described are
valid, enforceable and legally binding. The list set forth in Schedule 2.24 sets
forth the patents and patent applications specifying as of the date hereof as to
each, as applicable: (i) the title of the patent or patent application
constituting such Proprietary Right; (ii) the jurisdictions by or in which each
such Proprietary Right has been issued or registered or in which an application
for such issuance or registration has been filed, including the respective
registration or application numbers; and (iii) material licenses, sublicenses,
collaboration, joint development and similar agreements with licensors,
licensees or sublicenses as to which Oxycal or any Subsidiary is a party.
(a) Ownership of Proprietary Rights. Other than as
specifically disclosed in Schedule 2.24, Oxycal and its Subsidiaries own all
patents, patent applications, trademarks, trade names, service marks,
copyrights, trade secrets, copyrights, inventions, drawings, designs,
proprietary know-how or information, or other rights (collectively referred to
as "Proprietary Rights"), or have the exclusive license to use such Proprietary
Rights, which are used in their
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business as presently conducted and which are necessary to carry on the business
of Oxycal and its Subsidiaries, as presently conducted. All patents issued to
Oxycal or any Subsidiary are duly and validly issued and are in force. The name
"Ester-C" is a duly and validly issued trademark in each country specified in
Schedule 2.24. Neither Oxycal nor its Subsidiaries have sold any product on
which it holds a patent in any country other than the United States, or on which
it has filed patent applications in any country other than the United States,
prior to September 19, 1988.
(b) No Conflict or Infringement. The business and operations
of Oxycal and its Subsidiaries or the Proprietary Rights do not conflict with or
infringe, and no one has asserted that such operations conflict with or
infringe, any patents, patent applications, trade secrets, copyrights,
inventions, or any trademarks, trade names or service marks owned, possessed or
used by any third party (collectively referred to as the "Intellectual Property
Rights"). There are no claims, disputes, actions, proceedings, suits or appeals
pending against Oxycal or its Subsidiaries with respect to the Proprietary
Rights or any Intellectual Property Rights held by others and none has been
threatened. There are no facts known to Oxycal and its Subsidiaries or of which
Oxycal and its Subsidiaries have notice which would serve as a basis for any
claim that Oxycal and its Subsidiaries do not have the right to use, free of any
rights or claims of others, all Proprietary Rights in the development,
manufacture, use, sale or other disposition of any or all products or services
presently being used, furnished or sold in the conduct of the business of any of
them, as it is now conducted. Except as set forth in Schedule 2.24, no person
claims a superior right to or contests the right of Oxycal to use the name
"Ester-C" in connection with the sale of vitamin C products.
(c) No Proceedings. Except as specifically disclosed in
Schedule 2.24(c), there are no proceedings before any court or patent,
trademark, or copyright authority, foreign or domestic, to which Oxycal or any
of its Subsidiaries is a party or contesting any of the Proprietary Rights.
(d) Confidentiality. Oxycal and each Subsidiary have taken all
measures necessary and reasonable to maintain the confidentiality of all trade
secrets, processes, formulae, research and development results, and other
know-how, necessary to conduct their business as presently conducted, the value
of which information is contingent upon the maintenance of its confidentiality.
(e) Confidentiality and Non-Disclosure Agreements. Each
employee and officer of Oxycal and its Subsidiaries is a party to a confidential
non-disclosure agreement with his or her respective employer. No employee of any
of Oxycal or its Subsidiaries is in violation of any material term of any
employment contract, proprietary information and inventions agreement,
confidentiality agreement, non-competition agreement, or any other contract or
agreement relating to the relationship of any such employee with his or her
respective employer or any previous employer. Oxycal and its Subsidiaries have
entered into agreements with their employees and consultants providing that any
discovery or invention made by said employee or consultant is the property of
Oxycal or the Subsidiary and such agreements either qualify as a work for hire
arrangement or provide for an assignment to Oxycal or the Subsidiary of any
intellectual property or property rights.
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<PAGE> 16
(f) No Adverse Claims. Except as specifically disclosed in
Schedule 2.24(f), the Proprietary Rights are free of any adverse claims,
including without limitation, any unresolved ownership claims, with respect to
any third party, and there is no unauthorized use, infringement or
misappropriation of any Proprietary Right by any third party.
2.25 Section 341(f)(2) Consent. Neither Oxycal, any Subsidiary, nor any
predecessor, has consented under Section 341(f)(1) of the Code, or agreed under
Section 341(f)(3) of the Code, to have the provisions of Section 341(f)(2) of
the Code apply to any sale of its stock.
2.26 Related Party Transactions. Schedule 2.26 sets forth the amounts
and other essential terms of indebtedness or other current obligations,
liabilities, commitments (contingent or otherwise), agreements and contracts of
Oxycal and its Subsidiaries to or from any present officer, director, or
shareholder or any person related to, controlling, controlled by or under common
control with any of the foregoing (other than for employment services performed
within the past month the payment for which is not yet due) (a "Related
Person"), and all other transactions between such persons and Oxycal or any of
its Subsidiaries. Without limiting the generality of the foregoing, except as
specifically disclosed in Schedule 2.26 or any other Schedule, as of the date of
this Agreement, there is no outstanding indebtedness to or from Oxycal or the
Subsidiary to any Related Person. Any commitment, contract or agreement between
Oxycal or any of its Subsidiaries and any Related Person is terminable at will
by Oxycal (or, if applicable, any Subsidiary) and no such commitment, contract
or agreement materially affects Oxycal, its Subsidiaries, its business,
financial condition or properties.
2.27 Bank Accounts and Safe Deposit Arrangements. Schedule 2.27 sets
forth a complete list of (i) the name and address of each bank and brokerage
firm with which Oxycal and each Subsidiary has any accounts, safe deposit boxes,
lock boxes or vaults, (ii) the account numbers relating thereto, and (iii) the
names of all persons authorized to deal with such accounts or to have access to
such boxes or vaults.
2.28 Powers of Attorney. Except as specifically disclosed in Schedule
2.28, no person has any power of attorney to act on behalf of any of Oxycal or
any Subsidiary in connection with any of its properties or business affairs
other than such powers to so act as normally pertain to the officers of such
entity.
2.29 Environmental Matters, Health and Safety.
(a) Definitions. The following definitions shall apply for
purposes of this Section 2.29:
(i) "Environmental Conditions" means any quantifiable
condition of soil, surface waters, groundwaters, stream sediment, air
and similar environmental media, both on-site and off-site of the real
property, either owned or leased by Oxycal or any Subsidiary or on
which any of them operates or has operated its business (the
"Premises"), that requires
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<PAGE> 17
remedial action pursuant to any Environmental Law and/or that may
result in claims and/or demands by and/or liabilities to third parties,
including, but not limited to governmental entities. Environmental
Conditions shall include only those in existence at the Closing Date,
regardless of whether discovered before or after the Closing Date.
(ii) "Environmental Laws" means any and all federal,
state, local or municipal laws, regulations, ordinances, rules, orders,
guidelines, policies or requirements of any governmental authority
regulating or imposing standards of liability or standards of conduct
(including common law) concerning air, water, solid waste, Hazardous
Materials (including, but not limited to, the transfer of facilities
involved in the generation, storage, handling, transportation and/or
disposal of Hazardous Materials), worker and community right-to-know,
hazard communication, noise, radioactive material, resource protection,
subdivision, inland wetlands and watercourses, health protection and
similar environmental, health and safety, as in effect as of the
Closing Date. Such laws include, but are not limited to, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Responsibility Compensation and Liability Act, the Superfund Amendments
and Reauthorization Act, the Occupational Safety and Health Act, the
Hazardous Materials Transportation Act, the Toxic Substance Control
Act, the Federal Insecticide Fungicide and Rodenticide Act, the Clean
Water Act, the Clean Air Act, the Safe Drinking Water Act, and laws
relating to the regulation or permitting of storm water drainage, and
any laws relating to Oxycal's present manufacturing operations, all as
amended and effective on the date hereof, and the regulations, rules,
orders and policy statements promulgated or issued thereunder.
Environmental Laws also include any or all environmental permits,
approvals, consents, stipulations, licenses, registrations,
certificates and authorizations which are required by any Environmental
Law applicable to Oxycal and its Subsidiaries.
(iii) "Hazardous Materials" means any petroleum,
petroleum products, fuel oil, explosives, reactive materials, ignitable
materials, corrosive materials, hazardous chemicals, hazardous wastes,
hazardous substances, extremely hazardous substances, toxic substances,
toxic chemicals, radioactive materials, infectious materials and any
other element, compound, mixture, solution or substance which poses a
present or potential hazard to human health or the environment, as
determined by any Environmental Law or as otherwise defined and
regulated by Environmental Laws.
(iv) "Notice" means any summons, citation, directive,
order, claim, litigation, pleading, investigation, proceeding,
judgment, letter or any other written or oral communication from the
United States Environmental Protection Agency, the Arizona Department
of Environmental Quality, or any other federal, state or local agency
or authority, or any other entity or any individual, concerning any
intentional or unintentional act or omission which has resulted in or
which may result in the Release of any Hazardous Material into the
environment, including the surface water, groundwater, soil, air or
other environmental media, or other violation or alleged violation of
Environmental Laws and shall expressly include the imposition of any
lien pursuant to any Environmental Law.
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<PAGE> 18
(v) "Release" means releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, ejecting, escaping,
leaching, disposing, migrating, seeping, infiltrating, draining or
dumping. This term shall be interpreted to include both the present and
past tense, as appropriate and "Threatened Release", all as further
defined by any Environmental Law.
(vi) "Site Remediation Measures" means any efforts of
federal, state or local government, Oxycal or any Subsidiary, their
contractors, subcontractors, or agents, which are made, designed,
initiated, or maintained to ensure that Environmental Conditions are
consistent with Environmental Laws, and may include, without
limitation, investigation, site monitoring, containment, clean-up,
transport, removal, disposal, restoration and other remedial efforts of
any kind.
(b) Environmental Representations and Warranties. Oxycal
agrees, represents and warrants to Parent and Acquisition Corp.:
(i) Compliance. Except as specifically disclosed in
Schedule 2.29, Oxycal and each Subsidiary have been and are in
compliance with, and have no liability or obligation arising under, the
Environmental Laws, and neither Oxycal nor any Subsidiary has received
any Notice from any applicable governmental agency seeking any
information or alleging any violation of such Environmental Laws.
Except as specifically disclosed in Schedule 2.29, no Site Remediation
Measure is necessary for any business conducted by Oxycal or its
Subsidiaries or the Premises, nor are there any Environmental
Conditions on the Premises. Except as specifically disclosed in
Schedule 2.29, no capital improvements, alterations or repairs to any
facility owned, leased or operated by Oxycal nor any Subsidiary are
necessary or required to bring such facility into compliance with all
Environmental Laws now in effect.
(ii) Hazardous Materials/Underground Tanks. Except as
set forth on Schedule 2.29, Oxycal and each Subsidiary and their
predecessor(s) in interest, have not caused or permitted any use of the
Premises to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process any Hazardous Materials
or solid waste, except in compliance with all Environmental Laws, and
have not caused or permitted and have no knowledge of the Release of
any such Hazardous Materials on-site or off-site of the Premises,
except in compliance with all Environmental Laws. Except as set forth
on Schedule 2.29, all plants, buildings or structures owned, leased or
used by Oxycal and each Subsidiary, and all principal items, machinery
and equipment used in the business conducted by Oxycal and its
Subsidiaries comply with all applicable Environmental Laws. Except as
specifically disclosed in Schedule 2.29, the Premises do not contain
any asbestos or other Hazardous Materials, and no such materials are
located on, in or under the Premises. Except as specifically disclosed
in Schedule 2.29, any and all underground and aboveground tanks at the
Premises are in compliance with any and all Environmental Laws, and
such Environmental Laws do not mandate the removal or retrofitting of
such tanks earlier than one (1) year after the Closing. The removal of
any tank has been carried out in compliance with
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<PAGE> 19
all applicable Environmental Laws. Except as specifically disclosed in
Schedule 2.29, no condition, circumstance, or set of facts constitutes
a significant hazard to health, safety, property or the environment for
which Oxycal or any Subsidiary is or may be liable pursuant to any
Environmental Law. Neither Oxycal nor any Subsidiary has directly or
indirectly, disposed of Hazardous Materials or solid waste off-site in
a manner that gives rise to or creates an Environmental Condition or
violates any Environmental Law for which Oxycal or any Subsidiary is
liable.
(iii) Except as specifically disclosed on Schedule
2.29, there are no outstanding or threatened actions, claims,
proceedings, determinations or judgments by any party, including but
not limited to any governmental entity or expressly involving Oxycal or
any Subsidiary in any manner arising under the Environmental Laws or
alleging or involving personal injury or damage as a result of a
violation of any Environmental Law or otherwise involving Environmental
Conditions for which Oxycal or any Subsidiary is or may be liable.
(iv) Except as specifically disclosed in Schedule
2.29, Oxycal and each Subsidiary have complied with all notice, record
keeping and reporting requirements imposed by any governmental entity
and any informational requests or demands arising under any
Environmental Laws. Except as specifically disclosed in Schedule 2.29,
as of the Closing Date, neither Oxycal nor any Subsidiary, is liable
for any assessed penalties, fines, or forfeitures or is subject to any
stated restrictions on the conduct of its business for failure to
comply with any of the foregoing.
(v) Schedule 2.29 lists all real properties presently
owned, leased or operated by Oxycal and its Subsidiaries, the date of
acquisition or leasing thereof, the person or entity from whom such
real property was acquired or leased, the operations conducted thereon
since such real property was acquired, leased or operated and, the
operations conducted at the Premises prior to the acquisition or
leasing thereof to the extent known.
(vi) Schedule 2.29 lists all real properties formerly
owned, leased or operated by Oxycal and each Subsidiary, the dates of
acquisitions or leasing thereof, the dates of sale or termination of
such leases and the businesses or operations conducted at such real
properties.
(vii) Any exceptions to the representations and
warranties of Oxycal set forth in any Schedules referenced in this
paragraph (b) of this Section 2.29 will not, individually or in the
aggregate, have a Material Adverse Environmental Effect.
2.30 Customers and Suppliers. Schedule 2.30 sets forth a list of (i)
all of the customers of Oxycal and its Subsidiaries as of the date of this
Agreement, but not including customers from whom Oxycal or any of its
Subsidiaries in the aggregate has received less than One Hundred Thousand
Dollars ($100,000) in gross receipts during the twelve-month period ending June
30, 1997, and the three-month period ending September 30, 1997, showing the
approximate gross receipts
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received by Oxycal and its Subsidiaries from each customer or distributor,
packager or equivalent during the twelve-month period ending June 30, 1997, and
the three-month period ending September 30, 1997, and (ii) the ten (10) largest
suppliers of Oxycal and its Subsidiaries (measured by purchases) made during the
fifteen-month period ending September 30, 1997, excluding any supplier from whom
Oxycal and its Subsidiaries purchased in the aggregate less than One Hundred
Thousand Dollars ($100,000) in gross purchases during the immediately preceding
twelve-month period), showing the approximate total purchases made by each
Company from each such supplier during such period. Except as specifically
disclosed on Schedule 2.30, there has not been any termination, cancellation or
material adverse modification or change in the business relationship of Oxycal
or any Subsidiary with any such customer, supplier, or distributor, packager or
equivalent, and Oxycal and its Subsidiaries are unaware of any threatened loss
of any such customer, supplier, distributor, packager or equivalent.
2.31 Financial Advisor's Fee. Except for a fee which will become
payable to the Financial Advisor pursuant to a letter agreement, as amended, a
copy of which has been furnished to Parent, neither Oxycal nor any of the
Subsidiaries has incurred any obligation or liability, contingent or otherwise,
for any brokers', finders', advisors' or like fees or expenses in respect of the
matters provided for in this Agreement.
2.32 Dividends. Except as set forth in Schedule 2.32, there has been no
dividend or other distribution of assets to Oxycal Shareholders, whether
consisting of money, other personal property, real property or other things of
value, subsequent to June 30, 1997, and no dividend or other distribution will
be made to Oxycal Shareholders prior to the Closing Date.
2.33 Employee Benefit Plans. With respect to the employee benefits
provided to employees and former employees of the Company and the Subsidiaries:
(a) The Company and the Subsidiaries currently maintain only
the employee pension benefit plans, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as are listed in
Schedule 2.33 (the "Pension Plans").
(b) The Company and the Subsidiaries currently maintain only
the employee welfare benefit plans, as defined in Section 3(1) of ERISA
(including but not limited to, life insurance, medical, hospitalization,
holiday, vacation, disability, dental, and vision plans) as are listed in
Schedule 2.33 (the "Welfare Plans").
(c) The Company and the Subsidiaries currently maintain, or
have entered into, only the compensation programs and/or employment arrangements
(including but not limited to, incentive compensation, bonus, severance, sick
pay, salary continuation, deferred compensation, supplemental executive
compensation plans, and employment and consulting agreements) as are listed in
Schedule 2.33 (the "Compensation Programs").
(d) The Company and the Subsidiaries do not contribute, and
have not contributed within the last five years, to any multiemployer plan, as
defined by Section 3(37) of ERISA.
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(e) Each Pension Plan and Welfare Plan is in material
compliance with ERISA; each Pension Plan which is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified or a request for such determination has been timely filed
with the Internal Revenue Service (and to the Company's knowledge nothing has
occurred between the date of the last such determination and the Closing Date to
cause the Internal Revenue Service to revoke such determination).
(f) Any Pension Plan or any Welfare Plan designed to satisfy
the requirements of Section 125, Section 501(c)(9), or Section 4980B of the Code
is in material compliance with such section.
(g) The Company and the Subsidiaries do not maintain or
sponsor any employee stock ownership plan or trust.
(h) The Company and the Subsidiaries do not currently maintain
or sponsor any plan or suspended employee benefit plan that has been terminated
or partially terminated.
(i) To the knowledge of the Company none of the employee
benefit plans of the Company or any Subsidiary is under audit or review by the
Internal Revenue Service or the Department of Labor.
(j) No accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, exists (whether or not waived) with respect to any Pension
Plan as of the date hereof.
(k) All amounts required to be paid by the Company and/or any
Subsidiary with respect to each Pension Plan, Welfare Plan, and Compensation
Plan on or before the Closing Date have been paid or are reflected as accrued on
the Financial Statements.
(l) None of the Pension Plans or the Company or any party in
interest or disqualified person has engaged in any non-exempt "prohibited
transactions" as defined in Section 406 of ERISA or Section 4975 of the Code.
(m) Except as disclosed in Schedule 2.33, no Pension Plan or
Welfare Plan provides benefits, including, without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
beyond their retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) retirement benefits under a Pension Plan, (iii)
death benefits under a Welfare Plan, (iv) deferred compensation accrued on the
books of the Company or a Subsidiary, or (v) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary).
(n) No liability has been, or is expected by the Company or
any Subsidiary to be, incurred by the Company or any Subsidiary under Section
4062 of ERISA with respect to any Pension Plan.
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<PAGE> 22
(o) No reportable event within the meaning of Title IV of
ERISA has occurred with respect to any Pension Plan.
(p) The Company has furnished Parent with correct and complete
copies of each Pension Plan, Welfare Plan, and Compensation Program, together
with any trust agreements, administrative services agreements, summary plan
descriptions, employee informational material, financial statements relating
thereto, and current participant listings.
2.34 Restrictions; Burdensome Agreements. Neither Oxycal nor any of the
Subsidiaries are parties to any contract, commitment or agreement, and neither
Oxycal nor its Subsidiaries nor any of their respective properties or assets are
subject to or bound or affected by any charter, by-law or other corporate
restriction, or any order, judgment, decree, law, statute, ordinance, rule,
regulation, permit or other restriction of any kind or character, which would
(i) prevent Oxycal from entering into this Agreement or from consummating the
transactions contemplated hereby, or (ii) have a Material Adverse Effect on
Oxycal and which has not been disclosed to Parent in a Schedule hereto.
2.35 Disclosure. Except as specifically disclosed in Schedule 2.35
hereof, no representation or warranty hereunder and no certificate, statement or
other document delivered by Oxycal hereunder contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein, in light of the circumstances under which they were
made, not misleading. There is no fact known to Oxycal or any Subsidiary which
is or could reasonably be material to the transactions contemplated by this
Agreement and which has not been disclosed in the Financial Statements, the
Schedules hereto, or a certificate delivered to Parent. Copies of all documents
referred to in this Agreement, unless prepared solely by Parent or Acquisition
Corp., are true, correct and complete copies thereof and include all amendments,
supplements, and modifications thereto and all waivers thereunder.
2.36 Prospects. Except as specifically disclosed in Schedule 2.36,
neither Oxycal nor any of its Subsidiaries knows of, or is aware of, any matter,
development, fact, or condition which may have a Materially Adverse Effect on
Oxycal and its Subsidiaries or its business, properties or assets, which matter
has not been disclosed in writing to Parent.
2.37 Proxy Statement. The Proxy Statement (as defined in Section 3.5)
sent by Oxycal to the Oxycal Shareholders complies in all material respects with
the requirements of all state and federal laws applicable to Oxycal and does not
contain any untrue statement of a material fact concerning any of the matters
described therein and does not omit to state a material fact required to be
stated therein with respect to any of the matters described therein necessary in
order to make the statements contained therein, in light of the circumstances in
which they were made, not misleading (but Oxycal shall have no liability
hereunder with respect to any information contained in the Proxy Statement
furnished by Parent), and the descriptions in the Proxy Statement of statutes,
legal and governmental proceedings, contracts, and the interests of related
parties in the transactions described therein are accurate and fairly present
the matters described therein in all material respects.
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2.38 FTC Information. Oxycal has delivered to Parent all information
relating to the FTC investigations described in Section 3.9 that is material to
such proceeding.
2.39 Duty to Update. At all times to and including, and as of, the
Effective Time, Oxycal and its Subsidiaries shall not less frequently than
weekly amend or supplement the lists provided for herein as necessary so that
the information contained therein accurately reflects the current status of
Oxycal and the Subsidiaries.
ARTICLE 3. AGREEMENTS CONCERNING OXYCAL'S AND THE SUBSIDIARIES'
OPERATIONS PRIOR TO THE EFFECTIVE TIME
Oxycal covenants and agrees with Parent and Acquisition Corp. that
Oxycal and each of the Subsidiaries will or, to the extent not within its sole
control, will use its best efforts to, from and after the date of this Agreement
and until the Effective Time, act as follows:
3.1 Access to Documents. Oxycal and the Subsidiaries will authorize and
permit Parent, its representatives, accountants and counsel, to have full access
during normal business hours, upon reasonable notice and in such manner as will
not unreasonably interfere with the conduct of their businesses, to all of the
properties, books, records, operating procedures, tax returns, tax settlement
letters, intellectual property documents, contracts and documents of Oxycal and
each of the Subsidiaries and all other information with respect to the business
affairs, financial condition and assets of Oxycal and each of the Subsidiaries
as Parent may from time to time reasonably request, to make copies of such
books, records and other documents and to discuss the business affairs,
condition (financial and otherwise) and assets of Oxycal and each of the
Subsidiaries with such third persons, including, without limitation, the
directors, officers, employees, accountants, counsel and creditors of Oxycal and
each of the Subsidiaries, as Parent considers necessary or appropriate for the
purposes of familiarizing itself with the business and operations of Oxycal and
each of the Subsidiaries, obtaining any necessary orders, consents or approvals
of the transactions contemplated by this Agreement by governmental authorities
and conducting an evaluation of the assets and liabilities of any Subsidiary.
Each party shall use its best efforts to preserve for itself and each other
party each available legal privilege including the attorney-client privilege.
3.2 Conduct of Business. Oxycal and each of Subsidiaries will do the
following, except as otherwise agreed to in writing by Parent:
(i) Carry on its business in all material respects in
substantially the same manner as heretofore conducted; and
(ii) Except as they may terminate in accordance with their
terms, keep in full force and effect, and not default in or breach of any of its
obligations under, all Material Contracts, provided, however, that Oxycal or any
Subsidiary may terminate any Material Contract (other than ones on the Contract
List) unless such termination would have a Material Adverse Effect on the
terminating Oxycal entity; and
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(iii) Keep in full force and effect existing insurance
coverage; and
(iv) Use its best efforts to maintain, preserve, renew, keep
in full force and effect, and preserve its business organization and material
rights and franchises, Proprietary Rights, permits and licenses and to retain
its present employee force so that it will be available to Parent on and after
the Effective Time, and to maintain its existing, or substantially equivalent,
credit arrangements with banks and other financial institutions and to assure
the continuance of the body of its customer relationships; and
(v) Take such action as may be necessary to maintain,
preserve, renew and keep in full force and effect its corporate existence and
material rights and franchises; not amend either its Articles of Incorporation
or its By-Laws (except for By-Law amendments relating to the number of
directors, titles and descriptions of corporate offices and composition and
duties of committees); and duly comply in all material respects with all laws
applicable to it and to the conduct of its businesses; and
(vi) Maintain all assets in substantially the same condition
as they are now (reasonable wear and tear, which are not such as to adversely
affect the operation of the business, excepted), and give Parent immediate
written notice of any material damage to any of its assets or properties by fire
or other casualty; and
(vii) Comply, in all material respects, with all laws
applicable to it, its assets and the conduct of its business; and
(viii) Perform all of its material obligations under all
contracts and agreements without default, except for any default that would not
have a Material Adverse Effect; and
(ix) Promptly notify Parent of the opening or closing of any
office of Oxycal or any of the Subsidiaries at which business is conducted; and
(x) Exercise all good faith efforts to cause the transactions
contemplated by this Agreement to be consummated, and will furnish all documents
and further assurances, and take all action, that may be necessary to undertake,
perform and consummate the transactions contemplated by this Agreement.
3.3 Notification. Oxycal will promptly notify Parent of any event of
which Oxycal obtains knowledge which may materially and adversely affect the
financial condition, operations, assets, business, or properties of Oxycal or
any of the Subsidiaries or in the event that Oxycal determines that it is unable
to fulfill the conditions to the performance of Parent set forth in Section 6.1,
and Oxycal will furnish to Parent (i) as soon as available, all proxy
statements, information statements, financial statements, reports, letters and
communications sent by Oxycal to its stockholders or other securities holders,
and (ii) such other existing reports as Parent may reasonably request relating
to Oxycal or any of the Subsidiaries.
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3.4 Negative Covenants. Neither Oxycal nor any of the Subsidiaries will
do the following, except with the prior written consent of Parent:
(i) Incur or agree to incur any obligation or liability
(absolute or contingent) except in the ordinary course of business and
consistent with prior practice, and liabilities arising out of, incurred in
connection with, or related to the consummation of this Agreement; or
(ii) Grant any general or uniform increase in the rate of pay
of employees or employee benefits except, in the ordinary course of business and
consistent with prior practice, or grant any material increase in salary or
employee benefits of any officer, employee or agent whose salary exceeds fifty
thousand dollars ($50,000), except in the ordinary course of business and
consistent with prior practice, except for amendments to provide for the
acceleration of stock options issued and outstanding as of the date of this
Agreement, as specified in the Employee Benefit Plan List, and except for
increases in compensation (including bonuses or incentive awards) approved by
Parent or committed in writing prior to September 30, 1997; provided that Gerald
W. Elders and Richard G. Markham will be entitled to receive a closing bonus in
the amount of $11,700 each; or
(iii) Make any material capital expenditure, except as
contemplated by the existing capital budget and in the ordinary course of
business and consistent with prior practice, except for ordinary repairs,
renewals and replacements; or
(iv) Issue, sell, redeem or acquire for value, or agree to do
so, any debt securities or any shares of the capital stock or other equity
securities or other ownership interests of Oxycal (except for issuances upon
exercise of stock options outstanding on the date of this Agreement under the
Stock Option Plan) or any of the Subsidiaries, or declare, issue or pay any
dividend or other distribution of assets, whether consisting of money, other
personal property, real property or other things of value, to its stockholders,
except for (A) cash dividends payable by any Subsidiary which is wholly-owned by
Oxycal to Oxycal or another Subsidiary which is wholly-owned by Oxycal, (B)
sinking fund or other mandatory payments required under the terms of any
indenture or loan agreement or repurchases of any outstanding debt securities to
be applied against any such sinking fund payments in amounts which do not
exceed, with respect to any series or class of debt securities, the sinking fund
payments required within the next twelve-month period, (C) the payment of any
debt security upon the maturity thereof, and (D) obligations or liabilities
permitted to be incurred pursuant to clause (i) of Section 3.4 above; or
(v) Enter into any transactions other than in the ordinary
course of business; or
(vi) Compromise or otherwise settle or adjust any assertion or
claim of a deficiency in taxes (or interest thereon or penalties in connection
therewith) or file any appeal from an asserted deficiency, except in a form
previously approved by Parent, which approval shall not be unreasonably
withheld, or file any federal or state tax return before furnishing a copy to
Parent and affording Parent an opportunity to consult with the filing entity; or
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(vii) Without the prior written consent of Parent (which shall
not be unreasonably withheld), enter into any new commitments, or cancel, amend,
modify adversely, assign, encumber or terminate any of the commitments or make
any material capital investment, expenditure or improvement or enter into any
agreement therefor, except in the ordinary course of business and consistent
with past practices; provided, however, that Oxycal may pay the fees and
expenses referred to in clauses (i) and (ii) of this Section 3.4 and Section 7.1
at the Closing; or
(viii) Make any loan, or otherwise extend credit to any
person, firm or corporation or provide any guaranty or surety agreement except
in the ordinary course of business and consistent with past practices, nor
subject any of its property or assets to any lien, security interests,
encumbrance or charge; or
(ix) Sell, lease or otherwise dispose of any of the assets,
except in the ordinary course of business.
3.5 Meeting of Shareholders. Oxycal and its officers and directors
shall (i) cause a meeting of the Oxycal Shareholders to be duly called and held
as soon as practicable, but in no event later than November 8, 1997, unless
Parent agrees in writing to a later date, to consider and vote upon the Merger
and related matters, (ii) submit the Merger to the Oxycal Shareholders together
with a unanimous recommendation for approval by the Board of Directors of
Oxycal, unless in the exercise of its duties, the obligations imposed by law
upon the Board of Directors require a different recommendation, (iii) solicit
the approval of the Merger and this Agreement by the Oxycal Shareholders by
mailing or delivering to each Oxycal stockholder the Proxy Statement (as defined
below), and (iv) subject to the exercise of their legal duties, use their best
efforts to obtain the necessary approval and adoption of the Merger by the
Oxycal Shareholders. In connection with such Shareholders' meeting, Oxycal will
prepare and distribute a proxy statement (the "Proxy Statement") to be mailed to
its stockholders, all at the earliest practicable time. If at any time prior to
the meeting of Oxycal Shareholders referred to above, any event relating to
Oxycal or any of the Subsidiaries should be discovered which should be set forth
in an amendment of, or a supplement to the Proxy Statement, Oxycal shall
promptly so inform Parent, will furnish all necessary information to Parent
relating to such event, will use its best efforts to cause an appropriate
amendment or supplement to be transmitted to the Oxycal Shareholders and will
transmit such amendment or supplement as promptly as practicable.
3.6 Non-Solicitation. Neither Oxycal nor any Subsidiary, officer,
director, or employee of, or any financial advisor, attorney, accountant, agent,
or other advisory or representative retained by Oxycal, will directly or
indirectly solicit, discuss, or engage in negotiations with, or provide any
information to any person, other than Parent, concerning any possible proposal
regarding the acquisition of Oxycal, its assets, or its issued and outstanding
shares. Oxycal will immediately notify Parent if any such inquiries or proposals
are received by, or any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with Oxycal.
Notwithstanding the foregoing, nothing contained in this Agreement will prevent
Oxycal's Board of Directors from furnishing information to or entering into
discussions with any unsolicited person
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or entity or taking any other action required of it in order to exercise of its
duties, as a Board of Directors, under the laws of the State of Arizona.
3.7 Binding Agreement. The parties intend that this Agreement be
binding upon Oxycal, and its Subsidiaries to the extent provided herein and in
the Exhibits and Schedules hereto, and Oxycal shall exercise its best efforts to
consummate the transactions contemplated hereby.
3.8 FTC Investigation. Oxycal has disclosed to Parent that it is
subject to a pending investigation by the Federal Trade Commission ("FTC")
concerning certain claims Oxycal and its Subsidiaries have made concerning its
"Ester-C" products. Prior to the Closing, Oxycal will not enter into any
agreements with or consent to any order of the FTC without Parent's consent,
which will not be unreasonably withheld.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PARENT
AND ACQUISITION CORP.
As of the date of this Agreement and the Closing Date, Parent and
Acquisition Corp. agree and covenant with Oxycal and its Subsidiaries as
follows:
4.1 Organization, Good Standing, Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby.
Acquisition Corp. is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona and has the corporate power and
authority to execute, deliver and perform this Agreement and consummate the
transactions contemplated hereby.
4.2 Authorization. Parent and Acquisition Corp. have taken all
corporate action necessary to authorize the execution, delivery and performance
of this Agreement and each action is in full force and effect and has not been
amended or revoked. Such execution, delivery and performance do not and will not
violate, result in any default or acceleration under or conflict with any terms
of, any law, charter, by-law, lien, order, award, judgment, decree or contract
to which Parent or Acquisition Corp. is a party or is subject or by which Parent
or Acquisition Corp. is bound. This Agreement is enforceable against Parent and
Acquisition Corp. in accordance with its terms.
4.3 No Adverse Change in Conditions. There has been no material adverse
change in the business, assets, or financial condition of Parent and its
subsidiaries, as reflected in Parent's audited financial statements, dated as of
July 31, 1996, which would materially and adversely affect the ability of Parent
to pay the Merger Consideration.
4.4 Acquisition Corp. All of the issued and outstanding shares of
Acquisition Corp. are owned directly by Parent free and clear of all liens,
charges, and encumbrances of any nature whatsoever. Immediately prior to the
Effective Time, Acquisition Corp. will have no liabilities, either absolute,
accrued, contingent or otherwise, except those relating to this Agreement. True
and
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correct copies of Acquisition Corp.'s Articles of Incorporation, Bylaws, and
minutes are attached hereto as Schedule 4.4.
4.5 No Consents. There are no third-party consents or governmental
approval which are required of Parent or Acquisition Corp., or, if required,
such consents and approvals have been obtained or waived prior to the Closing
Date. There are no consents required by any lender or equity holder of Parent
required in order to consummate the Merger or, if required, any such consents or
waivers have been obtained.
4.6 No Default. There has been no default under, or a violation of, any
material contract, indenture, note, mortgage, bond, agreement, judgment, order
or decree to which Parent or any subsidiary is subject, which would materially
and adversely affect Parent's ability to consummate the Merger or to pay the
Merger Consideration when due.
4.7 Litigation. There is no litigation, action, suit, investigation or
proceeding pending or, to the knowledge of Parent, threatened, before any court,
agency or other governmental body against Parent or Acquisition Corp. (or any
corporation or entity affiliated with Parent or Acquisition Corp.) which seeks
to enjoin or prohibit or otherwise challenge the transactions contemplated
hereby.
ARTICLE 5. COVENANTS OF PARENT AND ACQUISITION CORP.
Parent and Acquisition Corp. covenant and agree with Oxycal as follows:
5.1 Further Assurances. Parent and Acquisition Corp. shall exercise all
good faith efforts to cause the transactions contemplated by this Agreement to
be consummated, and will furnish such documents and further assurances to each
other or to proper authorities as may be necessary for the full implementation
and consummation of this Agreement.
5.2 Indemnification of Current Officers and Directors. Parent hereby
agrees to provide the officers and directors of Oxycal and the Subsidiaries
listed on Schedule 5.2. (the "Current Officers and Directors") indemnification
rights that are no less broad than the indemnification rights provided in
Article XI of Oxycal's Restated Articles of Incorporation filed with the Arizona
Corporation Commission as of December 29, 1995, with respect to any matters
occurring prior to the Effective Time.
5.3 Other Indemnification. Parent covenants and agrees to defend,
indemnify, and hold harmless Oxycal's officers, directors, employees, agents,
advisers, representatives and Affiliates and the Shareholders and their agents,
advisers, representatives and Affiliates (collectively, the "Indemnitees") from
and against, and to pay or reimburse Indemnitees for, any and all claims,
liabilities, obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional, or otherwise
and whether or not resulting from third party claims) including without
limitation any out-of-pocket expenses and reasonable attorneys' and accountants'
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fees incurred in the investigation or defense of any of the same or in asserting
any of their respective rights hereunder, resulting from or arising out of
Parent's raising or use of the Merger Consideration.
5.4 Insurance Policies. At the Effective Time there is in force and
effect a policy of directors and officers liability insurance, which provides
the Current Officers and Directors with directors' and officers' liability
insurance. From and after the Closing Date, Parent shall use its best efforts to
maintain in force and effect that policy or a policy which in coverage and
benefits is comparable to the policy of insurance presently provided by Oxycal
to its Current Officers.
ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions to the Obligation of Parent and Acquisition Corp. The
obligation of Parent and Acquisition Corp. to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, which are for the sole
benefit of Parent and Acquisition Corp. (any of which may be waived in writing
by Parent and Acquisition Corp. in their sole and absolute discretion):
(a) Representations and Warranties True. The representations
and warranties of Oxycal which are contained in this Agreement, or contained in
any Schedule, certificate or other instrument or document delivered or to be
delivered pursuant to this Agreement, shall be true and correct at and as of the
Closing Date, in all material respects, as though such representations and
warranties were made on and as of the Closing Date. At the Closing, Oxycal shall
have delivered to Parent an officer's certificate to that effect with respect to
all such representations and warranties made by Oxycal.
(b) Performance. Oxycal shall have performed and complied in
all respects with all of the obligations under this Agreement (including the
Exhibits and Schedules hereto) which are required to be performed or complied
with by Oxycal on or prior to the Closing Date. At the Closing, Oxycal shall
have delivered to Parent an officer's certificate to that effect with respect to
such obligations required to have been performed or complied with by Oxycal on
or before the Closing Date.
(c) Absence of Litigation and Other Matters. No statute, rule
or regulation shall have been enacted or promulgated, and no order, decree, writ
or injunction shall have been issued and shall remain in effect, by any court or
governmental or regulatory body, agency or authority which restrains, enjoins or
otherwise prohibits the consummation of the transactions contemplated hereby,
and no action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to Oxycal or any of the
Subsidiaries which, in the reasonable judgment of Parent's Board of Directors,
would have a material adverse effect on the transactions contemplated hereby or
on Oxycal or its Subsidiaries or the business conducted by any of them.
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(d) Articles of Merger and Plan of Merger. Oxycal shall have
executed and delivered to Parent and Acquisition Corp. the Articles of Merger
and Plan of Merger substantially in the form as Exhibit C, and such merger
certificates and other documents as are necessary to consummate the transactions
contemplated by this Agreement.
(e) Employment Agreement. Nancy J. Chandler ("Chandler") shall
have executed and delivered to Parent an employment agreement in a form
satisfactory to Parent and Chandler.
(f) Opinion of Counsel. Snell & Wilmer L.L.P., counsel to
Oxycal, shall have delivered to Parent an opinion in the form attached hereto as
Exhibit D.
(g) Conduct of Business in Ordinary Course. To the Closing
Date, Oxycal and each Subsidiary shall have conducted its business only in the
ordinary course, consistent with the past practices and the limitations of
Article 3, and the other covenants and representations made by Oxycal herein,
except for actions expressly permitted by this Agreement, matters incident to
carrying out this Agreement, or such further matters as may be consented to in
writing by Parent.
(h) Consents and Approvals. Oxycal and each Subsidiary shall
have obtained all consents and approvals and waivers and given such notices as
may be necessary to consummate the transactions contemplated hereby, including
but not limited to (i) requisite shareholder approval, and (ii) the consent to
the transactions contemplated hereby of the parties to all commitments under
which Oxycal or its Subsidiaries would otherwise be in default as a result of
the transactions contemplated hereby, other than commitments which individually
or in the aggregate are not material to the financial condition, or business of
Oxycal and its Subsidiaries, taken as a whole. All consents, authorizations,
orders or approvals of, and filings or registrations with, any federal, state,
local or foreign governmental commission, board or other regulatory body which
is required for or in connection with the execution, delivery, and performance
of this Agreement by Oxycal and the consummation of the transactions
contemplated hereby, shall have been duly obtained or made.
(i) No Material Adverse Changes. Since June 30, 1997, there
shall not have been any material adverse change in the business, financial
condition, assets, properties or results of operations of Oxycal and its
Subsidiaries, taken as a whole, and neither Oxycal nor any Subsidiary shall have
sustained any material loss or interference with its business or properties from
fire, explosion, flood or other casualty in excess of $50,000, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree.
(j) Delivery by Oxycal. Oxycal shall deliver or cause to be
delivered to Parent:
(i) A copy of the Articles of Incorporation and the
By-Laws of Oxycal and each Subsidiary, as amended to the Closing Date,
certified by the Secretary or an Assistant Secretary of each company,
and the original corporate stock ledgers, corporate seal and minute
book(s) of each of the companies.
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(ii) Certificates of good standing as of a recent
date (within two (2) weeks of the Closing) issued by (A) the
Corporation Commission of the State of Arizona to the effect that
Oxycal and Inter-Cal are in good standing under the laws of Arizona,
and (B) the Secretary of State of each state in which that Oxycal and
each of its Subsidiaries is authorized to transact business as a
foreign corporation to the effect that each company is duly qualified
as a foreign corporation in each state and foreign jurisdiction where
it transacts business.
(iii) Resignations, dated the Closing Date, of all
the officers and directors of Oxycal and each Subsidiary in office
immediately prior to the Closing Date, unless otherwise notified by the
Parent.
(iv) Written evidence satisfactory to Parent that
Oxycal and its Subsidiaries have obtained all necessary governmental or
regulatory approvals for the transactions contemplated hereby.
(v) Written evidence satisfactory to Parent that all
outstanding options to purchase any capital stock of any of Oxycal or
any Subsidiary, and all similar arrangements, have been fully exercised
or properly terminated.
(vi) Such further instruments or documents as Parent
or its counsel may reasonably request to assure the effective carrying
out of the transactions contemplated hereby.
(vii) The Cash Consideration Offset Certificate
required by Section 7.1 hereof.
(k) Noncompete Agreements. Gerald W. Elders, Richard G.
Markham, Rockwell C. Webb, William B. Fulkerson, and Raymond B. Sigafoos shall
have executed and delivered to Parent the Noncompete Agreements in the form
attached hereto as Exhibit E.
(l) Limitation on Dissenting Shareholders. Not more than ten
percent (10%) of the Oxycal Shares shall have voted against the Merger and not
more than five percent (5%) of the Oxycal Shares shall have elected to exercise
his or her appraisal rights under A.R.S. Section 10-1301, et seq.
(m) Withholding Consents. Oxycal shall have delivered a
Withholding Consent in the form of Exhibit F completed in full and duly executed
by each Optionee.
6.2 Conditions to the Obligation of Oxycal. The obligation of Oxycal
and the Subsidiaries to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, on or prior to the Closing Date,
of each of the following conditions (any of which may be waived in writing by
Oxycal in its sole and absolute discretion):
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(a) Representations and Warranties True. The representations
and warranties of Parent and Acquisition Corp. contained in this Agreement, or
contained in any Schedule, certificate or other instrument or document delivered
or to be delivered pursuant to this Agreement, shall be true and correct at and
as of the Closing Date, in all material respects, as though such representations
and warranties were made on and as of the Closing Date. At the Closing, each of
Parent and Acquisition Corp. shall have delivered to Oxycal a certificate to
that effect with respect to all such representations and warranties made by such
entity.
(b) Performance. Parent and Acquisition Corp. shall have
performed and complied in all respects with all of the obligations under this
Agreement which are required to be performed or complied with by it on or prior
to the Closing Date. At the Closing, each of Parent and Acquisition Corp. shall
have delivered to Oxycal an officer's certificate to that effect with respect to
all such obligations required to have been performed or complied with by such
entity on or before the Closing Date.
(c) Absence of Litigation and Other Matters. No statute, rule
or regulation shall have been enacted or promulgated, and no order, decree, writ
or injunction shall have been issued and shall remain in effect, by any court or
governmental or regulatory body, agency or authority which restrains, enjoins or
otherwise prohibits the consummation of the transactions contemplated hereby,
and no action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been commenced or overtly threatened with
respect to the transactions contemplated hereby, other than claims asserted by
any dissenting Oxycal Shareholders under A.R.S.
Section 10-1301 et seq.
(d) Articles of Merger. Parent and Acquisition Corp. shall
have executed and delivered the Articles of Merger and Plan of Merger and
related documents referred to in Section 6.1 (d) hereof.
(e) As required by Section 1.3(a), Parent shall have provided
the Exchange Agent with the Cash Consideration to be paid to the Oxycal
Shareholders and the Financial Advisor as contemplated by Section 1.2(b) hereof.
(f) Opinion of Counsel. Streich Lang P.A., counsel to Parent
and Acquisition Corp., shall have delivered to Oxycal (and on which Oxycal's
directors and shareholders may rely) an opinion in the form attached hereto as
Exhibit G.
(g) Exchange Agent Agreement. Parent and Acquisition Corp.
shall have executed and delivered the Exchange Agent Agreement.
(h) No Material Adverse Change. Since April 30, 1997, there
shall not have been any material adverse change in the business, financial
condition, assets, properties, or results of operations of Parent that would
materially and adversely affect Parent's ability to pay the Merger
Consideration.
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(i) Consents and Approvals. Parent and Acquisition Corp. shall
have obtained all consents and approvals and waivers and given such notices as
may be necessary to consummate the transactions contemplated hereby, including
but not limited to (i) requisite approval of the Board of Directors of Parent
and Acquisition Corp., (ii) requisite approval of the sole shareholder of
Acquisition Corp., Parent, (iii) the consent to the transactions contemplated
hereby of the parties to all commitments under which Parent, Acquisition Corp.,
or their subsidiaries would otherwise be in default solely as a result of
consummating the transactions contemplated hereby, other than commitments which
individually or in the aggregate are not material to the financial ability of
Parent and its subsidiaries, taken as a whole, to pay the Merger Consideration
when due. All consents, authorizations, orders or approvals of, and filings or
registrations with, any federal, state, local or foreign governmental
commission, board or other regulatory body which is required for or in
connection with the execution, delivery, and performance of this Agreement by
Parent and Acquisition Corp. and the consummation of the transactions
contemplated hereby shall have been duly obtained or made.
ARTICLE 7. BROKERS' OR FINDERS' FEES, EXPENSES; CONFIDENTIALITY
7.1 Fees and Expenses. Except as otherwise provided in this Agreement,
each party agrees to bear its own fees and expenses in connection with
negotiating this Agreement and consummating the transactions contemplated by
this Agreement and the Merger. The Cash Consideration shall be reduced dollar
for dollar by (i) all reasonable attorneys' fees, accounting fees, and other
expenses of Oxycal in excess of $100,000 related to the Merger Transaction, and
(ii) all fees and expenses payable by, or on behalf of, Oxycal to any investment
banker, broker, financial consultant, finder or Financial Advisor, excluding the
Financial Advisor Fee, which amounts are directly or indirectly related to the
Merger Transaction. The parties agree that the Financial Advisor Fee will be
paid and deducted from the Cash Consideration pursuant to Section 1.3(a). On or
before the Closing Date, Oxycal will provide Parent with an officer's
certificate (the "Cash Consideration Offset Certificate") detailing the expenses
specified in clauses (i) and (ii) of the immediately preceding sentence so that
Parent may calculate the Cash Consideration. Except for the Financial Advisor,
each party represents and warrants to the others that it has not engaged or
dealt with any broker, finder, consultant or any other person who would be
entitled to any brokerage commission, finder's fee or related payment concerning
the transaction contemplated by this Agreement. Except for the Financial
Advisor, each party agrees to indemnify and hold the others entirely free and
harmless for, from and against any loss, damage, liability or expense (including
attorneys' fees) arising from any claim by any broker, finder, consultant or
advisor for any brokerage commission, finder's fee or similar payment because of
any act or omission of such party or its representatives.
7.2 Confidentiality; No Public Disclosure. The parties covenant and
agree that they shall not publicly disclose the terms of the transactions
contemplated by this Agreement unless (i) Oxycal and Parent shall mutually agree
to such disclosure, (ii) such disclosure is compelled by an order of a court or
governmental agency having competent jurisdiction in the premises, and after
consultation by the disclosing party with the other party, (iii) such disclosure
shall be determined by such party's counsel to be required or necessary for
purposes of such party's compliance with applicable
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regulations or foreign, federal or state securities laws and the rules and
regulations promulgated thereunder, and after consultation to the extent
practicable by such party with the other parties, (iv) such disclosure is
required by lawful discovery in any judicial proceeding, and after consultation
by the disclosing party with the other parties, or (v) in any action by any
party to enforce this Agreement. Nothing in this Agreement shall prevent Oxycal
from disclosing this Agreement to the Oxycal Shareholders in connection with
soliciting their approval of the Merger.
ARTICLE 8. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS
8.1 General. The representations, warranties, and agreements of the
parties contained in this Agreement shall not survive the Closing, and
thereafter no party hereto and no officer, director, employee, or shareholder of
any party shall have any liability whatsoever with respect to any such
representation, warranty, or agreement.
ARTICLE 9. TERMINATION OF AGREEMENT: AMENDMENT; WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(i) By the mutual written consent of Parent and Oxycal;
(ii) By either Parent or Oxycal: (A) if any court or
governmental or regulatory agency, authority or body shall have enacted,
promulgated or issued any statute, rule, regulation, ruling, writ or injunction,
or taken any other action, restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and all appeals and means of appeal therefrom
have been exhausted; or (B) if the Closing shall not have occurred on or before
the Closing Date; provided, however, that the right to terminate this Agreement
pursuant to this Section 9.1(ii)(B) shall not be available to any party whose
(or whose affiliate(s)') breach of any representation or warranty or failure to
perform or comply with any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing Date to occur on or before such
date;
(iii) By Parent, if any of the conditions specified in Section
6.1 shall not have been met or waived prior to the Closing Date; or
(iv) By Oxycal, if any of the conditions specified in Section
6.2 shall not have been met or waived prior to the Closing Date.
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9.2 Extension of Closing for Breach. If, as of the Closing Date, the
Merger has not been consummated as a result of the failure of the other party to
satisfy any term or condition of this Agreement (the "Breaching Party"), the
non-breaching party may give written notice to the Breaching Party that the
Closing Date is extended by up to 30 days from the original Closing Date. Upon
the giving of such Notice, the Closing Date shall be extended for up to 30 days
and the Merger shall be consummated on or before the occurrence of the extended
Closing Date.
9.3 Effect of Termination. If terminated pursuant to Section 9.1, this
Agreement shall become void and there shall be no liability on the part of any
of the parties, except that nothing herein shall relieve any party from
liability for a breach of this Agreement or a failure to perform as required
herein prior to the termination hereof.
9.4 Waiver of Terms or Conditions. Any of the terms or conditions of
this Agreement may be waived at any time prior to the Effective Date by the
party which is, or whose shareholders are, entitled to the benefit thereof, by
action taken by the board of directors of such party, or by its chairman, or by
its president and chief executive officer; provided, however, that such waiver
shall be in writing and shall be taken only if, in the judgment of the board of
directors or officer taking such action, such waiver will not have a materially
adverse effect on the benefits intended hereunder to the shareholders of its or
his corporation; and the other parties hereto may rely on the delivery of such a
waiver as conclusive evidence of such judgment and the validity of the waiver.
Neither the conduct of due diligence, the delivery of any officer's certificate,
nor the closing of the transactions contemplated by this Agreement shall waive
or in any way diminish the representations, warranties, covenants or obligations
of any party made under this Agreement.
9.5 Amendment. Anything herein or elsewhere to the contrary
notwithstanding, the extent permitted by law, this Agreement and the exhibits
hereto may be amended, supplemented, or interpreted at any time prior to the
Effective Time by written instrument duly authorized and executed by each of the
parties hereto; provided, however, that this Agreement may not be amended after
the action by shareholders of Oxycal in any respect that would prejudice the
economic interests of such Oxycal shareholders, or any of them, except as
specifically provided herein or by like action of such shareholders.
ARTICLE 10. MISCELLANEOUS
10.1 Benefits of this Agreement. Nothing in this Agreement shall be
construed to grant or confer any rights upon any person who is not a party to
this Agreement, and this Agreement shall be for the sole and exclusive benefit
of Parent, Acquisition Corp., Oxycal and each Subsidiary.
10.2 Successors and Assigns. This Agreement may not be assigned by
Oxycal, any Subsidiary, Acquisition Corp. or Parent without the prior written
consent of all of the parties. This Agreement shall bind and inure to the
benefit of the parties (including the Surviving Corporation) and their
respective heirs, administrators, executors, successors and permitted assigns.
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10.3 Notices. Any notice from one party to the other shall be deemed
given (i) when delivered, or (ii) on the third business day after being
deposited in the United States mail, certified mail, return receipt requested,
postage prepaid, or (iii) the business day of facsimile transmission, provided
confirmation of transmission is received by the sender, and such notice shall be
addressed to the person at the address listed below or to such other person
and/or address as may be designated from time to time in writing:
If to Parent or Acquisition Corp.:
Zila, Inc.
5227 North 7th Street
Phoenix, Arizona 85014
Attn: Joseph Hines
Facsimile: (602) 234-2264
With copies to:
Streich Lang P.A.
Two North Central Avenue
Phoenix, Arizona 85004
Attn: Kevin J. Tourek
Facsimile: (602) 229-5690
If to Oxycal:
Oxycal Laboratories, Incorporated
533 Madison Avenue
Prescott, Arizona 86301
Facsimile: (520) 778-7986
If to the Oxycal Shareholders:
The addresses specified in Schedule 2.4.1
With copies to (in the case of notice to Oxycal or the Oxycal
Shareholders):
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Matthew P. Feeney
Facsimile: (602) 382-6070
10.4 Severability. In the event any covenant, condition or other
provision of this Agreement is held to be invalid or unenforceable by a final
judgment of a court of competent
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<PAGE> 37
jurisdiction, then such covenant, condition or other provision shall be
automatically terminated and performance thereof waived, and such invalidity or
unenforceability shall in no way affect any of the other covenants, conditions
or provisions hereof, and the parties hereto shall negotiate in good faith to
agree to such amendments, modifications or supplements of or to this Agreement
or such other appropriate actions as, to the maximum extent practicable, shall
implement and give effect to the intentions of the parties as reflected in this
Agreement.
10.5 Entire Agreement. This Agreement, the Schedules, the Exhibits and
the other agreements executed pursuant hereto and thereto contain all of the
terms agreed upon by the parties with respect to the subject matter hereof, and
there are no representations or understandings between the parties except as
provided herein. This Agreement may not be amended or modified in any way except
by a written amendment to this Agreement duly executed by the parties. The
Recitals, Schedules and Exhibits constitute a part of this Agreement.
10.6 Waiver. No waiver of a breach of, or default under, any provision
of this Agreement shall be deemed a waiver of such provision or of any
subsequent breach or default of the same or similar nature or of any other
provision or condition of this Agreement.
10.7 Applicable Law. This Agreement shall be governed by and construed
(both as to validity and performance) and enforced in accordance with the laws
of the State of Arizona applicable to agreements made and to be performed wholly
within such jurisdiction.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument, but all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
10.9 Headings. Any heading preceding the texts of the severed articles
and sections of this Agreement, and any glossary, table of contents or index of
schedules and exhibits shall be solely for convenience of reference and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
10.10 Dispute Resolution Procedures. All Disputes (as defined in
Section 10.10(b)) shall be resolved exclusively according to the procedures set
forth in this Section 10.10, except as otherwise provided herein.
(a) Mediation. No party shall commence an arbitration
proceeding pursuant to the provisions of Section 10.10(b) below unless such
party shall first give a written notice (a "Dispute Notice") to the other party
and the American Arbitration Association ("AAA") setting forth the nature of the
Dispute. The Dispute Notice shall constitute a request for mediation and
arbitration, if mediation fails. The parties shall attempt in good faith to
resolve the Dispute by Mediation under the Commercial Mediation Rules of the AAA
in effect on the date of the Dispute Notice. If the parties cannot agree on the
selection of a mediator within twenty (20) days after delivery of the Dispute
Notice, the mediator will be selected by the AAA. If the dispute has not been
resolved by mediation as provided above within sixty (60) days after delivery of
the Dispute Notice,
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<PAGE> 38
then the dispute shall be determined by arbitration in accordance with the
provisions of Section 10.10(b) hereof.
(b) Arbitration. If a Dispute cannot be resolved by Mediation,
as described in Section 10.10(a), it shall be resolved by binding arbitration
(except as set forth in (f) below) in accordance with the terms of this Section.
A "Dispute" shall include any action, dispute, claim or controversy of any kind,
whether in contract or tort, statutory or common law, legal or equitable, now
existing or hereafter arising under or in connection with, or in any way
pertaining to, this Agreement or the Articles of Merger and Merger Agreement and
any Schedules or Exhibits hereto (collectively, the "Documents"), any
transaction or obligations of any kind related directly or indirectly to any of
the Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Documents. Any party may by summary proceedings bring an
action in court to compel arbitration of a Dispute. Any party who fails or
refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(c) Governing Rules. Arbitration proceedings shall be
administered by the AAA or such other administrator as the parties shall
mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All
Disputes submitted to arbitration shall be resolved in accordance with the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the Documents. The arbitration
shall be conducted in Phoenix, Arizona at a location convenient to the parties,
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitations applicable to any Dispute
shall apply to any arbitration proceeding. Discovery shall be permitted, to the
same extent allowed under the Federal Rules of Civil Procedure, but shall be
subject to regulation or limitation by the arbitrators, and shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction.
(d) No Waiver; Provisional Remedies Self-Help and Foreclosure.
No provision hereof shall limit the right of any party to exercise self-help
remedies, including without limitation, setoff, or to obtain provisional or
ancillary remedies, including without limitation, injunctive relief,
sequestration, attachment, garnishment or the appointment of a receiver, from a
court of competent jurisdiction before, after or during the pendency of any
arbitration or other proceeding. The exercise of any such remedy shall not waive
the right of any party to compel arbitration hereunder.
(e) Arbitrator Qualifications and Powers; Awards. Arbitrators
must be active members of the Arizona State Bar who have excellent academic and
professional credentials and who are partners or shareholders in respected law
firms, or retired judges of the state or federal judiciary of Arizona, in each
case with not less than ten years experience in the substantive experience
applicable to the subject matter of the Dispute, or certified public accountants
practicing with an accounting firm with a national or regional practice and
experienced in audit or financial analysis. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions
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filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the state of Arizona, (ii)
may grant any remedy or relief that a court of the state of Arizona or a United
States District Court could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award, and (iii) shall
have the power to award recovery of all costs and fees, to impose sanctions and
to take such other actions as they deem necessary to the same extent a judge
could pursuant to the Federal Rules of Civil Procedure, the Arizona Rules of
Civil Procedure or other applicable law. Any Dispute in which the amount in
controversy is $1,000,000 or less shall be decided by a single arbitrator who
shall not render an award of greater than $1,000,000 (including damages, costs,
fees and expenses). By submission to a single arbitrator, each party expressly
waives any right or claim to recover more than $1,000,000. Any Dispute in which
the amount in controversy exceeds $1,000,000 shall, upon demand by either party,
be decided by majority vote of a panel of three arbitrators; provided however,
that all three arbitrators must actively participate in all hearings and
deliberations. If a Dispute involves any matter involving the analysis or
understanding of financial statements or the calculation of any Adverse Change
or Adverse Adjustment, the arbitrator shall be an independent public accountant
or, if a panel of three arbitrators is involved, at least one of said
arbitrators shall be an independent public accountant) or, if only one
arbitrator is hearing the matter and that arbitrator is not an independent
public accountant, the sole arbitrator shall retain the services of an
independent public accountant acceptable to both parties to assist him.
(f) Judicial Review. In any arbitration in which the amount in
controversy exceeds $500,000, the arbitrators shall be required to make
specific, written findings of fact and conclusions of law. In such arbitrations
(i) the arbitrators shall not have the power to make any award which is not
supported by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings of fact are
supported by substantial evidence and the conclusions of law are not erroneous
under the applicable substantive law, and (iii) the parties shall have in
addition to the grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (A) whether the
findings of fact rendered by the arbitrators are supported by substantial
evidence, and (B) whether the conclusions of law are erroneous under the
applicable substantive law. Judgment confirming an award in such a proceeding
may be entered only if a court determines the award is supported by substantial
evidence and not based on legal error under the applicable substantive law.
(g) Fees and Costs. If either party fails to proceed with
mediation or arbitration as provided herein or unsuccessfully seeks to stay such
mediation or arbitration, or fails to comply with any arbitration award, or is
unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party shall be entitled to be awarded
costs, including reasonable attorneys' fees, paid or incurred by such other
party in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
(h) Tolling Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time shall be tolled while
the procedures specified in this
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Section 10.10 are pending. The parties will take such action, if any, required
to effectuate such tolling.
(i) Injunctive Relief. Nothing in this Section 10.10 shall bar
any party from seeking temporary, preliminary or permanent injunctive relief in
order to prevent irreparable harm or to maintain the status quo or to preserve
rightly in order that a matter may be submitted for mediation or arbitration as
provided herein.
(j) Miscellaneous. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within one year of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Documents or the subject matter of the Dispute shall
control.
10.11 No Agreement Until Executed. This Agreement shall not constitute
a contract or evidence of a contract among the parties unless executed by all
parties hereto, irrespective of the negotiations among the parties or the
exchange of drafts of this Agreement.
ARTICLE 11. DEFINITIONS
As used herein, the following capitalized terms shall have the
following meanings unless the context otherwise requires:
"Acquisition Corp." shall mean Zila Acquisition Corp.
"Affidavit and Indemnification Agreement' shall have the
meaning set forth in Section 1.3(b).
"Affiliate" of a Person means a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise.
"Cash Consideration" shall have the meaning set forth in
Section 1.2(b).
"Cash Consideration Offset Certificate" shall have the meaning
set forth in Section 7.1.
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<PAGE> 41
"Certificates" shall have the meaning set forth in Section
1.3(a).
"Closing" shall have the meaning set forth in Section 1.10.
"Closing Date" shall have the meaning set forth in Section
1.10.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Compensation Programs" shall have the meaning set forth in
Section 2.33(c).
"Contract List" shall have the meaning set forth in Section
2.7.
"Current Officers and Directors" shall have the meaning set
forth in Section 5.2.
"Deloitte Touche" shall have the meaning set forth in Section
2.5.
"Dissenting Shares" shall have the meaning set forth in
Section 1.13.
"Effective Time" shall have the meaning set forth in Section
1.9.
"Exchange Agent" shall have the meaning set forth in Section
1.3(a).
"Exchange Agent Agreement" shall have the meaning set forth in
Section 1.3(a).
"Export" shall have the meaning set forth in Recital A.
"Financial Advisor" shall mean Cruttenden Roth Incorporated.
"Financial Advisor Fee" shall be $959,000.
"Financial Statements" shall have the meaning set forth in
Section 2.5.
"FTC" shall have the meaning set forth in Section 3.8.
"Indemnitees" shall have the meaning set forth in Section 5.3.
"Initial Deposit" shall have the meaning set forth in Section
1.3(a).
"Intellectual Property Rights" shall have the meaning set
forth in Section 2.24(b).
"Inter-Cal" shall have the meaning specified in Recital A.
"Interim Financial Statements" shall have the meaning set
forth in Section 2.5.
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"Material Adverse Effect" means any matter, including, without
limitation, the breach of any representation, warranty or covenant herein (other
than a breach by Parent or Acquisition Corp.) that alone or in the aggregate
with other matters (whether or not such matters are individually material) has a
material adverse effect on the business, properties, assets, or financial
condition of the Oxycal and its Subsidiaries, taken as a whole.
"Material Contracts" shall have the meaning set forth in
Section 2.7.
"Merger" shall have the meaning set forth in Recital D.
"Merger Consideration" shall have the meaning set forth in
Section 1.2(a).
"Optionee" means each of the eighteen (18) individuals
entitled to exercise one or more Stock Options, as identified on Schedule 11.
"Oxycal" means Oxycal Laboratories, Incorporated, an Arizona
corporation.
"Oxycal Shareholders" shall have the meaning set forth in
Recital B.
"Oxycal Shares" shall have the meaning set forth in Recital B.
"Parent" means Zila, Inc., a Delaware corporation.
"Pension Plans" shall have the meaning set forth in Section
2.33(a).
"Permits" shall have the meaning set forth in Section 2.16.
"Per Share Cash Consideration" shall have the meaning set
forth in Section 1.2(b).
"Person" means any natural person, firm, partnership,
association, corporation, company, limited liability company, limited
partnership, trust, business trust, governmental authority, or other entity.
"Plan of Merger" shall have the meaning set forth in Article
1.
"Proprietary Right" shall have the meaning set forth in
Section 2.24(a).
"Proxy Statement" shall have the meaning set forth in Section
3.5.
"Related Person" shall have the meaning set forth in Section
2.26.
"Stock Option" means the right to purchase Oxycal common
stock.
"Stock Option Plan" shall have the meaning set forth in
Section 2.2.
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"Subsidiary List" shall have the meaning set forth in Section
2.3.
"Subsidiary" or "Subsidiaries" shall have the meanings set
forth in Section 2.3.
"Surviving Corporation" shall have the meaning set forth in
Section 1.1.
"Venture List" shall have the meaning set forth in Section
2.3.
"Welfare Plans" shall have the meaning set forth in Section
2.33(b).
"Withholding Amount" means, with respect of each Optionee, the
amount of federal and state withholding tax Oxycal is required to withhold at
the Effective Time with respect to the exercise of the Stock Options standing in
the name of such Optionee and (if applicable) the payment by Oxycal to such
Optionee of any Stock Option reimbursement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
"Parent": ZILA, INC,
A DELAWARE CORPORATION
By: /s/ Joseph Hines
-----------------------------------
Its: President
----------------------------
"Acquisition Corp.": ZILA ACQUISITION CORP., AN
ARIZONA CORPORATION
By: /s/ Joseph Hines
-----------------------------------
Its: President
----------------------------
"Oxycal": OXYCAL LABORATORIES,
INCORPORATED, AN ARIZONA
CORPORATION
By: /s/ Nancy J. Chandler
-----------------------------------
Its: Vice President of Operations
-----------------------------
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EXHIBIT "99"
Zila Acquires Oxycal Laboratories
PHOENIX, Nov. 10 /PRNewswire/ -- Zila, Inc. (Nasdaq: ZILA - news), international
provider of healthcare products for dental/medical professionals and consumers,
announced today completion of the acquisition of privately-held
OxycalLaboratories, Incorporated, of Prescott, Arizona.
Oxycal manufactures and markets a patented and enhanced form of vitamin C under
the trademark Ester-C(R).
Utilizing a growing network of more than 100 distributors, Oxycal sells Ester-C
vitamin products in bulk to manufacturers andprivate labeling companies for use
in their own formulations. Products manufactured with Ester-C are sold
throughout the U.S.and in 41 countries worldwide. Oxycal requires its customers
to display the federally-registered Ester-C logo on theirpackaging. Ester-C,
with non-acidic and Body-Ready(R) characteristics, has been the best selling
branded vitamin Csupplement in the U.S. health food industry for the last three
years.
"Ester-C can be found in various dietary supplement formulations in 95 percent
of all health food stores, nearly 80 percent of chain pharmacies, the three
largest mass merchandisers and many food stores nationwide," said Oxycal
President Nancy Chandler. "But we still have plenty of room to expand market
share, here and abroad. Exciting opportunities for Ester-C exist among topical
applications (such as skin creams), chewable vitamins, nutrition bars, sport
drinks and particularly food fortification," she said. To boost sales and
promote new uses of Ester-C, Oxycal is in the early stages of a $2 million brand
advertising campaign.
With domestic sales accounting for 77 percent of Oxycal's business, considerable
growth is expected in foreign markets. Sales are strong in Hong Kong and
marketing recently began in China. The largest direct selling organization in
Indonesia is helping to open that important market for Ester-C. Elsewhere, the
largest health food chain in the United Kingdom recently began selling Ester-C
products. In Norway and Denmark, Ester-C accounts for more than half of health
food store vitamin C sales.
Oxycal holds two other patents on the use of vitamin C metabolites and their
impact in pharmaceutical products as well as nutritional supplements. The
implications and potential benefits of expanding application of Oxycal's
technology to prescription and over-the-counter drug formulations are
significant and could include: reducing medication dosages, improving drug
delivery through better cellular absorption, increasing pharmaceutical
performance and decreasing toxic side effects or gastrointestinal discomfort.
Licensing and other relationships with pharmaceutical companies may be
considered to fully exploit the potential of this technology.
<PAGE> 2
Zila President Joseph Hines said, "Oxycal will have a very positive impact on
Zila's earnings. For Oxycal's fiscal year 1997 (ended June 30, 1997), net sales
were $14,496,000, a 32 percent increase over the prior year. Sales growth has
continued into FY 1998, as worldwide market penetration increases. Oxycal's FY
1997 pre-tax profit was $4,032,000, which should increase as sales volume grows
and operating efficiencies are realized. Oxycal's management intends to build on
this foundation by increasing market share domestically and internationally,
improving formulations, expanding the product line, and entering into licensing
and royalty arrangements to take advantage of the potential dental,
pharmaceutical and veterinary applications for their patented technology."
Ester-C is produced at Oxycal's 23,500 square foot manufacturing and R&D
facility in Prescott, Arizona. It is distributed by Inter-Cal Corporation, an
Oxycal subsidiary. Oxycal, which has some 50 employees, will remain at its
present location, with its present management.
One hundred million Americans spend more than $9 billion a year on vitamins and
other dietary supplements, up from $4 billion in 1990. More than half of
American households buy vitamin supplements. The Nutrition Business Journal
estimates that the domestic market for vitamin C is $925 million, with 5-15
percent annual sales growth since 1990.
Vitamin C speeds the healing of wounds and is essential in the formation of
collagen (the body's intercellular cement) and 300 other body processes. Unlike
most animals, humans cannot manufacture their own vitamin C; they must replenish
their supply regularly.
Zila has grown rapidly during calendar year 1997, with acquisitions of
Bio-Dental Technologies Corporation and Cygnus Imaging, Inc. Zila recently
acquired Peridex(R), a prescription anti-bacterial oral rinse, from The Procter
& Gamble Company. The Oxycal acquisition was financed with assistance from the
New York investment banking firm of Jesup and Lamont.
Details of the transaction have not yet been disclosed.
With the Oxycal acquisition, Zila, Inc., has five operating groups. Zila
Pharmaceuticals markets prescription and non-prescription oral healthcare
products. Cygnus Imaging manufactures and markets CygnaScope(TM) and
OralVision(TM) intraoral video camera systems, and CygnusRay(TM) digital x-ray
systems. Zila Professional Products Group includes PracticeWorks(R) dental
practice management software and Zila Dental Supply, a national dental products
distributor, marketing 16,462 items to dental professionals through extensive
telemarketing and direct mail, catalog and internet sales. Zila Manufacturing is
the world's only producer of pharmaceutical grade toluidine blue, the active
ingredient in OraTest(TM), the first oral cancer detection system. Zila is
introducing OraTest in markets worldwide. And Oxycal Laboratories manufactures
and markets internationally Ester-C(R) vitamins, patented products with
non-acidic and Body-Ready(R) characteristics.
<PAGE> 3
This press release contains forward-looking statements which are based largely
on Zila's expectations and are subject to various business risks and
uncertainties, some of which are beyond Zila's control. Actual results could
differ materially from these forward-looking statements as a result of such
risks. There can be no assurances that the forward-looking statements contained
herein will in fact transpire or prove to be accurate.
SOURCE: Zila, Inc.
