EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
Carter-Wallace, Inc.,
CPI Development Corporation,
MCC Acquisition Holdings Corporation,
MCC Merger Sub Corporation
and
MCC Acquisition Sub Corporation
Dated as of May 7, 2001
TABLE OF CONTENTS
Page
RECITALS
ARTICLE I
The Mergers
1.1. The CPI Merger.....................................3
1.2. The Company Merger.................................3
1.3. Closing............................................4
1.4. CPI Merger Effective Time..........................4
1.5. Company Merger Effective Time......................4
ARTICLE II
The Surviving Stockholder
2.1. Certificate of Incorporation of the Surviving
Stockholder........................................5
2.2. Bylaws of the Surviving Stockholder................5
2.3. Directors of the Surviving Stockholder.............5
2.4. Officers of the Surviving Stockholder..............5
ARTICLE III
The Surviving Company
3.1. Certificate of Incorporation of the Surviving
Company............................................5
3.2. Bylaws of the Surviving Company....................5
3.3. Directors of the Surviving Company.................6
3.4. Officers of the Surviving Company..................6
ARTICLE IV
Effect of the Mergers on Capital Stock;
Exchange of Certificates
4.1. Effect of the CPI Merger...........................6
(a) CPI Merger Consideration......................6
(b) Cancellation of CPI Shares....................7
(c) CPI Merger Sub................................7
4.2. Effect of the Company Merger.......................7
(a) Company Merger Consideration..................7
(b) No Effect on Certain Company Shares...........8
(c) Company Merger Sub............................8
4.3. Payment for Shares.................................8
(a) Paying Agent..................................8
-i-
(b) Exchange Procedures...........................9
(c) Transfers....................................10
(d) Termination of Exchange Fund.................11
(e) Lost, Stolen or Destroyed Certificates.......12
4.4. Dissenters' Rights................................12
4.5. Adjustment to Merger Consideration Amounts........12
(a) Increase in After-Tax Proceeds of Asset Sale.13
(b) Decrease in After-Tax Proceeds of Asset Sale.13
(c) Net After Tax Proceeds Information...........13
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of CPI.............16
(a) Organization, Good Standing and
Qualification................................16
(b) Capital Structure............................17
(c) Corporate Authority; Approvals...............18
(d) Governmental Filings; No Violations..........18
(e) Litigation and Liabilities...................19
(f) Taxes........................................20
5.2. Representations and Warranties of the Company.....21
(a) Organization, Good Standing and
Qualification................................21
(b) Capital Structure............................22
(c) Corporate Authority; Approval and Fairness...23
(d) Governmental Filings; No Violations..........24
(e) Company Contracts............................25
(f) Company Reports; Financial Statements........25
(g) Absence of Certain Changes...................27
(h) Litigation and Liabilities...................28
(i) Employee Benefits............................28
(j) Compliance with Laws; Permits................31
(k) Takeover Statutes............................32
(l) Environmental Matters........................32
(m) Taxes........................................33
(n) Labor Matters................................35
(o) Insurance....................................35
(p) Intellectual Property........................36
(q) Brokers and Finders..........................37
(r) Real Property................................37
5.3. Representations and Warranties of Parent, CPI
Merger Sub and Company Merger Sub.................38
(a) Organization, Good Standing and
Qualification................................38
(b) Corporate Authority..........................38
(c) Governmental Filings; No Violations..........39
(d) Ownership of Shares..........................40
(e) Funds........................................40
-ii-
(f) Financial Structure..........................41
ARTICLE VI
Covenants
6.1. Interim Operations................................41
6.2. Acquisition Proposals.............................48
6.3. Stockholder Approvals.............................52
6.4. Proxy Statement...................................52
6.5. Filings; Other Actions; Notification..............52
6.6. Access............................................55
6.7. Stock Exchange De-listing.........................56
6.8. Assets Purchase...................................56
6.9. Publicity.........................................57
6.10. Benefits..........................................58
(a) Stock Options................................58
(b) Stock Awards.................................58
(c) Employee Benefits............................58
(d) Service and Assumption of Plan Obligations...59
(e) Severance Pay................................60
(f) Payment of Bonuses...........................60
(g) Additional Benefit Matters...................60
6.11. Expenses..........................................60
6.12. Indemnification; Directors' and Officers'
Insurance.........................................61
6.13. Takeover Statute..................................64
6.14. Parent Vote.......................................64
6.15. Recapitalization..................................64
6.16. Return of Information.............................65
6.17. FIRPTA............................................65
6.18. Debt Financing....................................65
6.19. Inventory Build Out...............................65
6.20. Payment of CPI Indebtedness and Obligations.......66
6.21. Carter-Horner Dividend; No Transferred
Subsidiaries Funding..............................66
6.22. Sofibel...........................................67
6.23. Fund Agreement....................................67
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect
the Mergers.......................................67
(a) Assets Purchase..............................67
(b) Recapitalization.............................67
(c) Stockholder Approval.........................67
-iii-
(d) Regulatory Consents..........................67
(e) No Orders....................................68
7.2. Conditions to Obligations of Parent, CPI Merger
Sub and Company Merger Sub........................68
(a) Representations and Warranties...............68
(b) Performance of Obligations of CPI and the
Company......................................69
(c) Company Closing Notice.......................70
(d) Financing....................................70
(e) No Litigation................................70
(f) Fund Agreement...............................70
7.3. Conditions to Obligation of CPI and the Company...70
(a) Representations and Warranties...............70
(b) Performance of Obligations of Parent, CPI
Merger Sub and Company Merger Sub............71
(c) Buyer Closing Notice.........................71
(d) Parent Closing Notice........................71
(e) Solvency Opinion.............................71
8.1. Termination by Mutual Consent.....................72
8.2. Termination by Either Parent or the Company.......72
8.3. Termination by the Company........................72
8.4. Termination by Parent.............................73
8.5. Effect of Termination and Abandonment.............74
ARTICLE IX
Miscellaneous and General
9.1. Survival..........................................76
9.2. Modification or Amendment.........................77
9.3. Waiver of Conditions..............................77
9.4. Counterparts......................................77
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.....77
9.6. Notices...........................................78
9.7. Entire Agreement; NO OTHER REPRESENTATIONS........79
9.8. No Third Party Beneficiaries......................80
9.9. Obligations of Parent and of the Company..........80
9.10. Severability......................................80
9.11. Interpretation....................................80
9.12. Assignment........................................81
-iv-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of May 7, 2001, among Carter-Wallace, Inc., a Delaware corporation
(the "Company"), CPI Development Corporation, a Delaware corporation ("CPI"),
MCC Acquisition Holdings Corporation, a Delaware corporation ("Parent"), MCC
Merger Sub Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ("Company Merger Sub"), and MCC Acquisition Sub Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("CPI Merger Sub").
RECITALS
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and Armkel, LLC, a Delaware limited liability company
("Assets Buyer") have executed and delivered an Asset Purchase Agreement, dated
as of May 7, 2001 (including the exhibits, schedules and annexes thereto, the
"Asset Purchase Agreement"), providing for, among other things, the sale,
conveyance, transfer, assignment and delivery to Assets Buyer of all of the
Company's and its affiliates' rights, title and interest in and to the Purchased
Assets (as defined in the Asset Purchase Agreement) and the assumption by Assets
Buyer of all of the Assumed Liabilities (as defined in the Asset Purchase
Agreement; such sales, transfers, assignments, purchases, acceptances and
assumptions collectively, the "Assets Purchase"), effective in each case
immediately prior to the CPI Merger (as hereinafter defined); and
WHEREAS, in connection with the Assets Purchase the Company and Assets
Buyer will enter into certain additional agreements including a Transition
Services Agreement, Cranbury Facilities Sharing Agreement and Lease, Decatur
Manufacturing Agreement, Insurance Claims Agreement, Indemnity Agreement,
Consumer Products Transitional Trademark License Agreement and Company Patent
License Agreement (collectively, the "Ancillary Agreements"); and
WHEREAS, the boards of directors of each of the Company, CPI, Parent,
Company Merger Sub and CPI Merger Sub have approved this Agreement, the boards
of directors of each of CPI, Parent and CPI Merger Sub have approved the
merger of CPI Merger Sub with and into CPI upon the terms and subject to the
conditions set forth in this Agreement (the "CPI Merger"), and the boards of
directors of each of the Company, Parent and Company Merger Sub have approved
the merger of Company Merger Sub with and into the Company upon the terms and
subject to the conditions set forth in this Agreement (the "Company Merger" and,
collectively with the CPI Merger, the "Mergers"); and
WHEREAS, the Board of Directors of the Company has by resolution
approved a memorandum of understanding with CPI, Parent, Company Merger Sub, CPI
Merger Sub and Assets Buyer with respect to and substantially consistent with
the Mergers, the Assets Purchase and the other transactions contemplated by this
Agreement and the Asset Purchase Agreement; and
WHEREAS, prior to consummation of the Mergers, (i) the holders of not
less than a majority of the outstanding shares of each class and series of
capital stock of CPI will approve an amendment to the certificate of
incorporation of CPI (the "Recapitalization Amendment") pursuant to which only
the following will occur: each outstanding share of (a) First Preferred Stock,
$100 par value per share, of CPI (each, an "CPI First Preferred Share"), (b)
Second Preferred Stock, $100 par value per share, of CPI (each, an "CPI Second
Preferred Share"), (c) Third Preferred Stock, $100 par value per share, of CPI
(each, an "CPI Third Preferred Share"), (d) Class A Common Stock, $10 par value
per share, of CPI (each, an "CPI Class A Common Share"), (e) Class B Common
Stock, $10 par value per share, of CPI (each, an "CPI Class B Common Share") and
(f) Class C Common Stock, $10 par value per share, of CPI (each, an "CPI Class C
Common Share" and, collectively with all of the other outstanding CPI Class C
Common Shares and all of the outstanding CPI First Preferred Shares, CPI Second
Preferred Shares, CPI Third Preferred Shares, CPI Class A Common Shares and CPI
Class B Common Shares, the "Unrecapped Shares") will be reclassified into and
exchanged (the "Recapitalization") for 23,508,000 shares of Common Stock, par
value $1.00 per share, of CPI (each a "Recapped Share") and collectively with
the other Recapped Shares and the Unrecapped Shares, the "CPI Shares"); (ii) the
Recapitalization Amendment will be duly filed with the Secretary of State of the
State of Delaware; and (iii) the Recapitalization will thereby be consummated
immediately prior to the CPI Merger Effective Time, as hereinafter defined;
-2-
WHEREAS, the Company, CPI, Parent, Company Merger Sub and CPI Merger
Sub desire to make certain representations, warranties, covenants and agreements
in connection with the Mergers and the other transactions contemplated by this
Agreement; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the holders of not less than a majority of the outstanding shares of
each class and series of capital stock of CPI, CPI and Parent are executing and
delivering Voting Agreements and an Indemnification Agreement providing for
certain matters relating to the Assets Purchase and the Mergers.
NOW, THEREFORE, in consideration of the premises, and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Mergers
1.1. The CPI Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the CPI Merger Effective Time (as defined in Section
1.4) CPI Merger Sub shall be merged with and into CPI and the separate corporate
existence of CPI Merger Sub shall thereupon cease. CPI shall be the surviving
corporation in the CPI Merger (sometimes hereinafter referred to as the
"Surviving Stockholder"), and the separate corporate existence of CPI with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the CPI Merger, except as set forth in Article II. The CPI Merger
shall have the effects specified in the Delaware General Corporation Law, as
amended (the "DGCL").
1.2. The Company Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Company Merger Effective Time (as defined in
Section 1.5) Company Merger Sub shall be merged with and into the Company and
the separate corporate existence of Company Merger Sub shall thereupon cease.
The Company shall be the surviving corporation in the Company Merger (sometimes
hereinafter referred to as the "Surviving Company"), and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger,
-3-
except as set forth in Article III. The Company Merger shall have the effects
specified in the DGCL.
1.3. Closing. The closing of the Mergers (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York at 9:00 A.M. on the first business day on which the last to be satisfied or
waived of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satis fied at the Closing, but subject to the
satisfaction or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the time and
date at which Closing takes place, the "Closing Date").
1.4. CPI Merger Effective Time. As soon as practicable on the Closing
Date and after receipt from the Company of notice that it will immediately
thereafter file the Company Merger Certificate (as hereinafter defined), and in
any event prior to the Company Merger Effective Time, CPI will cause a
certificate of merger (the "CPI Merger Certificate") to be executed,
acknowledged and filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the DGCL. The CPI Merger shall become effective at
the time when the CPI Merger Certificate has been duly filed with the Secretary
of State of the State of Delaware or as otherwise specified therein (the "CPI
Merger Effective Time").
1.5. Company Merger Effective Time. As soon as practicable on the
Closing Date, and in any event immediately following the filing of the CPI
Merger Certificate, the Company will cause a certificate of merger (the "Company
Merger Certificate") to be executed, acknowledged and filed with the Secretary
of State of the State of Delaware as provided in Section 251 of the DGCL. The
Company Merger shall become effective at the time when the Company Merger
Certificate has been duly filed with the Secretary of State of the State of
Delaware or at such other time following the CPI Merger Effective Time as may be
set forth in the Company Merger Certificate (the "Company Merger Effective
Time").
-4-
ARTICLE II
The Surviving Stockholder
2.1. Certificate of Incorporation of the Surviving Stockholder. The
certificate of incorporation of CPI as in effect immediately prior to the CPI
Merger Effective Time shall be the certificate of incorporation of the Surviving
Stockholder (the "Surviving Stockholder Charter"), until duly amended as
provided therein or by applicable Law.
2.2. Bylaws of the Surviving Stockholder. The bylaws of CPI Merger Sub
as in effect at the CPI Merger Effective Time shall be the bylaws of the
Surviving Stockholder (the "Surviving Stockholder Bylaws"), until thereafter
amended as provided therein or by applicable Law.
2.3. Directors of the Surviving Stockholder. The directors of CPI
Merger Sub immediately prior to the CPI Merger Effective Time shall, from and
after the CPI Merger Effective Time, be the directors of the Surviving
Stockholder until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Stockholder Charter and the Surviving Stockholder Bylaws.
2.4. Officers of the Surviving Stockholder. The officers of CPI Merger
Sub immediately prior to the CPI Merger Effective Time shall, from and after the
CPI Merger Effective Time, be the officers of the Surviving Stockholder until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Stockholder Charter and the Surviving Stockholder Bylaws.
ARTICLE III
The Surviving Company
3.1. Certificate of Incorporation of the Surviving Company. The
certificate of incorporation of the Company as in effect immediately prior to
the Company Merger Effective Time shall be the certificate of incorporation of
the Surviving Company (the "Surviving Company Charter"), until duly amended as
provided therein or by applicable Law.
3.2. Bylaws of the Surviving Company. The bylaws of the Company in
effect at the Company Merger Effective Time shall be the bylaws of the Surviving
Company (the
-5-
"Surviving Company Bylaws"), until thereafter amended as provided therein or by
applicable Law.
3.3. Directors of the Surviving Company. The directors of Company
Merger Sub immediately prior to the Company Merger Effective Time shall, from
and after the Company Merger Effective Time, be the directors of the Surviving
Company until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Company Charter and the Surviving Company Bylaws.
3.4. Officers of the Surviving Company. The officers of Company Merger
Sub immediately prior to the Company Merger Effective Time shall, from and after
the Company Merger Effective Time, be the officers of the Surviving Company
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Company Charter and the Surviving Company Bylaws.
ARTICLE IV
Effect of the Mergers on Capital Stock;
Exchange of Certificates
4.1. Effect of the CPI Merger. At the CPI Merger Effective Time, as a
result of the CPI Merger and without any action on the part of the holder of any
capital stock of CPI:
(a) CPI Merger Consideration. Each Recapped Share issued and
outstanding immediately prior to the CPI Merger Effective Time other than (i)
Recapped Shares owned by CPI and (ii) Recapped Shares owned by stockholders
("Dissenting CPI Stockholders") exercising appraisal rights pursuant to Section
262 of the DGCL shall be converted into the right to receive, without interest,
an amount in cash equal to $20.30, as such amount may be adjusted pursuant to
Section 4.5 and rounded to the nearest whole cent (the "CPI Merger
Consideration") all of which shall be paid by Parent pursuant to Section 4.3.
All Recapped Shares, by virtue of the CPI Merger and without any action on the
part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Recapped Shares (each, an "CPI Certificate") shall
thereafter cease to have any rights with respect to such Recapped Shares,
-6-
except the right to receive the CPI Merger Consideration for such Recapped
Shares upon the surrender of such certificate in accordance with 4.3 or the
right, if any, to receive payment from the Surviving Stockholder of the "fair
value" of such Recapped Shares as determined in accordance with Section 262 of
the DGCL.
(b) Cancellation of CPI Shares. Each CPI Share issued and outstanding
immediately prior to the CPI Merger Effective Time and owned by CPI shall, by
virtue of the CPI Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.
(c) CPI Merger Sub. At the CPI Merger Effective Time, each share of
Common Stock, par value $1.00 per share, of CPI Merger Sub issued and
outstanding immediately prior to the CPI Merger Effective Time shall, by virtue
of the CPI Merger and without any action on the part of CPI Merger Sub or the
holders of such shares, be converted into one validly issued, fully paid and
non-assessable share of common stock of the Surviving Stockholder.
4.2. Effect of the Company Merger. At the Company Merger Effective
Time, as a result of the Company Merger and without any action on the part of
the holder of any capital stock of the Company:
(a) Company Merger Consideration. Each share of Common Stock, par
value $1.00 per share, of the Company (each, a "Company Common Share") and each
share of Class B Common Stock, par value $1.00 per share, of the Company (each,
a "Company Class B Common Share" and, collectively with the other Company Class
B Common Shares and the Company Common Shares, the "Company Shares") issued and
outstanding immediately prior to the Company Merger Effective Time (other than
(i) Company Shares owned by Parent, CPI Merger Sub, Company Merger Sub or any
other direct or indirect subsidiary of Parent (collectively, the "Parent
Companies"), and (ii) Company Shares owned by the Surviving Stockholder or the
Company or any direct or indirect subsidiary of the Company, and (iii) Company
Shares owned by stockholders exercising appraisal rights pursuant to Section 262
of the DGCL ("Dissenting Company Stockholders" and, collectively with the
Dissenting CPI Stockholders, "Dissenting Stockholders")) shall be extinguished
and converted into the
-7-
right to receive, without interest, an amount in cash equal to $20.30, as such
amount may be adjusted pursuant to Section 4.5 and rounded to the nearest whole
cent (the "Company Merger Consideration") to be paid pursuant to Section 4.3.
Except as set forth in Section 4.2(b), all such Company Shares, by virtue of the
Company Merger and without any action on the part of the holders thereof, shall
no longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Company Shares
(the "Company Certificates" and, collectively with the CPI Certificates, the
"Certificates") shall thereafter cease to have any rights with respect to such
Company Shares, except the right to receive the Company Merger Consideration for
such Company Shares upon the surrender of such Company Certificate in accordance
with Section 4.3 or the right, if any, to receive payment from the Surviving
Company of the "fair value" of such Company Shares as determined in accordance
with Section 262 of the DGCL.
(b) No Effect on Certain Company Shares. Notwithstanding Section
4.2(a), each Company Share issued and outstanding immediately prior to the
Company Merger Effective Time and owned by any of the Parent Companies or
owned by the Surviving Stockholder or the Company or any direct or indirect
subsidiary of the Company, shall, by virtue of the Company Merger and without
any action on the part of the holder thereof, continue to be outstanding and
shall continue to represent one validly issued and outstanding Company Share,
and all of the rights, privileges, immunities, powers and privileges associated
with such Company Share shall continue unaffected by the Merger.
(c) Company Merger Sub. Each share of Common Stock, par value $1.00
per share, of Company Merger Sub issued and outstanding immediately prior to the
Company Merger Effective Time shall, by virtue of the Company Merger and without
any action on the part of Company Merger Sub or the holders of such shares, be
converted into one validly issued, fully paid and non-assessable Company Common
Share.
4.3. Payment for Shares.
(a) Paying Agent. Parent shall promptly, within one business day
following the Closing, deposit or cause to be deposited with a paying agent
selected by Parent with CPI's and the Company's prior approval, which shall not
be
-8-
unreasonably withheld (the "Paying Agent"), amounts sufficient in the
aggregate to provide all funds necessary for the Paying Agent to make payments
pursuant to Section 4.1(a) to holders of CPI Shares issued and outstanding
immediately prior to the CPI Merger Effective Time. Parent and/or the Surviving
Company shall promptly, within one business day following the Closing, deposit
or cause to be deposited with the Paying Agent, amounts sufficient in the
aggregate to provide all funds necessary for the Paying Agent to make payments
pursuant to Section 4.2(a) to holders of Company Shares issued and outstanding
immediately prior to the Company Merger Effective Time.
(b) Exchange Procedures. (i) Promptly after the CPI Merger Effective
Time, the Parent shall cause to be mailed to each Person who was, at the CPI
Merger Effective Time, a holder of record of issued and outstanding CPI Shares
(i) a letter of transmittal specifying that delivery shall be effected, and the
risk of loss and title to each CPI Certificate shall pass, only upon delivery of
such CPI Certificate (or affidavits of loss in lieu thereof) to the Paying
Agent, such letter of transmittal to be in such form and have such other
provisions as Parent and CPI may reasonably agree, and (ii) instructions for use
in effecting the surrender of CPI Certificates for payment of the CPI Merger
Consideration. Upon surrender to the Paying Agent of any CPI Certificate,
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, Parent shall promptly cause to be paid
to the Person(s) entitled thereto a check or wire transfer of "same day" funds
in the amount to which such Person(s) are entitled pursuant to Section 4.1(a),
after giving effect to any required tax withholdings. Any such CPI Certificate
shall then be canceled. No interest will be paid or will accrue on the amount
payable upon the surrender of any CPI Certificate.
(ii) Promptly after the Company Merger Effective Time, the Surviving
Company shall cause to be mailed to each Person who was, at the Company Merger
Effective Time, a holder of record (other than CPI and the other Parent
Companies) of issued and outstanding Company Shares (i) a letter of transmittal
specifying that delivery shall be effected, and the risk of loss and title to
each Company Certificate shall pass, only upon delivery of such Company
Certificate (or affidavits of loss in lieu thereof) to the Paying Agent, such
letter of transmittal to be in such form and have such other provisions as
Parent and the Company may
-9-
reasonably agree, and (ii) instructions for use in effecting the surrender of
Company Certificates for payment of the Company Merger Consideration. Upon
surrender to the Paying Agent of any Company Certificate, together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions Parent and/or the Surviving Company shall promptly cause to be
paid to the Person(s) entitled thereto a check in the amount to which such
Person(s) are entitled pursuant to Section 4.2(a), after giving effect to any
required tax withholdings and such Company Certificate shall then be canceled.
No interest will be paid or will accrue on the amount payable upon the surrender
of any Company Certificate.
(iii) If payment is to be made to a Person other than the registered
holder of the Certificate surrendered, it shall be a condition of such payment
that the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the Person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Stockholder or the Surviving Company (as the case
may be), or to the satisfaction of the Paying Agent, that such tax has been paid
or is not applicable.
(iv) For the purposes of this Agreement, the term "Person" shall mean
any individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)) or
other entity of any kind or nature.
(c) Transfers. (i) After the CPI Merger Effective Time, the stock
transfer books of CPI shall be closed, and there shall be no further
registration of transfers on the stock transfer books of CPI of the CPI Shares
that were outstanding immediately prior to the CPI Merger Effective Time. From
and after the CPI Merger Effective Time, the holders of CPI Certificates
evidencing ownership of CPI Shares outstanding immediately prior to the CPI
Merger Effective Time shall cease to have any rights with respect to such shares
except as provided herein or by applicable Law.
-10-
(ii) After the Company Merger Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers on the stock transfer books of the Company of the Company Shares that
were outstanding immediately prior to the Company Merger Effective Time. From
and after the Company Merger Effective Time, the holders of Company Certificates
evidencing ownership of Company Shares outstanding immediately prior to the
Company Merger Effective Time shall cease to have any rights with respect to
such shares except as provided herein or by applicable Law.
(d) Termination of Exchange Fund. (i) One hundred and eighty days
following the CPI Merger Effective Time, Parent shall be entitled to cause the
Paying Agent to deliver to it any funds (including any interest received
with respect thereto) made available to the Paying Agent in respect of the
payments to be made pursuant to Section 4.1(a) which have not been disbursed to
holders of CPI Certificates at the CPI Merger Effective Time, and thereafter
such holders shall be entitled to look to Parent (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the cash payable upon due surrender of their CPI Certificates.
(ii) One hundred and eighty days following the Company Merger
Effective Time, Parent and the Surviving Company shall be entitled to cause the
Paying Agent to deliver to them any funds (including any interest received with
respect thereto) made available to the Paying Agent in respect of the payments
to be made pursuant to Section 4.2(a) which have not been disbursed to holders
of Company Certificates at the Company Merger Effective Time, and thereafter
such holders shall be entitled to look to the Surviving Company or Parent
(subject to abandoned property, escheat or similar laws) only as general
creditors thereof with respect to the cash payable upon due surrender of their
Company Certificates.
(iii) Notwithstanding the foregoing, neither the Paying Agent nor any
party hereto shall be liable to any holder of Certificates for any amount paid
to a public official pursuant to any applicable abandoned property, escheat or
similar law. Parent or the Surviving Company, as applicable, shall pay all
charges and expenses, including those of the Paying Agent, in connection with
the exchange of cash for CPI Shares or Company Shares.
-11-
(e) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will pay in exchange for
such lost, stolen or destroyed Certificate the consideration due such holder
pursuant to Section 4.1(a) or Section 4.2(a) upon due surrender of the CPI
Shares or Company Shares represented by such Certificate.
4.4. Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to be paid the "fair value" of his or her CPI Shares or Company Shares,
as provided in Section 262 of the DGCL, CPI or the Company, as the case may be,
shall give Parent prompt notice thereof and Parent shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. None of CPI, the Company, the Surviving Stockholder or the Surviving
Company shall, except with the prior written consent of Parent, voluntarily make
any payment with respect to, or settle or offer to settle, any such demand for
payment. If any Dissenting Stockholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the CPI Shares or Company
Shares held by such Dissenting Stockholder shall thereupon be treated as though
such CPI Shares or Company Shares had been converted into the CPI Merger
Consideration pursuant to Section 4.1(a) or the Company Merger Consideration
pursuant to Section 4.2(a), as the case may be.
4.5. Adjustment to Merger Consideration Amounts. The net after tax
proceeds of the cash received by the Company in payment of the Purchase Price
(as defined in the Asset Purchase Agreement) (the "Adjusted After Tax Proceeds
Amount") shall be determined by the Company in good faith, taking into account
the information reflected on the final and binding After Tax Proceeds Schedules
as defined in Section 4.5(c), at least five days prior to the Closing. Such
determination shall be made using the same methodology that was used to
calculate the net after tax proceeds to be received by the Company in payment of
the Purchase Price (as defined in the Asset Purchase Agreement) as reflected in
Section 4.5 of the Company Disclosure Letter (the "After Tax Proceeds Amount").
-12-
(a) Increase in After-Tax Proceeds of Asset Sale. If the Adjusted
After Tax Proceeds Amount exceeds the After Tax Proceeds Amount, the amount of
the CPI Merger Consideration or the Company Merger Consideration (as the case
may be) to be received by each Eligible CPI Shareholder (as hereinafter defined)
or Eligible Company Shareholder (as hereinafter defined) (as the case may be) in
respect of each Recapped Share or Company Share (as the case may be) shall be
increased by the result of (i) the amount of such excess divided by (ii)
50,603,522 (the "Fully Diluted Number"). For purposes hereof, an "Eligible CPI
Shareholder" shall be any holder of Recapped Shares other than CPI and an
"Eligible Company Shareholder" shall be any holder of Company Shares (other than
Parent, the Surviving Stockholder, or any direct or indirect subsidiary of
Parent, the Surviving Stockholder, or the Company or any direct or indirect
subsidiary of the Company).
(b) Decrease in After-Tax Proceeds of Asset Sale. If the Adjusted
After Tax Proceeds Amount is less than the After Tax Proceeds Amount, the amount
of the CPI Merger Consideration or the Company Merger Consideration (as the case
may be) to be received by each Eligible CPI Shareholder or Eligible Company
Shareholder (as the case may be) in respect of each Recapped Share or Company
Share (as the case may be) shall be reduced by the result of (i) the amount of
such shortfall divided by (ii) the Fully Diluted Number. It is understood and
agreed, notwithstanding the foregoing, that the Fully Diluted Number will be
appropriately adjusted if the Company Merger Consideration would otherwise be
reduced pursuant to this Section 4.5(b) to an amount equal to, or below the
exercise price of outstanding Company Options (as hereinafter defined).
(c) Net After Tax Proceeds Information. This subsection (c) shall not
apply to the methodology reflected in Section 4.5 of the Company Disclosure
Letter.
(i) The Company shall (A) provide access to Parent and its
representatives to all information and personnel relevant to the calculation of
the After Tax Proceeds Schedules (as defined below) and the Adjusted After Tax
Proceeds Amount as may be reasonably requested by Parent or its representatives
on an ongoing basis from the date of this Agreement to the date that is five
days before the Closing Date; (B) as soon as reasonably practicable, but no
later than June 10, 2001, furnish to Parent (1) a calculation of the earnings
and profits of the Transferred
-13-
Subsidiaries (as defined in the Asset Purchase Agreement), calculated by KPMG
LLP ("KPMG") using its reasonable best efforts which reflects the most recent
audited financial statements of the Company (the "Foreign E&P Calculation"), (2)
a proposed allocation of purchase price among the Purchased Assets (as defined
in the Asset Purchase Agreement) prepared pursuant to the Asset Purchase
Agreement (the "Purchase Price Allocation"); and (3) a revised After Tax
Proceeds Amount taking into account the most recent applicable information
including the Foreign E&P Calculation and the proposed Purchase Price Allocation
(the "Revised After Tax Proceeds Amount") (collectively, the "Interim After Tax
Proceeds Schedules"); and (C) as soon as reasonably practicable, but no later
than 15 days prior to the Closing, furnish to Parent the final Purchase Price
Allocation to be reflected in the Asset Purchase Agreement (the "Final Purchase
Price Allocation") and a revised Foreign E&P Calculation taking into account,
using reasonable best efforts, the earnings and profits of the Transferred
Subsidiaries between the date of the most recent audited financial statements of
the Company and the date that is 15 days prior to Closing, along with all
documentation used to support such calculation (the "Revised Foreign E&P
Calculation") (collectively, the "Final After Tax Proceeds Schedules" and
together with the Interim After Tax Proceeds Schedules, the "After Tax Proceeds
Schedules"). Each of the After Tax Proceeds Schedules shall be prepared as to
properly reflect the resolution of any objection made by Parent pursuant to
clause (ii) of this subsection (c).
(ii) Unless Parent provides specific written notice to the Company of
an objection (A) in the case of an Interim After Tax Proceeds Schedule, no later
than the tenth day following Parent's receipt thereof or (B) in the case of a
Final After Tax Proceeds Schedule, not later than the fifth day following
Parent's receipt thereof, such Interim After Tax Proceeds Schedule or Final
After Tax Proceeds Schedule, as the case may be, shall then become binding upon
the Company and Parent for purposes of this Agreement. If Parent, by written
notice to the Company no later than such tenth or fifth day, as the case may be,
objects to an item reflected on an Interim After Tax Proceeds Schedule or a
Final After Tax Proceeds Schedule, as the case may be, such After Tax Proceeds
Schedule shall not become binding for purposes of this Agreement, the Company
and Parent shall discuss such objection in good faith and, if they reach written
agreement amending the After Tax Proceeds Schedule, such After Tax Proceeds
Schedule as amended by such written
-14-
agreement shall become binding upon the Company and Parent for purposes of this
Agreement;
(iii) If the Company and Parent do not reach such written agreement
(A) in the case of an Interim After Tax Proceeds Schedule, no later than the
tenth day following Parent's delivery to the Company of such notice of objection
or (B) in the case of a Final After Tax Proceeds Schedule, no later than the
third day following Parent's delivery to the Company of such notice of
objection, those aspects of the After Tax Proceeds Schedule as to which such
objection was made shall be submitted for arbitration by a big five accounting
firm acceptable to, and independent of, the Company and Parent, (the "Accounting
Firm") (whose fees shall be paid equally by the Company and Parent), which shall
arbitrate the dispute and submit a written statement of its adjudication, which
statement, when delivered to the Company and to Parent, shall become final and
binding upon the Company and Parent for purposes of this Agreement. The scope of
the disputes to be resolved by the Accounting Firm is limited to whether the
amounts set forth on the After Tax Proceeds Schedule (A) were the result of
errors of fact or mathematical errors, (B) are supportable based on the books
and records of the Company (C) are in accordance with the Company's prior
accounting practices generally and, if appropriate, are consistent with the
methodology used to calculate foreign earnings and profits in prior years and
(D) are substantially in compliance with Section 312 of the Internal Revenue
Code. The Accounting Firm is not to make any other determination. The
determination of the Accounting Firm, which in no case shall be made later than
the fifth day prior to the Closing Date, shall constitute an arbitral award that
is final, binding and unappealable and upon which a judgment may be entered by
any court having jurisdiction thereof.
(iv) Parent shall have the right to object to the computation of the
After Tax Proceeds Amount only to the extent such objection relates to errors of
fact or mathematical errors. Specific written notice of such objection may be
provided to the Company at any time on or prior to May 25, 2001. The Company and
Parent shall discuss such objection in good faith and, if they reach written
agreement regarding such objection, such agreement shall be properly reflected
in the Revised After Tax Proceeds Amount. If the Company and Parent do not reach
written agreement regarding such objection prior to the date that Parent
receives the Revised After Tax Proceeds Amount from the
-15-
Company, such objection shall be deemed an objection to the Revised After Tax
Proceeds Amount under clause (ii) of this subsection (c).
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of CPI. Except as set forth in the
disclosure letter attached hereto as Exhibit A (the "CPI Disclosure Letter"),
CPI hereby represents and warrants to Parent and CPI Merger Sub that:
(a) Organization, Good Standing and Qualification. CPI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate or similar power and
authority to own, lease and operate its properties and assets and to carry on
its business as presently conducted and is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction where the
ownership, leasing or operation of its properties or conduct of its business
requires such qualification. CPI has made available to Parent a complete and
correct copy of CPI's certificate of incorporation and bylaws, each as amended
to date. CPI's certificate of incorporation and bylaws so delivered are in full
force and effect. CPI does not have any Subsidiaries other than the Company and
the Subsidiaries of the Company.
As used in this Agreement, "CPI Material Adverse Effect" means a
material adverse effect on the financial condition, business, assets or results
of operations of CPI, assuming and after giving effect to the consummation of
the Assets Purchase and the other transactions contemplated by the Asset
Purchase Agreement; provided, however, that any such effect resulting from any
change in economic or business conditions generally or in the pharmaceutical
industry specifically shall not be considered when determining whether an CPI
Material Adverse Effect has occurred.
As used in this Agreement, the term "Subsidiary" means, with respect
to CPI, the Company, Parent, CPI Merger Sub or Company Merger Sub, as the case
may be, any entity, whether incorporated or unincorporated, of which at least a
majority of the securities or ownership interests having by their terms ordinary
voting power to elect a majority of the
16
board of directors or other persons performing similar functions is directly or
indirectly owned or controlled by such party or by one or more of its respective
Subsidiaries or by such party and any one or more of its respective
Subsidiaries; provided, however, that, for purposes of this Agreement, the
Company shall not be deemed to be a Subsidiary of CPI.
(b) Capital Structure. The authorized capital stock of CPI consists
and, at all times prior to the Recapitalization, will consist, of 97,000 CPI
First Preferred Shares, of which 92,343.4 shares were outstanding on May 2,
2001, 1,000,000 CPI Second Preferred Shares, of which 544,076.75 shares were
outstanding on May 2, 2001, 5,000,000 CPI Third Preferred Shares, of which
3,806,043 shares were outstanding on May 2, 2001, 1,500 CPI Class A Common
Shares, of which 0 shares were outstanding on May 2, 2001, 13,500 CPI Class B
Common Shares, of which 11,172 shares were outstanding on May 2, 2001, and 1,500
CPI Class C Common Shares, of which 1,306 shares were outstanding on May 2,
2001. As of and following the Recapitalization, the authorized capital stock of
CPI will consist of 23,508,000 Recapped Shares, of which 23,508,000 will be
outstanding immediately prior to the CPI Merger Effective Time. All of the
outstanding shares of capital stock of CPI have been duly authorized and are
(and following consummation of the Recapitalization will be) validly issued,
fully paid and nonassessable. As of the date of this Agreement, CPI has no
shares of capital stock reserved for issuance or subject to issuance, except
that, as of May 2, 2001, there were 1,306 CPI Class A Common Shares reserved for
issuance upon conversion of CPI Class C Common Shares. As of the Closing, there
will be no shares of capital stock reserved for issuance or subject to issuance.
Except with respect to the Recapitalization and as set forth above or in the
certificate of incorporation of CPI, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or sell any shares of capital stock or other securities of
CPI or any securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or acquire, any
securities of CPI, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. CPI does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable
-17-
for securities having the right to vote) with the stockholders of CPI on any
matter ("CPI Voting Debt"). Except as set forth in Section 5.1(b) of the CPI
Disclosure Letter, CPI does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
equity interest in any person.
(c) Corporate Authority; Approvals. (i) CPI has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
the Memorandum of Understanding and to consummate the CPI Merger, subject only
to approval of this Agreement and the other transactions contemplated hereby by
a majority of the votes entitled to be cast by the holders of the CPI Shares,
voting together as a single class (the "CPI Requisite Vote"). Each of this
Agreement and the Memorandum of Understanding has been duly and validly executed
and delivered by CPI and, assuming the due authorization, execution and delivery
by the Company, Parent, CPI Merger Sub and Company Merger Sub, constitutes a
valid and binding agreement of CPI enforceable against CPI in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles (the "Bankruptcy
and Equity Exception").
(ii) The Board of Directors of CPI has unanimously (A) approved (i)the
Memorandum of Understanding and (ii) this Agreement subject to the corporate
actions required to be taken with respect to the Recapitalization, (B)
determined the advisability of entering into this Agreement and (C) recommended
that the stockholders of CPI adopt this Agreement.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.4, (B) pursuant to the HSR Act, (C)
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (D) pursuant to the European Community Merger Control Regulation and (E)
required to be made with any Governmental Entity (as defined below) in any
jurisdiction outside the United States, no notices, reports or other filings are
required to be made by CPI with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by CPI from, any
-18-
governmental or regulatory authority, agency, commission, body or other
governmental entity (each, a "Governmental Entity") in connection with the
execution and delivery of this Agreement by CPI and the consummation by CPI of
the CPI Merger, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have an CPI Material
Adverse Effect or prevent, materially delay or materially impair the ability of
CPI to consummate the CPI Merger or the other transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of this Agreement and the
Memorandum of Understanding by CPI do not, and the consummation by CPI of the
CPI Merger and the other transactions contemplated hereby will not, constitute
or result in (A) a breach or violation of, or a default under, the certificate
of incorporation or bylaws of CPI or the comparable governing instruments of any
of its Subsidiaries, or (B) a breach or violation of, a default under, the
termination (or right of termination), amendment (or right of amendment),
cancellation (or right of cancellation) or acceleration of any obligations, or a
loss of a material benefit under, or the creation of a lien, liability, pledge,
security interest, Claim or similar encumbrance on or the loss of any assets of
CPI (with or without notice, lapse of time or both) pursuant to, any material
agreement, lease, sublease, contract, license, note, mortgage, indenture,
arrangement or other obligation not otherwise terminable by the other party
thereto on 90 days' or less notice ("Contract") binding upon CPI or, assuming
compliance with the DGCL and all Laws requiring the filings and or notices
described in Section 5.1(d)(i), any Law (as defined in Section 5.2(j)) or
governmental or non-governmental permit, concession, franchise or license to
which CPI is subject.
(e) Litigation and Liabilities. There are no (i) civil, criminal or
administrative actions, suits, claims, hearings, arbitrations, litigations,
investigations or proceedings (collectively, "Claims") pending or, to the
knowledge of the officers or directors of CPI, threatened against CPI or (ii)
material obligations or material liabilities, whether or not accrued, contingent
or otherwise (collectively, "Obligations") relating to CPI other than Claims and
Obligations relating to this Agreement or the Company.
-19-
(f) Taxes. CPI (i) has prepared in good faith and duly and timely
filed (taking into account any extension of time within which to file) all Tax
Returns (as defined below) required to be filed by it, and all such Tax Returns
are complete and correct in all material respects; (ii) has paid all Taxes (as
defined below) required to have been paid that are shown as due on such Tax
returns, except with respect to matters contested in good faith; and (iii) has
not waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency. As of the date
hereof, there are not pending or, to the knowledge of CPI, threatened in
writing, any audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters.
CPI has not (i) filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code") or analogous provision of state,
local or foreign law; (ii) been a member of an affiliated group of corporations
filing a consolidated United States federal Tax Return, nor has any liability
for the Taxes of another person, including liability arising from the
application of Treasury Regulation ss. 1.1502-6 or any analogous provision of
state, local or foreign law, or as a transferee or successor, by contract or
otherwise; or (iii) entered into a closing agreement pursuant to Section 7121 of
the Code or similar provision for purposes of state, local or foreign taxes
relating to Taxes due from CPI. Assuming the representations and warranties of
the Company set forth in Section 5.2(m) with respect to whether the Company has
ever been a "United States real property holding corporation" are true and
accurate in all respects, CPI has never been a "United States real property
holding corporation" within the meaning of Section 897 of the Code. There are no
liens or encumbrances for Taxes on any of the assets of CPI except for statutory
liens for Taxes not yet due or payable. As of the date hereof, CPI has no
"undistributed personal holding company income" as defined in Section 545 (a) of
the Code. CPI has delivered to Parent true, correct and complete copies of all
federal Tax Returns for all open Tax years, examination reports and statements
of deficiencies. The Recapitalization of CPI immediately prior to the CPI Merger
will not give rise to federal income tax liability of CPI.
As used in this Agreement, the term (i) "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental,
-20-
customs duty, capital stock, severances, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect of such penalties and
additions, and (ii) "Tax Return" includes all returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax authority relating to Taxes.
5.2. Representations and Warranties of the Company. Except as set
forth in the disclosure letter attached hereto as Exhibit B (the "Company
Disclosure Letter") or the Company Reports (as hereinafter defined) filed prior
to the date hereof, the Company hereby represents and warrants to Parent and
Company Merger Sub that:
(a) Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority to
own, lease and operate its properties and assets and to carry on its business as
presently conducted (after giving effect to the Assets Purchase and the other
transactions contemplated by the Asset Purchase Agreement) and is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership, the leasing or operation of its properties or
conduct of its business (after giving effect to the Assets Purchase and the
other transactions contemplated by the Asset Purchase Agreement) requires such
qualification, except where the failure to be so qualified or in good standing
is not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect (as defined below). The Company has made available to
Parent a complete and correct copy of the Company's and its Subsidiaries'
certificates of incorporation and bylaws, each as amended to date. The
Company's and its Subsidiaries' certificates of incorporation and bylaws so
delivered are in full force and effect.
As used in this Agreement, "Company Material Adverse Effect" means a
material adverse effect on the financial condition, business, assets or results
of
-21-
operations of the Company and its Subsidiaries taken as a whole, assuming and
after giving effect to the consummation of the Assets Purchase and the other
transactions contemplated by the Asset Purchase Agreement; provided, however,
that any such effect resulting from any change in economic or business
conditions generally or in the pharmaceutical industry specifically shall not be
considered when determining whether a Company Material Adverse Effect has
occurred. Section 5.2(a) of the Company Disclosure Letter contains a true and
accurate list of all of the Subsidiaries of the Company other than the
Transferred Subsidiaries (as defined in the Asset Purchase Agreement). Except
for its interest in its Subsidiaries, the Company does not own, directly or
indirectly, any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest in any person.
(b) Capital Structure. The authorized capital stock of the Company
consists of 80,000,000 Company Common Shares, of which 33,465,711 shares were
outstanding on May 2, 2001, and 13,056,800 Company Class B Common Shares, of
which 12,224,835 shares were outstanding on May 2, 2001. All of the outstanding
Company Shares have been duly authorized and are validly issued, fully paid and
nonassessable. As of May 2, 2001, 4,095,017 options and 817,959 deferred stock
awards were outstanding, all of which were granted pursuant to the Stock Plans
(as defined below). Since May 2, 2001 and prior to the date hereof, the Company
has not issued (i) any Company Shares other than pursuant to the exercise of any
Company Options and Stock Awards or (ii) any Company Options or Stock Awards. As
of the date of this Agreement, the Company has no Company Shares reserved for
issuance or subject to issuance, except that, as of May 2, 2001, there were
12,224,835 Company Common Shares reserved for issuance upon conversion of the
Company Class B Common Shares, and as of May 2, 2001, 2,126,904 Company Common
Shares reserved for issuance pursuant to the Company's 1977 Restricted Stock
Award Plan, as amended (the "1977 Restricted Stock Plan") and 3,172,663 Company
Common Shares reserved for issuance pursuant to the Company's 1996 Long-Term
Incentive Plan (the "1996 LTIP" and, together with the 1977 Restricted Stock
Plan, the "Stock Plans"). Each of the outstanding shares of capital stock or
other equity interests of each of the Company's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and, except for directors'
qualifying and nominee shares, owned by the Company or a direct or indirect
wholly owned subsidiary of the Company, free and clear of any lien,
-22-
pledge, security interest, claim or similar encumbrance and free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), except for
restrictions imposed by applicable securities laws. Except as set forth above
there are no authorized, issued or outstanding Company Shares or other shares of
capital stock or other securities of the Company and no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or sell any shares of capital stock or other securities of
the Company or any of its Subsidiaries or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any securities of the Company or any of its
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter ("Company
Voting Debt").
(c) Corporate Authority; Approval and Fairness. (i) The Company has
all requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and the Memorandum of Understanding and to consummate this Agreement,
subject only to approval of this Agreement and the other transactions
contemplated hereby by a majority of the votes entitled to be cast by holders of
the Company Shares, voting together as a single class (the "Company Requisite
Vote"). Each of this Agreement and the Memorandum of Understanding has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by CPI, Parent, CPI Merger Sub and Company
Merger Sub, constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(ii) The Board of Directors of the Company at a meeting duly called
and held has unanimously by those present (A) approved this Agreement, the
Memorandum of Understanding and the Company Merger and the other transactions
contemplated hereby, (B) determined the advisability of entering into this
Agreement and (C)
-23-
recommended that the stockholders of the Company adopt this Agreement. The Board
of Directors of the Company has received the opinion of its financial advisor,
J.P. Morgan Securities Inc., to the effect that the Company Merger Consideration
to be received by the holders of the Company Shares in the Company Merger is
fair to such holders from a financial point of view and has received the opinion
of its financial advisor, Houlihan Lokey Howard & Zukin, Inc., to the effect
that the Company Merger is fair to the holders of the Company Shares from a
financial point of view. It is agreed and understood that each such opinion is
for the benefit of the Company's Board of Directors and may not be relied on by
Parent, CPI Merger Sub or Company Merger Sub.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Sections 1.4 and 1.5, (B) pursuant to the HSR
Act, (C) pursuant to the Exchange Act, (D) pursuant to Environmental Laws,
including the New Jersey Industrial Site Recovery Act and the Connecticut
Property Transfer Act, (E) pursuant to the European Community Merger Control
Regulation, or (F) required to be made with any Governmental Entity in any
jurisdiction outside the United States, no notices, reports or other filings are
required to be made by the Company with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Company
from, any Governmental Entity in connection with the execution and delivery of
this Agreement by the Company, the consummation by CPI of the CPI Merger or the
consummation by the Company of the Company Merger and the other transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent, materially delay or materially impair the ability of
the Company to consummate the Company Merger or the other transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement and the
Memorandum of Understanding by the Company do not, and the consummation by the
Company of the Company Merger and the other transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a default
under, the certificate of incorporation or bylaws of the Company or the
comparable governing instruments of any of its Subsidiaries, or (B) a breach or
violation of, a default under, a termination (or right of termination),
amendment (or right of amendment), cancellation (or right of cancellation) or
acceleration of
-24-
any obligations, or a loss of a material benefit under, or the creation of a
lien, liability, pledge, security interest, Claim or similar encumbrance on or
the loss of any assets of the Company or any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any Contract binding upon
the Company or any of its Subsidiaries or, assuming compliance with the DGCL and
all Laws requiring the filings and or notices described in Section 5.1(d)(i),
any Law (as defined in Section 5.2(j)) or governmental or non-governmental
permit, concession, franchise or license to which the Company or any of its
Subsidiaries is subject, except, in the case of clause (B) above, for any
breach, violation, default, termination (or right of termination), amendment (or
right of amendment), cancellation (or right of cancellation) or acceleration,
creation, change or loss that, individually or in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect.
(e) Company Contracts. Section 5.2(e) of the Company Disclosure Letter
lists (i) any Contracts (other than Contracts which constitute Purchased Assets)
the performance of which involves consideration in excess of $1,500,000, (or
that are otherwise material to the Company) other than distribution, license,
purchase or supply agreements entered into in the ordinary course of business,
consistent with past practice and contracts included in the Assets Purchase
(collectively, "Company Contracts") and (ii) to the knowledge of the Company, no
Company Contracts limit the freedom of the Company or any of its Subsidiaries to
engage in any line of business or to compete with any Person beyond the term of
such Company Contract. The Company has made available to Parent a correct and
complete copy of each written Contract listed in Section 5.2(e) of the Company
Disclosure Letter. To the knowledge of the Company, each Contract listed in
Section 5.2(e) of the Company Disclosure Letter is a valid and binding agreement
and is in full force and effect.
(f) Company Reports; Financial Statements. (i) The Company has
delivered to Parent each registration statement, report, proxy statement or
consent or information statement prepared by it since March 31, 2000 (the "Audit
Date"), including (A) the Company's Annual Report on Form 10-K for the year
ended March 31, 2000, and (B) the Company's Quarterly Reports on Form 10-Q for
the periods ended December 31, 2000, each in the form (including exhibits,
annexes and any amendments thereto) filed with the Securities and Exchange
Commission (the "SEC")
-25-
(collectively, including any such reports filed subsequent to the date hereof
and as amended, the "Company Reports"). As of their respective dates, (or, if
amended, as of the date of such amendment) the Company Reports did not, and any
Company Reports filed with the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements made therein, in light of the circumstances in which they
were made, not misleading. Each of the consolidated balance sheets included in
or incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents, or (in the case of Company Reports filed
after the date of this Agreement) will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of earnings, retained earnings and comprehensive
earnings and consolidated statements of cash flows and of changes in financial
position included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents, or (in the case of
Company Reports filed after the date of this Agreement) will fairly present, the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with generally accepted accounting principles ("GAAP")
con sistently applied during the periods involved, except as may be noted
therein.
(ii) The combined balance sheet and combined statement of earnings
included in the audited pro forma statement of the Company and its Subsidiaries
(excluding the Business (as defined in the Asset Purchase Agreement)) as of
March 31, 2000, in each case including the notes and schedules thereto, all
included in Section 5.2(f) of the Company Disclosure Letter (the "Audited Pro
Forma Financial Statements") and the unaudited pro forma combined balance sheet
and combined statements of earnings of the Company and its Subsidiaries
(excluding the Business) as of the nine months ended December 31, 2000, in each
case including any notes and schedules thereto, all included in Section 5.2(f)
of the Company Disclosure Letter (the "Interim Pro Forma Financial Statements")
fairly present the combined financial position of the Company and its
Subsidiaries (excluding the
-26-
Business) as of their respective dates and the balance sheet and statement of
earnings in the Audited Pro Forma Financial Statements fairly present the
results of operations (excluding the Business) for the periods set forth
therein, in each case in accordance with GAAP and the accounting principles
summarized therein, except as may be noted therein, and subject in the case of
the Interim Pro Forma Financial Statements to normal year-end adjustments and
the absence of footnotes and similar presentation items therein.
(iii) Except as set forth in Section 5.2(d) of the Company Disclosure
Letter, Section 5.2(f) of the Company Disclosure Letter sets forth (i) the
outstanding amount of long term Indebtedness of the Company as of December 31,
2000, and (ii) a list of the Contracts containing the terms of such
Indebtedness. "Indebtedness" shall mean, without duplication,(i) all obligations
for repayment of borrowed money, including guarantees of such obligations, or
for the deferred purchase or acquisition price of property or services
(excluding trade accounts payable and accrued liabilities which arise in the
ordinary course of business) which are, in accordance with GAAP, includable as a
liability on a consolidated balance sheet of the Company, and (ii) all amounts
representing the capitalization in accordance with GAAP of rentals payable by
the Company or a Subsidiary (other than pursuant to a lease under which the
Company or a Subsidiary is the lessor).
(g) Absence of Certain Changes. Except for actions contemplated by
this Agreement and except as reflected, reserved or otherwise disclosed in the
Audited Pro Forma Financial Statements, the Interim Pro Forma Financial
Statements and the financial statements included in or incorporated by reference
in the Company Reports filed prior to the date hereof, since the Audit Date, the
Company and its Subsidiaries have conducted their respective businesses only
in, and have not engaged in any material transaction other than according to,
the ordinary and usual course of such businesses and there has not been (i) any
change in the financial condition, business or results of operations of the
Company and its Subsidiaries that, individually or in the aggregate, has had or
is reasonably likely to have a Company Material Adverse Effect; (ii) any action
taken by the Company or its Subsidiaries during the period from the Audit Date
through the date of this Agreement, that would constitute a breach of Sections
6.1(b)(iii)(A), 6.1(b)(iii)(D), 6.1(b)(iii)(E), 6.1(b)(iv), 6.1(b)(vi),
6.1(b)(viii)(A), 6.1(b)(ix), 6.1(b)(x),
-27-
6.1(b)(xiii) and 6.21(b); or (iii) any action taken by the Company or its
Subsidiaries during the period from the Audit Date through the date of this
Agreement, making any tax election or permitting any insurance policy naming it
as a beneficiary or loss-payable payee to be canceled or terminated, in each
case, except in the ordinary and usual course of business.
(h) Litigation and Liabilities. Except as reflected, reserved or
otherwise disclosed in the Audited Pro Forma Financial Statements, the Interim
Pro Forma Financial Statements and the financial statements included in or
incorporated by reference in the Company Reports filed prior to the date hereof,
there are no (i) Claims pending or threatened against the Company or any of its
Subsidiaries or (ii) Obligations relating to the Company or any of its
Subsidiaries which would be required to be reflected, reserved or otherwise
disclosed in the financial statements of the Company under GAAP if occurring on
a date covered by such financial statements, including those relating to matters
involving any Environmental Law (as defined in Section 5.2(l)), of the Company
or any of its Subsidiaries, except for such Claims or Obligations that could
have been incurred in accordance with Section 6.1(b) had the provisions of such
Section been applicable at such time or as are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries nor any of their respective properties
is or are subject to any order, writ, judgment, injunction, decree or award,
which individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect.
(i) Employee Benefits.
(i) A true and correct copy of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, deferred stock, stock option,
employment, termination, collective bargaining, change-of-control, severance,
compensation, medical, health or other plan, agreement, policy or arrangement
that covers current or former employees of the Company and its Subsidiaries (the
"Employees") or current or former directors of the Company (the "Directors")
(the "Compensation and Benefit Plans") and any trust agreement, insurance
contract or other funding instrument forming a part of such Compensation and
Benefit Plans has been made
-28-
available to Parent prior to the date hereof other than Compensation and Benefit
Plans maintained in the United States that are not material individually or in
the aggregate, and Compensation and Benefit Plans maintained outside of the
United States that are not individually material. With respect to each
Compensation and Benefit Plan, the Company has also made available to Parent
prior to the date hereof, if applicable, (i) any summary plan description and
other written communications (or a description of any oral communications) by
the Company or any of its Subsidiaries to their employees concerning the extent
of the benefits provided under a Compensation and Benefit Plan, other than such
written or oral communications that do not alter the terms of the plan and (ii)
for the two most recent years (A) the Form 5500 and attached schedules, (B)
audited financial statements and (C) actuarial valuation reports. The
Compensation and Benefit Plans are listed in Section 5.2(i) of the Company
Disclosure Letter, other than those Compensation and Benefit Plans maintained in
the United States that are not material individually or in the aggregate and
Compensation and Benefit Plans maintained outside of the United States that are
not individually material.
(ii) Each Compensation and Benefit Plan has been established and
administered substantially in accordance with its terms, and is in compliance in
all material respects with applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and other applicable Laws.
Each Compensation and Benefit Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA and that is intended to be qualified
under Section 401(a) of the Code (a "Pension Plan") has received a favorable
determination letter from the Internal Revenue Service (the "IRS"), and neither
the Company nor any of its Subsidiaries is aware of any circumstances likely to
result in revocation of any such favorable determination letter. As of the date
hereof, there is no pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened, material litigation, administrative investigation,
auditor proceeding or claim (other than routine claims for benefits in the
ordinary course) relating to the Compensation and Benefit Plans. Neither the
Company nor any of its Subsidiaries has engaged in a transaction with respect to
any Compensation and Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject the Company or any of
its Subsidiaries to a material tax or
-29-
penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) As of the date hereof, no liability under Subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by the Company or any
Subsidiary with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate"). The Company and its Subsidiaries have
not incurred and do not expect to incur any withdrawal liability with respect to
a multiemployer plan under Subtitle E to Title IV of ERISA, and no such
multiemployer plan is in reorganization or insolvent (as those terms are defined
in ERISA Sections 4241 and 4245, respectively). No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for any
Pension Plan or by any ERISA Affiliate within the 24-month period ending on the
date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date hereof.
Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA.
(v) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially deter mined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan.
(vi) Neither the Company nor its Subsidiaries have any obligations for
retiree health and life benefits under any Compensation and Benefit Plan.
-30-
(vii) Neither the execution of this Agreement or the Asset Purchase
Agreement nor the consummation of the Assets Purchase, the Mergers and the other
transactions contemplated by this Agreement and the Asset Purchase Agreement
will(x) entitle any Employees or Directors of the Company or its Subsidiaries to
severance pay, (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Compensation and
Benefit Plans or (z) result in any breach or violation of, or a default under,
any of the Compensation and Benefit Plans.
(viii) No event has occurred and no condition exists that would
subject the Company or any of its Subsidiaries either directly or by reason of
their affiliation with any ERISA Affiliate, to any material tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable Laws,
rules and regulations, except for such liabilities which, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse Effect.
(ix) All employee benefit plans maintained outside of the United
States comply in all respects with applicable local law except for such failures
to comply as would not, individually or in the aggregate, result in a Company
Material Adverse Effect.
(j) Compliance with Laws; Permits. (i) The businesses of each of the
Company and its Subsidiaries have not been, and are not being, conducted in
violation of any federal, state, local or foreign law, statute, ordinance, rule,
regulation, judgment, order, injunction, decree, Claim award, settlement or
stipulation, agency requirement, license or permit of any Governmental Entity
(collectively, "Laws"), except for violations that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse Effect.
The Company and its Subsidiaries have not received any notices of violations
with respect to any Laws, except for violations which, individually or in the
aggregate, are not be reasonably likely to have a Company Material Adverse
Effect.
(ii) Each product (other than products included in the Assets
Purchase) subject to the jurisdiction of the Food and Drug Administration under
the Federal Food, Drug and Cosmetic Act, as amended (the "FDCA") or the
Prescription Drug Marketing Act, as amended (the "PDMA") or subject to
-31-
the jurisdiction of the Drug Enforcement Agency under the Comprehensive Drug
Abuse Prevention and Control Act of 1970, as amended (the "CSA") which is
manufactured, tested, distributed, held and/or marketed by the Company or any of
its Subsidiaries is being manufactured, held and distributed in compliance with
all applicable requirements under the FDCA, the PDMA and the CSA including, but
not limited to, those relating to investigational use, premarket clearance, good
manufacturing practices, labeling, promotion and advertising, record keeping,
filing of reports and security, sampling, distributing, importing or exporting,
except for such failures so to comply that, individually or in the aggregate,
are not reasonably likely to have a Company Material Adverse Effect.
(k) Takeover Statutes. No "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation (including,
without limitation, Section 203 of the DGCL) (each, a "Takeover Statute") is, or
at the CPI Merger Effective Time or Company Merger Effective Time will be,
applicable to CPI, the Company, the CPI Shares, the Company Shares, the Assets
Purchase, the Mergers or the other transactions contemplated by this Agreement
or the Asset Purchase Agreement. Assuming the accuracy of Parent's
representations and warranties contained in Section 5.3(d) (Ownership of
Shares), the Board of Directors of the Company has taken all action so that
Parent will not be prohibited from entering into a "business combination" with
the Company as an "interested stockholder" (in each case as such term is used in
Section 203 of the DGCL) as a result of the execution of this Agreement, the
Asset Purchase Agreement or the consummation of the Assets Purchase or the
Mergers.
(l) Environmental Matters. Except for such matters as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, the Company and its Subsidiaries, the properties currently
owned, leased or operated by the Company and its Subsidiaries and the properties
and facilities currently or formerly owned, leased or operated by the Company
and its Subsidiaries:
(i) are, and at all previous times have been, in compliance with all
applicable Environmental Laws;
(ii) are not the subject of any pending Claim or written notice
alleging the violation of any, or liability
-32-
under, applicable Environmental Laws and no such notice is threatened;
(iii) are not currently subject to any order, settlement, judgment or
decree arising under or relating to any Environmental Law;
(iv) have not had any air emissions or wastewater discharges of
Hazardous Substances except as permitted under applicable Environmental Laws;
and
(v) Hazardous Substances have not been generated, transported,
treated, stored, disposed of, arranged to be disposed of, released or threatened
to be released at, on, from or under any of the properties, assets or facilities
currently owned, leased or operated or formerly owned, leased or operated by the
Company or any of its Subsidiaries in violation of, or in a manner or to a
location that has resulted, or to the knowledge of the Company would be
reasonably expected to result, in liability under or related to, any
Environmental Laws.
As used in this Agreement, the term (i) "Environmental Law" means any
applicable Law, regulation, code, license, permit, order, decree or injunction
(A) governing the protection of the environment, (including air, water, soil and
natural resources) or as relating to exposure to Hazardous Substances, human
health or (B) the use, storage, handling, release or disposal of Hazardous
Substances and (ii) "Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic or radioactive under any
applicable Environmental Law and any other material or substance that is
regulated, or that could reasonably be expected to result in liability, under
any Environmental Law including petroleum and any derivative or by-products
thereof, asbestos and asbestos containing materials and polychlorinated
biphenyls.
(m) Taxes. The Company and each of its Subsidiaries (i) have prepared
in good faith and duly and timely filed (taking into account any extension of
time within which to file) all Tax Returns required to be filed by any of them
and all such Tax Returns are complete and correct in all material respects; (ii)
have paid all Taxes that are shown as due on such Tax Returns, except with
respect to matters contested in good faith; and (iii) have not waived any
statute of limitations with respect to Taxes
-33-
or agreed to any extension of time with respect to a Tax assessment or
deficiency. As of the date hereof, there are not pending or, to the knowledge of
the Company, threatened in writing, any audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters. Except as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, the Company has not (i) filed a consent under Section 341(f) of
the Code or analogous provision of state, local or foreign law; (ii) been a
member of an affiliated group of corporations filing a consolidated United
States federal Tax Return (other than a group the common parent of which was the
Company), nor has any liability for the Taxes of another person (other than
Subsidiaries of the Company which are members of an affiliated group of
corporations filing a consolidated United States federal Tax Return the common
parent of which is the Company), including liability arising from the
application of Treasury Regulation ss. 1.1502-6 or any analogous provision of
state, local or foreign law, or as a transferee or successor, by contract or
otherwise; (iii) entered into a closing agreement pursuant to Section 7121 of
the Code or similar provision for purposes of state, local or foreign taxes
relating to Taxes due from the Company. The Company has never been a "United
States real property holding corporation" within the meaning of Section 897 of
the Code. There are no liens or encumbrances for Taxes on any of the assets of
the Company, except for (i) statutory liens for Taxes not yet due or payable,
(ii) liens for Taxes that are being contested in good faith which such contest
is disclosed in Section 5.2(m) of the Company Disclosure Letter, and (iii) any
other liens for Taxes that are not, individually or in the aggregate, reasonably
likely have a Company Material Adverse Effect. The Company has withheld all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party. The Company has delivered to Parent true, correct and complete
copies of all federal Tax Returns for all open Tax years, examination reports
and statements of deficiencies. The Company and its Subsidiaries have disclosed
on its federal income Tax Return all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code. The unpaid Taxes of the Company did not, as of
December 31, 2000 exceed the reserve for Tax liability (other than any reserves
for deferred Taxes established for timing differences between book and Tax
income) set forth on the Interim Pro Forma Financial
-34-
Statements and will not, as of the Closing Date, exceed that reserve as adjusted
for the passage of time through the Closing Date consistent with past practice
of the Company in filing its Tax Returns. Sofibel S.A.R.L. ("Sofibel") is, and
has been since its formation, a corporation for United States federal income tax
purposes.
(n) Labor Matters. As of the date hereof, neither the Company nor any
of its Subsidiaries is the subject of any material proceeding asserting that the
Company or any of its Subsidiaries has committed an unfair labor practice or
seeking to compel it to bargain with any labor union or labor organization, nor
is there pending or, to the knowledge of the Company, threatened, nor has there
been for the past five years, any labor strike, dispute, walk-out, work
stoppage, slow-down or lockout involving the Company or any of its Subsidiaries.
No action, suit complaint, charge, arbitration, inquiry, proceeding or
investigation by or before any court, governmental agency, administrative agency
or commission brought by or on behalf of any employee, prospective employee,
former employee, retiree, labor organization or other representative of the
employees is pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries that is reasonably likely to be adversely
decided and if so adversely decided, individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect. As of the date
hereof, the Company and its Subsidiaries are in compliance with all obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 1988
("WARN") and all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise, except as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. Neither the Company nor any of its Subsidiaries shall, at any
time within the sixty (60) day period prior to the Closing Date, effectuate a
"plant closing" or "mass layoff," as those terms are defined in WARN or any
state or local law, affecting in whole or in part any site of employment,
facility, operating unit or employee.
(o) Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Company or any of its Subsidiaries are in
full force and effect, and the Company and its Subsidiaries are not in
-35-
material default thereunder except for any such failures to maintain insurance
policies or defaults thereunder that, individually or in the aggregate, are not
reasonably likely to have a Company Material Adverse Effect.
(p) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is licensed
or otherwise possesses rights to use all patents, inventions, discoveries,
formulae, processes, domain names, trademarks, trade names, service marks,
copyrights, works of authorship, technology, know-how, computer software
programs, computer applications and trade secrets and all other intellectual
property ("IP") that are owned or used in the business of the Company and its
Subsidiaries as currently conducted (after giving effect to the Assets Purchase
and the other transactions contemplated by the Asset Purchase Agreement),
(collectively "Company IP") except for any such failures to own, be licensed or
possess as are not reasonably likely, individually or in the aggregate, to have
a Company Material Adverse Effect.
(ii) Except for such matters not reasonably likely to have a Company
Material Adverse Effect:
(A) neither the Company nor any of its Subsidiaries is, nor will it be
as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any licenses,
sublicenses and other agreements used in the business of the Company and
its Subsidiaries as currently conducted (other than any licenses,
sublicenses or other agreements relating to the Purchased Assets) as to
which it is a party and pursuant to which it is authorized to use any IP
owned by a third party (collectively, "Third-Party IP");
(B) no Claims with respect to any Company IP (other than claims
relating to intellectual property rights held or used in connection with
the Purchased Assets) are currently pending or, to the knowledge of the
Company, are threatened by any Person;
(C) to the knowledge of the Company, there is no impairment, dilution
or other violation or misuse, unauthorized use, infringement or
misappropriation of any of the Company IP by any third party, or by the
-36-
Company of any Third-Party IP used in the business as currently conducted;
(D) the Company and its Subsidiaries have taken commercially
reasonable steps to protect, maintain and safeguard the confidentiality of
any Company IP as used in the business as currently conducted, the value of
which relies upon the maintenance of confidentiality;
(E) the Company IP, together with the IP licensed to the Company
pursuant to the Ancillary Agreements, constitute all the IP used in the
business of the Company as currently conducted; and
(F) to the knowledge of the Company, all Company IP is valid and
subsisting.
(q) Brokers and Finders. Neither the Company, CPI nor any of their
respective subsidiaries has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection with
Mergers, the Assets Purchase or the transactions contemplated by this Agreement
or the Asset Purchase Agreement, except that the Company has employed (i) J.P.
Morgan Securities Inc. as its financial advisor, whose fees will be paid by the
Company in accordance with the arrangements with J.P. Morgan Securities Inc.,
which arrangements have been disclosed in writing to Parent prior to the date
hereof, (ii) the Company has employed Houlihan Lokey Howard & Zukin, Inc. as its
financial advisor, whose fees will be paid by the Company in accordance with the
arrangements with Houlihan Lokey Howard & Zukin, Inc. which arrangements have
been disclosed in writing to Parent prior to the date hereof and (iii) CPI has
employed an appraiser to advise CPI with respect to the Recapitalization, whose
fees will be paid as set forth in Section 6.20.
(r) Real Property. Section 5.2(r) of the Company Disclosure Letter
lists all of the real property of the Company or its Subsidiaries other than the
real property transferred pursuant to the Assets Purchase. Section 5.2(r) of the
Company Disclosure Letter also lists all real property owned, leased or operated
by the Company or its Subsidiaries and disposed of during the 20 years prior to
the date of this Agreement. Except as set forth in Section 5.2(r) of the Company
Disclosure Letter and other than with respect to disposed property, the Company
has good, valid and marketable title to, or a valid leasehold interest in,
-37-
all of its properties or assets except for defects in title, easements,
restrictive covenants and similar encumbrances or impediments that would not,
individually or in the aggregate, be reasonably likely to result in a Company
Material Adverse Effect. The Company will use commercially reasonable efforts to
obtain all consents necessary to transfer the currently leased real property set
forth in Section 5.2(r) of the Company Disclosure Letter in connection with the
transactions contemplated by this Agreement and the Asset Purchase Agreement.
5.3. Representations and Warranties of Parent, CPI Merger Sub and
Company Merger Sub. Parent, CPI Merger Sub and Company Merger Sub hereby
represent and warrant to CPI and the Company that:
(a) Organization, Good Standing and Qualification. (i) Each of Parent
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership, the leasing or
operation of its properties or conduct of its business requires such quali-
fication, except where the failure to be so qualified or in good standing is
not, individually or in the aggregate, reasonably likely to prevent or impair
the ability of Parent, CPI Merger Sub or Company Merger Sub to consummate the
Mergers or affect the validity of either Merger.
(ii) Each of Parent, Company Merger Sub and CPI Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby and
has not carried on any activities to date other than those incident to its
formation and the consummation of this Agreement.
(b) Corporate Authority. No vote of the holders of the capital stock
of Parent is necessary to approve this Agreement or the Memorandum of
Understanding, either Merger or the other transactions contemplated hereby.
Parent, CPI Merger Sub and Company Merger Sub each has the requisite corporate
power and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and the
Memorandum of
-38-
Understanding and to consummate the Mergers and the other transactions
contemplated hereby and no other corporate proceedings on the part of Parent,
CPI Merger Sub and Company Merger Sub are necessary to authorize this Agreement
and the Memorandum of Understanding or to consummate the transactions
contemplated hereby. This Agreement has been duly adopted by the sole
stockholder of CPI Merger Sub and has been duly adopted by the sole stockholder
of Company Merger Sub, in each case in accordance with applicable Law and the
applicable certificate of incorporation and bylaws of such corporations. Each of
this Agreement and the Memorandum of Understanding has been duly and validly
executed and delivered by Parent, CPI Merger Sub and Company Merger Sub and,
assuming due authorization, execution and delivery by CPI and the Company,
constitutes a legal, valid and binding agreement of Parent, CPI Merger Sub and
Company Merger Sub enforceable against each of them in accordance with its
terms, subject to the Bankruptcy and Equity Exception.
(c) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Sections 1.4
and 1.5, (B) pursuant to the HSR Act, (C) pursuant to the Exchange Act, (D)
pursuant to any Environmental Laws, (E) pursuant to the European Community
Merger Control Regulation, and (F) required to be made with any Governmental
Entity in any jurisdiction outside the United States, no notices, reports or
other filings are required to be made by Parent, CPI Merger Sub or Company
Merger Sub with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Parent, CPI Merger Sub or Company
Merger Sub from, any Governmental Entity, in connection with the execution and
delivery of this Agreement by Parent, CPI Merger Sub or Company Merger Sub and
the consummation by Parent, CPI Merger Sub and Company Merger Sub of the Mergers
and the other transactions contemplated hereby, except those that the failure to
make or obtain are not, individually or in the aggregate, reasonably likely to
prevent, materially delay or impair the ability of Parent, CPI Merger Sub or
Company Merger Sub to consummate the Mergers or the other transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement and the
Memorandum of Understanding by Parent, CPI Merger Sub and Company Merger Sub do
not, and the consummation by Parent, CPI Merger Sub and Company
-39-
Merger Sub of the Mergers and the other transactions contemplated hereby, will
not constitute or result in (A) a breach or violation of, or a default under,
the certificate of incorporation or bylaws of Parent or the comparable governing
instruments of any of its Subsidiaries, or (B) a breach or violation of, or a
default under, the termination (or right of termination), amendment (or right of
amendment), cancellation (or right of cancellation) or acceleration of any
obligations or a loss of a material benefit under, or the creation of a lien,
liability, pledge, security interest, Claim or similar encumbrance on or the
loss of any assets of Parent or any of its Subsidiaries (with or without notice,
lapse of time or both) pursuant to, any Contract binding upon Parent or any of
its Subsidiaries or, assuming compliance with the DGCL and all Laws requiring
the filings and or notices described in Section 5.3(c)(i), any Law or
governmental or non-governmental permit, concession, franchise or license to
which Parent and its Subsidiaries is subject, except, in the case of clause B)
above, for any breach, violation, default, termination (or right of
termination), amendment (or right of amendment), cancellation (or right of
cancellation) or acceleration, creation, change or loss that, individually or in
the aggregate, is not reasonably likely to prevent, materially delay or impair
the ability of Parent, CPI Merger Sub or Company Merger Sub to consummate the
Mergers or the other transactions contemplated by this Agreement.
(d) Ownership of Shares. Except as contemplated by the CPI Merger,
neither Parent nor any of its Subsidiaries beneficially owns or is the
beneficial Owner of any CPI Shares or any Company Shares.
(e) Funds. Parent has executed and delivered the commitment letter
from Bear, Stearns & Co. Inc. and Bear Stearns Corporate Lending Inc. (the "Debt
Commitment Letter") to provide to Parent (or to CPI Merger Sub or Company Merger
Sub or another subsidiary of Parent), subject to the terms and conditions
thereof, the amount of debt financing set forth in the Debt Commitment Letter
that when funded, along with the Investor Equity (as hereinafter defined) will
provide Parent with the funds necessary to consummate the Mergers and pay all
fees, expenses and costs in connection with negotiation, execution and
performance of the Agreement by Parent, CPI Merger Sub and Company Merger Sub.
Parent has furnished copies of such Debt Commitment Letter to the Company and
CPI. The financing to be provided thereunder is referred to herein as the "Debt
Financing".
-40-
(f) Financial Structure. (i) Parent and Company Merger Sub hereby
represent that no less than $278 million of the total financing, to be incurred
in connection with the Company Merger (the "Company Financing") will consist of
contributions from MedPointe Capital Partners, L.L.C. of at least $10 million in
equity, Carlyle Partners III, L.P. of at least $134 million in equity and a
group comprised of Cypress Merchant Banking Partners II L.P., 55th Street
Partners II L.P. and Cypress Merchant Banking II C.V. of at least $134 million
in equity (collectively, the "Investor Equity").
ARTICLE VI
Covenants
6.1. Interim Operations. (a) CPI covenants and agrees that, after the
date hereof and prior to the CPI Merger Effective Time (unless Parent shall
otherwise approve in writing, which approval shall not be unreasonably withheld
or delayed, and except as set forth in Section 6.1(a) of the CPI Disclosure
Letter, or as otherwise contemplated by this Agreement, the Asset Purchase
Agreement or the Ancillary Agreements):
(i) it shall conduct its business as a holding company for Company
Shares in the ordinary course of business, consistent with past practice
and comply in all material respects with all applicable Laws, including
Environmental Laws;
(ii) it shall not (A) issue, sell, pledge, dispose of or encumber any
Company Shares; (B) amend its certificate of incorporation or bylaws except
pursuant to the Recapitalization Amendment; (C) split, combine or
reclassify its outstanding shares of capital stock, except pursuant to the
Recapitalization Amendment; or (D) repurchase, redeem or otherwise acquire
any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock except
pursuant to the Recapitalization Amendment;
(iii) it shall not issue, sell, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable or exercisable
for, or
-41-
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of its capital stock of any class or any CPI Voting Debt or any
material property or assets except pursuant to the Recapitalization
Amendment;
(iv) it shall not incur any material liability or obligation or
otherwise engage in any activity or take any action other than in
furtherance of the consummation of the transactions pursuant to this
Agreement in accordance with the provisions of this Agreement; provided,
however, that prior to the due adoption of this Agreement by holders of the
Company Shares constituting the Company Requisite Vote, CPI shall not be
prohibited by this clause (iv) from providing information at the Company's
request in response to a request therefor by a Person who has made an
unsolicited bona fide written Acquisition Proposal pursuant to clause (B)
of the proviso in Section 6.2(a) or from participating in negotiations or
discussions by the Company with a Person pursuant to clause (C) of the
proviso in Section 6.2(a);
(v) it shall not change in any material respect any of the accounting
principles or practices used by it, except as may be required as a result
of a change in GAAP; and
(vi) it shall not make any tax election without prior notice to
Parent, except in the ordinary course of business; and
(vii) it shall not authorize or enter into an agreement to do any of
the foregoing.
(b) The Company covenants and agrees as to itself and its Subsidiaries
that, after the date hereof and prior to the Company Merger Effective Time
(unless Parent shall otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, and except as otherwise contemplated by this
Agreement, the Company Disclosure Letter, the Asset Purchase Agreement or the
Ancillary Agreements):
(i) it shall operate the business of it and its Subsidiaries (other
than such portion as comprises the Business) only in the ordinary course of
business, consistent with past practice and in material
-42-
compliance with all applicable Laws, and, to the extent consistent with
such operation, use commercially reasonable efforts to: (A) preserve the
present business organization intact; and (B) preserve any beneficial
business relationships with all customers, suppliers, Government Entities,
and others having business dealings with the business of it and its
Subsidiaries (other than such portion as comprises the Business);
(ii) it shall maintain (A) the material assets of the Company and its
Subsidiaries (other than the Purchased Assets) in such condition and repair
consistent with past practice, and (B) insurance upon all of the material
assets of the Company and its Subsidiaries (other than the Purchased
Assets) and with respect to the conduct of the business of the Company and
its Subsidiaries (other than the Business) in full force and effect,
comparable in amount, scope, and coverage to that in effect on the date of
this Agreement;
(iii) it shall not (A) authorize, issue, deliver, sell, pledge,
dispose of or encumber any capital stock owned by it in any of its
Subsidiaries that are not Transferred Subsidiaries (as defined in the Asset
Purchase Agreement); (B) amend its or its Subsidiaries' or certificate of
incorporation or bylaws or equivalent organizational documents; (C) split,
combine or reclassify (including causing the conversion of Class B Common
Shares to Common Shares pursuant to Article FOURTH, Section 2(e)(1)(iii) of
the certificate of incorporation of the Company) its or its Subsidiaries'
outstanding shares of capital stock; (D) declare, set aside, make or pay
any dividend payable in cash, stock, property or otherwise in respect of
any capital stock other than dividends from its direct or indirect wholly
owned Subsidiaries and other than, in the case of the Company, regular
quarterly cash dividends not in excess of $0.08 per Company Share per
quarter (paid to record holders of stock on a date set consistent with past
practice); or (E) repurchase, redeem or otherwise acquire, except, in the
case of the Company in each case set forth above, in connection with the
Stock Plans, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its capital stock or any securities
-43-
convertible into or exchangeable or exercisable for any shares of its
capital stock;
(iv) neither it nor any of its Subsidiaries that are not Transferred
Subsidiaries shall (A) issue, authorize, deliver, grant, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of its capital stock of any
class or any Company Voting Debt (other than, in the case of the Company,
Company Common Shares issuable pursuant to Company Options or Stock Awards
outstanding on the date hereof under the Stock Plans); (B) lease or
otherwise dispose of, or grant or sell any option or right to purchase that
portion of the Company's business that does not include the Purchased
Assets, except in the ordinary course of business, consistent with past
practice; or (C) sell, assign, transfer, convey or otherwise dispose of any
material asset or right of the Company or subject any of the assets of the
Company (other than the Purchased Assets) to any further material lien,
charge, license, mortgage, pledge, security interest or similar encumbrance
(each, an "Encumbrance"), other than (i) Permitted Encumbrances (as defined
in the Asset Purchase Agreement) (ii) as reflected, reserved or otherwise
disclosed in the Audited Pro Forma Financial Statements, the Interim Pro
Forma Financial Statements or the financial statements included in or
incorporated by reference in the Company Reports filed prior to the date of
this Agreement or (iii) in the ordinary course of business, consistent with
past practice;
(v) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Compensation and Benefit Plans or arrangement that
would be a Compensation and Benefit Plan if it were in effect on the date
hereof, or pay or promise to pay, any bonus, profit-sharing or special
compensation to the Employees or Directors or make any increase in the
compensation or benefits payable or to become payable to any of such
Employees or Directors, or hire, without the consent of Parent which
consent shall not be unreasonably withheld, any employee who would be
entitled to an annual base salary greater than $100,000, except (A) for
changes that are required by
-44-
applicable Law, (B) to satisfy obligations under the terms of any
Compensation and Benefit Plan in effect as of the date hereof, (C) for
increases in compensation that are made in the ordinary course of business
consistent with past practice (which shall include normal periodic
performance reviews and related compensation and benefit increases), which
increases their effective dates for corporate officers are set forth in
Section 6.1(b)(v) of the Company Disclosure Letter and (D) for employment
arrangements for or grants of awards, other than equity-based awards, to
newly hired employees (hired in accordance with this paragraph) in the
ordinary course of business consistent with past practice; provided,
however, that nothing in this clause (v) shall permit any action that would
otherwise be prohibited by clause (iv)(A) above;
(vi) except in the ordinary course of business consistent with past
practice or in connection with the Assets Purchase, neither it nor any of
its Subsidiaries shall enter into or terminate any Company Contract, or
make any change in any of its Company Contracts;
(vii) neither it nor any of its Subsidiaries shall make any tax
election or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be canceled or terminated without prior notice to
Parent, except in the ordinary and usual course of business or in
connection with the Assets Purchase;
(viii) neither it nor any of its Subsidiaries shall (A) acquire (by
merger, consolidation or acquisition of stock or assets) or sell (by
merger, consolidation or sale of stock or assets) any corporation,
partnership or other business organization or division thereof or any
assets in each case, which are material to the Company and its Subsidiaries
taken as a whole other than in connection with the Assets Purchase, (B)
incur any long-term indebtedness for money borrowed or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital
contributions to, or investments in any other person (other than a
Subsidiary or Transferred Subsidiary of the Company or in connection with
the Assets Purchase), in each case, other than (x)in the ordinary course of
business consistent with past
-45-
practice or (y) any letter of credit entered into in the ordinary course of
business consistent with past practice, (C) authorize any new capital
expenditures which are, in the aggregate, in excess of $500,000 other than
unforeseen capital expenditures that may be necessary to operate the
business consistent with past practice or (D) authorize any new commitments
for taurolidine spending which are, in the aggregate, in excess of $500,000
(it being understood that commitments made prior to the date hereof with
respect to pre-clinical work or clinical studies are not covered by these
limitations);
(ix) neither it nor any of its Subsidiaries shall change in any
material respect any of the accounting principles or practices used by it,
except as may be required as a result of a change in SEC guidelines or
GAAP;
(x) neither it nor any of its Subsidiaries shall pay, discharge or
satisfy any liabilities or Obligations, other than any payment, discharge
or satisfaction (A) in the ordinary course of business consistent with past
practice, (B) in accordance with the terms of any such liabilities or
Obligations, (C) which does not involve an amount in excess of $100,000, or
(D) as set forth in Section 6.1(b)(x) of the Company Disclosure Letter;
(xi) neither it nor any of its Subsidiaries shall settle or compromise
any litigation pending against the Company (whether or not commenced prior
to the date of this Agreement) other than settlements or compromises of
litigation or where the amount paid (less the amount reserved for such
matters by the Company or covered by insurance) in settlement or compromise
in each case does not exceed $100,000 or $500,000 in the aggregate;
(xii) neither it nor any of its Subsidiaries shall effectuate a "plant
closing" or "mass layoff," as those terms are defined in WARN or any state
or local law, affecting in whole or in part any site of employment,
facility, operating unit or employee;
(xiii) neither it nor any of its Subsidiaries shall adopt a plan of
complete or partial liquidation, dissolution, consolidation, restructuring,
-46-
recapitalization, merger or other reorganization of the Company or any of
its Subsidiaries (other than the Mergers and the Assets Purchase);
(xiv) neither it nor any of its Subsidiaries shall involuntarily
separate any Employee from employment with the Company without due cause;
and
(xv) neither it nor any of its Subsidiaries shall authorize or enter
into an agreement to do any of the foregoing.
(c) The provisions of this Section 6.1 notwithstanding, nothing in
this Agreement shall be construed or interpreted to prevent the Company or any
Subsidiary from (i) entering into the Asset Purchase Agreement and the Ancillary
Agreements or complying with any of the terms thereof (ii) subject to Section
8.8, of the Asset Purchase Agreement making, accepting or settling intercompany
advances to, from or with one another; (iii) subject to Section 6.21(b), causing
any Subsidiary to pay or distribute to the Company all cash, money market
instruments, bank deposits, certificates of deposit, other cash equivalents,
marketable securities and other investment securities then owned or held by such
Subsidiary; (iv) subject to Section 6.21(b), causing any Subsidiary which owns
or holds any Purchased Assets to transfer such assets to the Company or its
nominee prior to the Closing by means of a dividend, distribution in kind or
other transfer without consideration; or (v) subject to Section 6.21(b),
engaging in any other transaction incident to the normal cash management
procedures of the Company and its Subsidiaries, including, without limitation,
short-term investments in bank deposits, money market instruments, time
deposits, certificates of deposit and bankers' acceptances and borrowings for
working capital purposes and purposes of providing additional funds to
Subsidiaries made, in each case, in the ordinary course of business, consistent
with past practice; provided, however, that neither the Company nor any of its
Subsidiaries may take any action pursuant to this Section 6.1(c) to the extent
such action would have a material adverse effect on the Tax liability of the
Company or any of its Subsidiaries without the prior written consent of Parent,
which shall not be unreasonably withheld or delayed.
-47-
6.2. Acquisition Proposals. (a) The Company agrees that neither it nor
any Subsidiary of the Company nor any of their respective officers or directors
shall, and that it shall direct and use its best efforts to cause its and such
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by them or any of the Company's
Subsidiaries) not to, directly or indirectly, (i) initiate, solicit, encourage
or otherwise facilitate any inquiries or the making of any proposal or offer
with respect to a merger, reorganization, share exchange, consolidation,
purchase, or similar transaction involving (A) more than 15% of the consolidated
assets of the Company primarily related to the Business (a "Consumer Products
Acquisition Proposal"); (B) more than 15% of the consolidated assets of the
Company other than assets primarily related to the Business (such assets, the
"Healthcare Business" and such a proposal, a "Healthcare Acquisition Proposal");
or (C) more than 15% of the outstanding equity securities of the Company or more
than 15% of each of the consolidated assets related to the Business and the
consolidated assets related to the Healthcare Business (a "Company Acquisition
Proposal", any Consumer Products Acquisition Proposal, Healthcare Acquisition
Proposal or Company Acquisition Proposal being referred to as an "Acquisition
Proposal"); (ii) engage in any negotiations concerning, or provide any
confidential information or data to, or have any substantive discussions with,
any Person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal (including by
entering into any letter of intent or similar document or any contract,
agreement or commitment with any Person making such an Acquisition Proposal) or
(iii) approve, endorse or recommend any Acquisition Proposal; provided, however,
that, prior to the due adoption of this Agreement by holders of Company Shares
constituting the Company Requisite Vote, nothing contained in this Agreement
shall prevent the Company, its directors, officers, agents or other
representatives from (A) complying with its disclosure obligations under federal
or state law; (B) providing information in response to a request therefor by a
Person who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from the Person so requesting such information an
executed confidentiality agreement on terms substantially similar to those
contained in the Confidentiality Agreement (as defined in Section 9.7), it being
understood that such confidentiality
-48-
agreement will not prohibit the making of an Acquisition Proposal; (C) engaging
in any negotiations or discussions with any Person who has made an unsolicited
bona fide written Acquisition Proposal or entering into an agreement with such
Person solely with respect to the payment by such Person of amounts payable to
Parent pursuant to Section 8.5(b) hereof or to Assets Buyer pursuant to Section
11.5(b) of the Asset Purchase Agreement; or (D) approving, endorsing or
recommending such an Acquisition Proposal to the stockholders of the Company
(which, in the case of a Healthcare Acquisition Proposal or Company Acquisition
Proposal, shall be deemed to be a withdrawal or modification of the
recommendation of this Agreement by the Board of Directors of the Company) or,
following the termination of the Asset Purchase Agreement pursuant to Section
11.3(a) thereof, entering into an agreement with a Person who has made an
unsolicited bona fide written Consumer Products Acquisition Proposal with
respect to such Consumer Products Acquisition Proposal, if and only to the
extent that, (i) in each such case referred to in clause (B), (C) or (D) above,
the Board of Directors of the Company determines in good faith (after
consultation with outside legal counsel) that failure to take such action would,
in light of such Acquisition Proposal and the terms of this Agreement, be
inconsistent with the fiduciary duties of the directors under applicable Law and
(ii) (x) in the case of clauses (B) and (C) above, the Board of Directors of the
Company determines in good faith (after consultation with its financial advisor)
that taking the actions permitted pursuant to such clauses with respect to such
Acquisition Proposal could reasonably be expected to result in a Superior
Proposal, assuming such Acquisition Proposal is consummated and (y) in the case
referred to in clause (D) above, the Board of Directors of the Company
determines in good faith (after consultation with its financial advisor) that
such Acquisition Proposal is a Superior Proposal. A Consumer Products
Acquisition Proposal is a "Superior Proposal" if (i) the transaction (or series
of transactions) pursuant to such Acquisition Proposal involves the direct or
indirect (by stock acquisition or otherwise) acquisition by a third party of all
or substantially all of the consolidated assets of the Company primarily related
to the Business and (ii) the consummation of such transaction (or series of
transactions) pursuant to such Acquisition Proposal, together with the
consummation of the Mergers pursuant hereto, will be more favorable to the
Company's stockholders from a financial point of view than the Assets Purchase,
taken together with such Mergers and, for purposes
-49-
of the determination to be made in clause (D) above, in the good faith judgment
of the Board of Directors of the Company, it is reasonably likely to be financed
by such third party. A Healthcare Acquisition Proposal is a "Superior Proposal"
if (i) the transaction (or series of transactions) pursuant to such Acquisition
Proposal involves the direct or indirect (by merger, stock acquisition or
otherwise) acquisition by a third party of the Healthcare Business and (ii) the
consummation of such transaction (or series of transactions) pursuant to such
Acquisition Proposal, together with the consummation of the Assets Purchase and
the other transactions contemplated by the Asset Purchase Agreement, will be
more favorable to the Company's stockholders from a financial point of view than
the Mergers, taken together with the Assets Purchase and such other transactions
and, for purposes of the determination to be made in clause (D) above, in the
good faith judgment of the Board of Directors of the Company, it is reasonably
likely to be financed by such third party. A Company Acquisition Proposal is a
"Superior Proposal" if (i) the transaction (or series of transactions) pursuant
to such Acquisition Proposal involves a third party unaffiliated with CPI
acquiring, directly or indirectly, not less than a majority of the outstanding
Company Shares (by merger, stock acquisition or otherwise) or acquiring,
directly or indirectly, all or substantially all of the consolidated assets of
the Company, (ii) such transaction (or series of transactions) is reasonably
likely to be consummated and (iii) the consummation of such transaction (or
series of transactions) pursuant to such Acquisition Proposal will be more
favorable to the Company's stockholders from a financial point of view than the
combined effect of the Assets Purchase and the Mergers. The Company agrees that
it will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposals. The Company agrees that it will notify Parent
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives.
(b) In the event the Company terminates the Asset Purchase Agreement
pursuant to Section 11.3 thereof in order to enter into an agreement with
respect to a Consumer Products Acquisition Proposal that constitutes a Superior
Proposal, Parent, Company Merger Sub and CPI Merger Sub shall be required to
accept (i) the buyer of the Business
-50-
pursuant to such agreements as a replacement "Assets Buyer" (the "Substitute
Assets Buyer") for purposes hereof and (ii) such agreement as a replacement
"Asset Purchase Agreement" (such agreement and any related agreements,
collectively, the "Substitute APA") for purposes hereof if such Substitute
Assets Buyer and Substitute APA would not, in the good faith judgment of Parent
(as compared with the Asset Purchase Agreement and the agreements entered into
in connection therewith) materially and adversely affect either Parent's rights
or obligations hereunder and under the agreements executed and delivered in
connection herewith (including the voting agreement with CPI and the
indemnification agreement and voting agreement with certain stockholders of CPI)
or the Company's rights or obligations hereunder (provided that any term or
provision of the Substitute APA that creates liabilities or obligations on the
part of the Company that will be discharged or satisfied prior to the Closing or
will be an Assumed Liability (as defined in the Asset Purchase Agreement) under
the Asset Purchase Agreement will not, for purposes of the foregoing, be deemed
to materially and adversely affect the Company's rights or obligations
hereunder), taking into account all relevant factors, including the terms and
conditions of the Substitute APA and the financial position of the Substitute
Assets Buyer. If the Company should notify Parent that it intends, subject to
not receiving a Section 6.2(b) Notice (as hereinafter defined), to terminate the
Asset Purchase Agreement pursuant to Section 11.3(a) thereof in order to enter
into a Substitute APA pursuant to Section 11.3(a) and, prior to, or at the time
of delivery of such notice, provides Parent with a draft of such Substitute APA,
Parent will notify the Company (the "Section 6.2(b) Notice") within three
business days of such notice (not counting the day of receipt) whether, in the
exercise of its good faith judgment, such Substitute APA with the Substitute
Assets Buyer would have any of the material adverse effects described above. If
Parent does not provide a Section 6.2(b) Notice within such three-day period,
Parent shall be deemed to accept the Substitute Assets Buyer and the Substitute
APA. For purposes of this Agreement, upon execution and delivery by the Company
of the Substitute APA, all references herein to the "Assets Purchase" and the
"Asset Purchase Agreement" shall become references to such Substitute APA. It is
further agreed that the giving by the Company to Assets Buyer of the notice that
it intends to terminate this Agreement pursuant to Section 8.3(a) in order to
enter into a Substitute Merger Agreement (as defined in the Asset Purchase
Agreement) and the drafts, documents and
-51-
information contemplated by Section 8.11(c) of the Asset Purchase Agreement
shall not, in and of itself, provide Parent a right to terminate under Section
8.4 of this Agreement.
6.3. Stockholder Approvals. (a) (i) Subject to fiduciary obligations
under applicable Law, the Board of Directors of the Company shall recommend
approval of the transactions contemplated by this Agreement to the holders of
Company Shares and (ii) the Company will take, in accordance with applicable Law
and its certificate of incorporation and bylaws, all actions necessary to
convene a meeting of stockholders to vote on the Company Merger as promptly as
practicable.
(b) CPI will take, in accordance with applicable Law, its certificate
of incorporation and bylaws, all actions necessary to convene a meeting of
stockholders (to be held or taken prior to the time of the meeting of
stockholders of the Company referred to in Section 6.3(a)) to vote on (or to
take action by written consent approving) the CPI Merger and the
Recapitalization Amendment as promptly as practicable.
6.4. Proxy Statement. The Company shall prepare and file with the SEC
a proxy or consent statement with respect to the solicitation of consents or
proxies relating to the Mergers and the Assets Purchase (the "Proxy Statement")
as promptly as practicable and promptly thereafter mail the Proxy Statement to
the holders of Company Shares. CPI, the Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in the Company's Proxy Statement and any amendment or supplement thereto will,
at the date of mailing to stockholders and at the time of the Company Requisite
Vote, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
6.5. Filings; Other Actions; Notification.
(a) CPI, the Company and Parent shall cooperate with each other and
shall use their respective reasonable best efforts to take or cause to be taken
all appropriate actions, and do or cause to be done all things, necessary,
-52-
proper or advisable on its part under this Agreement and applicable Laws to
consummate and make effective the Mergers and the Assets Purchase as promptly as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Mergers. Subject
to applicable Laws and the terms of any relevant agreements with third parties
relating to the exchange of information, Parent and the Company shall have the
right to review in advance, and to the extent practicable each will consult the
other on, all the information relating to Parent, CPI or the Company, as the
case may be, and any of their respective Subsidiaries, that appear in any filing
made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Mergers and the Assets Purchase. In
exercising the foregoing right, each of CPI, the Company and Parent shall act
reasonably and as promptly as practicable.
(b) CPI, the Company and Parent, CPI Merger Sub and Company Merger Sub
each shall, upon request by the other, furnish the other with all information
concerning itself, its Subsidiaries, directors, officers and stockholders and
such other matters as may be reasonably necessary or advisable in connection
with the Proxy Statement, or any other statement, filing, notice or application
made by or on behalf of Parent, CPI, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Mergers.
(c) CPI, the Company and Parent, CPI Merger Sub and Company Merger Sub
each shall keep the other apprised of the status of matters relating to
completion of the transactions contemplated hereby, including promptly
furnishing the other with copies of notice or other communications received by
Parent, CPI or the Company, as the case may be, or any of their respective
Subsidiaries, from any third party and/or any Governmental Entity with respect
to the Mergers and the Assets Purchase (to the extent such notice would have any
material effect on Parent); provided, however, that in respect of any
communication to or from any Governmental Entities relating to the Mergers, each
Party shall afford the other Party with advance notice of, and a meaningful
opportunity to
-53-
participate in, any such communications, including, without limitation, a right
to attend, with advisors present, any meetings (telephonic or in person) with
such Governmental Entities.
(d) Without limiting the generality of the undertakings pursuant to
this Section 6.5, the Company (in the case of clauses (i) and (iii)) and Parent,
CPI Merger Sub and Company Merger Sub (in all cases set forth below) agree to
take or cause to be taken the following actions: (i) provide promptly to any and
all federal, state, local or foreign courts or Governmental Entities with
jurisdiction over enforcement of any applicable antitrust laws (each, a
"Government Antitrust Entity") information and documents requested by any
Government Antitrust Entity or necessary, proper or advisable to permit
consummation of the Mergers; (ii) the proffer by Parent of its willingness to
sell or otherwise dispose of, or hold separate and agree to sell or otherwise
dispose of, such assets, categories of assets or businesses of the Company or
Parent or either's respective Subsidiaries (and to enter into agreements with
the relevant Government Antitrust Entity giving effect thereto) no later than 90
days from the date of this Agreement if such action should be reasonably
necessary or advisable to avoid the commencement of a proceeding to delay,
restrain, enjoin or otherwise prohibit consummation of the Mergers by any
Government Antitrust Entity; and (iii) take promptly, in the event that any
permanent or preliminary injunction or other order is entered or becomes
reasonably foreseeable to be entered in any proceeding that would make
consummation of the Mergers in accordance with the terms of this Agreement
unlawful or that would prevent or delay consummation of the Mergers, any and all
reasonable steps (including the appeal thereof, the posting of a bond or the
taking of the steps contemplated by clause (ii) of this paragraph) necessary to
vacate, modify or suspend such injunction or order so as to permit such
consummation on a schedule as close as possible to that contemplated by this
Agreement.
(e) Without limiting the generality of Section 6.5(a), the Company
agrees to provide, and shall cause its Subsidiaries and shall use its reasonable
best efforts to cause its and their respective officers, employees and advisors,
including KPMG, to provide, reasonable assistance to Parent in connection with
the completion of the Debt Financing contemplated in the Debt Commitment Letter
to be consummated contemporaneously with or at or after the Closing in respect
of the transactions contemplated in this
-54-
Agreement; provided, however, that the foregoing does not require the executive
officers of the Company to travel outside New York City.
(f) Without limiting the generality of Section 6.5(a), Parent hereby
agrees to use its reasonable best efforts to enter into definitive documentation
with respect to the Debt Financing as provided for in the Debt Commitment Letter
on substantially the same terms reflected in the Debt Commitment Letter,
including using its reasonable best efforts to satisfy all conditions applicable
to Parent in such definitive agreements. Parent hereby further agrees to use its
reasonable best efforts to negotiate substantially complete forms (subject to
customary review and comment by the banks in the syndicate group) of definitive
agreements with respect thereto prior to the mailing of the Proxy Statement
(although signing may be delayed until a later date). Parent will keep the
Company informed on a regular ongoing basis of the status of the efforts to
obtain such Debt Financing. In the event any portion of such Debt Financing
becomes unavailable in the manner or from the sources originally contemplated,
Parent will use its reasonable best efforts to obtain any such portion from
alternative sources on substantially comparable terms, if available, or if not
substantially comparable, on terms and conditions reasonably satisfactory to
Parent.
6.6. Access. Upon reasonable notice, and except as may otherwise be
required by applicable Law or the terms of any relevant agreements with third
parties, CPI and the Company shall (and the Company shall cause its Subsidiaries
to) afford Parent's officers, employees, counsel, accountants and other
authorized representatives ("Representatives") reasonable access, during normal
business hours throughout the period prior to the Company Merger Effective Time,
to their respective properties, books, Contracts and records, management and
other employees and, during such period, the Company shall (and shall cause its
Subsidiaries to) furnish promptly Parent with all information concerning its
business, properties and personnel as Parent or its Representatives may
reasonably request, provided that no investigation pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by CPI
or the Company and provided, further, that the foregoing shall not require CPI
or the Company to permit any inspection, or to disclose any information, in the
reasonable judgment of CPI or the Company, as the case may be, would result in
the disclosure
-55-
of any trade secrets of third parties or violate any obligation of CPI or the
Company with respect to confidentiality if CPI or the Company, as the case may
be, shall have used reasonable efforts to obtain the consent of such third party
to such inspection or disclosure. All requests for information made pursuant to
this Section shall be directed to an executive officer of CPI or the Company, as
the case may be, or such Person as may be designated by any such officer. All
such information shall be governed by the terms of the Confidentiality Agreement
(as defined in Section 9.7).
6.7. Stock Exchange De-listing. The Surviving Company shall use its
reasonable best efforts to cause the Company Shares to be de-listed from the New
York Stock Exchange and de-registered under the Exchange Act as soon as
practicable following the Company Merger Effective Time.
6.8. Assets Purchase.
(a) The Company shall not (i) amend or modify the Asset Purchase
Agreement as in effect on the date hereof or the Ancillary Agreements or grant
any waiver with respect to the Asset Purchase Agreement or the Ancillary
Agreements in a manner that materially and adversely affects either Parent's
rights or obligations hereunder or under the Ancillary Agreements or the
Company's rights or obligations thereunder or under the Ancillary Agreements
(provided that an amendment or modification to the Asset Purchase Agreement that
creates liabilities or obligations on the part of the Company that will be
discharged or satisfied prior to Closing or will be an Assumed Liability under
the Asset Purchase Agreement will not be deemed to materially and adversely
affect the rights or obligations of the Company) (ii) terminate the Asset
Purchase Agreement pursuant to Section 11.1 without the prior consent of Parent,
which shall not be unreasonably withheld, delayed or conditioned in the case of
clause (ii) or (iii) terminate the Asset Purchase Agreement to accept a Consumer
Products Acquisition Proposal unless such proposal is with a Substitute Assets
Buyer that constitutes a Substitute APA.
(b) Parent, CPI Merger Sub and Company Merger Sub will cooperate with
the Company in causing the Closing contemplated by the Asset Purchase Agreement
and the Closing contemplated by this Agreement to occur and be effected on the
same date and the Closing contemplated by this Agreement to immediately follow
the Closing contemplated by the Asset
-56-
Purchase Agreement; it being understood and agreed that the Asset Purchase
Agreement will not be consummated until all conditions to Closing in the Asset
Purchase Agreement and this Agreement and the conditions to the extension of
financing by all respective financing sources (both equity and debt) have been
satisfied or waived and the parties to such agreements and their respective
financing sources (both equity and debt) have entered into an appropriate
agreement satisfactory to the Company (the "Closing Agreement") to such effect,
and Parent, CPI Merger Sub and Company Merger Sub agree that once the Closing
contemplated by the Asset Purchase Agreement is consummated in accordance with
the terms thereof and in accordance with this Section 6.8(b), all conditions to
Closing under this Agreement shall irrevocably be deemed satisfied or waived.
(c) Parent and its affiliates shall not directly or indirectly
(through affiliates or otherwise), individually or as a group, enter into any
agreement or other arrangement with any party to the Asset Purchase Agreement
that would obligate any party to the Asset Purchase Agreement to refuse or
otherwise fail to cooperate with the Company and its representatives or obligate
any party to the Asset Purchase Agreement to oppose or otherwise act to thwart
the Company's efforts to (i) negotiate with respect to a Healthcare Acquisition
Proposal or (ii) enter into a Healthcare Acquisition Proposal that is a Superior
Proposal.
6.9. Publicity. The initial press release concerning this Agreement
and the Mergers shall be a press release, approved in advance by the Company and
Parent, and thereafter the Company and Parent each shall consult with each other
prior to issuing any press releases or otherwise making public announcements
with respect to the Mergers and the other transactions contemplated by this
Agreement and prior to making any filings with any third party and/or any
Governmental Entity (including any national securities exchange or interdealer
quotation service) with respect thereto, except as may be required by Laws or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange or interdealer quotation service on which the securities of
the Company or Parent are listed or quoted in which case the party required to
make the release shall use reasonable efforts to allow the other party
reasonable time (recognizing the disclosure obligation imposed by federal
securities laws) to comment on such release in advance of such issuance, it
being understood
-57-
that the final form and content of any such release, to the extent so required,
shall be at the final discretion of the disclosing party.
6.10. Benefits.
(a) Stock Options.
As soon as practicable after the date hereof, the Company (or the
appropriate administrative body) shall take any necessary actions (including
seeking any required employee consents) so that, at the Company Merger Effective
Time, each then outstanding option granted under the Stock Plans to purchase
Company Shares (a "Company Option"), whether vested or unvested, shall be
canceled, with the holder thereof receiving from the Company at the Closing an
amount of cash equal to the product of (x) the amount, if any, by which the
Company Merger Consideration exceeds the exercise price per Share subject to
such Company Option (whether vested or unvested) and (y) the number of Company
Shares issuable pursuant to the unexercised and outstanding portion of such
Company Option, less any required withholding of taxes. The Company has provided
to Parent a schedule of the exercise price for each Company Option outstanding
on the date hereof.
(b) Stock Awards. As soon as practicable after the date hereof, the
Company (or the appropriate administrative body) shall take any necessary
actions (including seeking any required employee consents) so that, at the
Company Merger Effective Time, each deferred stock award and restricted stock
award ("Stock Award") outstanding under the 1996 Long Term Incentive Plan shall
be fully vested and shall be canceled with the holder thereof receiving from the
Company at the Closing an amount of cash equal to (i) all accrued but unpaid
dividends with respect thereto and (ii) the product of (A) the Company Merger
Consideration and (B) the number of Company Shares covered by such Stock Award,
less any required tax withholding.
(c) Employee Benefits. Parent agrees that, during the period
commencing at the Company Merger Effective Time and ending on June 30, 2002, the
employees of the Company (other than employees who are primarily employed in the
Business ("Available Employees")) (the "Continuing Employees") will continue to
be provided with benefits under employee benefit plans (other than plans
involving the issuance of equity) that are no less favorable in the
-58-
aggregate than the benefits currently provided by the Company and its
Subsidiaries to such employees under the Compensation and Benefit Plans listed
in Section 5.2(i) of the Company Disclosure Letter (excluding such Plans that
provide equity-based compensation and the programs for executive automobile
leasing described in Section 6.1(b)(v) of the Company Disclosure Letter);
provided, however, that Employees covered by a collective bargaining agreement
shall not be subject to the foregoing sentence, but shall be subject to the
applicable collective bargaining agreement.
(d) Service and Assumption of Plan Obligations. In addition to the
obligations set forth in Section 6.10(c), following the Company Merger Effective
Time, Parent shall cause service by the Continuing Employees with the Company
and its Subsidiaries (and any predecessor entities) to be taken into account for
purposes of eligibility to participate, eligibility to commence benefits,
vesting, severance and vacation entitlement under any benefit plans of Parent or
its Subsidiaries in which such Continuing Employees are entitled to participate
(including the Surviving Company) to the same extent such service is credited
pursuant to the comparable Compensation and Benefit Plan listed in Section
5.2(i) of the Company Disclosure Letter, except to the extent such credit would
cause duplication of benefits. From and after the Company Merger Effective Time,
Parent shall (i) to the extent satisfied or inapplicable under similar
Compensation and Benefit Plans that are listed in Section 5.2(i) of the Company
Disclosure Letter, cause to be waived any pre-existing condition limitations
under benefit plans of Parent or its Subsidiaries in which employees of the
Company or its Subsidiaries participate and (ii) cause to be credited to any
deductible or out-of-pocket expense of Parent's plans any deductibles and
out-of-pocket expenses incurred by such employees and their beneficiaries and
dependents during the portion of the calendar year prior to participation in the
benefit plans provided by Parent and its Subsidiaries. Parent and the Company
acknowledge that the transactions contemplated by this Agreement and the Asset
Purchase Agreement shall, to the extent applicable, be a "change-in-control" of
the Company with respect to all participants under the Compensation and Benefit
Plans listed in Section 5.2(i) of the Company Disclosure Letter. Parent shall,
and shall cause the Surviving Company to assume and agree to perform all
employee benefit obligations to current and former employees under the
Compensation and Benefit Plans in accordance with their terms (including, to the
extent not
-59-
prohibited under the terms of the Compensation and Benefit Plans, the right to
amend or terminate such Compensation and Benefit Plan).
(e) Severance Pay. Parent shall provide severance pay to Continuing
Employees (other than Employees covered by collective bargaining agreements) in
accordance with the severance plan set forth in Section 6.10(e) of the Company
Disclosure Letter and Parent agrees that the Company shall make the payments
contemplated by Section 6.1(b)(v)(I) of the Company Disclosure Letter at the
Closing or, for certain executives, such later time as provided therein.
(f) Payment of Bonuses. At the first to occur of (i) such Continuing
Employee's termination of employment (for any reason other than for cause
(determined in accordance with the Company's historical practices) or (ii) the
date on which the 2002 fiscal year bonus is paid, the Company shall pay to each
Continuing Employee (whose employment or other agreement does not otherwise
provide for such payment) a payment equal to a pro-rata portion of such
Employee's target bonus, if any, under the Company's annual incentive bonus
plan(s) in which such employee is a participant for the period from April 1,
2001 until the Closing, which payment shall be a minimum bonus guarantee with
respect to the fiscal year 2002 bonus.
(g) Additional Benefit Matters. Prior to the Closing, the Company
shall provide Parent a list of and true and correct copies of any Compensation
and Benefit Plans that were not listed in Section 5.2(i) of the Company
Disclosure Letter. At the Closing, Parent shall deliver executed letters in the
same form as are attached as Exhibit A hereto addressed to the recipients
described therein.
6.11. Expenses. (a) The Surviving Company shall pay all charges and
expenses, including those of the Paying Agent in connection with the
transactions contemplated in Article IV and any transfer taxes, conveyance taxes
and sales taxes, if any, payable in connection with the consummation of the
Mergers. Except as otherwise provided in Section 8.5(b), whether or not the
Mergers are consummated, all costs and expenses incurred in connection with this
Agreement and the Mergers and the other transactions contemplated by this
Agreement shall be paid by the party incurring such expense.
-60-
(b) Notwithstanding the provisions of Section 6.11(a), in the event
that the Asset Purchase Agreement is terminated and the Company reimburses the
expenses of Assets Buyer pursuant to Section 12.2(b) of the Asset Purchase
Agreement, then the Company may terminate this Agreement and promptly, but in no
event later than two days after the date of such termination, pay all of the
charges and expenses incurred by Parent in connection with this Agreement and
the transactions contemplated herein up to a maximum amount of $2,500,000,
payable by wire transfer of same day funds.
6.12. Indemnification; Directors' and Officers' Insurance. (a)
Following the Closing Date, Parent shall, and Parent shall cause the Surviving
Company to, indemnify and hold harmless, to the fullest extent permitted under
applicable Law (and Parent shall also advance expenses as incurred to the
fullest extent permitted under applicable Law provided the Person to whom
expenses are advanced provides any undertaking required by applicable law to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification), each present and former director, officer,
employee and agent of the Company and the Company's current and former
Subsidiaries (collectively, the "Indemnified Parties") against any reasonable
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred by such
director, officer, employee or agent acting in such capacity in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Company Merger Effective Time,
including the Mergers, the Assets Purchase and the other transactions
contemplated by this Agreement and the Asset Purchase Agreement.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.12, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Surviving Company
thereof, but the failure to so notify shall not relieve any party hereto of any
liability or obligation it may have to such Indemnified Party if such failure
does not materially prejudice the indemnifying party. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Company Merger Effective Time), (i) Parent or the Surviving Company
shall have the right to
-61-
assume the defense thereof and neither Parent nor the Surviving Company shall be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent and the Surviving
Company elect not to assume such defense or counsel for the Indemnified Parties
advises that there are issues which raise conflicts of interest between Parent,
the Surviving Stockholder or the Surviving Company and the Indemnified Parties,
the Indemnified Parties may retain counsel reasonably satisfactory to them, and
Parent or the Surviving Company shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Parent and the Surviving Company shall be
obligated pursuant to this paragraph (b) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction unless the use of one counsel for
such Indemnified Parties would present such counsel with an actual or potential
conflict of interest, (ii) the Indemnified Parties will cooperate in the defense
of any such matter and (iii) neither Parent nor the Surviving Company shall be
liable for any settlement effected without its prior written consent; and
provided, further, that none of the parties hereto shall have any obligation
hereunder to any Indemnified Party if and when a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
non-appealable, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law.
(c) The Surviving Company shall maintain the Company's existing
officers' and directors' liability insurance with existing policy limits ("D&O
Insurance") for a period of six years after the Company Merger Effective Time;
provided, however, that if the annual premium therefor is in excess of 200% of
the last annual premium paid prior to the date of this Agreement (on an
annualized basis) or if the existing D&O Insurance expires, is terminated or
canceled during such six-year period, the Surviving Company will use its best
efforts to obtain as much D&O Insurance as can be obtained for the remainder of
such period for a premium not in excess (on an annualized basis) of 200% of the
last annual premium paid prior to the date of this Agreement. Notwithstanding
any contrary provision of this Agreement, prior to the Company Merger Effective
Time, the Company may, with the consent of Parent which consent shall not be
unreasonably withheld, purchase insurance coverage
-62-
extending for a period of six years the Company's directors' and officers'
liability insurance coverage in effect as of the date hereof (covering past or
future claims with respect to periods prior to and including the Company Merger
Effective Time, including, with respect to the Mergers, the Assets Purchase and
the other transactions contemplated by this Agreement and the Asset Purchase
Agreement); provided that the aggregate premium payable for such insurance shall
not exceed 250% of the last annual premium paid for such coverage prior to the
date hereof.
(d) The Surviving Company will provide at the Closing to each person
who is an officer or director of the Company immediately prior to the Company
Merger Effective Time a copy of a certificate or certificates of insurance (i)
evidencing that it possesses such D&O Insurance at policy limits in effect at
Closing and (ii) providing that said D&O Insurance cannot be canceled except
after ten days prior written notice to said officers and directors; provided,
however, that if such D&O Insurance is canceled or terminated during the
six-year period after the Company Merger Effective Time, the Surviving Company
shall promptly provide the aforesaid officers and directors with a new
certificate or certificates of insurance regarding such new D&O Insurance
obtained for the remained of such six-year period.
(e) Parent and CPI Merger Sub agree that all rights to indemnification
existing in favor of the present or former directors, officers, employees or
agents of the Company or any of the Company's current or former Subsidiaries,
respectively, as provided for in the certificate of incorporation or bylaws of
the Company, as in effect as of the date hereof, or as provided for in other
agreements which have been made available to Parent to which the Company is a
party, as in effect as of the date hereof, with respect to matters occurring
prior to and as of the Company Merger Effective Time shall survive the Mergers
and shall continue in full force and effect for a period of not less than the
statutes of limitations applicable to such matters, and Parent agrees to cause
the Surviving Stockholder or the Surviving Company, as the case may be, or
another of Parent's Subsidiaries, to comply fully with its obligations hereunder
and thereunder.
(f) If Parent, the Surviving Stockholder, the Surviving Company or any
of their respective successors or assigns (i) shall consolidate with or merge
into any other
-63-
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation or
other entity, then, and in each such case, proper provisions shall be made so
that the successors and assigns of Parent, the Surviving Stockholder or the
Surviving Company, as the case may be, shall assume all of the obligations set
forth in this Section.
(g) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
6.13. Takeover Statute. If any Takeover Statute is or may become
applicable to the Mergers or the other transactions contemplated by this
Agreement, CPI, the Company and their respective boards of directors shall grant
such approvals and take such actions as are necessary so that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Mergers and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions.
6.14. Parent Vote. Parent shall vote (or consent with respect to) or
cause to be voted (or a consent to be given with respect to) any Company Shares
and any shares of common stock of CPI Merger Sub or Company Merger Sub
beneficially owned by it or any of its affiliates or with respect to which it or
any of its affiliates has the power (by agreement, proxy or otherwise) to cause
to be voted (or to provide a consent), in favor of the adoption and approval of
this Agreement and the Mergers at any meeting of stockholders of the Company,
CPI Merger Sub or Company Merger Sub, respectively, at which this Agreement
shall be submitted for adoption and approval and at all adjournments or
postponements thereof (or, if applicable, by any action of stockholders of any
of the Company, CPI Merger Sub or Company Merger Sub by consent in lieu of a
meeting).
6.15. Recapitalization. Immediately prior to the CPI Merger Effective
Time, CPI shall cause the Recapitalization Amendment to be duly filed with the
Secretary of State of the State of Delaware and the Recapitalization thereby
shall be effective prior to the CPI Merger Effective Time.
-64-
6.16. Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, Parent, CPI
Merger Sub and Company Merger Sub shall promptly return to the Company or, if
requested by the Company, destroy (and if requested by the Company, Parent shall
execute and deliver to the Company a certificate confirming that all such
materials have been destroyed) all books, contracts, records and data room
contents and other written information and all copies or summaries thereof
furnished by the Company or its Subsidiaries or any of their respective agents,
employees, or representatives (including all copies, if any, thereof), and shall
not use or disclose the information contained in such books and records or other
documents for any purpose or make such information available to any other entity
or person.
6.17. FIRPTA. The Company shall have delivered to CPI on or prior to
the Closing a certificate, duly executed and acknowledged, certifying that the
Company is not a "U.S. real property holding corporation" within the meaning of
Section 897 of the Code, such certification to be in the form contemplated by
Treasury Regulation Section 1.1445-2(c). CPI shall have delivered to Parent on
or prior to Closing a certificate, duly executed and acknowledged, certifying
that CPI is not a "U.S. real property holding corporation" within the meaning of
Section 897 of the Code, such certification to be in the form contemplated by
Treasury Regulation Section 1.1445-2(c).
6.18. Debt Financing. Parent further covenants and agrees to use its
reasonable best efforts to (i) provide the Company and its advisors, on a
current basis, drafts and final versions of the documents related to the Debt
Financing, with an opportunity to comment thereon and (ii) assure that any
conditions to funding the Debt Financing relating to loan syndication are
satisfied at or prior to the time that all other conditions to effect the
Mergers hereunder can be satisfied.
6.19. Inventory Build Out. The Company will cooperate with Parent and
use its commercially reasonable efforts to (a) get Soma Products qualified for
production at the Company's Decatur, Illinois manufacturing and distribution
facility under the Food and Drug Administration's "changes being effected"
standard; (b) increase the production of Soma, Soma Compound and Soma
-65-
Compound with Codeine (collectively, the "Soma Products") at the Company's
Cranbury, New Jersey manufacturing and distribution facility as set forth in
Section 6.19 of the Company Disclosure Letter; and (c) issue one or more
purchase orders for carisoprodol and other material sufficient to produce the
Soma Products as set forth in Section 6.19 of the Company Disclosure Letter.
6.20. Payment of CPI Indebtedness and Obligations. All Indebtedness
and obligations of CPI including, without limitation, the costs of the appraiser
hired by CPI to assist it in performing the Recapitalization and legal counsel
in connection herewith, shall be assumed (with a release in favor of CPI from
the lender or other obligee) or repaid by the CPI Stockholders at or prior to
the CPI Merger Effective Time.
6.21. Carter-Horner Dividend; No Transferred Subsidiaries Funding. (a)
In connection with the transactions contemplated by this Agreement and the Asset
Purchase Agreement, prior to the Closing, the Company will cause Carter-Horner,
Inc. ("CHI"), a Canadian corporation and wholly owned subsidiary of the Company,
to dividend to the Company all cash, cash equivalents and short-term investments
on hand, less applicable withholding taxes, in excess of $1,000,000, and such
dividend shall be taken into account in calculating the Adjusted After Tax
Proceeds Amount using the same methodology that was used to calculate the After
Tax Proceeds Amount (as reflected in Section 4.5 of the Company Disclosure
Letter).
(b) Other than the dividend required pursuant to Section 6.21(a) above
and the renewal of the terms of the intercompany loan from CHI to Sofibel that
otherwise would become payable in August 2001, prior to the Closing, the Company
shall not, and shall cause its Subsidiaries not to, directly or indirectly (i)
cause or permit CHI to distribute or otherwise provide cash, cash equivalents or
short-term investments to the Company or any Subsidiary of the Company,
including any Transferred Subsidiary or (ii) contribute or agree to contribute
capital to any Transferred Subsidiary (other than cash contributed or agreed to
be contributed by one Transferred Subsidiary (other than CHI) to another
Transferred Subsidiary).
(c) The Company shall not declare, set aside, make or pay any dividend
on the Closing Date.
-66-
6.22. Sofibel. None of the Company, Sofibel or any successor entity
will take any action that would result in Sofibel or any successor entity being
classified as other than a corporation for United States federal income tax
purposes.
6.23. Fund Agreement. At or prior to the CPI Merger Effective Time,
Parent shall execute and deliver to CPI, with a copy thereof to the Company, the
fund agreement contemplated by Section 7 of the Indemnification Agreement (the
"Fund Agreement").
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligation of each party to effect the Mergers is subject to the
satisfaction or waiver at or prior to the CPI Merger Effective Time of each of
the following conditions (other than with respect to Section 7.1(b), which shall
not be a condition for CPI):
(a) Assets Purchase. The Closing contemplated by the Asset Purchase
Agreement shall have occurred.
(b) Recapitalization. The Recapitalization Amendment shall have been
duly filed with the Secretary of State of the State of Delaware.
(c) Stockholder Approval. This Agreement shall have been duly adopted
by holders of Company Shares constituting the Company Requisite Vote.
(d) Regulatory Consents. The waiting periods applicable to the
consummation of the Mergers under the HSR Act shall have expired or been
terminated and, other than the filing of the CPI Merger Certificate and Company
Merger Certificate, all notices, reports and other filings required to be made
prior to the Company Merger Effective Time by CPI, the Company or Parent or any
of their respective Subsidiaries with, and all consents, registrations,
approvals, permits and authorizations required to be obtained prior to the
Company Merger Effective Time by CPI, the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"Governmental Consents") in connection with the execution
-67-
and delivery of this Agreement and the consummation of the Mergers and the other
transactions contemplated hereby by CPI, the Company, Parent, CPI Merger Sub and
Company Merger Sub shall have been made or obtained (as the case may be), except
those that the failure to make or to obtain are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect.
(e) No Orders. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of either Merger
(collectively, an "Order").
7.2. Conditions to Obligations of Parent, CPI Merger Sub and Company
Merger Sub. The obligations of Parent, CPI Merger Sub and Company Merger Sub to
effect the Mergers are also subject to the satisfaction or waiver by Parent at
or prior to the CPI Merger Effective Time of the following conditions:
(a) Representations and Warranties. (i) (A) The representations and
warranties of the Company set forth in this Agreement that are qualified by
reference to Company Material Adverse Effect shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
such date and time (except to the extent that any such representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date);
(B) the representations and warranties of the Company set forth in this
Agreement that are not qualified by reference to Company Material Adverse Effect
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of such date and
time (except to the extent that any such representation and warranty expressly
speaks as of an earlier date, in which case such representation and warranty
shall be true and correct in all material respects as of such earlier date),
provided, however, that notwithstanding anything herein to the contrary, the
condition set forth in this Section 7.2(a)(i)(B) shall be deemed to have been
satisfied even if any representations and warranties of the Company (other than
Section 5.2(b) hereof) are not so true and correct unless the failure of such
representations and
-68-
warranties of the Company to be so true and correct, individually or in the
aggregate, has had or is reasonably likely to have a Company Material Adverse
Effect; and (C) Parent shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer of the Company to the effect that such
Chief Executive Officer has read this Section 7.2 and the conditions set forth
in this Section 7.2 have been satisfied.
(ii) (A) The representations and warranties of CPI set forth in this
Agreement that are qualified by reference to CPI Material Adverse Effect shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though made on and as of such date and time (except to the extent that any
such representation and warranty expressly speaks as of an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date); (B) the representations and warranties of CPI set forth in this
Agreement that are not qualified by reference to CPI Material Adverse Effect
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of such date and
time (except to the extent that any such representation and warranty expressly
speaks as of an earlier date, in which case such representation and warranty
shall be true and correct in all material respects as of such earlier date),
provided, however, that notwithstanding anything herein to the contrary, the
condition set forth in this Section 7.2(a)(ii)(B) shall be deemed to have been
satisfied even if any representations and warranties of CPI are not so true and
correct unless the failure of such representations and warranties of CPI to be
so true and correct, individually or in the aggregate, has had or is reasonably
likely to have an CPI Material Adverse Effect; and (C) Parent shall have
received a certificate signed on behalf of CPI by the Chief Financial Officer or
a Vice President of CPI to the effect that such Chief Executive Officer has read
this Section 7.2 and the conditions set forth in this Section 7.2 have been
satisfied.
(b) Performance of Obligations of CPI and the Company. CPI and the
Company shall have performed in all material respects the obligations required
to be performed by them under this Agreement at or prior to the Closing Date and
Parent shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer of the Company and on behalf of CPI by the Chief
Executive Officer of CPI to such effect.
-69-
(c) Company Closing Notice. The Company shall have executed and
delivered to Parent the Closing Agreement as contemplated by Section 6.8(b).
(d) Financing. Parent shall have received the financing proceeds under
the Debt Financing (or as otherwise contemplated by Section 6.5(f)) on the terms
and conditions set forth in the Debt Commitment Letter or upon terms and
conditions which are substantially comparable thereto, and to the extent that
any of the terms and conditions are not so set forth or substantially
comparable, on terms and conditions reasonably satisfactory to Parent.
(e) No Litigation. No Governmental Entity shall have instituted any
suit, action or proceeding that remains pending at the time of Closing seeking
to restrain, enjoin or otherwise prohibit the consummation of either Merger (an
"Injunctive Action"); and no Person shall have instituted any suits, actions or
proceeding that remains pending at the time of Closing before any U.S. court of
competent jurisdiction, except for (i) any Injunctive Action and (ii) any other
such suits, actions or proceedings that are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect.
(f) Fund Agreement. The Shareholders of CPI shall have executed and
delivered to Parent the Fund Agreement.
7.3. Conditions to Obligation of CPI and the Company. The obligations
of CPI and the Company to effect the Mergers are also subject to the
satisfaction or waiver by the Company at or prior to the CPI Merger Effective
Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent, CPI Merger Sub and Company Merger Sub set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of such date and time (except to the extent any
such representation and warranty expressly speaks as of an earlier date), and
the Company shall have received certificates signed on behalf of Parent by the
Chief Executive Officer of Parent, on behalf of CPI Merger Sub by Chief
Executive Officer of CPI Merger Sub and by Company Merger Sub by Chief Executive
Officer of Company
-70-
Merger Sub to such effect; provided, however, that notwithstanding anything
herein to the contrary, this Section 7.3(a) shall be deemed to have been
satisfied even if the representations and warranties of Parent, CPI Merger Sub
and Company Merger Sub are not so true and correct unless the failure of such
representations and warranties to be so true and correct, individually or in the
aggregate, is reasonably likely to prevent, materially delay or impair the
validity of either Merger.
(b) Performance of Obligations of Parent, CPI Merger Sub and Company
Merger Sub. Each of Parent, CPI Merger Sub and Company Merger Sub shall have
performed in all material respects the obligations required to be performed by
them under this Agreement at or prior to the Closing Date and the Company shall
have received certificates signed on behalf of Parent by the Chief Executive
Officer of Parent, on behalf of CPI Merger Sub by the Chief Executive Officer of
CPI Merger Sub and on behalf of Company Merger Sub by the Chief Executive
Officer of Company Merger Sub to such effect.
(c) Buyer Closing Notice. Assets Buyer and its financing sources (both
debt and equity) shall have executed and delivered to the Company the Closing
Agreement as contemplated by Section 6.8(b).
(d) Parent Closing Notice. Parent, CPI Merger Sub and Company Merger
Sub and their financing sources (both debt and equity) shall have executed and
delivered to the Company the Closing Agreement as contemplated by Section
6.8(b).
(e) Solvency Opinion. The Board of Directors of the Company shall have
received an opinion, in form and substance and from an independent evaluation
firm reasonably satisfactory to the Board of Directors of the Company, as to
solvency matters relating to the Company and its Subsidiaries and to Parent and
its Subsidiaries before and after giving effect to the transactions contemplated
by this Agreement and the Asset Purchase Agreement, including the incurrence of
indebtedness related thereto. Parent, CPI Merger Sub, Company Merger Sub and the
Company will, and will cause their respective Subsidiaries, officers, employees,
agents or other representatives to, cooperate with the evaluation firm in
performing the services required hereby, by, among other things, providing
relevant information and access to employees and data.
-71-
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated
and the Mergers may be abandoned at any time prior to the CPI Merger Effective
Time, whether before or after the adoption of this Agreement by holders of
Company Shares referred to in Section 7.1(c), by mutual written consent of the
Company and Parent by action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may
be terminated and the Mergers may be abandoned at any time prior to the CPI
Merger Effective Time by action of the Board of Directors of either Parent or
the Company if (i) the Mergers shall not have been consummated by October 31,
2001 (the "Termination Date"), whether such date is before or after the adoption
of this Agreement by holders of Company Shares, (ii) the Company shall not have
obtained the Company Requisite Vote upon a vote taken at a meeting of the
Company stockholders duly convened therefor or at any adjournment or
postponement thereof or as a result of a solicitation of consents pursuant to
the DGCL and the federal proxy rules, or (iii) any Order permanently
restraining, enjoining or otherwise prohibiting consummation of either Merger
shall become final and non-appealable (whether before or after the adoption of
this Agreement by holders of Company Shares); provided, however, that the right
to terminate this Agreement pursuant to clause (i) above shall not be available
to any party that has breached in any material respect its material obligations
under this Agreement in any manner that shall have contributed to the occurrence
of the failure of the Mergers to be consummated.
8.3. Termination by the Company. This Agreement may be terminated and
the Mergers may be abandoned at any time prior to the CPI Merger Effective Time,
whether before or after (other than as provided in Section 8.3(a) below) the
adoption of this Agreement by holders of Company Shares referred to in Section
7.1(c), by action of the Board of Directors of the Company:
(a) prior to effectiveness of the Company Requisite Vote if (i) the
Board of Directors of the Company authorizes the Company, subject to complying
with the terms
-72-
of this Agreement, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal (other than with respect to a
Consumer Products Acquisition Proposal) and the Company notifies Parent in
writing that it intends to enter into such an agreement, (ii) Parent does not
make, within three business days of receipt (not counting the day of receipt) of
the Company's written notification of its intention to enter into a binding
agreement for such Superior Proposal, an offer that the Board of Directors of
the Company determines, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to the
stockholders of the Company as such Superior Proposal and (iii) as a condition
to termination pursuant to this Section 8.3(a), the Company upon such
termination pays to Parent in immediately available funds any fees required to
be paid pursuant to Section 8.5.
(b) if there has been a material breach by Parent, CPI Merger Sub or
Company Merger Sub of any representation, warranty, covenant or agreement
contained in this Agreement that is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by the Company to
the party committing such breach, and as a result of any such breach or breaches
either of the conditions set forth in Section 7.3(a) or (b) would not be
satisfied at the Closing.
(c) if (i) the Asset Purchase Agreement has been terminated in
accordance with the terms thereof and Section 6.8(a)(ii) hereof (other than
pursuant to Section 11.3(a) of the Asset Purchase Agreement to enter into a
binding written agreement concerning a Consumer Products Acquisition Proposal)
or (ii) within 10 business days after the termination of the Asset Purchase
Agreement pursuant to such Section 11.3(a), the Company has not entered into a
new agreement with respect to a Consumer Products Acquisition Proposal that
Parent, Company Merger Sub and CPI Merger Sub are required to accept as a
Substitute APA pursuant to Section 6.2(b).
8.4. Termination by Parent. This Agreement may be terminated and the
Mergers may be abandoned at any time prior to the CPI Merger Effective Time by
action of the Board of Directors of Parent:
(a) if (i) the Board of Directors of the Company shall have withdrawn
or adversely modified its approval or
-73-
recommendation of this Agreement or after an Acquisition Proposal with respect
to a Company Acquisition Proposal or Healthcare Proposal has been made failed to
reconfirm its recommendation of this Agreement within ten business days after a
written request by Parent to do so or (ii) the Company shall have failed to
include in the Proxy Statement the recommendation of the Board of Directors of
the Company referred to in Section 6.3.
(b) if there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement that
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by Parent to the party committing such breach, and as a
result of any such breach or breaches by the Company either of the conditions
set forth in Section 7.2(a)(i) or (b) would not be satisfied at the Closing.
(c) if there has been a material breach by CPI of any representation,
warranty, covenant or agreement contained in this Agreement that is not curable
or, if curable, is not cured within 30 days after written notice of such breach
is given by Parent to the party committing such breach, and as a result of any
such breach or breaches by CPI either of the conditions set forth in Section
7.2(a)(ii) or (b) would not be satisfied at the Closing.
(d) if (i) the Asset Purchase Agreement is terminated (other than
pursuant to Section 11.3(a) of the Asset Purchase Agreement to enter into a
binding agreement concerning a Consumer Products Acquisition Proposal that
constitutes a Superior Proposal) or (ii) within 10 business days after the
termination of the Asset Purchase Agreement pursuant to such Section 11.3(a),
the Company has not entered into a new agreement with respect to a Consumer
Products Acquisition Proposal that Parent, Company Merger Sub and CPI Merger Sub
are required to accept as a Substitute APA pursuant to Section 6.2(b).
8.5. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Mergers pursuant to
this Article VIII, this Agreement (other than as set forth in this Section 8.5
and Section 9.1) shall become void and of no effect with no liability on the
part of any party hereto (or of any of its directors, officers, employees,
agents, legal and financial advisors or other representatives).
-74-
(a) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 8.3(a) or (ii) by Parent pursuant to Section 8.4(a) or (b)
or (iii) by either party pursuant to Section 8.2(ii) if, in the case of this
clause (iii), the Voting Agreement executed and delivered by CPI has not been
terminated pursuant to Section 8(b)(i)(z) thereof at the time of such vote, then
the Company shall promptly, but in no event later than two business days after
the date of such termination, pay Parent a termination fee of $15 million and
shall promptly, but in no event later than two days after being notified of such
by Parent, pay all of the reasonable and customary charges and expenses incurred
by Parent or Company Merger Sub or CPI Merger Sub in connection with this
Agreement and the transactions contemplated by this Agreement up to a maximum
amount of $5 million, in each case payable by wire transfer of same day funds.
Notwithstanding the foregoing, in the event that this Agreement is terminated by
either party pursuant to Section 8.2(ii) and if the Voting Agreement executed
and delivered by CPI has been terminated pursuant to Section 8(b)(i)(z) thereof
at the time of such vote, the Company shall promptly, but in no event later than
two days after being notified of such by Parent, pay all of the reasonable and
customary charges and expenses incurred by Parent or Company Merger Sub or CPI
Merger Sub in connection with this Agreement and the transactions contemplated
by this Agreement up to a maximum amount of $5 million, payable by wire transfer
of same day funds. Notwithstanding any other provision of this Agreement, in the
event that either (i) the Asset Purchase Agreement is terminated pursuant to
Section 11.3(b) thereof or Section 11.4(a) or (b) thereof, or (ii) this
Agreement is terminated pursuant to Section 8.4(d)(ii) as a result of the
termination of the Asset Purchase Agreement pursuant to Section 11.3(a) of the
Asset Purchase Agreement, or (iii) Parent, Company Merger Sub, ABC Merger Sub
and their respective debt and equity financing sources have executed and
delivered to the Company the Closing Agreement stating that all conditions to
the Closing (other than the execution and delivery of the Closing Agreement by
the other parties thereto) have been or will be satisfied or waived by Parent
(other than Section 7.1(e), which cannot be waived for this purpose) and this
Agreement is thereafter terminated pursuant to Section 8.3(c) or 8.4(d), then,
in either such case, the Company shall promptly, but in no event later than two
days after the date of such termination, pay all of the charges and expenses
incurred by Parent in connection with this Agreement and the
-75-
transactions contemplated hereby up to a maximum amount of $2,500,000, payable
by wire transfer of same day funds. The Company's payment shall be the sole and
exclusive remedy of Parent, Company Merger Sub or CPI Merger Sub against the
Company, CPI and any of their Subsidiaries and their respective directors,
officers, employees, agents, advisors or other representatives with respect to
the breach of any covenant or agreement set forth in this Agreement if the
Agreement is terminated by Parent pursuant to Section 8.4(b). In the event that
the Company shall reimburse Parent's expenses pursuant to any of Section
6.11(b), the first sentence of this Section 8.5(a), the second sentence of this
Section 8.5(a) or the third sentence of this Section 8.5(a) (any of such four
provisions, a "Specified Provision"), payments made in respect of the
reimbursement of expenses pursuant to any Specified Provision will be credited
against any payment required to be made pursuant to any other Specified
Provision. The Company acknowledges that the agreements contained in this
Section 8.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent, CPI Merger Sub and
Company Merger Sub would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 8.5(b),
and, in order to obtain such payment, Parent, CPI Merger Sub or Company Merger
Sub commences a suit which results in a judgment against the Company for the fee
set forth in this paragraph (b), the Company shall pay to Parent, CPI Merger Sub
or Company Merger Sub its reasonable costs and expenses (including reasonable
attorneys' fees) in connection with such suit, together with interest on the
amount of the fee at the prime lending rate of Citibank, N.A. in effect on the
date such payment was required to be made.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of CPI, the Company,
Parent, CPI Merger Sub and Company Merger Sub contained in Sections 6.7 (Stock
Exchange De-listing), 6.10 (Benefits), 6.11 (Expenses) and 6.12
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Mergers. This Article IX, the agreements of CPI, the
Company, CPI Merger Sub, Parent and Company Merger Sub contained in Section 6.11
(Expenses), Section 8.5 (Effect of Termination and Abandonment) and the
-76-
Confidentiality Agreement shall survive the termination of this Agreement. All
other representations, warranties, covenants and agreements in this Agreement
shall not survive the consummation of the Mergers or the termination of this
Agreement.
9.2. Modification or Amendment. Subject to the provisions of the
applicable Law, at any time prior to the CPI Merger Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of Parent and the Company.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Mergers are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT TO THE
EXTENT THAT DELAWARE LAW IS REQUIRED TO BE APPLICABLE UNDER APPLICABLE CHOICE OF
LAW PRINCIPLES. The parties hereby irrevocably submit to the jurisdiction of the
courts of the State of New York and the Federal courts of the United States of
America located in the County of New York, New York solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and
-77-
determined in such a New York State or Federal court. The parties hereby consent
to and grant any such court jurisdiction over the person of such parties and
over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 9.6 or in such other manner as may be permitted by law shall
be valid and sufficient service thereof.
(a) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail return receipt requested,
postage prepaid, by overnight courier, or by facsimile:
if to Parent, CPI Merger Sub or Company Merger Sub
C/o MedPointe Capital Partners, L.L.C.
51 JFK Parkway
First Floor, West
Short Hills, N.J. 07078
Attention: Anthony H. Wild
Facsimile: (973) 218-2704
(with a copy to William E. Curbow, Simpson Thacher
& Bartlett, 425 Lexington Avenue, New York, New
York 10017 (Facsimile: (212) 455-2502).)
-78-
if to the Company
1345 Avenue of the Americas
New York, New York 10105
Attention: Ralph Levine
Facsimile: (212) 339-5289
(with copies to James C. Morphy, Sullivan &
Cromwell, 125 Broad Street, New York, New
York 10004 (Facsimile: (212) 558-3588) and
Matthew G. Hurd, Sullivan & Cromwell, 1870
Embarcardero Road, Palo Alto, California
94303 (Facsimile: (650) 461-5700).)
if to CPI
1345 Avenue of the Americas
New York, New York 10105
Attention: Marshall M. Green
Facsimile: (212) 339-5236
(with a copy to Charles M. Nathan, Latham &
Watkins, 885 Third Avenue, New York, New York
10022 (Facsimile: (212) 751-4864).)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above. Notice shall be deemed given on
the date of actual delivery to the appropriate address. Delivery receipts and
records issued by postal authorities and overnight air couriers shall be
conclusive evidence of delivery dates for deliveries by such entities. The
Company shall timely send copies of any notices it receives pursuant to Section
12.7 of the Asset Purchase Agreement to Parent.
9.7. Entire Agreement; NO OTHER REPRESENTATIONS. This Agreement
(including any exhibits hereto), the CPI Disclosure Letter, the Company
Disclosure Letter and the Confidentiality Agreement, dated September 29, 2000,
between Parent and the Company (the "Confidentiality Agreement") constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE V OF THIS AGREEMENT,
NONE OF CPI, THE COMPANY, PARENT, CPI MERGER SUB OR COMPANY MERGER SUB MAKES ANY
OTHER REPRESENTATIONS OR WARRANTIES(INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS), AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS
OR WARRANTIES
-79-
MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL
AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOT-
WITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY
ONE OR MORE OF THE FOREGOING.
9.8. No Third Party Beneficiaries. Except in respect of Section 6.12
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Company Merger Effective Time, on the part of the
Surviving Company to cause such Subsidiary to take such action.
9.10. Severability. It is the intention of the parties that the
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability or the other provisions hereof. It is the intention of the
parties that if any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.11. Interpretation. The words "hereof," "herein," and "hereunder"
and words of similar import, when
-80-
used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Terms defined in the singular shall have
correlative meanings when used in the plural, and vice versa. The table of
contents and headings herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to limit or otherwise
affect any of the provisions hereof. Where a reference in this Agreement is made
to a Section or Exhibit, such reference shall be to a Section of or Exhibit to
this Agreement unless otherwise indicated. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." References herein to the "Company's
knowledge" or the "knowledge of the Company" refer to the actual knowledge of
the officers of the Company after reasonable inquiry specified in Section 9.11
of the Company Disclosure Letter.
9.12. Assignment. This Agreement shall not be assignable by operation
of law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly owned direct or indirect subsidiary to be
a Constituent Corporation in lieu of CPI Merger Sub or Company Merger Sub, in
which event all references herein to CPI Merger Sub or Company Merger Sub, as
the case may be, shall be deemed references to such other subsidiary, except
that all representations and warranties made herein with respect to CPI Merger
Sub and Company Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as of
the date of such designation. Any purported assignment made in contravention of
this Section 9.12 shall be null and void.
-81-
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
of this Agreement.
CARTER-WALLACE, INC.
By: /s/ Ralph Levine
---------------------------------
Name: Ralph Levine
Title: Chairman and Chief Executive
Officer
CPI DEVELOPMENT CORPORATION
By: /s/ Marshall M. Green
---------------------------------
Name: Marshall M. Green
Title: Comptroller
MCC ACQUISITION HOLDINGS CORPORATION
By: /s/ Anthony H. Wild
---------------------------------
Name: Anthony H. Wild
Title: President
MCC MERGER SUB CORPORATION
By: /s/ Anthony H. Wild
---------------------------------
Name: Anthony H. Wild
Title: President
MCC ACQUISITION SUB CORPORATION
By: /s/ Anthony H. Wild
---------------------------------
Name: Anthony H. Wild
Title: President
EXHIBIT A
Date
Dear [Executive Name / Retiree Name]:
This letter confirms our commitment to honor the obligations of
Carter-Wallace, Inc., a Delaware corporation (the "Company") under the Corporate
Officer Medical Expense Reimbursement Plan (the "Medical Plan"), the Personal
Financial Counseling Policy and the agreements regarding split dollar life
insurance to which you and the Company are parties (all of these programs are
referred to in this letter collectively as the "Agreements") in accordance with
their respective terms, on and after the Closing Date, as defined in the
Agreement and Plan of Merger, dated as of May 7, 2001, among the Company, CPI
Development Corporation, a Delaware corporation ("CPI"), MCC Acquisition
Holdings Corporation, a Delaware corporation ("Parent"), MCC Merger Sub
Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
("Company Merger Sub"), and MCC Acquisition Sub Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("CPI Merger Sub" and
together with Parent and Company, the "Newco Entities") and the other parties
thereto.
In addition, for so long as providing your coverage under the Medical
Plan on an insured basis permits you to receive benefits thereunder in a manner
that does not cause you to recognize taxable income (for example, as is
currently provided under Sections 104, 105 and 106 of the Internal Revenue Code
of 1986, as amended (and successor statutory provisions)), we will maintain such
insurance or, if we do not maintain such insurance, we will provide you such
benefits by other means reasonably satisfactory to you on a tax-free basis. In
the future, if the Internal Revenue Code does not permit such tax benefits to be
delivered by maintaining insurance we may discontinue the underlying insurance,
but we will continue to provide the benefits promised to you under the Plan
albeit not on a tax-free basis.
In the event that you and we have a dispute regarding the benefits or
terms of any of the Agreements or this letter, Parent will or will cause the
Company to reimburseany reasonable legal fees and expenses incurred by you in
seeking to enforce your rights, to the extent described in this paragraph,
unless the Newco Entity that is named in
-A-1-
your dispute substantially prevails. Your reasonable legal fees and expenses
will be paid promptly as incurred (but in any event within fifteen days after
receipt of notice that you have incurred such fees and expenses together with
documentation of such fees and expenses), not to you, but to a third party
escrow agent satisfactory to both of us, pending resolution of your claim. Upon
notice of a final non-appealable resolution of your claim and provided that a
determination has not been made by the tribunal or other body hearing the
dispute that the Newco Entities named in your dispute have substantially
prevailed in respect of the claims you have brought and provided that a
settlement agreement has not been entered into providing for a different
allocation of legal fees, then the escrow agent shall pay to you the funds so
deposited (plus interest earned thereon). Any remaining reasonable legal fees or
expenses incurred by you in connection with your claim that were not covered by
the money paid to you from the escrow fund, will be reimbursed by us directly
within fifteen business days of your notice to us of such fees and expenses. If
the Newco Entities named in your dispute substantially prevail, the escrow agent
shall return to us the funds we deposited, plus interest earned thereon and you
will not be entitled to any reimbursement with respect to such legal fees and
expenses. Of course, if a settlement agreement between you and the Newco
Entities provides for a different allocation of legal fees and expenses, then
the escrow agent will disburse the escrowed amounts in a manner consistent with
such settlement agreement.
Until further notice, your claims for reimbursement of medical
expenses should continue to be sent to the Treasurer of the Company, as provided
in the Medical Plan. All other correspondence regarding these Agreements should
be sent to the Vice President of Human Resources. If you have questions about
this letter, please feel free to contact [PARENT REPRESENTATIVE] or [COMPANY
REPRESENTATIVE].
-A-2-
Sincerely,
-----------------------
Chief Executive Officer,
Carter-Wallace, Inc.
-----------------------
Chief Executive Officer,
MCC Acquisition Holdings
Corporation
-A-3-